• Lineage, a cold storage industrial warehouse Real Estate Investment Trust (REIT), went public on the NASDAQ on 07/25/2024, marking the largest initial public offering (IPO) of 2024 year-to-date (YTD) and raising $4.4 billion. It was the largest IPO since ARM Holdings raised $4.8 billion in September 2023.
• The Lineage IPO is yet another illustration of how far the REIT market has broadened from the narrow perception that REITs consist primarily of commercial office buildings. With Office REITs representing only 3.2% of the total public REIT market, we remind readers that REIT stocks comprise far more potential than the negative sentiment and outlook for office properties.
• Relative to the S&P 500, REITs are cheap. On an earnings basis, the spread of REIT vs. S&P 500 is nearly 3X the post-Global Financial Crisis (GFC) average and now at a post-COVID-19 peak.
Under the Radar
Given the dramatic recent political events, the artificial intelligence hype-cycle, speculation of Federal Reserve rate cuts and the ongoing office building apocalypse, it’s easy to see how investor attention was diverted from one of the more compelling financial stories of 2024. Lineage, a cold storage industrial warehouse REIT, went public on the NASDAQ on 07/25/2024, marking the largest IPO of 2024 YTD and raising $4.4 billion. It was the largest IPO since ARM Holdings raised $4.8 billion in September 2023.
Lineage was founded in 2008 by former investment bankers who, in partnership with private equity investors, built and acquired cold storage properties which now number more than 480 facilities comprising 3 billion cubic feet across the US, Europe and Asia. They also modernized across the cold storage supply chain, integrating technology and capabilities to support logistics operations such as order and inventory management, e-commerce support and integrated transportation with the ability to better coordinate shipments to cut lead times and lower costs.
The company has capitalized on the growing consumer demand for fresh and fresh-frozen foods. In addition, cold storage and transportation are integral to many pharmaceutical distribution efforts, such as the distribution of COVID-19 vaccines during the pandemic, as the vials had to be stored and transported at very cold temperatures.
REITs are More Than Office Buildings
The Lineage IPO is yet another illustration of how far the REIT market has broadened from the narrow perception that REITs consist primarily of commercial office buildings. With Office REITs representing only 3.2% of the total public REIT market, we remind readers that REIT stocks comprise far more potential than the negative sentiment and outlook for office properties.
As illustrated nearby, the REIT market is heterogeneous, providing unique exposures to dynamic and diverse components of the economy. Sectors such as Residential, Retail, Telecommunications, Industrial, Health Care and Data Center REITs each provide significant contributions to the market cap of the REIT universe.
REITs Provide Attractive Valuations vs S&P 500
Looking beyond the Lineage IPO, REITs currently provide attractive valuations. As illustrated nearby, the spread of REIT vs. S&P 500 earnings is nearly 3X the post-GFC average and now at a post-COVID-19 peak. With much of the bad news from office REITs priced in and potential rate cuts later this year, REITs appear to be positioned for attractive returns.
Conclusion
Far from the office apocalypse and technology to enhance what is artificial, the Lineage IPO is a remarkable story of innovation, ingenuity, persistence and diligent capital allocation backed by real assets.
REITs are far more than office buildings. In our view, the negative sentiment from commercial offices that has affected the entire REIT category has been overdone.
Currently, REITs are historically cheap relative to S&P 500 earnings. The potential for lower rates, coupled with stable (and often vital) business models, strong balance sheets and an improving mergers and acquisitions / IPO environment are all constructive for compelling REIT returns.
Important Disclosures & Definitions
FTSE NAREIT All Equity REITs Index: a free-float adjusted, market capitalization-weighted index of US equity REITs. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.
Price/Funds from Operations (P/FFO) Ratio: a valuation ratio of a company's current share price compared to its per-share funds from operations.
Real Estate Investment Trust (REIT): companies that own or finance income-producing real estate across a range of property sectors. Listed REITs have characteristics of both the income potential of bonds and growth potential of stocks.
S&P 500 Index: widely regarded as the best single gauge of large-cap US equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization.
One may not invest directly in an index.
AAI000732 08/06/2025
