Bain Capital. Developer Team Up to Build Refrigerated Warehouses Across US
The private-equity firm and the real estate developer say they plan to build 10 to 15 storage sites across the U.S. in the coming years
Private-equity firm Bain Capital is teaming up with real-estate developer Barber Partners LLC for a big bet on the hot market for cold storage.
Bain and Dallas-based Barber Partners have formed a joint venture aimed at spending $500 million to build 10 to 15 refrigerated warehouses across the U.S. over the next three to five years, the firms said Tuesday, with the average facility spanning roughly 300,000 square feet.
A 302,400-square-foot warehouse in Denton, Texas, will be the first project of the joint venture, called Chill Storage.
Bain is helping finance the venture and will work with Barber on the design of the sites and other aspects of the project, according to a spokesman. The firms declined to disclose how much each is contributing.
The industrial real-estate business has boomed in recent years, driven by a surge in e-commerce shopping that has pushed retailers and logistics companies to seek space close to population centers for rapid delivery to stores and homes. The refrigerated arena marks an opportunity, said David DesPrez, a director at Bain, because many cold-storage facilities are aging and traditionally have been built near production sites rather than cities.
“Compared to the rest of retail, I think any grocery is still under-penetrated from an e-commerce perspective,” Mr. DesPrez said.
Demand for local, fresh food is “a very durable trend that necessitates facilities being within that four-hour drive of growing metro areas, and we think that those metros that are growing fastest are undersupplied, so we’re hoping to deliver to those areas,” he said.
The pandemic-era surge in online grocery shopping and home deliveries has fueled strong demand for food storage, with refrigerated market leaders Lineage Logistics LLC and Americold Realty Trust building or aiming to break ground on millions of square feet of space over the past year to handle meat, produce and other perishables. Lineage has rapidly expanded its footprint in recent years, increasing its current storage capacity to 2.5 billion cubic feet currently from about 2.1 billion in March 2021, according to a company representative.
Other specialist technology companies are building highly-automated sites known as micro-fulfillment centers, in smaller spaces in cities. New York City-based Fabric last month opened a 39,000-square-foot facility in Dallas that uses the company’s robotics.
Wall Street interest in cold storage has also been heating up. In a CBRE Group Inc. survey of investors seeking alternative investment sectors, 39% said they were interested in cold storage in 2022, up from 7% in 2019, according to the real estate services firm.
Slowing online sales this year have cast doubt on the staying power of pandemic e-commerce trends, however.
Bain and Barber said they are targeting established supermarket chains and logistics operators as tenants, Mr. DesPrez said. The firms won’t operate the warehouses, as Americold and Lineage do, but will lease them to tenants, said Mr. DesPrez.
The companies are talking with potential tenants for the first facility, officials said, and working with CBRE to bring in one to three occupants per site.
“These leases are very sticky,” said Barber Chairman Patrick Barber. “Tenants tend to get into these buildings, and they don’t leave because of all of the infrastructure and everything that it takes for them to get into these buildings.”
He added that the firms’ goal is to give retailers and third-party logistics companies a more modern, high-tech offering that will make their operations more efficient.
Development will start in the southeastern U.S., then move up to the Northeast and over to the West Coast near key distribution hubs, he said.
