Americold Realty Trust Aktie

Hello, and welcome, everyone, joining today's Americold Realty Trust First Quarter 2026 Earnings Call. [Operator Instructions]

Please note this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Rich Leland. Please go ahead.

Hello, and thank you for joining us today for Americold Realty Trust's First Quarter 2026 Earnings Conference Call. In addition to the press release distributed this morning, we have filed a supplemental financial package with additional detail on our results. These materials are available on the Investor Relations section of our website at www.americold.com. This morning's conference call is hosted by Americold's Chief Executive Officer, Rob Chambers; along with Chris Papa, our Chief Financial Officer.

Management will make some prepared comments, after which we'll open up the call to your questions. Before we begin, let me remind you that management's remarks today may contain forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those anticipated. These 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. Management undertakes no obligation to update publicly any of these statements in light of new information or future events.

During this call, we will also discuss certain non-GAAP financial measures, including NOI, core EBITDA, net debt to pro forma core EBITDA and AFFO, among others. The full definition of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental financial package available on the company's website. Please note that all warehouse financial results are in constant currency and reflect the Q1 2026 same-store pool unless otherwise noted. Now I'll turn the call over to Rob for his prepared remarks.

Thank you, Rich, and thank you all for joining our first quarter 2026 earnings conference call. Before we begin, I would like to formally welcome Chris Papa to the team as our Chief Financial Officer. Chris started with us in February and brings more than 2 decades of experience leading investment-grade rated and publicly traded REITs. Since joining the team, Chris has been fully engaged, meeting with leaders across the business, spending time with our investors and our customers and touring our facilities. He brings a unique mix of qualifications and experiences, and I look forward to his many future contributions to drive our business forward.

Turning to our first quarter financial results. We delivered AFFO of $0.29 per share, above analyst consensus. Chris will review the full details in just a few minutes, but I was pleased that all key metrics materialized in line or slightly better than our original guidance. I'm particularly encouraged that our physical occupancy was flat year-over-year, further supporting our belief that inventories levels have largely stabilized. These trends have continued in April, and we believe that we should see a return to more normalized seasonal trends as we progress throughout the year.

Our pricing metrics in the quarter also marginally overperformed expectations. Our commercial teams continue to lead with our value proposition, which we call the Americold Advantage, consisting of best-in-class service, technology solutions and a suite of services rather than simply competing on price as you see from others in our industry. Our customer churn rate remains low at 2.5%, further validating our view that service remains a top priority to our customers when considering their cold chain partner.

During the quarter, we also successfully renewed 34% of the year's fixed committed contracts that were either month-to-month or set to expire in 2026. This represents approximately $100 million of revenue and extends the weighted average duration of our future expirations. Importantly, we held our total rent and storage revenue from fixed committed contracts at 59%, very solid performance during a critical renewal period as customers continue to see the benefits of a fixed commitment structure.

All of these metrics demonstrate our company-wide focus on commercial excellence as we navigate through the current market environment. Since stepping into the CEO role, I've been laser-focused on setting a strong foundation for future growth while ensuring that we deliver on our financial commitments. Despite a continued challenging macro environment, we've now delivered 3 straight quarters that either met or exceeded AFFO per share consensus. Beyond our financial performance, we also made significant progress this quarter on each of our 5 key strategic priorities.

As a reminder, we launched these objectives late last year to strengthen the foundation of our organization and set us up for long-term success. They include delevering our balance sheet to maintain our investment-grade profile, actively managing our portfolio of real estate assets for maximum value, streamlining our operations and rightsizing our cost structure, identifying unique opportunities to drive occupancy growth across our network and selectively supporting our key customers and strategic partnerships. Perhaps the most foundational of these priorities are the strategic actions that we are taking to strengthen our balance sheet.

Earlier this morning, we announced the formation of a new joint venture with EQT Partners, one of the largest purpose-driven real estate investors in the world. EQT is a sophisticated investor in the space as they own one of the largest cold storage providers in Europe. They will hold a 70% interest in the JV as part of their infrastructure portfolio with Americold contributing a seed pool of 12 properties across the U.S. worth over $1.3 billion. This represents a blended cap rate to the JV of approximately 7% or nearly $3,300 per pallet position. This is a significant premium to our public market valuation, which reflects the mission-critical nature of our assets.

As part of the agreement, we will continue to operate the assets, providing continuity of service to our customers as well as providing ongoing asset management and development expertise to the JV. We anticipate closing the transaction in the third quarter, at which point Americold will receive approximately $1.1 billion in proceeds, which we intend to use to pay down a portion of our outstanding debt. As many of you are aware, joint ventures are a common structure across the REIT industry, and I'm thrilled to have EQT as a partner to help support our strategy. We expect to expand the platform in the future with additional development opportunities, and we already have one exciting new project for consideration, which I will discuss in just a moment.

As we look forward, our capital allocation priorities remain consistent, maintaining an investment-grade balance sheet, evaluating the portfolio for asset recycling opportunities and continuing our disciplined approach to new capital deployment. Our second priority is to actively manage our portfolio to address underperforming properties while pursuing the highest and best use of our geographically diverse network of real estate assets.

During our fourth quarter call, we indicated that we had identified 9 additional facilities to exit or idle in 2026. Two of these exits were completed in Q1. Both of these facilities were leased and we returned the keys to the owner at the end of the term after successfully shifting much of the customer inventory into our nearby facilities. These buildings will be torn down, removing over 62,000 pallet positions from the Atlanta market. Of the remaining facilities, the majority have been idled and are actively being marketed for sale.

While we continue to do our part to remove excess capacity from the industry, we continue to see smaller, less sophisticated operators remain under pressure. In the quarter, we've heard of several smaller operators and new market entrants either shutting their doors or struggling to meet their financial commitments. In many of those instances, we've been the beneficiary of volumes coming back to Americold given our status as an industry leader. Beyond just exiting facilities, we are also pursuing attractive triple net leasing opportunities across the portfolio.

During Q1, we identified one of these opportunities and purchased an existing leased facility at well below market value and subsequently entered into a 15-year triple net lease with a new tenant to fully occupy the space. By eliminating the rent expense and acquiring the property at a discount, we are able to achieve an approximate 10% return on investment. We also signed several other new deals in the quarter and have increased our annualized leasing revenue by over $4 million or about 7%, which you can see reflected on Page 24 of the financial supplement. These are all great examples of the disciplined process we are taking to creatively ensure we are receiving the best value possible from our real estate assets.

Our third priority is to rightsize our cost structure and drive efficiencies across our operation. Late last year, we identified $30 million in potential savings within indirect labor and SG&A, and I'm pleased to report that all initiatives were completed in Q1 as expected. We are exploring additional cost actions, and Chris will discuss the details in a moment. While we are taking cost out of the business, we are being extremely cautious to ensure that we retain the high level of customer service that Americold is known for in the industry.

This quarter, I'm pleased to announce that our Fort Worth Railhead site received the Warehouse of the Year award from Kraft Heinz. This award was measured by performance KPIs like turn times, inventory accuracy, fill rates and others. It is a great example of our relentless pursuit of efficiency and high-quality service, resulting in meaningful value to our customers. Congratulations to our team in Fort Worth. Our fourth priority is driving organic growth by leveraging our operational expertise, scale and mission-critical infrastructure in adjacent and underpenetrated sectors.

Late last year, we announced our initial win with On the Run in South Australia, one of the nation's most well-known convenience and petrol providers. And in February, we announced the expansion of our relationship to support their national network in Australia. As a reminder, we are providing tri-temperature warehousing services to replenish every product in the store and have expanded our coverage to 600 of their locations.

Additionally, I am very pleased that we recently renewed our contract with KFC in Australia for an additional 10 years. Americold has been working with KFC stores for the last 30 years, and we will continue to support their restaurant network of approximately 500 stores on the East Coast of Australia for the next decade, providing tri-temperature warehousing and distributing all of their food and nonfood materials.

Additionally, as part of this extension, we're implementing a technology solution that will generate restaurant-level sales forecast, recommend replenishment orders and proactively optimize inventory positioning across the network. This technology will serve as the backbone of our store support solutions and is a great example of Americold's differentiated offering and the value we can provide to our QSR and multiunit customers.

In North America, we successfully closed on a handful of new pet food and floral deals this quarter, expanding our presence in nonfood categories. Additionally, our initial outreach into the pharmaceutical space resulted in a new storage commitment for probiotic products. While these floral, pet food and pharma deals will not be material to our results this year, they remain a great example of our ability to capture business in multiple new markets while the food industry remains under pressure.

One area that we're particularly excited about is our e-commerce business, which has been growing at a double-digit rate. We're currently onboarding 3 new accounts and shipped over 1 million packages last year. We've expanded our capability to 5 sites across the country and have the ability to cover 99.5% of the U.S. population in 2 days or less. Similar to our retail and QSR customers, e-commerce is operationally intensive, which gives us an advantage in pursuing new business given our experience in the area and the strength of the Americold operating system.

On to our fifth priority. From a development perspective, our expansions in Sydney, Australia and Christchurch, New Zealand were both delivered on time and on budget during the quarter. Both expansions are dedicated to large grocery retailers and add critical capacity to both markets where our existing facilities are nearly full. These facilities are great examples of the opportunity to strategically invest in markets that have not seen the level of speculative activity that has occurred in the U.S.

Finally, as I mentioned earlier, one of the important benefits of our new partnership with EQT is the ability to pursue new development opportunities through the joint venture. While we have significantly narrowed our development pipeline and refined our internal requirements for capital allocation, there are certain customer-driven projects where it makes sense to support our key relationships. A great example of this is a new customer-dedicated project that we're kicking off with McCain Foods in Plover, Wisconsin.

McCain is a top 5 customer for Americold with a nearly 35-year relationship. We have an existing plant advantage facility that is located adjacent to their manufacturing plant in Plover. They want to consolidate portions of their cold storage network with an additional 56,000 pallet positions at the site. The project is backed by a 20-year fixed commitment agreement from McCain. And given the attractive profile of the project, we believe that this is the type of project that could fit well in the joint venture. This is truly a win-win transaction for all the parties involved, and we're honored that McCain chose us for this opportunity, and we look forward to servicing them for many more years to come.

This win also highlights the importance of having a diverse network at every node in the supply chain. As customers evaluate their future networks, we continue to see large food manufacturers looking to consolidate significant piles of inventory back closer to production. This is an area where Americold is a clear industry leader, and we're positioned to take advantage of this trend given our long-standing relationships and solutioning expertise.

I am proud of our progress in each of our 5 key strategic priorities this quarter with the joint venture representing a meaningful step towards our long-term leverage goal. As we continue to relentlessly pursue cost savings, portfolio management and see our developments continue to come online, we're confident that our current playbook will build a strong foundation for future success.

With that, I'll turn the call over to Chris to provide some additional details on our performance in the quarter as well as some of the anticipated impacts to our financial statements from the new joint venture. Chris?

Thanks, Rob, and good morning, everyone. I'm excited to participate this morning on my first call as Americold's Chief Financial Officer. As Rob mentioned, since joining, I have met with our leaders, investors, customers and toured several of our facilities. I have been impressed by the capability, discipline and service that our teams bring every day. I believe the scale, diversity and mission-critical nature of our assets when coupled with our operational expertise, creates a compelling value proposition that is difficult to replicate. I look forward to helping unlock this value for our shareholders.

One of my first priorities when I arrived was to fully engage in the strategic capital raise initiative that our management team and Board have been diligently pursuing for the past several months. I am very familiar with real estate joint ventures and the partnership with EQT not only strengthens Americold's balance sheet by funding debt repayment, improving liquidity and reducing future development risk, but also allows us to preserve operational control and cash flow from the assets.

As Rob mentioned, we expect the transaction to close in the third quarter, at which point we will receive approximately $1.1 billion in cash proceeds. We plan to use these proceeds to repay all of our 2026, 2027 and a portion of our 2028 U.S. dollar-denominated debt maturities. We will continue to operate these warehouses and receive a management fee of approximately $15 million to $20 million each year. We will also receive 30% of the NOI generated by the venture, which will be recorded on our P&L under the line item titled Income (Loss) from Investments in Partially Owned Entities. These 12 properties represent approximately $231 million in revenue and $103 million in NOI for fiscal 2025.

At the end of Q1, our net debt to pro forma core EBITDA was 7.1x, and this transaction on a pro forma basis would reduce this by about 3/4 of a turn. This reflects significant progress toward our goal of 6x or less. We believe this joint venture, along with our portfolio optimization, ongoing cost actions and stabilizing industry fundamentals gives us strong confidence in our ability to achieve this goal, and we remain committed to maintaining our investment-grade profile.

While we don't know the exact timing of when the transaction will close, we estimate that the JV could be a full year headwind to AFFO of approximately $0.10 per share or roughly $0.06 per share for the second half of 2026. The ultimate impact will depend on when the deal closes. Since the business is currently performing in line to slightly ahead of our expectations, we believe that we will be able to offset most, if not all, of this impact. We are proud of our ability to preserve our AFFO guide for the year and simultaneously execute a strategic transaction to reduce leverage and significantly improve our balance sheet position. We will provide more granular updates to our individual guidance components as the deal nears completion.

Beyond the joint venture, I next want to discuss our first quarter results, where we delivered AFFO per share of $0.29, exceeding analyst consensus. We were encouraged to see same-store physical occupancy stabilize with economic occupancy contracting slightly less than anticipated. While we are not updating our full year occupancy and pricing assumptions, this is certainly encouraging performance. Outside of the U.S., we were pleased to see throughput in both Europe and Asia Pacific increase from the prior year, and Europe's physical occupancy increased by over 800 basis points in the quarter. This is very strong performance and reflects the positive impact of the new business that was won by the international team over the past couple of quarters.

Our Q1 warehouse NOI decreased 4.5% as expected, driven by the ongoing pricing pressure in the storage market and lower throughput as well as a modest $2 million headwind from energy costs this quarter. As a reminder, almost all of our customer contracts have the ability to pass through abnormal cost increases. In addition to the power surcharge mechanism, we also lock in power rates in deregulated states, which represents about 25% of our portfolio. We have pursued energy saving best practices for many years, and we are also leveraging AI to strategically pull power from the grid during nonpeak hours. As a reminder, power expense is only about 6% of our same-store warehouse costs, and we plan to leverage all available mitigation strategies to continue managing these costs closely and minimize future P&L impacts.

As Rob mentioned, one of our key priorities for the year is to optimize our cost structure. We were pleased to see core SG&A for the quarter came in relatively flat year-over-year, absent the impact of certain accruals that can fluctuate in Q1 and serve to offset the typical wage rate inflation across the business. Late last year, we identified $30 million in savings between both indirect labor and SG&A. We are pleased to report that these were fully executed and we reduced indirect labor by over 400 positions in Q1. Additionally, we recently commenced the second phase of this project to identify further cost savings opportunities in other parts of our business as well as to explore ways to enhance efficiency within our organizational structure.

Our goal is not only to reduce expenses, but also to optimize how our teams operate and collaborate across the company. I look forward to sharing the outcome of this broader analysis with you on next quarter's call. Additionally, as Rob mentioned earlier, we have made great progress with our portfolio management initiative, which is another one of our 5 key priorities for the year. As a reminder, when a site has no customers and minimal operating costs or otherwise meets the held-for-sale accounting criteria, we moved their expenses to transactions, strategic initiatives and other costs on our P&L.

You can see on Page 22 of the supplement that we have included additional detail regarding these costs, which have decreased substantially versus the prior year. When we exit sites, we are often able to terminate the lease or find an interested buyer in a fairly short period of time. Proceeds from the sale of our own properties will assist with delevering our balance sheet. Additionally, since I joined the company, we have asked the team to do a review of our expansion and development projects to reassess our assumptions around the timing of stabilization dates, cash flows and expected yields given the duration of the current macro environment. While certain of these projects have been impacted more than others, many of them have in some way felt the effects of the soft market conditions that are impacting our industry. We will update you on the results of this review in the coming quarters.

In the short time I have been with Americold, I've been impressed by the team's focus on delivering the strategic priorities for the year. I believe these priorities are the best blueprint to building a strong foundation for the future and that this team can bring that vision to life. I am proud to be part of such a talented group of people and look forward to leveraging my expertise to further unlock this company's potential.

Now I would like to turn the call back over to Rob for some closing comments. Rob?

Thanks, Chris. I'm very pleased with our results this quarter and remain confident in the long-term direction of our business. In my discussions with customers over the past several months, they remain cautious with their outlook for the year. However, they are increasingly mentioning investments in innovation as well as increased marketing and promotional spend, all with a focus on consumer value. These actions are intended to help drive organic volume growth. And in fact, we've seen this reflected in their earnings releases over the past several months with several customers reporting sales growth in the first quarter of the year.

I hope to see this continue to gain traction as we navigate through the balance of the year. As I've mentioned in the past, this is not a team that is standing still and waiting for a rebound in demand. I'm very proud of the significant progress that we are making across all 5 of our key priorities while also delivering on our financial commitments. The formation of the joint venture is a significant accomplishment, strengthening the balance sheet, illuminating the disconnect between public and private markets and supporting future developments. It is also a testament to this team and this organization's ability to execute as well as the Board's focus on unlocking shareholder value.

With disciplined capital allocation, a sharpened focus on operational excellence and unwavering dedication to customer service, I believe we are well equipped to create meaningful growth over time. I want to thank our associates around the world for their continued hard work and our shareholders for their ongoing trust and support.

Operator, we're now ready to open the call for questions.

[Operator Instructions] We will take our first question from Michael Griffin with Evercore ISI.

Wondering if you could give a little bit more color on the facilities being contributed to the JV, where they are along the cold chain, the age, customer mix, kind of anything that might have stood out for these assets? And then would you say it's indicative of the portfolio quality overall at that, call it, 7% transaction cap rate? And then lastly, I know you mentioned the cap rate in the prepared remarks. How should we think about this deal on sort of an EV to EBITDA multiple basis?

Thanks, Michael. So let me start with the portfolio that we're contributing to the joint venture. I think what you said is right. I mean the facilities are a good representation of the broader North American portfolio. So what we see would be facilities that are geographically diverse, facilities that are across each of the nodes in the supply chain, along with some conventional and automation as well. So we think it's a very good mix of facilities. It's one that EQT was certainly excited about being part of the joint venture. And from our perspective, we're also very excited that we'll continue to have a meaningful ownership stake in those facilities and be able to operate them and provide the level of continuity to our customers that they would expect. So it's a significant accomplishment out of the gate here, and we're very excited about it.

We'll go to our next question. Brendan Lynch with Barclays.

Maybe just on the physical occupancy growth that you saw in the quarter, can you disaggregate that between consolidation to fewer facilities versus just the industry improving?

Yes. There's really essentially nominal to no impact on the consolidation of the facilities because we adjusted that same-store pool at the end of last year. So the impact to physical occupancy in Q1 was a result of industry stabilization along with a combination of new business wins coming in, some market share gains that we've seen as we've seen some of the volumes that had previously been with some of these small providers come back in. So I think when you look at the overall impact of the physical occupancy being flat to slightly up, it was driven by industry fundamentals, new business wins and some market share gains.

We'll go next to Viktor Fediv with Scotiabank.

I have a follow-up on the JV financials. So it looks like EQT will be retaining 70% and you will be getting $1.1 billion in cash proceeds, which kind of implies $1.6 billion of total value. Just trying to understand puts and takes here and what is involved?

Well, I mean the total transaction size is $1.3 billion. Given the debt we're planning on putting on the project and our equity contributed to the venture, we think we'll be able to pull out about $1.1 billion of proceeds from the venture.

And we'll take our next question from Craig Mailman with Citi.

I think Griffin asked earlier about the EV to EBITDA multiple. I don't think I heard an answer on that. Does the 7% cap equate to somewhere around 9% to 10% EV to EBITDA multiple? Maybe give us some guardrails there. And then, Chris, your commentary that you guys are putting debt in the JVs, is that 0.75 turn reduction on debt to EBITDA, is that on a look-through basis? Like if you assume the JV debt, do you still get that 3/4 of the turn reduction or a form of that?

Sure. So I'll answer that -- the second question first. Yes, the 3/4 of the turn we talked about includes picking up our share of the debt from the JV. So we'd be picking up our 30% portion of that debt as well as the EBITDA. I'll let Scott address the EV to EBITDA question.

Craig, if you think about the math around this one, $1.3 billion enterprise value for the JV, an NOI strip before fee of roughly $110 million and then with a fee around $17 million to get to a net NOI strip of low 90s, and that gets you to the 7% cap rate that we quoted. So hopefully, those parts help answer the question on a yield basis, which you can convert to a multiple. And when you think about the fee strip in this business, given the operational intensive nature and amount of work that goes into it, looks a little bit different than I'd say your traditional industrial business.

And Craig, I'd add that if you look at it on an EV to EBITDA basis, it's -- this valuation implies a couple of hundred basis point increase over where the stock is currently trading.

And we'll go next to Michael Goldsmith with UBS.

It seems like you were active on the renewals of fixed commitment contracts during the quarter. So maybe can you talk a little bit about the negotiations with your tenants? What was the feedback from them? What was their ability to absorb pricing or they're asking for concessions? Just trying to get a sense of what you're hearing from your tenant base and how that ties to your overall pricing power?

Yes. Thanks, Michael. I mean, I think the work that we did in the quarter on fixed commitments is one of the -- certainly one of the highlights of the quarter. As we mentioned in our prepared remarks, we were able to work through 34% of all the fixed commitment contracts that were month-to-month or had expirations in 2026. We said now for several quarters, just as a reminder, that these contracts tend to be relatively ratable throughout the year, meaning there's not a whole lot of outsized renewals in one quarter or another. So that 34% represents great progress in a single quarter.

We continue to be very pleased by the conversations that we're having that we think are extremely constructive given the fact that our customers recognize the value of having that fixed commitment structure. So despite the fact that we recognize and acknowledge that there's more capacity in the industry than there has been historically, we've been able to maintain that 59% of our total rent and storage revenue being derived from these fixed commitment contracts. So I think the metrics speak for themselves. It's playing out probably slightly better than what we had planned in our guide. You saw that our economic occupancy was down slightly, while our physical occupancy was flat. That's exactly what we assumed would happen, a slight contraction, but it is less of a decrease in terms of economic occupancy than what we had planned. So very, very encouraged to see that.

On the pricing side of the equation, our pricing metrics are marginally better than what we had guided to. Storage on a constant currency basis was down slightly year-over-year. That does tend to be -- the storage side of the business does tend to be the side of the business that get discounted a little bit more than the handling just given the margin profile. So we're making sure we're being thoughtful. We're making sure we're market competitive on the pricing and that we're responding to the current environment. But at the same time, we continue to lead with our value proposition.

And I think as this environment has played out longer, really what customers are seeing is that customer service is the most important decision-making factor in who they partner with. And price is important, but if your product isn't showing up on time and in full and if you can't invest in your customer base and you can't grow with them and you don't have the technology solutions and your only value proposition is price, you eventually return back to the industry leaders. And so that's exactly what we're seeing, constructive conversation, and I think great progress this quarter.

We'll take our next question from Michael Carroll with RBC Capital Markets.

Rob, is there a specific mandate for the new joint venture as in does coal need to contribute specific future investments or development opportunities in the JV? Or does this need to be agreed upon by both parties to be able to do it similar to like the McCain development that you talked about in your prepared remarks?

Yes. Look, I mean, we want to scale this venture. And so we're -- we'll be working to provide first looks of development opportunities to the joint venture. There's no mandate that if the venture passes on those that we can't do those on our own accord. So we'll be providing some first looks related to development projects to the venture. We think that's the best path forward, given the opportunity to do some off-balance sheet development to ensure that it doesn't -- there's less volatility to earnings there. Outside of that, no mandate to contribute other stabilized assets. So this is going to be a great partnership. We think we're confident we found the right partner in EQT given their level of sophistication in this space and the alignment of our mission and our values. So a big step for both parties.

We'll take our next question from Nick Thillman with Baird.

Maybe I wanted to touch a little bit more on just the joint venture assets being contributed and the profile of them. As we think of it relative to your fixed commitment contracts, is it similar to that 50% of that revenue associated with those assets is similar in mix? And then what the average duration of those contracts are on those assets being contributed? And then maybe separately, just a point of clarification on the $110 million of NOI, does that include the handling and services NOI contribution as well?

Yes. On the NOI, it does. It's both the storage and handling NOI. I would say the portfolio is very representative of the broader Americold pool. So again, these sites are geographically diverse. There's some conventional, there's some automation, they are customer dedicated, they are multi-tenant, there are fixed commitments, there are transactional agreements. So be thinking about it as very similar to the broader portfolio. The Americold wholly-owned portfolio will look very similar pre and post. And that's exactly what EQT was looking for, and that's exactly what we felt like was the right path to seed the JV.

And we'll take our next question from Mike Mueller with JPMorgan.

I think this is kind of a dumb clarification question. But the release says that EQT isn't baked into guidance. But Chris, when you were talking about the transaction in your comments, you mentioned that you're kind of proud to maintain guidance while this is kind of going on simultaneously. So I guess, is it in guidance? Or is it not guidance?

Yes. Let me start and Chris can jump in. I mean -- so look, I mean, we're sitting here on May 7. And as we look at the trajectory of the business and we look at the fact that the metrics were coming in line to above our expectations, absent the joint venture, we would be thinking about the business trending towards the higher end of our original guide. And now that we have this joint venture that is still subject to traditional closing conditions, and we don't have the final date of when the JV will be -- will close.

When we look at it on a pro forma basis, what we can sit here today and tell you is when we factor in the closing of a joint venture assumed during the third quarter that we'll be able to absorb the impact of that JV and maintain our original guide. So as we get a little bit closer to the closing of the JV, we'll be able to provide more specific details around each one of the guidance parameters. But the punchline here is we're maintaining our guide inclusive of the impact of the joint venture in 2026.

And then just to be more specific about the guidance, the original guidance that we had given obviously did not include the JV, but it also did not include any incremental cost optimization initiatives. So those two things going, obviously, in different directions, coupled with, as Rob said, our business performing slightly ahead of expectations gave us confidence to keep it in that $120 million to $130 million range from an AFFO perspective. But we'll come back with more details in the second quarter as we get -- as the JV and the cost optimization initiatives materialize.

And we'll go next to Alexander Goldfarb with Piper Sandler.

So a question, as you guys were doing the strategic review, and I'm guessing that it's not done, how does exiting regions -- there's discussion in the press that perhaps maybe certain regions overseas to exit or larger outright sales? Just trying to see is, is the JV -- is this it, you're done? I mean you have 2 activists as part of the company. So is this JV done? Or there are other potential strategic initiatives and work that could include exiting, whether it's regions or larger portfolios?

Yes. Let me maybe just take a step back so I can answer the question holistically. I mean, since I took the role in September, one of my first priorities was to sit down with the Board and really develop what our key strategic initiatives were going to be for 2026. And top of the list was strengthening the foundation and delevering the balance sheet. And so knowing that, that was a priority, we started a process right then and there to evaluate multiple different options to get there. And we've looked at different geographies, portfolio management, this joint venture opportunity, and during that review process, it was very clear that there was tremendous interest from institutional investors, not just in this asset class, but also to have a continuing partnership with Americold.

And so as we started down the path of evaluating this option specifically, we felt like it met all of our objectives. This option obviously strengthens our balance sheet. It gives us the opportunity to pay down debt materially and lower leverage. This transaction highlights the large gap between public and private valuations in the space. Again, these facilities are being contributed $3,300 per pallet position, where we trade at $1,500 per pallet position right now. So a significant premium. This supports our ability to do development with our key strategic customers in a customer-dedicated manner, and it allows us to continue to have a meaningful ownership percentage in these facilities and provide the level of continuity to our customers that we expect and do it all with a partner that we really feel has the right level of sophistication, experience and is aligned from a value perspective.

So this is the right deal. We're confident in that. We certainly are always open to options that create shareholder value. I think we're doing within our priority list several other key initiatives, the portfolio optimization and management with the 19 sites over the last 2 years that we're idling and/or exiting is having a meaningful impact on our results. The great things that we're doing to grow this business organically, you can see in our occupancy and our pricing. So I think this puts us on a trajectory to get to our long-term leverage goal, but we're always open to continue to evaluate opportunities on a go-forward basis.

And Alex, if you think about it from a balance sheet perspective, we talked about in our prepared remarks that this transaction, we expect to have an impact of reducing our debt-to-EBITDA of about 3/4 of a turn. It's a meaningful contribution toward our deleveraging, but it also allows us to start thinking about things on a go-forward basis on a more targeted basis. So continuing to do more targeted capital recycling plus the cost optimization initiatives that are underway will continue to also move the needle on deleveraging down toward that 6x or less target. So I think we could be more surgical on a go-forward basis. But certainly, we're considering options as we continue to manage the business.

And we'll take a follow-up question from Mike Mueller, JPMorgan.

Real quick on the prior question about JVs, the JV and development, I think you said we're going to provide some first looks to the JV. So is it -- you have the choice to provide a first look on development to the JV? Or you kind of have to do all U.S. development first looks to the JV?

Mike, it's Scott. Yes, we've given EQT our exclusive partner to look at those joint ventures and then there's optionality after that, if that does not go into the joint venture. But hopefully, that answers the question. And it's targeted to North America Mike, and we'll be focusing on some potential expansion opportunities in the seed pool as well as things like build-to-suits like the project Rob highlighted on the call.

And I think as we wrap up here, I just want to highlight, again, as we move forward and sitting here today in May, we've got very clear priorities. This team is now a track record of demonstrating our ability on executing against those priorities and delivering on our guide and our financial commitments. And so I thank all of our associates for helping us support that and delivering every day and look forward to continuing that track record.

And that does bring us to the end of our question-and-answer session. We'd like to thank everybody for joining today's call. We appreciate your time and participation. You may now disconnect.

Greetings. Welcome to Americold Realty Trust Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the call over to Rich Leland, Vice President, Investor Relations. Thank you. You may begin.

Good morning, and thank you for joining us today for Americold Realty Trust's Fourth Quarter and Full Year 2025 Earnings Conference Call. In addition to the press release distributed this morning, we have filed a supplemental financial package with additional detail on our results. These materials are available on the Investor Relations section of our website at www.americold.com.

This morning's conference call is hosted by Americold's Chief Executive Officer, Rob Chambers; along with Scott Henderson, our Chief Investment Officer and Interim Chief Financial Officer. Management will make some prepared comments, after which we will open up the call to your questions.

Before we begin, let me remind you that management's remarks today may contain forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those anticipated. These 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. Management undertakes no obligation to update publicly any of these statements in light of new information or future events.

During this call, we will also discuss certain non-GAAP financial measures, including NOI, core EBITDA, net debt to pro forma core EBITDA and AFFO, among others. The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental financial package available on the company's website. Please note that all warehouse financial results are in constant currency unless otherwise noted.

Now I'll turn the call over to Rob for his prepared remarks.

Thank you, Rich, and thank you all for joining our fourth quarter 2025 earnings conference call. Today, I'd like to review our 2025 accomplishments, walk through our 2026 key priorities and review the components of our 2026 financial outlook.

But before I begin, I'd like to take a brief moment to publicly welcome Chris Papa to the Americold executive leadership team. Chris will be joining us on Monday of next week as our new Chief Financial Officer. Chris is a seasoned and highly regarded real estate executive and previously served as Chief Financial Officer of CenterPoint Properties, a leading developer, owner and manager of industrial real estate. He also brings extensive public company experience, having served as the CFO for both Post Properties as well as Liberty Property Trust.

Over the years, we have intentionally assembled a strong leadership team here at Americold with extensive operational expertise. And I'm excited to now supplement this with Chris' experience leading 2 investment-grade rated REITs and further strengthen our ability to execute on our strategic priorities. Chris is well known in the investment community, and he's looking forward to engaging with all of you throughout the coming year.

Turning to our 2025 accomplishments. Despite the persistent industry headwinds we faced throughout the year, our teams continue to execute well. This includes not only delivering on our financial commitments for the quarter, but also making significant progress across many of our key business initiatives. Financially, we delivered fourth quarter AFFO of $0.38 per share, slightly ahead of expectations, which also puts us above the midpoint of our revised full year guide. The combination of sequential increase in occupancy, along with the benefits from our ongoing cost reductions and portfolio management initiatives allowed us to deliver a year-over-year quarterly increase in NOI, EBITDA and AFFO dollars for the first time since Q3 of 2024.

Additionally, we are encouraged to see the year-over-year decline in economic occupancy improve progressively throughout the year. Scott will review the details of our results in a few minutes, but I'm very pleased with the improvements we've made in our internal forecasting process and how we closed out the year according to plan. Commercially, our teams continue to successfully navigate the current competitive pricing environment and deliver additional gains in both storage and handling rates for the quarter.

During 2025, we achieved our goal of generating approximately 60% of our rent and storage revenues from fixed commitment contracts. As many of you remember, this was an initiative that we launched a few years ago when less than 40% of our revenues came from fixed commits. Even though customers may reevaluate their overall space requirements, they continue to appreciate the stability and predictability that a fixed commitment contract brings as it allows them to fully leverage the space and reduce their per pallet cost by turning inventory faster.

Americold also benefits from stable cash flows given the vast majority of these contracts are for multiple years. We truly believe these agreements are a win-win for both parties and are evidence of our ability to lead the industry in commercial excellence. Operationally, we delivered services margins of nearly 14% in the fourth quarter, and our full year margin of 12.7% is up nearly 1,000 basis points over the past 2 years.

We continue to reap the benefits of our labor initiatives. And today, we have one of the best trained, engaged and highly effective workforces in the industry. Their commitment to service excellence is evidenced by our low customer churn rate, which has remained stable in the low single digits as well as the numerous customer and industry recognitions that we have received throughout the year, including Johnsonville's 3PL Summit Warehouse of the Year for our Clearfield location, and the Cold Storage Facility of the Year Award from Refrigerated & Frozen Foods Magazine for our Russellville facility.

Finally, during 2025, we also supported our customers with the delivery of 3 new expansion and development projects around the world. All of them are consistent with our strategy of focusing our investments on lower-risk developments like our Allentown expansion or creating new and innovative supply chain solutions like our Kansas City and Dubai facilities that were developed in conjunction with our strategic partners. Each of these projects was completed on time and on budget. I'm proud of these and all of our accomplishments in 2025 and the foundation they create heading into 2026.

Turning to 2026. As we outlined on last quarter's call, there are a number of demand and supply headwinds that are continuing to impact our industry. While we believe most of them are transitory, we do expect them to create continued pressure on revenue throughout the year. This is particularly evident in the forward distribution node where the industry has seen the most speculative development over the past several years. However, we are not content with waiting on a broader market recovery. And shortly after I assume the CEO role, I began a process with our management team and Board of Directors to develop a list of 5 key priorities that would further diversify our customer base, position us to take advantage of new growth opportunities and ultimately deliver shareholder value.

They set the direction for what we want to accomplish in 2026, and I'd like to review them with you now in greater detail. First, we're making meaningful progress on our initiative to delever our balance sheet. We are evaluating a variety of opportunities to achieve this goal, whether it is through a traditional REIT joint venture or selling certain nonstrategic assets. This is an important priority for the company as we are committed to maintaining our investment-grade profile. The investment-grade rating is a significant advantage in terms of both broad market access as well as cost of capital. We have seen strong interest in our assets from multiple potential investors at attractive valuations. Based on our progress so far, we believe that we'll be in a position to share additional details on this initiative with you during the first half of the year.

Our second priority is to evaluate our global portfolio of diverse real estate assets to ensure that we're maximizing profitability and getting the best and highest use of our facilities. We initiated a robust portfolio management process of low-profit facilities in 2025 and already have a track record of successfully exiting properties and reallocating customer inventory, resulting in a favorable transaction for the company. Each property is evaluated for opportunities either within our existing sales pipeline or for potential triple net lease opportunities to new or existing tenants compared to taking the property dark or pursuing an outright sale of assets that are deemed nonstrategic.

Triple net leases are an interesting opportunity as they have not traditionally been an area of focus for Americold. We believe in the current environment that this could be an attractive way to increase occupancy levels across our network with both food and nonfood customers.

Our third priority is to drive organic growth by expanding our aperture and leveraging our value proposition into new and previously underpenetrated sectors. Last quarter, I spoke about the value of having a presence at all 4 nodes of the supply chain and Americold's leadership position in providing store support solutions to some of the world's largest grocery retailers and QSR brands. This store support service is operationally intensive. However, the fast-turning nature of the business means that we're able to generate a much higher level of NOI per pallet position than any other node.

Despite our leadership position in this sector, we're still only scratching the surface as most of this business is in-sourced today. We do, however, have strong momentum behind this initiative. During 2025, we won a large fixed commitment contract in the Houston market with one of the world's largest retailers. And later in the year, we successfully expanded our retail presence into Europe for the first time with large supermarket operators in Portugal and the Netherlands.

More recently, I'm especially excited about taking our capabilities into an entirely new sector with the late December announcement of our new win with On The Run. On The Run is a well-known and fast-growing gas and convenience store chain in Australia, and our proven model of supporting more than 1,500 QSR locations across 6 major brands in Asia Pac translates seamlessly to this new sector. Some of the services we will provide include tri-temperature warehousing, high throughput pick, integrated warehouse and transport solutions and multi-vendor consolidation.

Since that initial announcement in December, we have expanded our relationship with On The Run even further to include new business wins in New South Wales and Queensland. And in total, we will be supporting nearly 600 of their locations across Australia.

As I mentioned earlier, we are only scratching the surface of what I see as the long-term potential for Americold to leverage our capabilities in this area with new and existing customers and expand into new sectors and geographies. We have a strong reputation for mastering this complex work and continue to demonstrate our ability to close these deals based on our operational expertise and deep customer relationships.

Additionally, our business development teams are out meeting with customers to identify new sales opportunities in adjacent sectors such as pet food, floral, e-commerce, pharmacy and more. We've rolled out a new program across our operations to incentivize lead generation and have already closed a couple of new deals in the floral sector. While they are admittedly small to start, we can already see that these types of products fit nicely into our well-established and proven Americold operating system. Most importantly, these wins are strong evidence of our team's ability to execute where we focus the organization's attention on delivering our key priorities.

Beyond driving organic growth, our fourth priority is to take a very disciplined approach to evaluating inorganic growth opportunities. We will continue to focus only on lower-risk developments that are customer or strategic partner-driven, and we are purposely limiting our near-term development spend until our balance sheet leverage is reduced.

Our 4 in-process developments in Port Saint John, Dallas-Fort Worth, Christchurch, New Zealand and Sydney, Australia all remain on time and on budget. We are especially looking forward to the Port Saint John grand opening later this year, which is our flagship development in Canada, creating another node in our unique end-to-end logistics solution to move food across North America. The grand opening will be held at this year's Port Days event, which is the 1-year anniversary of our initial groundbreaking.

Fifth, we continue to rightsize our cost structure and manage expenses closely. In the second half of 2025, we began executing our plan to unlock $30 million in annualized cost savings within both indirect labor and SG&A. These actions are now largely complete, giving us confidence in our ability to achieve these savings. Additionally, we expect to reduce Project Orion and transformation-related cash spend this year by approximately $50 million. In the current environment, we are continuing to closely evaluate every dollar of spend, and Scott will give further details on these initiatives when he discusses our full year guidance.

I strongly believe that these 5 priorities position us well to not only manage through some of the near-term headwinds facing our industry, but also establish a strong foundation for Americold's future growth. As I've been speaking with customers over the past several months, it's clear they remain cautious about their outlook for demand this year. Food inflation remains a top concern with many food producers reporting price growth while struggling to grow volumes on their core SKUs. However, we're encouraged to see some of our customers introducing new products and investing in innovation as a way to drive volume, which could help build safety stock. While we believe physical occupancy has largely stabilized, customers are continuing to manage their inventory tightly and closely evaluating their space requirements as contracts come up for renewal.

As you can see from our fourth quarter results, the team continues to do an excellent job of balancing occupancy and price, but we are taking a realistic view of the market and continue to believe that both will be headwinds for us in 2026. With this macro environment in mind, we are taking a pragmatic view to our outlook for the year and expect AFFO to be between $1.20 and $1.30 per share.

Now I'll turn it over to Scott to walk through some of the details.

Thanks, Rob, and good morning, everyone. Starting with our financial results. As Rob mentioned, we delivered fourth quarter AFFO per share of $0.38, which was slightly ahead of expectations. This was an increase versus the prior year, and we also saw a year-over-year increase in fourth quarter core EBITDA and total company NOI. For the full year, we delivered AFFO of $1.43 per share, which was also in line with expectations. Economic occupancy came in slightly better than expected in the fourth quarter, increasing 280 basis points sequentially, primarily due to the impact of the seasonal harvest, slightly better holiday volumes and portfolio management. Throughput decreased slightly sequentially as most inflows to build inventory occurred during the third quarter. As is typical, we have already started to see occupancy levels in January and February, consistent with normal seasonal trends.

Both storage and services revenue per pallet were positive in the quarter, with services up 2.4% as we continue to protect margin on that piece of the business and ensure that we are fairly compensated for the value that we provide to customers. Storage revenue per pallet was also up for the quarter, but at a more modest 0.3% rate, reflecting the competitive market pressures that we have mentioned on previous calls.

Turning to our fourth quarter capital markets activity. At the end of December, we entered into a new $250 million term loan with $150 million of the proceeds used to repay our U.S. revolver down to 0 and $100 million of the proceeds going to cash on hand. Subsequent to year-end, we then used $100 million of cash and $100 million of U.S. revolver borrowings to repay the $200 million Series A maturity on January 8.

At this point, I'd like to add some detail to a couple of the key priorities for 2026 that Rob reviewed earlier. First is the strategic capital raise to delever the balance sheet. Our leverage at the end of the fourth quarter was 6.8x, and we are looking to reduce it meaningfully as part of this initiative. We are evaluating a variety of opportunities to achieve this goal, whether it is through a joint venture with an equity partner or selling certain nonstrategic assets. This would help solidify our balance sheet while providing a source of funding for future growth. Given the limited number of large transactions in our space, we anticipate that this will also provide investors with additional insight into the true asset value of our mission-critical infrastructure.

As Rob mentioned, we have made meaningful progress in this area over the past several months and are seeing strong interest in our assets from multiple potential investors. We are also continuing to make great progress with our portfolio management initiative to maximize profitability, ensure the best and highest use of our expansive network of real estate assets.

During 2025, we exited our joint venture in Brazil, and we strategically exited or idled a total of 10 sites in North America. In addition to generating cash proceeds for the company, we have also removed over 22 million cubic feet of capacity for more than 65,000 pallet positions. For 2026, we have already identified a total of 9 sites that are prime candidates and 2 of these were closed in the first quarter.

As a reminder, the majority of inventory at these sites can be moved to nearby facilities, resulting in a benefit to our bottom line. This not only provides savings from a cost perspective, but it also allows us to reallocate capital to sites that are performing well. I'm proud of the results our team has already demonstrated in this area and look forward to what they will accomplish this year.

Now I'd like to take a few moments to discuss the assumptions and details behind our 2026 outlook. While we are excited about the early momentum we are seeing behind all 5 of our key priorities, we do realize that the market environment remains challenging, and it will take time to fully realize the benefits from these initiatives. Importantly, our outlook does not assume an increase in consumer demand or incorporate any transactions that have not yet been announced.

As Rob mentioned earlier, we are expecting full year 2026 AFFO between $1.20 and $1.30 per share. I would like to remind everyone that the second half of the year tends to experience higher volumes due to the impact of the agricultural harvest and a pickup in demand around the holiday season. As I mentioned earlier, we did see a slight seasonal lift in Q4 and have already seen the normal decline begin in Q1. As is typical, we are expecting first quarter AFFO to be the lowest quarter of the year with sequential increases as we progress throughout the year.

Now I'll move on to the specific components of our full year outlook. During our last call, we indicated that we expected revenue per pallet in total to be down approximately 100 to 200 basis points and economic occupancy to be flat to down by as much as 300 basis points in 2026 as the current market conditions are causing customers to reevaluate their space commitments at contract renewal. The 2026 renewals so far have followed these high-level trends as we continue to thread the needle between price and occupancy for each customer and minimize the overall impact to revenue and profitability.

As a result, we would expect to generate same-store revenue for the year of approximately $2.2 billion to $2.27 billion. For same-store NOI, we are expecting a range of between $735 million and $785 million for 2026. This reflects the continued pricing and occupancy pressure mentioned earlier, partially offset by our cost cutting and portfolio management initiatives.

As I mentioned previously, 1 of our 5 key priorities for this year is to rightsize our cost structure. As part of this initiative, we've identified opportunities to streamline our operations and eliminate $30 million worth of indirect warehouse labor and SG&A costs. These actions started in Q4 and have been largely completed, helping to offset other inflationary pressures across the business.

For total company NOI, we are expecting approximately $780 million to $845 million, which includes the impact of same-store warehouse discussed earlier in addition to our Transportation segment and non-same-store warehouses. For 2026, we expect core SG&A to be between $218 million and $228 million, which is a reduction of nearly $7 million at the midpoint. This reflects the targeted cost reductions we are making across the business, partially offset by labor inflation and other cost increases forecasted in 2026.

Additionally, as Rob mentioned, we expect to reduce Project Orion related cash spend by $50 million. While this does not impact AFFO, it does free up important additional capital for other business needs. We are expecting core EBITDA of between $570 million and $620 million for the year, reflecting the NOI and SG&A outlooks that I have already discussed.

For interest expense, we are forecasting between $170 million and $180 million for the full year. As a reminder, we have been capitalizing interest related to our ongoing development projects, which ends as projects are completed and come online. For maintenance CapEx, we are expecting to spend between $60 million and $70 million for the year, consistent with 2025 as volumes remain low and we continue with our portfolio management review process.

You will note that we have streamlined our guidance parameters to align with industry standards and allow us to focus our messaging on key drivers of performance. We expect to retain the current high level of transparency into our initiatives and quarterly results. We believe that this will ultimately enhance confidence in our forecasting ability while ensuring continued transparency and accountability. Additionally, please note that our managed segment will be consolidated in our warehouse segment for 2026, which is reflected in our guidance.

Now I'll turn the call back over to Rob for some closing remarks. Rob?

Thank you, Scott. As you heard on this morning's call, we are entering 2026 with a clear set of priorities to position Americold for future success. While we recognize that there are still challenges across the industry, we are actively generating new opportunities as well. Most importantly, we continue to service our customers with excellence, and our value proposition remains clear. Our diverse network of real estate contains many opportunities to generate revenue through multiple operating environments and our experienced management team is dedicated and focused on unlocking that value. We are one of the few cold storage owners and operators with a presence at every node of the supply chain. And when coupled with our deep customer relationships, strategic partnerships and operational excellence, this gives us a unique advantage.

We are excited about the early progress we've made on our 2026 key priorities, but I realize it will take time to reap the full benefits. I believe that we have the right strategy and the right team to drive continued momentum in these initiatives, and I look forward to reporting on our progress as we proceed throughout the year.

With that, I'll turn the call over to the operator for questions. Operator?

[Operator Instructions] Our first question is from Samir Khanal with Bank of America.

So Rob, maybe to set the tone here kind of high level, let's talk about the customer and kind of the demand side, right? I mean you talked a little bit about customer contracts that are coming up for renewal. So maybe high level, talk about kind of what you're hearing from the customer.

Thanks, Samir. Yes. I mean, obviously, tons of conversations over the last few months with a majority of our customers. And I think pretty consistently, we're hearing both in those discussions and in terms of what we see in their earnings releases that their net sales growth is relatively flattish, and that's the projection for most of 2026. Those flattish numbers are really a result of their price being up low to mid-single digits and then their volume being down low to mid-single digits. I think most, as they look out throughout the course of the year are not necessarily predicting large inflections in consumer demand. And so that's really what we've incorporated into our guidance for the year. That said, everybody knows it would be really tough for, I think -- for consumers to really stomach a lot of material price increases from here. So they're definitely focused on ways to try to grow volume. There is a lot of talk about the investments that they're going to make in their brands and the promotional dollars that have been set aside for 2026 to really try to drive some volumes on their core SKUs.

But I think probably the green shoots or the encouraging dialogue that we have with customers now are about the fact that they recognize the need to drive volume. And so they are looking at more innovation in 2026, how they really try to have some successful new product launches in 2026. And those are things that would drive safety stock. And -- all that said, while there's good dialogue about what the year could look like, we're not going to sit back and wait for that traditional business to inflect. Like we said in our prepared remarks, the BD team is out looking at new commodities, looking at new sectors that we can lean into. And probably the best example of that was the On The Run deal that we won late in the year, which is in a brand-new sector, which is the convenience store distribution.

So when you think about all the things that we're doing kind of in an idiosyncratic manner and the fact that we have our real estate team out looking at opportunities as well, I think we've got a great chance to deliver on the expectations that we put forward for the year.

Our next question is from Michael Griffin with Evercore ISI.

On the occupancy assumptions for '26, Scott, I noted in your prepared remarks, you said you expect economic occupancy to be flat to down 300 basis points. I think last quarter, the expectation was down 200 to 300 basis points, at least just looking at the transcript last quarter. So did anything change kind of quarter-over-quarter there, maybe shedding some of these underperforming assets could help boost economic occupancy. Just want to make sure I've got things lined up from an apples-to-apples perspective as it relates to economic occupancy expectations.

Sure. So I'll take that one. I mean I think you're right. I mean, so last time we talked a little bit about 200 to 300. And again, at that point, we wanted to provide some parameters. It wasn't necessarily formal guidance, but we were encouraged by what we saw in the fourth quarter, the sequential occupancy growth of 280 basis points was certainly higher than what we had originally planned. I think it's a combination of a number of things. Some of it is the portfolio management activities that we are actively in the process of executing. That helps. It's the new business sales pipeline that we talked about last year. We said a lot of that volume would be delayed a bit, and we are encouraged by the way that came in at the end of the year.

And then really the dialogue around where these contract renewals are coming in. It's based on what we've seen thus far over the last 3 or 4 months. We certainly attack those renewals far ahead of when their actual expiries are. And based on what we see now, it's a little more favorable than what we talked about last quarter.

Griff, it's Scott. Just to follow up, too, as a reminder, on Page 29 of our IR supplement, you'll see the new same-store pool that gets recast to the prior year of 2025 on a quarterly basis. So when you're building your model, just a reminder that Page 29 is the new same-store pool.

And just to clarify, are the asset sales or deleveraging expected in your '26 AFFO guidance?

They are not. No anything that hasn't been announced is not included.

Our next question is from Michael Goldsmith with UBS.

As part of your portfolio review, can you talk about your international presence? How important is the Europe and Asia geographies as part of your core business? How much synergy is there with the core U.S.? How easy would it be separate? And just what's the appetite right now to maybe streamline the geographies?

Sure. Look, yes, I mean, our international assets are both in Europe, Asia Pacific, our joint venture in the Middle East are all assets that we would say are performing well and in line with our expectations. We are doing a very thorough review of our entire portfolio, as we described previously to make sure that we feel like all of our focus and intention are on the markets and submarkets that we feel like we can win in longer term. And so we're doing an evaluation across the board of what the right portfolio is going to look like going forward. We can't get into any more specifics than that at this period of time. But as we mentioned on the -- in our prepared remarks, we're very focused on how we ensure that we can strengthen our foundation, delever our balance sheet and put ourselves in a position to grow long term. And we feel like we'll be in a position to give more details around that here in the first half of the year.

Our next question is from Craig Mailman with Citigroup.

It's Nick Joseph here with Craig. Just on the deleveraging initiative, what percentage of assets are either noncore? And what's the size of the potential JV pool that you'd be looking to do?

Yes. So I think from our perspective, the way to really think about it is we want to put ourselves in a position where we get to a leverage level that will allow us to continue to be -- have an investment-grade rated balance sheet. That is key. And so when we think about what that means, it's leverage coming down materially to 6 or below. So you can kind of do the math on what would be required to get us all the way there, but that is the focus is how do we make sure that we have a transaction that's sizable enough to meaningfully delever and maintain investment grade.

Our next question is from Greg McGinniss with Scotiabank.

I just wanted to talk about kind of expected retention on the fixed contracts expirations, 30% of the total pool of fixed contracts that's expiring. And then are these customers kind of fully stepping back from fixed contracts? Are they just paring back their requirements? Are they pushing on pricing? Any additional color would be appreciated.

Thanks for the question, Greg. Yes. So -- we've been in a tough demand environment for a while. And I got to tell you, we're very proud of the team for the way that we've kind of led the industry here in terms of fixed commitment contracts. We talked about the growth that we've seen in that over the last several quarters despite the challenging environment. We know 2026 is an outsized year for renewals. But the first point that I would make is, as I said in my prepared remarks, customers see the value of having space committed. This is mission-critical infrastructure for our customers' supply chain. So the concerns really are not around the customers not see the value from fixed commitments and are they stepping away from those entirely. That is not at all what we're seeing.

We're seeing a very high retention rate of our customers who sign up for these types of agreements. And instead, what we're seeing is more of a tightening up of the gap between physical and economic occupancy. So if a customer sign up for 20,000 pallets and they're using 12,000 instead of renewing at 20,000, they might renew at 17,000 or 15,000. That's more of what we're seeing. And so we've chopped a lot of wood. We get after these very early in terms of how the discussions in terms of how these are going to renew. And so we've incorporated the expectations for what we think will happen with these contracts into our guide of flat to down 300% or flat to down 300 basis points on economic occupancy. That's our expectation, and that is informed by what we've seen thus far in the contract renewals.

Our next question is from Todd Thomas with KeyBanc Capital Markets.

I wanted to follow up on the potential transaction or possible joint venture that you're discussing. I understand one of the primary objectives is to reduce leverage, and you also mentioned that no unannounced transaction activity is assumed in guidance. But I'm just curious how we should think about the potential earnings dilution that you might be willing to tolerate? And maybe you could just talk a little bit about that in terms of potential pricing or whether you expect to be able to transact in a non-dilutive manner, how we should start thinking about that?

Todd, it's Scott. Thanks for the question. I think at this point, we're not prepared to provide that level of detail around a potential transaction. But as was said in the prepared remarks, we will likely have more detail to come in the -- around midyear.

We're encouraged by early conversations in terms of certainly the interest and the potential valuations. And while any time you do a transaction like that, it will certainly impact kind of what our expectations are for the year. I think in the long term, it absolutely is the right path forward for us.

Okay. Maybe just following up on that. Are you expecting this to be sort of a single transaction or sort of a series of transactions throughout the first half or throughout the year?

Todd, it's Scott. At this point, we're evaluating a handful of different things, and I think it'd be better for us to comment on that around the announcement.

Our next question is from Blaine Heck with Wells Fargo.

Can you just give us your thoughts on the current supply picture and excess capacity throughout the cold storage market in the U.S., Europe and Asia and maybe in your target markets specifically?

Sure. Thanks. Certainly, where we've seen the excess supply has been largely in the U.S. So the same supply dynamics really have not been experienced in our European business or in the Asia Pac business. It's heavily concentrated in the U.S. And then further, as we've said, if we were to look kind of by the nodes, which I think is a great way to look at the business, you would see most of the incremental supply has been in the 4 distribution locations followed relatively closely by the port locations.

I think we remain consistent in the view that over the last few years, it's in excess of 15% of incremental capacity that's been added, mainly by a lot of new market entrants whose business model is to get a little bit of scale and then try to transact. And I think that business model is really not one that has come to fruition like a lot of those folks would have liked. We know from discussions that many of those new facilities with new market entrants are not performing to their original underwriting in large part because of occupancy that's just not there for them.

We, in fact, continue to see customers who have not necessarily liked the experience with some of these small new market providers coming back to Americold, which is a great sign. So I do think we are past the peak deliveries of what we've seen these last few years in terms of new capacity. Announcements have slowed down materially. There are a few new deliveries still happening this year on previously announced projects, but we're encouraged to see new announcements slow. I think a lot of folks have probably learned a lesson about what it takes to be successful in this business and why Americold is an industry leader.

And just to clarify, is that 15% of excess capacity based on square footage or cubic feet?

We would actually view it more on pallet positions.

Our next question is from Michael Carroll with RBC Capital Markets.

Scott, I wanted to circle back on your comments in the prepared remarks about COLD consolidating its business and mothballing some of the underperforming warehouses. Can you give us an idea of how many warehouses were mothballed in 2025 and what could happen in 2026? And related to that, is that the reason why the new same-store pool is dropping to 215 warehouses from the current pool of 219 warehouses?

Sure. Thanks, Mike. To answer your question around 2025, we either exit or idled approximately 10 assets in 2025. As we look to 2026, we -- as I said on the call, we had 9 identified, 2 we've already taken action around in the first quarter. And so if you want to bridge to Page 29, which is the new same-store of 215, the old same-store was 219. So the bridge there is -- let me get that exact math for you, Mike, is we're taking out 7 assets, which I just mentioned that we're taking action on in 2026. And then you add in the 3 managed assets, so that lands you at 215. So 219, minus 7, plus 3 gets you to 215. And a quick call out on the managed. The managed revenue actually will show up in the services part of that P&L on Page 29 and the pallets will show up through the throughput.

Our next question is from Michael -- Mike Mueller with [indiscernible].

Is that me?

Mike, yes. Go ahead.

Yes, yes. Okay. Sorry about that. I guess as a follow-up to that question, how material or not could the occupancy lift from selling or idling the 9 sites that you just talked about? How material could that be? And then also, like the new complementary use initiatives that you're going after, like how should we think of in terms of the occupancy lift potential coming from those -- so those two buckets there?

Yes. I mean if we thought about in the -- let me think about it in terms of the fourth quarter. So in the fourth quarter, that 280 basis point occupancy lift, really about 100 of that was related to the seasonal harvest, which is kind of what we talked about last year. You have about a 100 basis point increase from some of the portfolio management initiatives that we've been taking. And the rest, that 80 basis point increase was really from new business opportunities that kind of came to fruition in the fourth quarter. So that would be the impact for Q4. I'm not sure, quite frankly, if we haven't broken out for how to think about it in 2026.

Our next question is from Vince Tibone with Green Street.

I was hoping to unpack the non-same-store guide a little bit for NOI, which it looks like it's around $50 million at the midpoint. Just if you could kind of unpack the difference between like the transportation and managed segment, which is like about $40 million of NOI last year versus additional development leasing. What I'm really trying to get at is just how much incremental development stabilization is incorporated in the guidance? And if there's anything on that transportation line and third-party line that's any volatility there we should be aware of?

Sure. Vince, it's Scott. Thanks for the question. Let me help you bridge that. So when you look at our -- when you look at our new same-store guide, the mid is $760 million, okay? And as I mentioned, that now includes our managed NOI segment that is now getting rolled into that. So the $760 million, and again, when you're building your model, look at Page 29 of the IR supp, which shows that our updated same-store pool being recast to 2025. So the $760 million is on that same-store pool on 2029, which includes the managed, okay?

If you then think about our -- we gave you a total NOI guide at the mid, which was $813 million, okay? So $813 million is total NOI. And if you take $813 million minus $60 million, that gives you a number. But remember, trans is also in that number. If you assume trans is roughly flat at $31 million, so you take $813 million, minus $760 million, minus $31 million, gets you the non-same-store pool at the mid of around $20 million. So I'll stop there, Vince, but I just wanted to bridge that math for you.

No, that's helpful. The managed segment like we had about $9 million of NOI, that's now in the warehouse segment, correct? So it sounds like there's $20 million in whether it's the Houston acquisition last year and additional development stabilization. I just want to confirm what's in that remaining $20 million. Is that a fair categorization?

That's right -- sorry, Mike. (sic) [ Vince ]. And that squares, that's the developments that are ramping up that's the assets in the non-same-store pool, and then that's things like the Houston acquisition. All in that $20 million roughly, I quoted you $22 million, but $20 million at the mid of the non-same-store pool.

Great. If I can maybe squeeze in one follow-up. I know the focus is obviously on economic occupancy. But do you think physical occupancy has effectively bottomed here on a seasonally adjusted basis? Like on for full year, do you think you've actually see flat or even growing physical occupancy trends on a full year, full year basis?

We do, Vince. I mean we -- I think flat is the right way to think about it, but we think physical occupancy has stabilized. Our customers have rightsized their inventory to meet the current demand levels. Should there be a sustained increase in some demand, we think they'd have to increase their physical occupancy in order to meet their service requirements to the retailers, but that's not what we've assumed in our guide.

Our next question is from Nick Thillman with Baird.

Maybe following up on this cost structure and you guys eliminating some of the indirect labor associated with that. As we evaluate your North America versus just international portfolio, when you're doing this sort of review, is there any material difference as you look at like a facility level basis on how the cost structure is in those international assets and maybe the G&A overhead associated with that when you compare it to North America?

So what I would say is our European portfolio and our North America portfolio are pretty consistent. I think in terms of indirect labor, if I were to look at our Asia Pacific portfolio, we do skew a little more heavily towards retail in operations. So you're going to have probably more services revenue and more labor, both direct and indirect kind of as a percentage of revenue than what you would see in the U.S., which is more balanced between kind of pallet in, pallet out manufacturer business and retail business. From a G&A standpoint, I think as we look at our European business, given that it's not scaled yet as significantly as we have in North America or Asia Pac, you might see a slightly higher percentage there if you were looking at it as a percentage of revenue, but not major fluctuations across any of the 3 geographies, to be honest with you, besides some of those nuances, Nick.

Our next question is from Brendan Lynch with Barclays.

Maybe you can just give us some color on how you and the Board are thinking about the dividend policy given your deleveraging plans and other capital allocation considerations.

Yes. It's mission-critical for us. We -- as we've said at NAREIT and on prior calls, we want to maintain our investment-grade rating, and we want to maintain our dividend. We know how important that is. And so we're focused on capital allocation and deleveraging events that allow us to do both of those things and think about the right way to fund kind of a much more rationalized development portfolio.

Guys, I'd like to just go back over what's in the same-store and what's in the non-same-store on a go-forward basis. There's been a few questions that come in on it. So I'd like to maybe take a shot at walking everyone through it again.

If you think about -- I'd just ask you to refer to Page 29, which is our new same-store pool. What's in the new same-store pool now, we are also consolidating our managed business. Our managed business had 3 assets in it that are now part of that 215. So when you look at the same-store pool for this -- for 2025, which was 219, you remove the 7 assets I mentioned on the call and then you add back in the 3 managed assets, that gets you to the 215. When you think about the managed revenue and NOI, it shows up -- it will show up under the services revenue and services NOI on that same-store pool page on 29.

And when you think about how to get to the non-same-stool store pool number, again, we guided for the same-store at $760 million. The $760 million, as a reminder, again, includes these 3 managed assets in that NOI. We then -- if you think about the guide for the full company NOI, it was $813 million. $813 million less $760 million leaves you $53 million. But in that $53 million is also trans because that's part of our total company NOI. You assume trans flat at $31 million. You back that out and the residual is $22 million, which is our non-same-store pool bucket.

So the 3 buckets are $760 million of same-store, which now includes managed, $22 million of non-same-store pool, which is our assets ramping up in development and M&A, the one M&A deal. And then lastly, approximately $31 million in trans NOI and you add all that up, and that gets you to the $813 million at the mid of total NOI.

So hopefully, that addresses everyone's questions around that.

Thank you. With no further questions at this time, this will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Greetings, and welcome to the Americold Realty Trust Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Rich Leland. Please go ahead.

Good morning, and thank you for joining us today for Americold Realty Trust's third quarter 2025 earnings conference call. In addition to the press release distributed this morning, we have filed a supplemental financial package with additional detail on our results. These materials are available on the Investor Relations section of our website at www.americold.com.

This morning's conference call is hosted by Americold's Chief Executive Officer, Rob Chambers; and Jay Wells, our Chief Financial Officer. Management will make some prepared comments, after which we will open up the call to your questions.

Before we begin, let me remind you that management's remarks today may contain forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those anticipated. These 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. Management undertakes no obligation to update publicly any of these statements in light of new information or future events.

During this call, we will also discuss certain non-GAAP financial measures, including NOI, constant currency, net debt to pro forma core EBITDA and AFFO, among others. The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental information package available on the company's website. Please note that all warehouse financial results are in constant currency unless otherwise noted.

Now I will turn the call over to Rob for his prepared remarks.

Thank you, Rich, and thank you all for joining our third quarter 2025 earnings conference call.

Before diving into the third quarter results, I would like to congratulate George Chappelle on his well-earned retirement after a long and successful career. He originally stepped into the Americold CEO role coming out of the disruptions from COVID and outlined the 4 key priorities that you have heard us talk about on our previous calls, a focus on providing excellent service to our customers, improving the retention, training and productivity of our workforce, growing our service margins and building out a robust pipeline of attractive development opportunities.

I had the opportunity to work side-by-side with George along the way as we made significant improvements across all of these areas. They are now part of our company DNA and remain a foundational component of our strategy. Personally, I also benefited from having George as a mentor as he helped prepare me to lead Americold into the future as part of the Board's succession plan.

Over the past 2 months, I've visited several geographic regions, both domestically and internationally, connecting with our teams and reinforcing our shared values and priorities. In addition, I've spent considerable time engaging with many of our top customers and strategic partners, most of whom I've had a relationship with for many years. The strength of these relationships, combined with our global scale and presence at all key nodes in the cold chain provides us with attractive and unique future growth opportunities.

While I will continue to pursue many of the strategies we have established over the past 4 years, I believe we also have the ability to lean further into the areas of the business that we think provide the best long-term opportunities, such as growing our market share in the fast-turning retail sector, expanding our quick service restaurants or QSR business to new geographies and pursuing growth in attractive and underpenetrated markets where occupancy rates are high.

I also believe that my background and experience in logistics provides a unique perspective. Throughout my history with Americold, I have played a large role in shaping our commercial strategies and business rules. This includes pursuing longer-term fixed committed contracts, which function more like a traditional real estate lease versus transactional arrangements.

Although there is a large and important operational component to our business, our foundation is a REIT, and we benefit from the stable cash flows that come from having a large and valuable network of strategically located mission-critical assets.

As a reminder, over 80% of our assets are owned. This is a key differentiator for Americold, both from a customer perspective and in terms of long-term value creation for our shareholders.

Our customers value us for the high quality and diversification of our real estate assets. Among our top 25 customers who represent approximately 50% of our warehouse revenue, 100% of them use multiple facilities across our network with an average of 17 sites each. Most of them also store product with us in multiple nodes of the supply chain.

This is a somewhat unique advantage for Americold versus our competition as we are one of the few players in the industry that has a significant presence at all 4 nodes of the cold storage food supply chain, which includes production advantage facilities, 4 distribution sites, retail distribution centers and port facilities. This is often underappreciated by investors, so let me spend a moment describing each of these facility types in more detail, along with some of their advantages.

First is our network of production advantaged, or production attached facilities. These warehouses are located close to where food is being harvested or produced, such as Russellville, Arkansas; Sikeston, Missouri and Wichita, Kansas. They receive product directly from our customers' manufacturing facilities, and we often provide a variety of value-add services at these locations such as tempering, boxing and blast freezing before storing the product.

Because these facilities are critical to our customers' production and distribution strategies, they generally only service 1 or 2 customers, operate under long-term fixed commitment agreements and tend to have some of the highest economic occupancy rates in our network as our customers want to protect the space. These facilities also see the highest gap between physical and economic occupancy, which is expected given the value our customers get from controlling the space around their production facilities.

Given the geographic locations, longer-term agreements and higher level of customer intimacy, these relationships often last for decades, making them highly immune from speculative capacity. Our automated expansion in Russellville, Arkansas, for example, was completed in 2023 and is committed to a single customer under a 20-year agreement. This site has won numerous awards since launching and was recently named Cold Storage Facility of the Year from Refrigerated & Frozen Foods Magazine.

Production advantaged facilities today make up about 30% of our capacity and revenue, and we view them as very valuable assets in our portfolio and an attractive area for future expansion. The next node in the cold chain is 4 distribution centers. These facilities are almost exclusively multi-tenanted with product from various food producers and are typically located near large population centers in key distribution corridors such as Atlanta, Dallas, Eastern Pennsylvania, Southern California and Chicago.

This is also where the vast majority of the speculative development has been deployed over the last few years, creating more pricing competition compared to the other supply chain nodes. We estimate that over the last 4 years, approximately 3 million pallet positions have been added in North America, most of which is in this node, representing over 15% of incremental capacity.

Due to the more transactional nature of these facilities, coupled with the speculative development and pricing competition, this is where we have seen the most pressure on fixed commitment renewal levels and rates, and we expect these headwinds to continue throughout next year. About 50% of our capacity and 40% of our revenue is derived from 4 distribution centers.

Despite the excess capacity in the 4 distribution node, our strong operating platform and focus on customer service does provide Americold with a competitive advantage. One great example is our recently launched Allentown expansion, which was underwritten on strong demand from existing customers and is ramping nicely since being completed last quarter.

We have a similar development underway in Dallas, where we are building automated capacity attached to an existing conventional facility that is rail served. This is a unique value proposition that other speculative developments can't offer. And we are leveraging our existing customer relationships in the region, along with our track record of operational excellence to make this building a success.

Next, food product often leaves these 4 distribution locations many times on an Americold brokered refrigerated truck and are sent to a retail distribution center where the retailer takes ownership of the product. Product typically enters the facility on hold pallets from the manufacturer. When a grocery store needs replenishment, our teams will pick the product at the case level and the cases are then reassembled into multi-manufacturer and multi-SKU custom pallets based on the store order. The product is then staged and loaded in a way that mirrors the truck delivery route.

The vast majority of this business today is currently in-sourced by the retailer as it's operationally intensive and a missed order can result in a stock out and missed sales. This is where Americold has built a strong leadership position. We have decades-long relationships with some of the largest retailers in the world and have built a reputation for mastering this complex work, which is out of reach for most cold storage providers.

Similar to production advantage locations, these facilities typically have a single tenant and operate under longer-term agreements. Given the high services content and fast-turning nature of this business, these facilities have much higher levels of NOI per pallet position than any other node. Approximately 10% of our capacity and 20% of our revenues are retail distribution centers today, and that number is growing.

You may remember that earlier this year, we announced an acquisition in Houston to accommodate a new fixed committed win with one of the world's largest retailers. We're expanding our capabilities overseas. And last quarter, we highlighted 2 new retail wins in Europe with 2 of the largest supermarket operators in Portugal and the Netherlands.

We also have a strong presence in Australia and New Zealand and serve several customers in the retail and QSR space. Given that most of this retail business is in-sourced today, this is a great opportunity for Americold to continue to grow despite the market pressures impacting other parts of the business.

The fourth node in the cold chain is port facilities. These warehouses tend to be multi-tenanted with limited fixed commitments as product is typically only in the warehouse for a short period of time before moving to the next location. This is an area where we have also seen speculative development as ports are the next logical choice for a new market entrant after the key logistics corridors. We've seen this occur recently in markets like Jacksonville, Charleston and Savannah.

Port facilities in total are about 10% of both our capacity and our revenues today, but we're actually taking a somewhat different approach to new port opportunities and looking to leverage the expertise of our strategic partnerships that new entrants to the market aren't able to access. A great example is our development in Port Saint John in Canada, done in collaboration with CPKC and DP World.

Later this month, I'll be traveling to Dubai to further celebrate the grand opening of our import/export hub at the Port of Jebel Ali, which was also built in partnership with DP World. These world-class partnerships provide us with opportunities to build unique supply chain solutions, and we're expecting strong customer interest for both facilities.

While each node of the supply chain is mission-critical infrastructure, I hope you can see why we place particular importance in the benefits of both the plant attached and retail distribution facilities. Despite the current headwinds facing our industry, we believe our presence in these 2 nodes differentiates Americold from our competitors and provides us with potential opportunities to further expand our leadership position as the vast majority of our competitors don't have these customer relationships, network or operational expertise to capture these opportunities.

Turning to our financial results for the quarter. I'm pleased that our third quarter results were in line with our expectations, delivering AFFO per share of $0.35. Despite the ongoing industry challenges from lower consumer demand and increased supply, our teams remain focused and continues to execute very well.

We are fortunate to have 2 experienced leaders overseeing our regions. Bryan Verbarendse, who succeeded me as President of the Americas, has extensive experience in retail and wholesale grocery supply chain operations, which is instrumental to gaining additional market share in the retail distribution node of the supply chain.

Richard Winnall, our President of International, has done an excellent job of capturing new business opportunities, particularly in the QSR space, which Australia excels at. The Asia Pacific region has seen their total warehouse NOI increase by approximately 16% year-to-date and their economic occupancy is well over 90%.

The macro environment, however, remains a challenge and recent customer commentary has reinforced this view that demand remains constrained, especially with lower-income consumers.

On our last call, we detailed several headwinds that are simultaneously converging, both on the demand side as consumers continue to struggle with food inflation, elevated interest rates, tariff uncertainty and governmental benefit reductions as well as on the supply side as our industry absorbs the speculative capacity that has recently come online. We believe these factors will continue to impact pricing and occupancy throughout 2026, and we have started to see this reflected in our renewal activity over the past several months.

However, I think it is important to point out that we do believe these headwinds will be largely transitory. On the excess capacity side, for example, we have already seen a slowdown in new development announcements, and we are past the peak of new deliveries. Many of these competitors do not have a sustainable long-term business model. And some of these new market entrants have already begun to exit.

We are also not standing by waiting for conditions to improve. Our business development teams are out meeting with customers to identify new sales opportunities, while also expanding our aperture into potential new sectors, including both food and nonfood categories. We are also actively managing our real estate portfolio, exiting certain facilities, while also evaluating triple net lease arrangements to help strategically drive occupancy levels across our network.

We remain confident in the long-term trajectory of the cold storage industry. Our value proposition and assets are unique and difficult to replicate, especially in an industry that is critical to the global food supply chain. This provides an exceptional opportunity for increased shareholder value when volumes ultimately recover.

Now I'd like to turn the call over to Jay to review our financial results and outlook for the remainder of the year.

Thank you, Rob, and good morning. First, I'd like to discuss the results for the quarter, then our capital position as well as our outlook for the remainder of the year.

As Rob mentioned, third quarter AFFO per share came in at $0.35, which was in line with our expectations. Same-store economic occupancy was 75.5%, down year-over-year, reflecting the continued demand pressure that we have seen in the market and flat sequentially to the prior quarter.

Same-store throughput increased slightly sequentially from Q2, largely due to the start of the annual agricultural harvest as expected. Same-store NOI contracted from the prior quarter, primarily due to the seasonal increases in power costs, in line with our guidance, and we continue to diligently control our expenses.

While the fundamentals of the business remain pressured, the team continues to execute well. Despite the competitive pricing environment, our rent and storage revenue per economic pallet increased on both the sequential and year-over-year basis, as we continue to balance both price and occupancy.

In addition, our services revenue per throughput pallet also increased both sequentially and year-over-year. Customer churn remains in the low single digits, while rent and storage revenue from fixed commitments held steady at 60%, maintaining the record level that we achieved earlier this year.

As a reminder, we may see some quarterly fluctuations in this metric. However, 60% remains our long-term goal based on the fact that approximately 70% of our revenue comes from our top 100 customers, and most of them see the benefits of the fixed commitment contract structure.

At quarter end, net debt to pro forma core EBITDA was 6.7x with approximately $800 million of available liquidity. We remain disciplined and prudent in our capital allocation decisions, focusing on customer-driven and strategic partnership projects that are lower risk and also allow us to grow with our customers.

Our development pipeline remains strong with approximately $1 billion of attractive opportunities. However, maintaining our dividend and investment-grade profile remains a top priority, and we are balancing our development pipeline accordingly. We remain committed to our 10% to 12% ROI benchmark before committing capital to any project.

We are also continuing to make strong progress on our portfolio management initiative. We exited 3 facilities during the quarter with a target to exit an additional 3 in the near term and additional facilities under review. Most of these sites are leased and customer inventory is often moved into nearby owned locations. This is part of a robust process we have in place to review all low occupancy sites across our portfolio.

As we look to the remainder of the year, our customers continue to communicate that they are hesitant to build inventory until they see a sustained increase in demand. This aligns with the assumptions in our current guidance framework. Therefore, we are reiterating guidance for the remainder of the year.

While we believe most of the headwinds in the industry are transitory, we do expect them to create pressure on both pricing and economic occupancy in 2026. As Rob mentioned, most of the pricing pressure has been in the 4 distribution node, which is about 40% of our business and where the industry has had the most speculative developments. We anticipate that this excess capacity will be absorbed over time, and we have seen a few instances of this already, but we think it could take a couple of years for this to be fully resolved.

In the interim, we anticipate that pricing gains will moderate in the fourth quarter and could be a headwind of about 100 to 200 basis points next year.

From an occupancy standpoint, we believe physical occupancy has stabilized, but we do see some risks in economic occupancy and expect next year's contract renewals will likely be at lower space commitments as customers continue to manage inventory tightly in this low demand environment. As a result, we anticipate that total economic occupancy could decrease by approximately 200 to 300 basis points next year.

Despite these near-term headwinds, we continue to be confident in the long-term strength of the business. Cold storage revolutionized the way that people eat, and the industry is a foundational component of the end consumers' day-to-day lives. We own a portfolio of mission-critical infrastructure that is well diversified across all nodes of the cold chain, and we believe that we are the best operator in the business.

As these headwinds gradually abate, we are positioned to reap the rewards of the investments we have made over the past 2 years in labor, operational excellence, IT systems and our commercial leadership.

Now I will turn the call back over to Rob for some closing remarks.

Thanks, Jay. While the current environment presents no shortage of challenges, the strength of our management team and diversification of our real estate gives us a strong competitive advantage in the market. Our value proposition remains strong, and we are managing the business to set ourselves up for the long-term success, leaning into opportunities and finding new ways to grow.

The presence of the previously discussed headwinds does not diminish the importance and value of our operational excellence, deep customer relationships, industry expertise and mission-critical scale and diversification.

I think it is important to highlight that Americold today is trading at a significant discount to our intrinsic value, and this is supported by several different measures.

From a replacement cost perspective, it would be impossible to acquire the land and replicate the 5.5 million pallet positions in our real estate portfolio for anywhere near our current $8 billion enterprise value, not to mention the incremental value of our operating system and experienced team of associates.

We are also currently trading at a historically high cap rate of around 10%, which is unusual for a business like ours that owns mission-critical infrastructure backed by long-term agreements, fixed committed contracts with high credit quality tenants.

And finally, we have an enterprise value to EBITDA multiple that is well below valuations for most of our publicly traded industrial and commercial real estate peers. My job, along with our management team and all of our associates around the world is to operate this business to maximize the value of these assets for the benefit of our customers and shareholders, and I believe we are taking the right actions to ultimately deliver outsized earnings growth.

With that, I'll turn the call over to the operator for questions. Operator?

[Operator Instructions] And our first question comes from Samir Khanal with Bank of America.

I guess, Rob, when I look at the KPIs in the quarter, occupancy and pricing did improve sort of when you look at it year-over-year, but throughput got a little bit worse. I guess how should we think about kind of throughput over the next 12 months? And maybe sort of expand on kind of what you're seeing on the ground over the last couple of weeks?

Sure. Thanks, Samir. So yes, from a throughput perspective, I mean, I think we still hear from our customers that the same thing that they're saying on their earnings releases, which is demand is challenged, largely because of lower and middle-income consumers that are still significantly under pressure from all of the factors that I mentioned in my prepared remarks.

And so while there still should be some seasonal demand for Thanksgiving and for Christmas, it is muted. And that's largely what we had anticipated. And as we go forward into next year, we're not yet at a point where we feel like we can predict an inflection point. And so we think throughput will still be challenged as we go into next year.

What we're hearing from customers on the ground is similar to what I just described. I think you've got customers that are hesitant, to be honest with you, to build inventory in the current environment until they really see a sustained increase in demand. And so as we're going through our discussions for next year, we factored all of that into some of the foundational elements that Jay talked about on the call in terms of what our expectations are for next year.

And if you look at sequentially, last call, I did talk that we'd see a little bit of lift sequentially in throughput, which we did. And that was really driven by the start of the harvest season and us starting to see those products come into our sites. And then next quarter, you will see we have a small lift in occupancy, about 100 bps, give or take, and that's really driven by the harvest season, too. So actually, throughput sequentially came in right around where we expected it.

Got it. And then, Jay, I guess, when I look at your guidance and also all the assumptions you have there, most of the items were unchanged, but interest expense did come down. So all else being equal, I mean, we should have probably seen an increase in AFFO, but that didn't go up. So maybe provide some color around this.

Yes. Sure. If you also look, it's a little bit, there was a move in classification from other income over to interest expense. So you'll see that the other income went down a similar amount. So overall, net-net, it didn't benefit AFFO.

And our next question comes from Greg McGinniss with Deutsche Bank (sic) [ Scotiabank ] .

This is Greg McGinniss with Scotia. I appreciate your ability to kind of project the business into the back half of the year. I'm curious on the margins that you're seeing quarter-over-quarter, some margin decline year-over-year as well. What are you doing to control the cost in the business? And what are your expectations there going forward?

Sure. So on the margin side of the business, with lower occupancy and lower throughput, obviously, that's going to challenge your margins a bit and you don't get the same leverage across your fixed cost base that you like to see when volumes go the other way. But we continue to do a really good job of controlling costs.

We've been able to manage and match our direct labor to our throughput in a way that I think has really helped boost handling margins. We've delivered handling margins in excess of 12% and are on track for that, which was our goal when we came into the year and continues to be outsized relative to historical margins on that side of the business. I think that we are seeing really good progress and results out of Project Orion.

And so we're continuing to implement that across the regions and Europe will be a big beneficiary of that as we go into next year. And then every single year, we have productivity targets that we set for our operations team. We have 2 great leaders of the P&L, like I mentioned on the call, and Bryan Verbarendse and Richard Winnall, who are very skilled and experienced at driving productivity through the Americold operating system and our technology platform. So I think we're going to be able to continue to control costs in a way that will allow us to deliver margins that we're comfortable with.

And on call, I discussed, we do have a very robust process of evaluating all of our low occupancy sites. We did remove another 3 sites this quarter with more targeted. And as we continue to do that, that's also taking cost out and will help us maintain our margin levels.

Great. And I just wanted to follow-up as well on the pricing impact expected from new occupancy -- sorry, new supply delivered over the last few years. Are you -- is Americold going to need to adjust fixed commitment pricing down as those contracts expire given the supply that's hit?

Well, I think you see that reflected in our prepared remarks in terms of what Jay outlined for our expectations as we go into next year. What I'd say is the team has done a remarkable job over the last few quarters. We've been in a tough demand environment now for a while, and you've seen us be able to maintain the fixed commitment levels at that goal of 60%. You've seen growth in pricing, both on the storage and the handling side over the last several quarters.

But there are certainly some markets and some nodes. We called out the 4 distribution centers in particular, where there's pressure on both of those KPIs, both from a pricing standpoint and from a fixed commitment standpoint. So we've chopped a lot of wood in terms of getting through a lot of our contract renewals during this tough environment, but there is more to go. And in certain instances, we're seeing some of the fixed commitments get tightened up.

We generally don't see our customers moving away from fixed commitments because they do want to protect the space. They understand the value. But in instances where their physical inventory has decreased to a point where they can bring down the fixed commitment a bit, we've seen some of that, and we've planned for that in terms of some of the building blocks that we outlined in the prepared remarks.

And moving next to Michael Carroll with RBC Capital Markets.

I guess, Rob, in prior quarters, you highlighted a pretty sizable sales pipeline that reflected roughly 8% of total revenues. I know your updated guidance range has assumed that this comes online in later periods kind of pushing out to 2026. I mean is that still the case? I mean, are these customers still going to bring product into your facilities? Or has that kind of pulled back and that sales pipeline kind of got smaller over the past few quarters?

Thanks, Mike. The sales pipeline has been a bright spot. I'll tell you; we're going to have a very good sales year this year. It will be a record for us in terms of new business wins. It's definitely been slower to materialize than we had originally planned. And in some cases, a lot of these programs are not immune to the same challenges that the rest of the business has had. So as they come into Americold, they come in, in lower amounts than what were originally anticipated or contracted for.

So it's still a highlight for us. I think new business. The team has done a great job acquiring it. But in the end, we have seen some of that offset by both reductions in the base business and just traditional customer churn.

Okay. And then on the fixed commitment side, is that -- should we expect more of those contracts to be up for renewal in the beginning of the year? I mean is there kind of seasonality? Or is it kind of spread out throughout the year?

That really is spread out through the year, Mike, is the contract terms tend to be based on when they're signed. So it's contract years more than it is fiscal years. So you'll see, I would say, a relatively consistent renewal cadence throughout the course of the year versus anything outsized in one quarter or another.

Your next question comes from Michael Griffin with Evercore ISI.

Rob, I want to go back to your comments just on the fixed commits and how you're negotiating with them, realizing that maybe you're prioritizing the stability of those cash flows that we might consider traditional REIT income types, so to say. But would you say that you'd be willing to give a bit on pricing in order to secure a longer-term commit? Or maybe walk us through the push and pull of a longer fixed commit contract versus what the pricing might be there?

Yes. I mean we balance all of those things. I mean we're looking at existing profitability. We have all the tools to be able to understand what market rates are, what profitability is by activity. We have a great activity-based pricing model. And so any time you have conversations with customers about a contract renewal, there's going to be dialogue around price, around volume, around length of contract, around business across the network.

So we balance all of those things to try to make sure that we're doing the right thing to maximize the value of those agreements and ultimately be able to defend our market share, while also maintaining the appropriate level of profitability.

So there's not -- I think the most important thing to say is there's not a one-size-fits-all strategy there. You have to take each agreement kind of as they come and understand where the current profitability is and what levers you can push and pull to get the right outcome for both us and our customer.

That's some helpful context. And then maybe, Jay, you talked about the facilities that you're taking offline. What happens there from a P&L perspective? Are you capitalizing the costs associated with those facilities now? And what would be the ultimate plan for those? Would it be reposition it, sell it? Maybe walk us through that a bit.

Thanks for the question. Many of these are leases, and it really is end of lease term that we evaluate them. So overall, once we remove all the pallets from the facility, those types of costs will go below the line. They are capitalized, but they're generally pretty minimal at that point in time.

But it is predominantly lease facilities that are either being repurposed by the landlord, removed for residential purposes, so a variety of different uses. So it's mostly a small amount moves below the line when they become inactive assets, but that's only for a very short period of time.

And obviously, the benefit from our standpoint, too, beyond reducing some of the costs and eliminating some maintenance expense is the fact that you get to move a lot of the existing customers from those leased facilities into owned infrastructure, and that provides a nice benefit.

And our next question comes from Blaine Heck with Wells Fargo.

Rob, you talked about spending considerable time engaging with customers and strategic partners. Can you just talk a little bit more about what you learned on the customer side, particularly how they're thinking about cost pressures on their businesses and what impact that's having on their inventory planning versus kind of the lower demand environment that has been mentioned several times as kind of the driver of that inventory management going forward?

Sure. So I mean every customer is looking at ways, obviously, to find opportunities to be efficient as they look out and they say that demand may be softer for a longer period of time than what anybody had originally anticipated.

I think from the discussions with most of our customers, what they are really having their internal discussions and debates about are when is the right time to build inventory. This, as an example, would be the typical time of the year that you would see significant builds in inventory to support what are seasonal spikes in demand.

What is a bit of a different approach at the moment are some of our customers saying, we're going to try to manage these shorter-term or seasonal spikes in inventory with the existing product that we already have in the system. So they're hesitant to build because nobody wants to be in a position where they have excess inventory like what happened, say, 18 months to 2 years ago, where many of the food manufacturers got their workforce rebuilt and back into their production plants, overbuilt and then took a long time to bleed down that inventory because they were in an environment where the demand just wasn't there.

And so the internal conversations that most of our customers are having is looking out over the course of the next few quarters and saying, what are some of the indicators they can see to show that maybe any of the increases from a demand perspective are sustainable, and it would allow them to ultimately start building.

The other big question that a lot of our customers on the food manufacturing side are having is when is the right time to introduce new innovation, new products, new SKUs. Those are things that we very much look forward to because obviously, as you see more innovation, more SKUs, that drives incremental safety stock. So I think our customers are trying to have those conversations.

And then lastly, I would say it would be what levels of promotional activity are really going to drive volume. So all of our customers do want to continue to invest in their product. They have over the last few quarters in a variety of ways with mixed success, to be honest with you.

I think when customers have historically made the investment in their product to support promotional activities, they've probably seen better results than what they've seen over the last few quarters. And that's simply because the cost of food has gone up at such a pace that even a slight discount off of that elevated price isn't enough to stimulate demand. So those are really the 3 questions that our customers are having every day with themselves and with the retailers.

Okay. That's really helpful context. Secondly, you talked about some of the newer competition in the industry that don't have a sustainable long-term business plan. I think you mentioned some of them already exiting. I guess when do you think you see those exits really accelerating? And how much of that product is likely to be the quality and potential price that you're comfortable with and maybe an acquisition opportunity?

I mean it's certainly something that we believe will become opportunistic over time. We're just not there yet. So most of the new market entrants that have come in really thought about, okay, let's get some scale. And then I think they were potentially encouraged by a lot of the acquisition activity that have been happening going back a few years and thought that, that would be a great exit strategy. With that not in the cards at the moment, it puts a lot of pressure on that business model.

And so when you don't have the same level of, let's say, network that Americold has or you don't have the same operating system we have or the technology stack that we have, there's not a lot of levers to win new business. Prices may be one. But if you start deeply discounting space to fill up your buildings and you can't get to a point where you're at full occupancy, the P&L looks very bad. And I think that's where we are for a lot of these new market entrants.

How much and how long folks want to deal with that is certainly not our call. But we're not in a position where we're going to be bailing any of the new market operators out. And so I think we're in a position where we can sit focus on driving our business, focus on growing our relationships with customers. And over the next few quarters, as some of that maybe results in more capitulation, then we're here to listen. But at this point, we're focused on driving our business.

And moving on to Michael Goldsmith with UBS.

You talked about how it could take a couple of years for the excess capacity to be absorbed. So what are the assumptions that you're using to arrive at that conclusion? And how can you best position yourself to navigate that sort of backdrop?

Sure. So we called out in our prepared remarks that we've seen what we believe is in excess of 15% of additional capacity that has been added. And this is an industry that, for a long time, had grown more with GDP and population growth. And so if you just do that math, it would be a few years for it to be absorbed.

I think as we continue to gain market share, that certainly helps absorb some of the capacity. I think as I've said, with the business models or the business plans that a lot of these new market entrants had, if those business models don't work, and we really believe that a lot of them are struggling at the moment. That potentially accelerates the ability for Americold to play a role in absorbing some of that capacity.

And then outside of that, I think the other thing that's important to keep in mind is Americold is not standing still in this environment. We have a lot of different ways to open the aperture in terms of how we drive new business into our portfolio, which isn't just waiting for the core kind of frozen food on the manufacturer side to grow.

We're going aggressively after retail business, which is largely in-sourced. We're going aggressively after quick service restaurant business that today we play a very little role in. I think there's opportunities to look at triple net lease deals that historically we've been not as open to because we want to do both the storage and the operation. I think there are commodities outside of just food.

So there's a lot of things that we're in early stages of exploring. And I think as some of those initiatives ramp up, we'll see our own capacity fill up, and we'll see the ability to potentially take some of those capacity in the.

Appreciate that color. And my follow-up is on pricing. You're telling low occupancy facilities. Can you talk a little bit about the pricing from like low occupancy facilities is something that may be more full?

Yes. I mean it really does depend on a lot of different things. It's -- our customers signing up for commitments, are they signing up for longer-term agreements? So it can be a pretty big variety across the board. I think we understand well, given our size and our scale, what market rates are in many of the different geographies.

And so what we tried to articulate on the call was that when we look at it across the nodes of the supply chain, which we think is a great way to talk about this business, the ones that are under the most pressure are the 4 distribution locations. That's where most of the speculative capacity has been added.

And so we are being more thoughtful about the way that we defend our market share and win new business in those geographies. And the net of that is the potential outcome that Jay outlined in his prepared remarks.

And Nick Thillman with Baird has our next question.

Rob, I appreciate all the commentary on all the different nodes, but one knock that generally is put on Americold is just the age of the portfolio relative to all the new builds and optimization of networks and kind of the effect there.

I was wondering if you could break down or dig a little bit into -- you're talking about the new supply issues just broadly in the forward distribution node. But if you look at the portfolio age and you look at sort of your composition, how does that all break down? Is it pretty similar across all 4 of those? Or is it maybe a little bit more skewed one way or the other?

Yes. I don't -- to be honest with you, I don't have the numbers right off the hand. So I don't want to share anything without all the facts.

But I do want to say that the first point we would disagree with vehemently. We spend a tremendous amount of effort, dollars, time maintaining these facilities. Our buildings are world-class. They provide a great service to our customers, and they're mission critical. If anything, other than that was the case, you would see Americold losing market share, not gaining market share.

And so because we've got the team that we have in place that maintains these facilities, we're very proud of our network. It's led to Americold being able to lead the industry from commercial excellence in terms of the most fixed commitments and the pricing type gains that we've been able to achieve over the last few years. All of that is because of the mission-critical high-quality infrastructure that we have. And so we would vehemently disagree with anyone that says that the age of our network is a knock on Americold.

No, that's very helpful. And then I wanted to get your -- pick your brain a little bit on the comments. Jay, you mentioned sort of the hurdle rates for new developments. And as we look at your development schedule just over the last 3 years, haven't necessarily hit the stabilized yields yet even for like the 3-year vintage assets.

So I want to kind of pair that with Rob's comments on driving shareholder value, thoughts about -- and the discount in the stock price. I guess where does stock share repurchases kind of rank in the deployment side of things as we look at capital allocation going forward?

So let me start, and then I'll hand it off to Jay. I think when we look at our development projects, the important thing to keep in mind is that these projects largely are not immune to the macro environment that impacts the broader network.

So any time we're building a facility, whether it's dedicated or multi-tenanted, if our customers' volumes are going to -- are down, that's going to impact the current returns. We still have a very high degree of conviction that our development projects will meet our stabilized returns and underwriting. It just takes a longer period of time in this environment.

And we're very encouraged by the significant improvements that we've made in our development platform over the last few years in terms of the team that we've been able to bring in. And you see that reflected in the fact that just over the last 2 quarters, as an example, we've delivered multiple projects on time and on or under budget. So feel very good about the development platform when it comes to some other capital allocation decisions. Jay anything else?

No. I said a couple of things on my prepared remarks. Number one, we have got to provide the growth requirements for our customers for our partnerships with CPKC, with DP World. That is a must do to maintain our customer base and our great partnerships that we have.

And then second, I mentioned on the call, maintaining our dividend, maintaining our investment-grade profile our top priorities also. So really, we're balancing those 2 items in development pipeline and maintaining our dividend and our investment-grade portfolio based on our current leverage.

We'll go next to Mike Mueller with JPMorgan.

A couple of questions. So for the first one, for the 200 to 300 basis points of economic occupancy erosion for the year that you're talking about for '26, should we think of that as being ratable throughout the year or starting off worse and ending the year better, which is obviously better for '27 or just kind of vice versa?

And the second question is, I apologize if I missed this. You talked about the economic occupancy down. But for '26, is it safe to say that you're expecting year-over-year pricing to be negative as well for services and storage?

Sure. On the pricing side, yes, what we called out there is we think that it could be a headwind next year of 100 to 200 basis points. We'll continue to do our general rate increases. But when we think about what it takes on the renewal side of the equation, when we take -- think about what it takes on driving new business and defending our market share, we think when we aggregate all those things, we could see it being a potential headwind for next year. So that's on the pricing side.

And that's across both storage and services to answer your question. And then when you look on the occupancy side, it really is going to come as Rob talked throughout the year as we redo our fixed commit. So there will be some headwind to start the year, but we also have a little wrap headwind from this year.

So I would say we're not giving specifically quarterly guidance at this point on our occupancy. We feel at this point of doing our budget, very confident that the guidance I gave on the call is appropriate. But quarterly, you have a little bit of wrap because we've seen some headwinds to start this quarter and next quarter that will flow in. But hard to say exactly how to phase it throughout the year at this point.

Yes. I think the point, Mike, is we don't do annual resets of these. So it's not like, hey, on January 1, all of our contracts reset. We negotiate our agreements as they kind of come online throughout the course of the year. When we sign an agreement, that tends to -- that date that we sign the agreement tends to be the annual kind of check-in point for when we -- when contracts ultimately are renewed. So it's not on a calendar basis. It's more on a contract year basis.

Got it. So -- but that's 100 to 200 average. And if you're talking about the ratable contract, I guess, negotiations occurring throughout the year, it just seems that you would end the year possibly at a lower point than that 100 to 200. Is that a fair statement? Or am I kind of off on that?

No, no, that's not how we're thinking about it. We're not really thinking about ending next year below those -- the points that -- or the metrics that Jay called out in the script. I think the way to think about that is that's the annual impact of it.

Moving next to Todd Thomas with KeyBanc Capital Markets.

I guess I just wanted to follow up first on that line of commentary around economic occupancy. I guess, as we look at expirations over the next few years, is there a potential risk of further decreases in economic occupancy beyond 2026 if demand does not improve much in the quarters ahead or if conditions do not really pick up from here?

I mean we're really not at a point now where we're talking about anything beyond what we think is going to potentially happen in 2026. I mean you see the renewal schedule. So our agreements with the large customers. So again, 70% of our revenue comes from our top 100 customers. They tend to be the ones that sign longer-term agreements. Those agreements are anywhere between 3 and 7 years. So they average 4 to 5.

So every year, there's going to be a tranche of contracts that come up for renewal, and they're all based on what the current market conditions are at the time. So if the environment improves, we think it becomes certainly a tailwind for us. And if the environment doesn't, it could become a headwind.

And keep in mind, we have been in a difficult environment for a while now. So we've already rolled through several renewals of agreements already, and we really see next year as being really the key year to get through the predominant amount of these type of agreements in the current difficult environment.

Okay. And then, Rob, you spent some time talking about the current portfolio mix today. There was a lot of commentary sort of back and forth around some of the different nodes. And I was just wondering if you can expand your comments around that in terms of emphasizing capital deployment, whether you plan to sort of reshape the complexion of the portfolio. I guess, how should we think about the portfolio mix going forward? And are there any significant changes that we should anticipate to that mix?

So we wanted to highlight that we put particular importance on those production advantage in the retail locations because those are areas where we feel like we've established leadership positions that are very difficult for anyone else to come in and replicate.

I mean on the production advantage side, there's a tremendous amount of benefit there in terms of those agreements tend to be longer term, fixed commitments. And it takes relationships with the big key customers that have been built over decades to really get them to trust you to build or run their plant advantage or plant attached sites.

So we think there's opportunity to continue to grow at that node. Retail is also an area where we're going to lean more into. It's very opportunistic from the standpoint of the fact that most of this business is in-sourced today. And there's a moat around it because you have to have a great operating platform to be able to deliver the type of service in retail that's required from that group of customers.

So I think you'll see us probably lean more into those 2. Certainly, we're not very interested in adding speculative capacity in the 4 distribution locations right now, given what we've seen occur over the last few years.

And then even in the port facilities, we're really going to focus our efforts if we're going to grow in that node by aligning to the strategic partnerships not just adding speculative capacity, but adding capacity that's in conjunction with our 2 strategic partners that creates a value proposition and an ecosystem that nobody else can match.

And moving next to Brendan Lynch with Barclays.

Maybe just following up on that last one. Rob, in your prepared remarks, you mentioned you're considering expanding into other food and nonfood categories. Maybe you could expand upon that a bit.

Sure. So again, I mean, there are certain categories that we're already in like retail and QSR that we want to lean more into. But we do hear from our customers that there's opportunities, as an example, to co-locate some of their dry product closer to where their frozen or refrigerated products are. So we're having dialogue about that to potentially absorb some capacity.

There are other markets like floral, pharma, components that all need refrigerated that today, we essentially do-nothing in. Pet food is a fast and growing market that we view as opportunistic. So as we look at opening the aperture here to continue to drive occupancy, I think we have a lot of avenues that today, we're just dipping our toe into that could be very opportunistic and look forward to talking about more of that over the next few quarters.

Great. That's helpful. And then it looked like your power costs didn't really increase that much year-over-year in the same-store pool. Can you talk about any related risk that you see coming related to power cost increases going forward and what protections you have in place?

Yes. I think, look, on power, I think we're doing a lot to drive power costs down in the business. We have solar programs. We do a lot of the maintenance programs that we have are focused on driving down power, the LED lighting type of initiatives that we have are all focused on ways that we can take cost out. We -- some of the continued maintenance that includes the rapid open and closed doors helps to save on power.

So we've got a lot of different initiatives that drive those down. And I think the other thing that we've done a nice job of over the last few years is making sure that to the extent that we do see power increase in certain markets, that would be considered a cost change that's largely beyond our control that we would look to pass on.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.

Greetings, and welcome to the Americold Realty Trust Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, [ Rich Leland, ] Vice President of Investor Relations and Treasurer. Thank you, sir. You may begin.

Good morning. Thank you for joining us today for Americold Realty Trust's Second Quarter 2025 Earnings Conference Call. In addition to the press release distributed this morning, we have filed a supplemental financial package with additional details on our financial results which is available in the Investor Relations section on our website at www.americold.com.

This morning's conference call is hosted by Americold's Chief Executive Officer, George Chappelle; President, Rob Chambers; and Chief Financial Officer, Jay Wells. Management will make some prepared comments, after which we'll open up the call to your questions.

Before we begin, let me remind you that management's remarks today may contain forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those anticipated. These 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 these statements in light of new information or future events.

During this call, we will also discuss certain non-GAAP financial measures, including NOI, constant currency, net debt to pro forma core EBITDA and AFFO. The full definitions of these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the supplemental information package available on the company's website. Please note that all warehouse financial results are in constant currency, unless otherwise noted.

Now I will turn the call over to George.

Thank you, Rich, and thank you all for joining our second quarter 2025 earnings conference call. This morning, I will provide an update on our four key priorities, our financial results for the quarter and current market conditions. Rob will then discuss our customer service initiatives and development activity. And finally, Jay will review our capital position and liquidity and discuss our outlook for the balance of the year.

Turning to our four key priorities and financial results for the quarter. We said Q2 would look a lot like Q1 and that's exactly how it unfolded. Starting with customer service. During the quarter, Americold was recognized as a top 3PL and cold storage provider by Food Logistics Magazine. This award on is cold storage companies that are revolutionizing the global cold storage food supply chain and reliably delivering innovative and high-quality solutions throughout the world. We are honored to be recognized, and I want to thank our incredible team for their continued dedication to providing our customers with best-in-class service.

As anticipated, same-store economic occupancy declined slightly in the second quarter versus the first quarter of the year. Q2 is typically the lowest seasonal quarter of the year for us, although it is difficult to define typical in the current environment. While we are pleased with the new business wins from our sales pipeline, occupancy gains have been slow to materialize given the ongoing demand headwinds.

We recently had two new retail wins in Europe that are good examples of our strategy to expand our retail and QSR business across the globe and build on our leadership position. The profile of the retail and QSR businesses puts it near the top of our portfolio in terms of cash flow generation.

Additionally, our rent and storage revenue from fixed commit contracts came in at 60% for the quarter, reflecting the quality of our mission-critical assets and the value we deliver to the customers who occupy them.

Turning to labor. The investments we have made over the past few years in training, engagement and retention initiatives continue to pay dividends. During the quarter, our perm-to-temp hours ratio was 75-25, giving us the ability to flex labor with demand while benefiting from the enhanced productivity that comes from having a dedicated and well-trained permanent workforce. You can see this reflected in the continued growth in our same-store warehouse services margins which improved by 90 basis points year-over-year to 13.3% for the quarter. This continues to be a bright spot for the company, and we remain confident in our ability to deliver service margins in excess of 12% for the full year.

Turning to pricing. In the second quarter, our same-store rent and storage revenue per economic occupied pallets increased approximately 1% versus the prior year. And same-store services revenue per throughput pallet increased by 4%. While we expect to see continued pricing pressure across our U.S. business, the team has done an excellent job of strategically defending our market share and maintaining our pricing architecture while ensuring that we receive fair value for the critical and diverse services we provide.

We believe service and operational excellence will become an even more important differentiator for Americold in the future as customers seek to turn inventory faster in an effort to realize working capital efficiencies.

As I mentioned last quarter, Americold is a trusted and experienced operator that delivers value to customers, far beyond price per pallet position. And therefore, we are more capable of balancing price and volume versus most competitors where price is their only lever.

On the development front, we have several key projects that were completed in the second quarter, including Kansas City, our flagship development with CPKC, creating an efficient new way to move temperature-controlled products across North America; our Allentown expansion, which was driven by strong customer demand in the region; and our flagship development in Dubai in partnership with DP World. Rob will discuss these further in just a moment, but these facilities are great examples of our ability to leverage our scale, expertise and unique strategic partnerships to drive innovative new market solutions.

Turning to our financial results for the quarter. Q2 AFFO per share was $0.36. Our performance in the first half of the year has largely been on track, and the team continues to execute well. However, the combined impacts of interest rates, tariffs, inflation, government benefit reductions and excess capacity continue to pressure occupancy rates across the industry.

Based on our conversations with customers, we expect these headwinds will likely continue into the second half of the year as they remain hesitant to build inventory in an uncertain demand environment. With inventory levels low across the supply chain, we are also seeing customers taking the opportunity to leverage available capacity in their own infrastructure rather than utilizing third-party storage providers.

As a result of these continued headwinds, we are taking a more conservative view of the market for the second half of the year, removing the traditional seasonal inventory build that we had been forecasting and now expect occupancy levels to remain pressured for the balance of the year. Despite these top line challenges, the team continues to execute well on our strategic priorities, and we remain focused on controlling what we can control, including lowering costs, improving efficiencies and capturing new business.

We are also actively pursuing alternative growth opportunities, such as expanding our retail and QSR business, as I mentioned earlier, and focusing on investments in underserved geographies around the world in need of infrastructure. Additionally, because of the operating component of our business, we have more levers than a traditional REIT, and this quarter is a great example of our ability to manage the variable pieces of our business in a balanced approach to deliver AFFO results in line with expectations. This ability to manage the business tightly will be increasingly important in the second half of this year as we further adjust our cost structure to reflect the current demand levels.

Jay will discuss these changes in more detail in a moment. But first, I will turn the call over to Rob so he can discuss our development projects and customer initiatives in greater detail.

Thank you, George, and good morning, everyone. Our commercial teams continue to execute well and during the second quarter same-store rent and storage revenue per economic occupied pallet increased year-over-year by about 1%. And warehouse services revenue per throughput pallet increased by 4%. Although we continue to see some irrational pricing moves by competitors, we have the tools and visibility to thread the needle, balancing price and occupancy effectively while strategically defending our market share as appropriate.

Our rent and storage revenue from fixed commitments came in at 60% for the quarter, maintaining the record that we set in the first quarter of the year. As a reminder, we believe 60% is the appropriate long-term level for this metric given the composition of our customer base. Our top 100 customers represent approximately 70% of our total warehouse revenue, and the vast majority of these customers prefer having committed space. Balancing this with the more transactional nature of some of our smaller accounts led us to set the 60% area as our goal.

While there could be some slight variability around this level, we believe the benefits to both us and the customers are clear. Meeting end market demand is a top priority for our customers and having guaranteed space gives them the opportunity to reduce their per pallet cost as they turn more inventory, allowing them to realize cost savings. This type of arrangement is more aligned with that of a traditional real estate lease and allow them to leverage the space as they see fit. For Americold, we get the benefit of having the vast majority of our contracts commercialize with multiyear agreements and do not reset volume guarantees or rates on an annual basis.

As a reminder, fixed commitments were approximately 40% of our revenue when we started this journey and our progress over the past 4 years in transitioning our customer base to fixed commitments is a clear indication of the win-win benefits of this structure and of our team leading the industry in commercial excellence.

Within our Global Warehouse segment, we had no material changes to the composition of our top 25 customers who account for approximately 50% of our Global Warehouse revenue and our churn rate remains below 4%. While the market remains competitive, we continue to win new business and have successfully converted on over 80% of the previously announced $200 million probability-weighted sales pipeline.

The occupancy ramp for these new customers is taking longer than expected in the current environment, and the revenue benefits are somewhat muted by declines in the base business, but our overall sales pipeline remains healthy, and our wins continue to surpass where we were last year.

As George mentioned, we recently had two significant wins in the Europe region that highlight our growing leadership position in the operationally-intensive and services-heavy retail segment of the market. The first win is with one of the largest supermarket chains in Portugal to utilize our 34,000-pallet position facility in Lisbon. We will now be providing them with frozen storage space and case-picking services under a multiyear fixed commitment agreement. Like most of our retail business, we expect the inventory to turn roughly 25x per year, making this an attractive cash flow business.

The second win is with one of the largest supermarket operators in the Netherlands to utilize our 38,000-pallet position facility in Barneveld. They have ambitious growth plans over the next 5 years and will be utilizing our storage and case-picking services under a multiyear agreement with similar inventory turn expectations.

Both the Lisbon and Barneveld facilities will be operating at well over 90% occupancy as these customers ramp in the coming quarters. The international team has done an excellent job of leveraging both the Americold operating system and our retail expertise in the U.S. and Asia Pac to expand our market share in Europe with these two new customer wins.

Now I'd like to give you an overview of our development activities as we have three attractive projects that went live during the second quarter. First is our Allentown, Pennsylvania expansion, which was completed in Q2. This facility came in below budget at $79 million compared to an initial estimate of $85 million and add 37,000 pallet positions and nearly 15 million cubic feet to our network.

Allentown is an ideal location to receive imports from the Philadelphia and New Jersey ports and is the largest transportation hub in the Northeast. After the expansion, this campus will have over 100,000 pallet positions to service this key distribution market. This is an example of our low-risk customer-driven approach to expansion projects as our original facility in Allentown was approaching 100% occupancy and the project was initiated due to demand from existing customers.

I'm happy to report that we have moved the stabilization date for the building up by 2 quarters due to the high demand we experienced for this space immediately upon opening. The management team in Allentown is one of the best in the business, and I'm excited to watch them service our customers with this increased capacity.

Second is our greenfield facility developed in collaboration with CPKC in Kansas City, Missouri, which also launched at the end of Q2. This facility was originally anticipated to be $127 million and was also completed under budget at $100 million. As a reminder, this facility is North America's only single-line rail service for moving refrigerated shipments between the U.S., Canada and Mexico.

Customers of our new facility will be able to clear customs in Kansas City, bypassing the significant congestion and wait times that often occur at the border, resulting in faster delivery times, lower costs and a much more environmentally friendly alternative to traditional over-the-road solutions. Much like a retail facility, this location will specialize in high-turn cross-dock operations, a complex and demanding component of the cold storage food supply chain that Americold is uniquely suited to handle. We are already seeing high demand for this space from our customers, which gives us confidence in our ability to deliver stabilization at the end of Q1 2026, which is 3 to 6 months faster than a typical development project.

Finally, our $35 million state-of-the-art flagship build with DP World in the Port of Jebel Ali in Dubai also launched during the second quarter. This facility is 40,000 pallet positions and connects to DP World's best-in-class port logistics solutions. This development was completed through our RSA joint venture and is another great example of Americold's ability to partner with multiple market leaders to identify new opportunities through our combined expertise.

Additionally, we have several other expansion and development projects in process, all of which are on time and on budget. Domestically, we have our $150 million, 50,000 pallet position automated expansion in Dallas, Fort Worth, Texas. And internationally, we have our $30 million, 13,000 pallet position expansion in Sydney, Australia; our $34 million, 16,000 pallet position expansion in Christchurch, New Zealand; and finally, our $79 million, 22,000 pallet position development in Port Saint John, Canada in partnership with DP World and CPKC.

In May, I was honored to deliver the keynote speech at the Port Saint John Port Days event, where we also hosted a groundbreaking ceremony for our new facility. DP World and CPKC have made substantial infrastructure investments in Port Saint John, which is Canada's largest Atlantic port by volume. The market is poised for significant growth and our new world-class facility will support temperature-controlled food flows from Canada and the rest of the world.

Our building is located on the grounds of the port facility, connecting us to the DP World infrastructure and CPKC rail line to create a unique end-to-end logistics solution. For customers, this means a more efficient way to move temperature-sensitive food through the port with reduced transit times and lower costs by shifting freight from trucks to rail.

Longer term, we see this location as an important link in the supply chain ecosystem we are creating with CPKC to provide customers with an innovative and unique cold chain solution connecting Canada, the United States and Mexico. The reception of the port could not have been more welcoming and enthusiastic, and we are excited to further deepen our relationship with this location and our strategic partners.

Our Lancaster facility is ramping up aligned with our expectations, proving the effectiveness of our automated retail technology. In order to prioritize the stabilization of the Lancaster site, we have modified the stabilization date of the Plainville facility to Q2 2026. This also ensures we are fully stabilized for the ramp-up of the retail season next year.

Overall, our development pipeline remains healthy at approximately $1 billion in high-quality, low-risk opportunities aligned with our strategy to focus on our customer-dedicated new builds, customer-driven expansions and unique cold chain solutions that are supported by our strategic partnerships.

Outside of the expansion underway in Dallas, which is driven by strong demand from our existing customers, most of our projects we currently have underway are focused on our international business. We continue to pursue attractive opportunities to support our customers in several of these underserved foreign markets, particularly in Asia Pacific, where occupancy rates are high, and there has generally been less speculative development activity. We also remain focused on opportunities at the plant-adjacent and retail nodes of the cold chain where we can leverage our deep customer relationships and operational expertise in a segment of the market that is out of reach for many other cold storage providers.

With that, I'll turn the call over to Jay.

Thank you, Rob, and good morning. As George and Rob have mentioned, the teams continue to execute well despite what has otherwise been a choppy overall market environment. During the second quarter, we continued to make progress on our key operational priorities and win new business while managing the business tightly. As a result of these efforts, AFFO per share for the quarter came in at $0.36, and our first half performance has been largely in line with expectations.

However, we did not see the typical seasonal uptick in occupancy and throughput materialize in either June or July. As a result, we are further muting our outlook for the second half of the year. We now expect same-store economic occupancy levels for the year to decrease by approximately 250 to 450 basis points and same-store throughput to decrease by 1% to 4%.

Sequentially, we anticipate that throughput will lift slightly from Q2 to Q3, which will build occupancy levels modestly in Q4. As a result of these continued market headwinds, we are reducing our AFFO guidance to $1.39 to $1.45 per share.

We continue to manage the business with an emphasis on AFFO and because of the operating components of our business, we have more levers to pull than a traditional REIT. Specifically, we are taking additional actions to reduce core SG&A and rightsize our cost structure in line with the current demand environment while still ensuring we continue to provide the superb customer experience that we're known for in the industry. Additionally, we are lowering our range for maintenance capital expenditures in line with the slowdown in throughput as many of the preventive maintenance activities are based on utilization.

Despite the current economic volatility, which has impacted cold storage occupancy levels, we remain firmly focused on driving shareholder value. Based on a variety of different metrics, Americold is currently trading far below its asset value, whether you look at capitalization rates, replacement costs or on a cost per pallet basis, we have over $10 billion of critical cold storage infrastructure deployed around the world. When combined with a robust Americold operating system and our dedicated and experienced team of associates serving customers in an industry that is complex and operationally challenging, we believe that we are uniquely prepared to maximize growth when industry volumes improve.

Turning to our balance sheet. Our $400 million public bond offering closed early in the second quarter, and the proceeds of that offering were used to repay a portion of our outstanding revolver borrowings. Anticipated, we also executed the first of two 12-month extension options available under our $375 million term loan facility.

Total net debt outstanding at the end of the quarter was $3.9 billion, with total liquidity of approximately $937 million, consisting of cash on hand and revolver availability. Net debt to pro forma core EBITDA was approximately 6.3x. We currently have a number of development projects underway and as they come online and stabilize, we expect the NOI generated from these facilities will allow us to deleverage throughout 2026 as we remain committed to managing the business to an investment-grade profile.

We also continue to rationalize our portfolio and sell off underperforming or nonstrategic assets. During the second quarter, we successfully completed three planned exits of idled facilities for total cash proceeds of $20 million. As a reminder, most of the facilities we are exiting this year are leased and the majority of the customers' inventory can be relocated to nearby owned facilities resulting in an accretive transaction for the company.

We plan to exit six more facilities, including our Pleasantdale, Georgia location, which was announced in early July. Additionally, as mentioned during our last call, we exited our minority ownership interest in the SuperFrio joint venture in Brazil, resulting in approximately $28 million of cash proceeds.

We have a disciplined internal approach to capital allocation and use the same discipline to ensure that we are receiving an attractive return on our investments. We believe the actions we have taken to rationalize the portfolio so far this year will allow us to strategically redeploy capital into higher-return projects and ultimately drive future growth and shareholder value.

Now I would like to turn the call back to George for some closing remarks.

Thank you, Jay. While the external environment remains challenging from both a demand and supply perspective, we have the operating experience to manage our variable costs while still meeting customer expectations. We believe our previous investments in technology, our labor force and industry-leading commercialization position us to weather this unique environment where multiple headwinds are simultaneously converging. Americold's value proposition remains unparalleled and uncompromised, which has proven itself through our unique customer solutions, dynamic offerings, disciplined capital deployment, and versatility through multiple operating environments.

I want to thank our 13,000 associates who work tirelessly all over the world each day to make our vision a reality. Your dedication, engagement and enthusiasm are what make Americold the cold storage provider of choice around the world.

With that, I'll turn the call back to the operator for questions. Operator?

[Operator Instructions] Our first question comes from Samir Khanal with Bank of America.

I guess, George, you talked about the ability to hold pricing, but give us an idea of how competitive this environment is right now. You've kind of used the word challenging a few times here. You talked about pricing pressure. But just any color would be helpful.

I would say the storage market remains very, very competitive when it comes to pricing, and we're even still seeing some moves into irrational, to be honest. So we consider it to be under a significant amount of pressure. We expect it to remain under pressure for the balance of the year and quite frankly, until occupancy growth returns.

Customers see the value in our strong operational execution and in customer service, and that's reflected in our low churn, still under 4%, as we mentioned on the call. The value-add services we provide are a big differentiator when it comes to pricing. It makes the business very sticky, it makes it easier to get fair value for our services, and it makes it much more difficult to move the business. So that's a strong -- an asset in our portfolio in terms of defending price, but it will remain under pressure for the second half of the year, and we are seeing it intensify in some cases as we move through the second half and occupancy remains challenged.

I think, Samir, the only thing I would add is that at Americold, I mean we have developed the tools, and we have the visibility to understand on a by-service basis, customer by customer, what are our margins, our profitability, and we're using those tools. We're using that visibility that we've created to make sure that we do the right thing to balance price and occupancy so that we're doing the best thing for the business on a go-forward basis.

And I think in our guidance revision, you see we have taken the storage pricing down. We haven't taken the handling pricing down, and that's very reflective of the value-add services we provide. The stickiness that they put in the business and the fact that customers realize for many of the value-added services we provide, they get incremental value that others can't provide. So that's a strong point.

And maybe the last point on pricing is we're talking about a very U.S.-centric environment. Other geographies where we have 90-plus percent occupancy, less speculative development, investment opportunities, we're fortunate we have a global business, and it provides us opportunities around the world when one area of the world may be going through some economic pressures, others aren't. And we're fortunate to have business in those geographies that we can continue to invest in.

And I guess my second question is on fixed commits, the 60%, I think it's -- you've been taking that number up, I think it held sort of similar to that 60% range from last quarter. Can you provide color on kind of how these contracts work? Do customers have the ability to restructure these contracts, given the challenges here?

Yes, I'll ask Rob to go through the details of the contracts. They are very, very structured. And I think we lead the industry, not only in commercial excellence in general, but certainly in selling fixed committed space, not just selling, but the structure of it in a second. 60% was the target we set a couple of years ago. We said we would -- we think that's an appropriate level for the business. But I'll just remind everybody, last quarter, we also said it's not going to remain pegged at 60% quarter in and quarter out. There could be some fluctuation, particularly when we talk about the first question you asked. So I'll turn it over to Rob to talk about the structure and the outlook.

Yes, we're very pleased that we maintained the percentage at 60%. These contracts generally are structured as multiyear arrangements. They are fixed monthly fees that include a commitment on pallet positions that generally is pegged at the peak amount of space that a customer is going to need for the year. That's the key value for our customers is that it holds the space available for them during the seasonal -- the traditional seasonal peaks when they need the space the most.

They are generally multiyear agreements, anywhere between, call them 3- to 7-year agreements if you're going into existing infrastructure. They're much longer-term agreements if you're going into a dedicated infrastructure that we built on behalf of a customer, and they don't include annual volume resets. The opportunity to reset the agreement is when those contracts expire. And we've had a lot of success, as you've seen over the last couple of years, even in a challenging environment of maintaining those fixed commitment levels and increasing them over the last couple of years.

Now that we're at that 60% range, I went through in my prepared remarks, why we feel like that's the right goal. And as George said, there could be some variability quarter-to-quarter. But we continue to lead with that because it is a win-win from a selling standpoint for both us and for our customers.

Our next question comes from Steve Sakwa with Evercore ISI.

I guess we're not really surprised, George, by your commentary around cautiousness around the business and the outlook. But I guess when I look at kind of the first half results and revenue down 1.4% on a constant currency basis, to get to the low end of the revenue of minus 4%, you obviously have to have a pretty large drop in the back half of the year. And my thought was that you had, I guess, easier comps coming in. And even if you didn't get the full seasonal build, it just would be hard to see things falling off that much on the revenue side. So can you maybe just help us walk through what's really pressuring the revenue growth in the back half of the year?

Yes. I think, Steve, there's a few things suppressing revenue growth in the first -- in the back half of the year. First would be the discussion we just had around price. We talked about pricing pressure. We talked about irrational moves we see in the marketplace. And you see we have taken out pricing guide down. So that would be number one.

But number two, we're facing a very unique situation when it comes to demand. There's probably five or six headwinds right now when you think of demand, whether it's interest rates, tariffs, inflation, potential SNAP cuts, GLP-1 drugs, excess capacity. I mean any two of these, we could overcome and grow, the combination of five or six makes it very, very difficult, not only to grow, but to forecast things like occupancy and price.

So the lower end of the range is a very -- do we think we're going to get there? No, but we're guiding to the middle of the range. But price is under pressure and demand is under pressure. So we're trying to be as conservative as we can. And you're right, we thought we'd see a seasonal lift in the second half of the year, and we didn't see any. So that also factors into how we put the guidance together. So that's the outlook.

And Steve, I mean if you look at just sequentially, first half of the year to second half of the year, revenue is growing sequentially, but what we have done and reason why it's down versus prior year, we have removed any seasonality except for certain harvests that are guaranteed from our forecast. But sequentially first half to second half revenue is increasing.

Okay. And then maybe just talk -- I guess, Rob did a pretty good job walking through the development pipeline. And I guess, how are you just thinking about new capital deployment and kind of return hurdles. It seems like you had pretty good success on some of the developments bringing costs in much lower maybe what drove those substantial savings? And then how do you think about new capital commitments and kind of return hurdles on new deals going forward?

Yes. I'll just make a few comments and turn it over to Rob. We don't see an issue on return hurdles. I mean, when we deploy capital, we have to have a return that's reasonable for the risk we take. And we think the 10% to 12% is that range. Is it conceivable, we would do one under 10%? It would require special circumstances that we would communicate. But in the main, we are still going to develop to the 10% to 12% hurdle rate. And why don't you...

Yes. I mean we -- as I outlined, Steve, I mean, first of all, we're very focused on new developments being in the three core priorities that we've outlined, which we feel are the lowest risk of development types of projects. So when we're talking about customer dedicated projects, we're talking about expansions in major markets where we already know and have aggregated demand that exceeds current capacity or these strategic partnerships that are about building an ecosystem that drives tremendous value for our customers.

So future projects are really focused around those low-risk deals that we think will generate the traditional 10% to 12% return on invested capital margins that we put out there for a while now. We're very pleased with the progress of our existing developments. To have three launched this quarter, all on time and under budget is a testament to the team that we built here and our development capabilities.

We were able to bring those in under budget for a variety of reasons, a lot of enhanced procurement processes that we've talked about over the last 2 years that we've implemented through some of our operational improvements and Project Orion. We also went out and were able to secure incentives with some of the local governments that -- in the municipalities where we were building, so very favorable there. Moving up the stabilization date in a facility like Allentown is really a big win for us. So we're very pleased with the development, and we see that as a continued growth lever going forward.

And then -- and Steve, I'll just add what I mentioned earlier, which -- as a global company, we have markets right now in our portfolio where we have a significant amount of assets at 90%-plus occupancy and in a market that doesn't have a lot of speculative development that we can build today. And so there's still opportunities out there to build with customers, obviously, with our partners and expansions in markets that we know have the demand and lack the supply. That makes it attractive to invest in. So there's no shortage of opportunities, and I think the pipeline remains intact, quite frankly. It's just that many of them are not going to be in the U.S. That's all.

Our next question comes from Greg McGinniss with Scotiabank.

I just wanted to touch back on the lack of seasonal uplift. Are you able to provide some greater context around your occupancy expectations in both Q3 and Q4 and help us understand how far below prior expectations occupancy sits today?

Well, I think what we said was we don't expect any seasonality in the second half. And quite frankly, if, I mentioned on the call, Q2 looked a lot like Q1, I think that the second half is going to look a lot like the first half. Q3, I think, might be a little overstated when you think of -- that's our highest quarter for power costs, and we think power cost might be a little higher than we forecasted. However, we think the fourth quarter is a couple of pennies too low.

So in the main, we would view the first half and the second half very analogous on almost every metric. And I don't know -- Jay, I don't know if you want to add...

And really the change in our forecast for occupancy, we had talked on the last call that we were expecting a 200-bps sequential build in occupancy on seasonality. And based on how we saw July unfold where we saw no seasonal lift, we basically eliminated that 200-bps sequential improvement in occupancy from our forecast.

Okay. And then you spoke about the factors impacting demand, whether it's interest rates, tariffs, inflation, what have you. Are you -- is there anything that could get your customers more confident to be increasing inventory levels independent of those items? Or is this going to be kind of completely macroeconomic-driven, and so we really just need to see some improvement from that standpoint before the business starts to improve again?

Well, I mentioned five or six individual headwinds that are affecting -- negatively affecting demand and the fact that we could overcome one or two of them, but the combination of five or six is very, very challenging.

Some components I mentioned are transitory. So if you think of interest rates, tariffs, inflation, those are things that should improve over time. We don't know when they're going to improve. We've tried to forecast the improvement in those macroeconomic parameters. And we haven't been very successful. So as Jay mentioned, we've just removed the seasonality for the remainder of the year. But those are transitory in nature. They will improve over time. And when they improve over time, consumer demand will improve over time, and that's when we believe we'll start to see the occupancy gains.

The others are a little more longer term, but I would say the others are more surmountable. I mean excess inventory will work its way through the system over time, et cetera. So it takes some of those five metrics to improve, at least the macroeconomic ones, the transitory ones I mentioned. And then I think consumers' health improves and then I think demand improves. When that happens, I can't predict. As I said, we've tried to predict that, and we've been unsuccessful a few times.

The last thing I'll say though is that we're not standing still. I mean we're actively pursuing the alternative growth opportunities. Rob and I both mentioned in retail and QSR. We have a very unique market position there to sell these services, and we're making a lot of progress. I mentioned that's amongst the highest cash flow portfolio in our business, and we're excited to grow it.

And I also mention again, this is a very U.S.-centric problem. We have opportunities around the world that are very, very attractive to invest in and we'll turn our capital deployment probably in that direction other than the partnerships we support. But the point is our portfolio is large enough where we still have very attractive opportunities even in times like this.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

George, I think you said in your prepared comments that certain customers are integrating or taking control of their cold chain needs as opposed to utilizing third-party warehouses. Can you elaborate on that comment a little bit? Did that impact the 4% churn rate that you saw? And is there any way to sort of quantify that impact on demand? And what segment are you seeing that most prevalent in? Just curious if you could talk about that a little bit as well.

Yes. I'd say it's another factor. I'd classify it as a relatively minor factor, but many of our large customers operate a significant cold storage platform within their own company. And it's normal course of business to ensure that their own assets are full before they move product out to a 3PL. So that's not new.

What's a little bit different is they're maximizing cold storage space within their operation, which they may not normally use for storing the product they're using it for. So there's a little bit -- they're being more aggressive because, quite frankly, their balance sheet is a little stretched at the moment, and their P&L is a little stretched at the moment.

So it's slightly more aggressive behavior. I mentioned it within the context of what we're seeing in the U.S. market. I'm not saying it's a significant driver or adder to the issues we face on demand. And I would expect it to turn around very, very quickly when demand returns because the space that most manufacturers would use right now to store -- storage is not normally used for that. And once demand returns, I'm confident it will come back. But think of it as more of an indicator as to how the environment is reacting right now and less as an impact on our business.

Okay. Got it. So it sounds like as their inventory levels normalize, they'll increase capacity in their warehouses first and then look back towards third-party warehouses and operators.

Which is normal course, yes. So again, think about it as giving you more context for the environment more than a significant impact on our financials.

Understood. And then I wanted to also ask about the noncore dispositions of the planned exits. What's the buyer profile of these assets? And is it your sense that they'll continue to operate as cold storage facilities?

Most of it are leased assets. The buyer is the owner essentially. We're turning leases. We have sold a couple of assets. But Jay, I think you have the details.

Yes. No. I mean, George got it right. The bulk are just leases that we're exiting and we're able to move the inventory to an owned facility nearby. The three sales that I talked about, all very small sites, you can tell, roughly $20 million of proceeds for the three sites. One was related to actually our transportation business over in Europe and the other were just two small properties that we actually idled a while ago, and we found not -- I would say, non-cold storage type individuals to buy them.

Our next question comes from Craig Mailman with Citi.

Jay, can you just tell us what was that $5.7 million in other income?

The $5.7 million in other income, I don't normally get questions on other income on this call. But what you saw there was it was the benefit of some of the sales transactions. It was some hedging transactions that we benefited from, I would say, was the bulk of the two items in other income.

Right. And that flowed through to AFFO?

Yes, because the hedging transactions are offset higher up. So it's on different lines of the P&L that nets down to when you get to AFFO.

Okay. And then just the second question, George, I don't want to beat a dead horse here on the macro and demand, I guess, but -- I know it's a little bit early to start thinking about 2026. But when you look at the environment, and we're all trying to figure out sort of the growth algorithm for next year, outside of the developments that you have underway and potential acquisitions.

From a core perspective, I mean, are there any near-term catalysts that you guys are seeing to shift the mindset of tenants to where we would see a reacceleration of inventory restocking? Or should we just kind of think for next year baseline occupancy is -- bounces around these levels because demand doesn't improve? And then just include the benefit of maybe capital deployment as we think about kind of trying to forecast?

Well, I think that's the big question we're all asking ourselves, Craig, what does it take to spur demand. I mentioned we now have multiple headwinds to demand. It's not a single factor by any means. And it's very difficult to handicap the effect of one demand driver on a percentage basis versus another versus another. So what we know is the cumulative effect is hard to come by.

So what would have to happen is some of those drivers would have to improve. Again, we can overcome one or two of them. We can grow through one or two of them. We can't grow through four or five of them. So something would have to change.

What I can tell you, customers are trying very hard to create demand. They're spending money behind promotions. They're spending money behind incentive plans and rebates. It's not lack of trying on behalf of customers. They're just having very difficult times in finding the right price points to drive volume where they're comfortable and retailers are comfortable. So the gaps are still very wide.

So I would say, one, not for a lack of trying on our customers' [ behalf ]. But two, with all the pressures on demand, we need to see some of them improvable before we can reliably say that occupancy will improve with it.

And this is where, I think, for us as a business to have a big operating component, this is where we have the opportunity to use all the levers and the tools in our tool belt to focus on earnings per share growth even in an environment where occupancy is challenged. This is where we continue to drive productivity. We're focused on adding incremental value-added services into the business. We're focused on improving business mix by generating new business wins in the retail and QSR business that are higher cash flowing.

So our customers aren't standing still, and we certainly aren't standing still. We're pulling every lever that we have to continue to drive this business forward even in a challenged environment.

And I think the last part of the question was capital allocation. I wasn't sure the context of it, Craig. But what I will say is, we have opportunities to deploy capital, and we will in areas of the world where they're not faced with the challenges we've been talking about. Our Asia Pac business, for instance, is doing exceedingly well, it's 90-plus percent occupied. It is very retail and QSR based. So investments down there make a lot of sense.

And just making the point that with a global company, we still have very attractive areas to invest in. We have two very strong partners in CPKC and DP World, who are growing also. So a lot of those are non-demand-driven opportunities to invest in, and we intend to take full advantage of those as well.

And Craig, a follow-up on other income. As I said, part was from gain on sale, part was from other income. $2.4 million was from the SuperFrio disposition that was adjusted out of AFFO and the other was just different types of hedging unwinds that just offset line items higher up. So that's more specific numbers for you.

Our next question comes from Blaine Heck with Wells Fargo.

Just a follow-up on Todd's earlier question. Do you have any sense of how much additional capacity your customers have within their own infrastructure, just the store inventory. Is this a situation in which they're running at pretty full capacity and any incremental inventory build is going to come to you? Or do you think they have significant additional underutilized space to kind of absorb before that spills over to the third parties?

No, I don't. And again, I made that comment or context purposes in terms of where we are. But our largest manufacturing customers have their own cold storage networks in their business. It would be normal course of business to keep those 100% full at all times, at all times, right? Why would you ever, under good times or bad, pay for space when you have free space that you own. So this isn't a new thing and there's not a lot of capacity left. It's just an example of how difficult the times are to grow demand and volume.

And one anecdotal comment around the level of that pressure and how some large manufacturers are taking even more aggressive [ tactics, ] using space, they wouldn't normally use for this type of thing to do that. So again, very unusual circumstances. When demand comes back, I think that all of that inventory moves back out because they'll need that space to perform operations in their normal business to ramp up demand or ramp up production.

So it's not a big deal. It's not a headwind we're particularly concerned about, but I put it in the script and talked about it only to provide context around what is going on with demand and the pressures that are out there.

Okay. Got it. That's helpful. And George, we've been dealing with tariffs for several months at this point. Can you talk about any specific direct or indirect impacts to the business that you would attribute to the tariffs in place? And maybe any concerns about specific products or trading partners looking forward?

As we've said in the past, the direct impacts are very, very small on our business. I can't give you a particular product or category. I mean everybody knows that protein exports have been under pressure for a while now, as you said, so et cetera. But it's the indirect impacts that hurt us the most. It's the fear of inflation. It's the lack of consumer confidence. It's everything we said a month -- a quarter or so ago. The indirect impacts on overall consumer health impact our business far, far more than the direct impact of tariffs on our business. And I think that's true.

The total food business is not -- outside of exporting raw materials and importing raw materials, there's not a lot of finished goods that get sent around the world. And I think the indirect far outweigh the direct impacts on our business with respect to tariffs. But it's all noise and it's all turmoil, and it all impacts demand at the end of the day, and that's why we have it on the list.

Our next question comes from Ki Bin Kim with Truist Securities.

Going back to your second half occupancy guidance that you're calling for basically flat. I'm just curious about that because part of what drives that seasonality is the holiday season, right, the Thanksgiving, Christmas season. So -- and we're already at lower occupancy levels. So I'm just curious why there wouldn't be some type of seasonal uplift? Or do you think there might be more customer churn? Are you -- will you lose some business in the second half? I'm just trying to reconcile those statements.

Yes. I understand, Ki Bin. Second half of the year, by the way, occupancy is up because of the agricultural harvest that will occur, as Jay mentioned earlier. But if you remove those annual events, occupancy is flat. We have removed seasonality around the holidays. And we've done it because we didn't see any seasonality around the summer.

So maybe it's an overly conservative approach. We are not anticipating losing any business. We think our churn will remain well below 4%. We don't see any customer losses in the second half of the year. So it's not driven by any of that. It's driven by, we haven't seen any seasonality through the summer, and we ask ourselves the question, should we plan, should we forecast seasonality in the second half of the year? And we came to the conclusion that perhaps a conservative approach, but prudent in our opinion, is to not forecast it. It's that simple.

Okay. And just one more question on your development. So I'm looking at Page 28 of your supplemental. You have a lot of projects here that are coming online in various stages. I just want to make sure that we don't -- us, we don't double count the growth from this platform next year. And just given that you don't really show how much NOI you're already capturing in the run rate, I was wondering if you could provide some color on what the incremental NOI growth could look like here on out.

No, I mean you can look at -- these are all in our non-same-store pool. So you can see that generating minimal NOI currently. If you look at our guide, it does dip a little bit as we go into Q3 because with Kansas City coming online, with Allentown coming online, you have the start-up costs associated with starting. So overall, if you look at the stabilization date, you apply the return and you offset by the small amount of NOI you see in non-same-store. That's how I would model it.

We have reached the end of our Q&A session, which now concludes today's teleconference. You may disconnect your lines at this time. Thank you for participating.