Table of Contents

• The $4 Billion Cold Storage IPO

• Is Real Estate Back?

• Beware the Institutions

At NOYACK Wealth Weekly, we’re excited to dive into one of the hottest sectors in commercial real estate: cold storage. ❄️

As the demand for rapid, reliable delivery of perishable goods skyrockets, the need for efficient, temperature-controlled warehouses has never been greater. This trend is reshaping the logistics landscape, and our "Smaller, Closer, Colder" strategy is at the forefront of this transformation.

Imagine ordering fresh produce, a new gadget, or your favorite meal kit and having it arrive faster than ever because the warehouse is just around the corner. 🚚🏠 That’s the future we’re building with strategically placed, smaller, temperature-controlled warehouses. By focusing on these facilities, we’re not only speeding up delivery times but also ensuring that products are stored and transported under optimal conditions, preserving their quality and freshness.

Why is this a game-changer? It's all about efficiency and sustainability. 🌱 By minimizing the distance products travel, we slash transportation costs and significantly reduce carbon emissions. 🌍 This means faster deliveries, fresher products, and a positive impact on the environment—benefits that resonate with our values. 💚

In this edition of NOYACK Wealth Weekly, we'll explore how these innovative cold storage strategies are reshaping the commercial real estate market and creating exciting investment opportunities. 🌟 

Anyone who knows me will tell you one thing…

I really like talking about cold storage. In fact, my love of talking about cold sotage make me the life of any party. Ok obviously not but we take it so seriously that its one of our prime targets our NREIT1 real estate fund!

Cold storage is exactly what it sounds like: storing perishable items at low temperatures along the supply chain in order to increase their shelf life.

I’ve been talking about cold storage for years – and there are a few reasons why I think this space is so intriguing:

• Demand for refrigerated warehouse space is rising, mostly thanks to a growing consumer preference for organic & plant-based food.  

• Existing cold storage supply is largely obsolete and not up to modern standards.

• New cold storage supply is expensive and costly to build for newcomers, creating barriers to entry.

• Massive supply& demand imbalance - our cold storage REIT - Noyack Logistics Income REIT 1 (NREIT1) has calculated that cold storage demand outstrips supply by 500% ! We hope to someday follow in Lineage’s footsteps by going public as well. Email us and we can tell you more.

In the right hands, these factors can add up to attractive returns and a fascinating specialty logistics play.

Is cold storage the flashiest play in the world? When compared to things like AI or crypto, definitely not.

But I don’t make investments to be flashy or to have something to talk about at cocktail parties – I make investments that will help me achieve my goals!

And there’s one cool reason I’m talking about cold storage today…

The $4 Billion Cold Storage IPO

Last week, the market saw one of its biggest IPOs in recent years when Lineage, a logistics REIT focused on cold storage, listed on the Nasdaq.

Here’s the transaction by the numbers:

$4 billion

The amount of cash that Lineage raised, one of the biggest IPOs since ARM last year.

57 million

The number of shares Lineage sold, exceeding expectations.

3 billion

The total cubic feet of Lineage’s cold storage, equivalent to about 81 Empire State Buildings.

The Lineage IPO is great news for cold storage as a whole. The transaction helps validate a market opportunity I’ve been discussing for years and some of the work we’ve been doing in NOYACK’s real estate funds.

But in the wake of the Lineage IPO, there’s one question I’ve been asked again and again. 

Is Real Estate Back?

It’s no secret that the real estate industry has been going through a rough patch.

In fact, over the past three years, the total return of the S&P 500 real estate index has actually been negative. 

Considering that Lineage is a real estate investment trust, I’ve had multiple conversations over the past week from people asking whether this transaction finally marks the turning point for real estate.

My answer is generally no – but not for the reasons you might think:

• People treat “real estate” like it’s one big market – but that’s not really the case at all. 

• Instead, real estate consists of a huge number of submarkets (like medical buildings, residential housing, logistics, etc…) that can move almost entirely independently of each other.

• Yes, the Lineage IPO is a good sign for logistics (and specifically the cold storage subset of logistics) – but it tells us almost nothing about the broader real estate market.

Just because Lineage had a successful IPO doesn’t mean you should toss your money into office buildings, which may never recover from remote & hybrid work trends.

There’s an old saying in real estate:

“Location, location, location.”

Which emphasizes that the value of a particular piece of real estate is hugely influenced by its physical location.

But considering how the performance of different real estate submarkets has diverged over the past few years, a more appropriate saying might be:

“Allocation, allocation, allocation.”

Which emphasizes that the prospect of a real estate investment is hugely influenced by the specific market the investment is allocated to. 

Beware the Institutions

There’s one final point I want to make on the Lineage IPO and why it makes me even more bullish on investing in logistics and cold storage.

IPOs are always institutional transactions – but this one is even more institutional than most:

• Lineage was founded by a pair of former Morgan Stanley investment bankers,

• They’ve received more than $9 billion in pre-IPO investments from major VC shops,

• And before going public the company was majority owned by a single PE firm.

In my experience, institutions have a notoriously poor track record of timing real estate markets.

Perhaps no institutional blunder is more famous than when Blackstone purchased legendary real estate investor Sam Zell’s portfolio of office buildings just before the 2008 market crash.

Real estate investor Sam Zell, no doubt chuckling at timing his Blackstone sale to perfection.

The result was that Blackstone had to wait years before the assets recovered and they were able to recoup their investment.

Here’s the bottom line: when it comes to decision-making, institutions tend to be lumbering, slow-moving players – not exactly the traits you want if you’re trying to capitalize on market trends. 

That means when institutions are buying, it might be time to think about selling (as Sam Zell did).

And when they’re selling (like offloading shares in an IPO), it might be time to think about buying.

As an old friend of mine used to put it, you need to zig when people zag and zag when people zig.

📺 WHAT WE'RE WATCHING

This interview with the two Lineage co-founders provides insight into the firm’s acquisition-led growth strategy and why cold storage is such a valuable tool in food supply chains. They also discuss how Lineage operates an asset-lite model in the capital-intensive real estate sector.

CNBC: Lineage co-founders on IPO debut

👂 WHAT WE’RE LISTENING TO

This episode of the Logistics of Logistics podcast offers a fascinating look at food supply chains through an interview with an industry expert. The discussion covers data tracking, cold storage, near shoring, and more. 

Logistics of Logistics: The Next Frontier in Food Logistics 

📖 WHAT WE’RE READING

This report from UBS takes a high-level look at the economics of cold storage, analyzing why demand is growing and how temperature-controlled supply chains can reduce perishable food loss in transportation. 

UBS: Cold: The new warm?

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