Participants

Kevin Reed; Vice President, Investor Relations; Americold Realty Trust Inc

George Chappelle; Chief Executive Officer, Director; Americold Realty Trust Inc

Robert Chambers; President; Americold Realty Trust Inc

Jay Wells Wells; Executive Vice President & Chief Financial Officer; Americold Realty Trust Inc

Steve Sakwa; Analyst; Evercore ISI

Mike Mueller; Analyst; JPMorgan

Blaine Heck; Analyst; Wells Fargo Securities LLC

Michael Carroll; Analyst; RBC Capital Markets

Todd Thomas; Analyst; KeyBanc Capital Markets

Nick Thillman; Analyst; Robert W. Baird & Co Inc

Greg McGinniss; Analyst; Scotiabank

Ki Bin Kim; Analyst; Truist Securities Inc

Presentation

Operator

Greetings, and welcome to the Americold Realty Trust fourth quarter 2024 earnings call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Reed, Vice President of Investor Relations. Thank you, sir. You may begin.

Kevin Reed

Good morning. Thank you for joining us today for Americold Realty Trust's fourth quarter and full year 2024 earnings conference call. In addition to the press release distributed this morning, we have filed a supplemental package with additional detail on our results, which is available in the Investor Relations section on our website at www.ir.americold.com.
This morning's conference call is hosted by Americold's Chief Executive Officer, George Chappelle; President of Americas, Rob Chambers; and Chief Financial Officer, Jay Wells. Management will make some prepared comments, after which we will open up the call to your questions.
On today's call, management's prepared remarks may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated.
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 them in light of new information or future events.
During this call, we will discuss certain non-GAAP financial measures, including, but not limited to, 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.
Now I will turn the call over to George.

George Chappelle

Thank you, Kevin, and thank you all for joining the call. This morning, I will review the key operational metrics and financial results for the fourth quarter and full year as well as provide the background and assumptions underpinning our 2025 out.
Rob will then provide an update on our recent customer initiatives and growth activity and Jay will summarize our capital position and liquidity as well as provide a detailed walk-through of our full year 2025 guidance.
Throughout the fourth quarter, we continue to control what we can control with a focus on operating efficiency, managing variable costs and providing best-in-class service to our customers. As always, we are guided by our four key priorities, and I'm pleased to review with you some of our accomplishments. Starting with customer service. We continue to provide best-in-class service through our network of automated and conventional facilities and a wide assortment of value-added warehouse service offerings.
Last quarter, our fully automated facility in Russellville, Arkansas was awarded site of the Year by [Conagra] for a flawless startup and ramp to full capacity. Additionally, our Atlanta Westgate facility was recognized as the frozen site of the year in 2024 from Kraft Heinz for providing exceptional customer service. Lastly, our Lowell, Arkansas facility was awarded Site of the Year from [Butterball] for the second consecutive year, also for exceptional customer service.
This kind of recognition is only possible through laser-focused dedication to serving our customers' needs with high-quality infrastructure, a broad array of warehouse services and a well-trained, engaged and productive workforce.
We are encouraged that same-store economic occupancy improved slightly sequentially to almost 79% in the fourth quarter. It's important to note we lapped an unusually high occupancy comp from the previous year. The takeaway here is that even with lower average occupancy in 2024, Americold was still able to grow profitably with better workforce productivity, improved revenue capture through our commercialization efforts, lower procurement costs and the technology improvements from our investment in Project Orion.
Our rent and storage revenue derived from fixed commitment storage contracts came in at approximately 59% for the quarter, a significant improvement of 680 basis points on a year-over-year basis. The breadth of our warehouse services and commitment to best-in-class award-winning customer service continues to keep Americold the leader in the industry when it comes to customers' willingness to reserve occupancy in our high-quality infrastructure.
Regarding our priorities around labor management, we maintained our perm to temp hours ratio at 75:25, which is in line with recent quarters. Associate turnover finished the quarter at 32%, maintaining a level of approximately 10% better than any time in our past. Our third metric measures the percentage of associates with less than 12 months of service and it remains at 22%, a 10% improvement from prior year.
Our workforce metrics have never been better, reflecting the investments we've made in engagement, training, communication and recognition. We manage these metrics closely across the business and share them to provide visibility into the foundation we've built to support our warehouse services business and to instill confidence in our ability to continue to grow profitably.
In 2024, we generated an incremental $125 million of same-store warehouse services NOI exceeding the $100 million commitment we made two years ago. As a result of our productivity initiatives, we also successfully grew our same-store warehouse services margins, which finished at an impressive 13%, up almost 7 percentage points from last year.
Turning to pricing. For the fourth quarter, our same-store rent and storage revenue per economically occupied pallet on a constant currency basis, increased by approximately 3% versus the prior year. And same-store services revenue per throughput pellet increased by approximately 6%. As we discussed last quarter, we expected normalization in our warehouse services pricing comps due to lapping the benefits of large renewal increases from late last year.
Moving to development. We exceeded our guide for announced starts in 2024 with our plan to build a new approximately $150 million automated expansion to an existing facility in the Dallas-Fort Worth market. We are pleased to say we just broke ground on that project in January.
To give an update on our two customer dedicated automated retail distribution facilities in Lancaster, Pennsylvania and Plainville, Connecticut, we continue to partner with our customer and remain thoughtful on our ramp schedule to ensure the long-term success of these facilities.
Based on the significant progress made, the automated facility in Pennsylvania currently has physical occupancy of 40% in building. We expect both physical occupancy and throughput to ramp as we hit stabilization in the second half of this year, and we expect Plainville to ramp up closely behind.
As a reminder, these are state-of-the-art fully automated retail facilities that support direct store delivery operations, the most operationally intensive nodes in the temperature-controlled supply chain. As a testament to our automation design and development capabilities, this quarter, our Russellville, Arkansas facility was the recipient of the 2024 built by the Best Award from the Controlled Environment Building Association.
This award is given to the most innovative and advanced building in the temperature-controlled space around the world that achieves a successful on-time and on-budget start-up. We are on it. Our automation capabilities have received such a prestigious global award. Altogether, these factors contributed to same-store NOI of approximately $204 million in the fourth quarter, an increase of 6% from prior year and fourth quarter AFFO of approximately $106 million or $0.37 per share.
Turning to our full year results. Same-store NOI grew over 11%, our second year in a row of double-digit growth. And over the past two years, we've added $120 million of AFFO, which is a 40% increase. Full year AFFO in 2024 was $1.47 per share.
Looking back on 2024, it's hard to overstate the progress we've made across our company. The successful technology go-live of Project Orion, no small feat in itself contributed meaningfully to the bottom line throughout the year.
Capital deployment accelerated as we announced attractive new developments across our portfolio and we delivered sustainable service margins that are well in excess of the 9% target we committed to just two years ago. These achievements and many others are all reflected in the 16% increase in AFFO per share we achieved versus 2023.
As we look forward into 2025, our development priorities remain unchanged with a focus on our strategic partnerships, low-risk expansions and customer dedicated developments. I'm pleased that already in 2025, we have made progress on all three of these priorities.
In January, we announced our plans to build our first import-export hub in Canada at Port St. John, New Brunswick, for approximately $79 million. This facility will be the first of its kind globally and bring together a miracle warehouse solutions with the maritime logistics capabilities of our strategic partner, DP World, and the real logistics solutions of our strategic partner, CPKC, all at a single facility.
It's important to note this isn't a demand-driven build. We are creating a greener, more efficient and reliable supply chain for the import-export of food services out of Eastern Canada, utilizing the world-class capabilities of our company and our partners.
I'm also pleased to announce that customer dedicated expansion projects, this one at our [Halen Drive] facility in Christchurch, New Zealand for approximately $34 million, which will be dedicated to one of the country's largest grocers. This is another example of a customer committing more of their business to Americold due to the quality and strategic location of our assets and exceptional customer service.
As we have stated multiple times throughout the past year, we have many attractive opportunities through our partnerships that are currently in underwriting and expect 2025 to be a year that is very active as our new development pipeline continues to exceed $1 billion.
Now on to the current market condition assumptions that are underpinning our 2025 guidance. We believe that we are seeing stabilization in the market and anticipate getting back to the more traditional seasonal trends where you see occupancy gains in the back half of the year.
For the full year 2025 within the same-store pool, we expect generally flat economic occupancy with 100 basis points increase or decrease from 2024. We expect throughput volumes to increase in the range of 100 basis points to 200 basis points from 2024.
From a pricing standpoint, we expect a normalized year of general rate increases and renewals. Operationally, we expect to see same-store warehouse services margins in excess of 12%. Given these inputs, we are guiding to a full year 2025 AFFO per share range of $1.51 to $1.59, with a midpoint of $1.55 per share. At the midpoint, this represents an approximate 5% increase from 2024.
Before I turn the call over to Rob, I would be remiss not to mention Americold's commitment to giving back and our ongoing efforts to combat hunger. Our partnership with Feed the Children is in its tenth year now and is committed to delivering resources to communities where we can have meaningful impact.
In the last 10 years, we have delivered nearly 2 million pounds of food or 1.8 million meals to approximately 650,000 families in underserved communities. We are proud of the accomplishments that we have been able to achieve in partnership with Feed the Children and look forward to continuing to make a positive impact in the future.
With that, I will turn it over to Rob.

Robert Chambers

Thank you, George. As George mentioned, our company delivered strong results during the fourth quarter to wrap up an impressive year both operationally and commercially as well as from a development perspective.
Customer service is key to growing market share in the long run, and we are proud of the recognition our customers have awarded us and the trust they put in us to operate their supply chains and protect their brands.
As our operational expertise and customer service that enables us to execute on our pricing initiatives, our activity-based pricing model ensures that we develop rates that enable us to offer pricing that both allows us to win in the market while also ensuring an appropriate margin across each of the value-added services we provide.
In the fourth quarter, same-store rent and storage revenue for economically occupied pallet on a constant currency basis increased by approximately 3% versus the prior year. Same-store constant currency services revenue for throughput pallet increased by approximately 6%. Driven by pricing put in place in the back half of 2023, coupled with general rate increases, or GRI at the beginning of 2024, along with better revenue capture and incremental value-added services.
As we mentioned earlier, given the great progress we've made in this area over the past year, we would expect pricing gains to moderate going forward. Within our Global Warehouse segment, we had no material changes to the composition of our top 25 customers who account for approximately 51% on Global Warehouse revenue on a pro forma basis. Our churn rate continues to remain low at approximately 3% of total warehouse revenues consistent with historical churn rates.
As George mentioned, we continue to be successful at increasing our fixed commitments with customers. And in the fourth quarter, rent and storage revenue derived from fixed commitment storage contracts came in at approximately 59%, a 15th straight quarterly record for Americold.
We are close to achieving our target of 60% fixed comments, but I do want to remind everyone that as we get closer to that goal, incremental increases become more difficult given the nature and structure of our client base.
Americold has established itself as the first choice for the world's largest food manufacturers and grocery retailers when it comes to their temperature-controlled supply chain. Our customers want end-to-end world-class service and to partner with a provider who could support them at every node in the supply chain. This is a major competitive advantage and uniquely positions Americold within our industry to be a cold storage provider of choice and to capitalize on our new business pipeline targeted at driving same-store occupancy.
Last quarter, we introduced a probability weighted new business pipeline that represents revenues of over $200 million and consists of growth within both existing and new customers to our portfolio. Our solutions team has been focused on proactively providing our customers with new and innovative ways to drive efficiencies into their supply chains, leveraging Americold's vast network and wide array of value-added services.
This consultative selling approach continues to resonate with our customers and positively impact the health and scale of our new business pipeline. We are encouraged by the amount of new business deals closed in the fourth quarter, and thus far in the first quarter of 2025. And as those new volumes materialize, we are confident they will have a positive impact on occupancy.
Given our strong operating metrics and our customer service excellence, we have continued to accelerate the underwriting process and evaluating development opportunities across the three primary areas of focus. Our strategic partnerships with CPKC and DP World, expansion projects at existing facilities and new customer dedicated build-to-suit developments. First, let me comment on the exciting announcement we made in late January as well as our expansion announcement today.
As George mentioned, last month, we announced plans to develop our first import-export hub in Canada at Port St. John in (inaudible) leveraging for the first time the combined capabilities of Americold, CPKC and DP World in a single location. This approximately $79 million conventional facility will provide 22,000 pallet positions in Port St. John and at 7.4 million cubic feet to our portfolio.
We expect stabilized ROIC in the 10% to 12% range. This hub will be uniquely positioned in the market, transforming supply chain efficiency and sustainability and will help customers reduce transportation costs and streamline the supply chain from production to export.
Port St. John has been the beneficiary of significant investment in recent years from both DP World and CPKC and the infrastructure they have built has attracted major global shipping lines to this location as a way to enhance food flows between Canada and global trading partners in Europe, South America and Asia Pacific. The facility will be accessible by rail and we anticipate significant customer demand based on our current pipeline. We broke ground during this quarter and expect to open the facility in Q3 2026.
Today's announcement of a new approximately $34 million conventional expansion at Christchurch, New Zealand, will support the increased demand from an existing customer of the facility. Americold has two sites in Christchurch, both operating consistently at 100% occupancy, and this expansion is necessary to support our customers' growth requirements.
The new expansion will add approximately 16,000 incremental pallet positions and is underwritten with a stabilized ROIC in the range of 10% to 12%. This expansion will be dedicated to the largest grocery retailer in the Asia PAC region.
This expansion is yet another example of our customers recognizing Americold as a cold storage provider of choice. We're proud that these two facilities will cover each of our development priorities, partnership builds, customer dedicated capacity and expansion in major markets.
In addition to these new announcements, we have five in-progress projects that all remain on track from both the timing and underwriting perspective. Three of them are scheduled to open in Q2 of 2025, including our $85 million, 37,000 pallet position expansion in Allentown, Pennsylvania; our $35 million, 40,000 pallet position Greenfield facility; flagship build with DP World in Port of Jebel Ali in Dubai and our $127 million, 22,000 pallet position, Greenfield facility, flagship build with CPKC in Kansas City, Missouri.
Our fourth in-progress development project, the $30 million, 13,000 pallet position expansion in Sydney, Australia is on track to open in Q1 of 2026. Our fifth in-progress development project are approximately $150 million automated expansion in DFW, Texas broke ground in January and remains on track to open in Q4 2026. As a reminder, this will add 50,000 pallet emissions.
These projects combined represent over $0.5 billion of growth capital, including approximately $250 million in projects with our strategic partnerships, both of which are still in the very early stages. We're proud of our ability to grow and execute, and we intend to continue to do so in 2025. Americold's customers view us as an extension of their own supply chain organization. And as they grow, we need to be there to help foster and support that growth.
This view is evidenced by our long-term committed and global nature of our relationships and decades of industry leadership we have built that level of trust. Even with the developments I spoke to earlier, our new development pipeline remains robust and still exceeds $1 billion in potential projects across our three development priorities.
With that, I will now turn it over to Jay.

Jay Wells Wells

Thank you, Rob. Today, I will discuss our capital position and liquidity and provide additional details on our 2025 guidance. First, I'll cover our balance sheet. At quarter end, total net debt outstanding was $3.4 billion, with total liquidity of approximately $922 million, consisting of cash on hand and revolver availability.
Net debt to core EBITDA was approximately 5.4 times. Investments in the expansion and development projects that Rob discussed will continue through 2025 with the Allentown, Kansas City and Dubai facilities opening during the second quarter. Please see page 26 of the IR supplement for additional details on our development projects.
Turning to our full year 2025 guidance. As George mentioned, we expect AFFO per share to be in the range of $1.51 to $1.59, with a midpoint of $1.55 per share. At the midpoint, this represents an approximate 5% increase from 2024. Before reviewing the individual components of this guidance that are set forth in the press release and on page 6 of the IR supplement let me quickly comment on the 2025 same-store pool for the Global Warehouse segment.
This pool has 226 facilities, which is approximately 97% of the total number of properties in our Warehouse segment. A summary of our 2025 same-store pool, historic performance for the full year 2024 is presented on page 28 of the IR supplement. We have seven facilities that are outside of the 2025 same-store pool.
Now turning to the individual components of our AFFO guidance and starting with our Global Warehouse segment. We expect full year 2025 same-store constant currency revenue growth to be in the range of 2% to 4%.
Let me provide more detail around the key drivers of this guide. With respect to occupancy and throughput volumes, we expect economic occupancy to be in the range of negative 100 basis points to positive 100 basis points compared to 2024 and throughput volume to increase in the range of 1% to 2%. As a reminder, we are still lapping some countercyclical build of inventory through the first half of this year and will return to a more normal seasonality trend in the back half of the year.
With respect to pricing, we expect constant currency rent and storage revenue for economic occupied pallet growth to be in the range of 1.5% to 2.5% and constant currency services revenue for throughput pallet growth to be in the range of 2.5% to 3.5%.
As a reminder, the pricing guidance reflects our expectation to see less outsized and off-cycle price increases and get back to a more normalized GRI and renewals. For the full year, our same-store constant currency NOI growth is forecasted to be in the range of 4% to 6%. The 2025 same-store pool services margins were 11.9% in 2024. And as George mentioned, we believe we can sustain service margins in excess of 12% for the full year 2025 aided by continued productivity initiatives and benefits from Project Orion.
With regard to the 2025 non-same-store pool, as can be seen on page 28 of the IR supplement, the non-same-store pool generated negative $19 million of NOI for the full year 2024. For the full year 2025, we expect the non-same-store pool to generate NOI in the range of 0 to positive $7 million.
As part of our ongoing active portfolio management process, we are strategically exiting five facilities during 2025, the majority of which are leased. The significant amount of the business in each of these facilities can be consolidated into other assets in our network, generating meaningful cost savings.
We expect to manage and Transportation segment's NOI to be in the range of $44 million to $48 million. We expect core SG&A to be in the range of $240 million to $245 million for the year, driven by incremental Q1 2025 licensing expense of approximately $4 million associated with our new Oracle SaaS environment and $3 million of labor costs previously capitalized as part of Project Orion that will now be expensed. Other incremental costs include $4 million related to employee merit increases and $6 million of incremental investment in fab security and IT transformation that will be recognized ratably throughout the year.
For the full year, we expect interest expense to be in the range of $145 million to $150 million, with approximately $19 million of interest being capitalized. For the full year, cash taxes is expected to be in the range of $8 million to $10 million and maintenance capital expenditures is expected to be in the range of $82 million to $88 million. Development starts are expected to be in the range of $200 million to $300 million.
Please keep in mind that our guidance does not include the impact of acquisitions, dispositions or capital markets activity beyond that, which has been previously announced, and please refer to our IR supplement for detail on additional assumptions embedded in this guidance.
Now let me turn the call back to George for some closing remarks.

George Chappelle

Thanks, Jay. 2024 was clearly a successful year in growing our partnerships, deploying capital on low-risk developments, enhancing our business with state-of-the-art systems and growing our warehouse services business at margin levels that were aspirational, not long ago. It's this momentum that gives us the confidence in our growth prospects for 2025.
Unlike traditional industrial REITs, we have the ability to generate unique organic profit opportunities by being a customer service focus, best-in-class operator, which we've done successfully for the past 2 years, we see nothing to change that going forward.
As always, I want to thank our associates around the world for their professionalism and hard work every day. It's your dedication that gives our customers the confidence that Americold will be there to support their current operations and future growth. Thank you again for joining us today, and we will now open the call for your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Steve Sakwa, Evercore ISI.

Steve Sakwa

Yes. Thanks. Good morning, George. I guess I wanted to come back to the occupancy target. You talked kind of minus 100 to plus 100. I know that was a challenging area in '24. I just trying to reconcile that outlook with kind of the spread between economic occupancy and physical occupancy, which seem to deteriorate between '23 and '24. And the commentary that you're getting from kind of the major food manufacturers about their growth in product and how you sort of assess that risk moving forward?

George Chappelle

Yes. Thanks, Steve. As you see our guide is flat, right? We're guiding to 0 improvement in economic occupancy over the year. It does say though that we do expect stabilization in the sense that we're back to seasonal trends, meaning that the first half of the year will be lower than the second half of the year.
When I speak to the gap between economic and physical occupancy, let me turn that over to Rob, but you can expect the gap to increase as we increase fixed commits, right? It's the nature of what a fixed commit is, a customer is reserving space for future seasonal use. So to go a little deeper on that, why don't you do that, Rob?

Robert Chambers

Yes. We don't see the gap between physical and economic occupancy being a big concern, to be honest with you. We've -- first of all, we've been in a tough environment for a while, and we've had 15 straight quarters now, growing our fixed commitments. We're very close to our publicly stated goal of being in the 60% range. And as George mentioned, as we sell more fixed commitments that gap does naturally widen a bit just because of the seasonal nature of the business.
And I think in the end, while maybe 10% sounds like a big gap at a macro level. If you think about it from a customer perspective, if you're a customer and you're reserving, call it, 20,000 pallet positions in our network, and you're utilizing 18 of the 20,000 pallets, that's a very comfortable buffer to operate your business. So it's pretty normal there. And I don't think that the gap between physical and economic is a concern in our view.

Steve Sakwa

Okay. Great. Thanks. And maybe, George, just to follow up on the service margin. I think you said it would maybe be better than 12%, but you've clearly demonstrated a great improvement here. Project Orion seems to be working well. I guess how conservative is that margin? And where do you ultimately think that margin can go over the next kind of one year to three years?

George Chappelle

Yes. Well, Steve, the first effect on the same-store pool as we recast the same-store pool 2025 pool in 2024 terms. And the services margins, when you do that are actually a little bit below 12%. If you do that math, and I think Jay explained that in his portion of the script. So we're starting from a little lower base when you take that into account. So greater than 12% is actually expanding those margins from where we are today.
Is it conservative? We've been beating it pretty consistently, but at the beginning of the year, it's difficult to know exactly where we will land. We know we'll be in excess of 12%. A lot depends on business mix. A lot depends on throughput volume, which we're guiding up this year. So I'd say it might be on the conservative side. But in this environment, as you know, things are changing pretty quickly. And what we do know is we can be 12%, and that's why we made the commitment in our guide.

Operator

Mike Mueller, JPMorgan.

Mike Mueller

Yeah. I guess what specifically are you hearing from customers that make you think that you're on the cusp of normalization? And as you look at the spectrum of customers, is it really being driven by one segment versus another?

George Chappelle

I don't think it's driven by one segment versus another, Mike. I think that the lower inventory we're seeing at the moment is very, very low. We're seeing throughput tick up a little bit, which means that activity is picking up a little bit. We're guiding to higher throughput as you see.
So I think it's just what we've gone through over the last two years and where we sit today, we feel like that we're stabilized, as we said in the script. And to that point, we feel like the second half of the year will go back to normal seasonal trends and be higher than the first half. So that indicates that we believe at least for this year, the bottom is in the first half of the year.
So it's been a long process over the last 24 months to get to where we are now. And we think we are at the point where seasonality finally takes over from builds of inventory that weren't driven by demand or weren't seasonal. So that's a positive, albeit off a lower base.

Jay Wells Wells

No. I think one thing we showed is even in this environment and this lower base, we show the ability to grow profitability. And we're just managing what we can control through this environment, and we'll continue to grow the bottom line through it.

Mike Mueller

Got it. And just following up on occupancies. What's your best sense today as to what more normalized physical and economic occupancy ranges should be compared to what you're expecting for this year?

George Chappelle

I can't really comment on that, Mike. As I said, the last two years on occupancy have been pretty challenging. And I don't think anybody could predict the future. We view it as flat year-over-year, but back to a seasonal trend off a lower base. And to me, that's a positive because it speaks to normalization and then we can grow from that point. But predicting occupancy at this point, I think anybody would have a problem doing that.

Jay Wells Wells

But I think long-range goal. I mean, we've always said mid-80s -- it's the target, and we still feel that's achievable. Rob talks about the very good pipeline of new business we're working on, and we're actually feel that even in this environment, we can, in the end, grow our occupancy. It's really just lapping -- still a little bit of a countercyclical inventory build that I talked about previously, that was built to 2023. We see a little bit to lap at the beginning of this year. But once we lap that, we feel with where the consumer is today, we can build with our business development team on top of that.

George Chappelle

Yes. My comments were more in near term. But longer term, we don't see any impact on the business in terms of our goals for occupancy, our goals for 85% or even higher percentage points. We said we could even get into the low 90s. So those are all achievable over the long run, and we believe in the long run, we'll get to those numbers. But short term, were the comments I made referring to.

Operator

Blaine Heck, Wells Fargo.

Blaine Heck

Great. Thanks. Good morning. George, I appreciate your commentary on the expected timing of a return to normal seasonality in the back half of the year. But I guess following up on that, what do you think we need to see specifically to ensure that happens and what signals should we be looking for?
Is it all about interest rates and inflation moderating, spurring stronger consumption. I guess, how does inventory rationalization amongst your tenants playing into the softer conditions. And are there any other kind of major industry dynamics that need to improve. And I guess what should we be monitoring before you think we can see that? And is that more of an inflection in operations and occupancy?

George Chappelle

Yes, Blaine, I think the number 1 activity that is going to drive occupancy in the second half of the year is something we mentioned on the previous call, Rob mentioned on the previous call with his sales initiatives. We have targets out there to drive occupancy in the second half of the year that we know we're making great progress on right now. And I'll ask Rob to comment on that in just a second.
But the reason we also believe the seasonal trend is there, if we look at our customers' holdings right now, it's clear they're low enough that they have to build to hit even any incremental demand when we hit summer grilling season, holidays, et cetera, et cetera.
So inventory levels we're at now, our customers would have to build, we believe, at least nominally to get to service the second half of the year. But coming back to the sales initiative we talked about last year, let me ask Rob to comment on a little bit.

Robert Chambers

Sure. Yes, we'd love to see, obviously, the overall base, (inaudible) but in the absence of some of that in the short term, we're focused on winning new business. And that new business comes from market share gains. It comes from going to customers who have in-sourced business historically over time and provided showing them the value of outsourcing to Americold and we're having a lot of success doing that.
We're very encouraged by the progress around our new business sales, particularly deals closed in the fourth quarter and thus far in the first quarter of this year. And when we look at it year-over-year, we're actually significantly ahead as it relates to new business deals closed over the last, call it, four months to six months, compared to where we were at this point a year ago. So we're making a lot of progress there. It will take a little bit of time for those volumes to materialize, and that's what we've shown in our guide of back half improvement around occupancy.

Blaine Heck

Great. That's helpful. And then second question, just clearly, the new administration is off to a quick start with rhetoric and potential action in the future on the tariff side and also on deportation. Can you talk a little bit more about how each of those could impact your business? And whether you have any data? Or can you give any color on what your exposure is to imported goods versus those that are domestically sourced?

George Chappelle

It's clearly the imported goods component of our business, sorry, is a very low percentage in the overall business. So I'm not terribly concerned about that. I think a lot of the impacts of tariffs right now are still a little bit hard to predict. There's a lot of movement back and forth. And I'm sure you know that as well as I do. So I'm not sure what the long-term impact will be. I suspect it will be less than we believe it will be today.
But also, we think there's a positive in this for some of our other operations. For instance, if you look at our plans from Mexico, we're designing a cheaper, more reliable solution to move goods between the US and Mexico. And that should be a benefit if the cost of tariffs actually get in place should be -- you'll have a cheaper way to get product to and from the US. So there could be a -- we believe, a tailwind to some of this with some of the things we're doing with CPKC, for instance.

Operator

Michael Carroll, RBC Capital Markets.

Michael Carroll

Yeah, thanks. Rob, can you provide some more color on the probability weighted new business pipeline that you mentioned in your prepared remarks. And also, can you kind of help us quantify this $200 million-plus of opportunities? I mean it sounds like that's roughly 8% of the current run rate -- revenue run rate. And is that the right way to think about it?

Robert Chambers

Sure. So when we think about that probability-weighted pipeline. So our -- when we say probability weighted, what we mean is $200 million, in terms of a total pipeline, it's actually much larger than that. That's the $200 million is when we put a probability against those opportunities, what we think we can close over time. That is higher. That $200 million is higher than what we've seen over the past couple of years. So our pipeline of new opportunities has been growing.
As I just mentioned, what we're very encouraged by is the fact that our close rate or our win rate around those opportunities is climbing now as compared to a year ago. So when we think about the maturity, when we think about the probability of the pipeline and those deals actually closing and materializing, it's going up year-over-year, and that's great.
So I think when we look at the quality of the opportunities, a lot of them are longer-term deals, they're fixed commitments. They're around -- they're in sectors like retail and others that are a bit idiosyncratic to Americold. So we're very encouraged by it, and we think that it's going to be a big part of the reason why we see occupancy gains in the back half of the year.

Jay Wells Wells

And keep in mind that the retail wins comes with a much higher turn business, too. So it benefits the throughput of numbers that we're guiding to, too, because we are bringing on customers retail QSR focus that just has more throughput as part of the business we do with them.

Michael Carroll

Okay. And it sounds like that $200 million-plus reflects roughly 8% of current warehouse revenues, mean should we think about that being offset by the typical 3% to 4% turn rate. So net-net, I should think about this adding 4% net revenue growth?

Robert Chambers

Yes. I think so you're right there, Mike, from the standpoint of we kind of break things down into three buckets, right? We say what's happening with the base business is the base going up or down? And then what do we win? And meaning what are we four on the top and what do we lose meaning what comes out of the bottom.
Our goal every year, obviously, is to win more than we lose. Our churn rate in terms of what's left the portfolio has been very constant over the last few years at 3%, and so to the extent that we're successful in closing that new business pipeline, it should net to positive occupancy, which is what we're -- what we think is going to happen in the second half.

Operator

Todd Thomas, KeyBanc Capital Markets.

Todd Thomas

Hi, thanks. Good morning. I just wanted to follow up on that point, I guess. I mean, it sounds like the new business pipeline is solid and that you're still assuming around the 3% (inaudible). But I was just curious if you could speak a little bit more to the lease expirations in '25, also '26. I didn't see that detail in the supplement this quarter, but as of last quarter, it was around 13.5%, expiring in '25, a little over 16% in '26. Can you just speak a little bit about what the expectations are on expirations?

Robert Chambers

Sure. Yes, that's right. We wouldn't consider either one of those kind of percentages outsized compared to typical years. As we said, our average contracts were a length for customers that are in existing infrastructure tends to be in that three year to seven year range. So anywhere between 15% and 25% of the business kind of rolls on an annualized basis. And we have a very high renewal rate as evidenced by that low churn rate.
And nothing's changed over the course of the last couple of years. We continue to be very successful renewing those agreements. We expect to do the exact same. The conversations are very constructive with customers at the moment about renewing. And I would continue to point to the fact that 15 straight quarters now, not only have we -- has that churn rate stay consistent, but we've been growing that fixed commitment percentage does get a bit harder now that we're close to the 60% goal. But the structure of the agreements, the term of the agreements, the fixed and committed nature of them, we would expect to continue even as we get into these renewal conversations.

Todd Thomas

Okay. And then I think there were some comments in the prepared remarks. I think, Jay, you may have mentioned some -- made some comments around five facilities that you are consolidating during the year. Can you just speak to that a little bit more and provide some more detail around those actions and how you're transitioning operations out of those facilities into other warehouses and also describe what the impact is expected to be on the model during the year and maybe how we should think about that on sort of an annual run rate?

Jay Wells Wells

Yes. Let me start and you can fill in the gaps, Rob. So yes, as I mentioned, they're primarily lease facilities that are at the end of the release. Scott Henderson is doing a good job managing our portfolio. And these were underperforming properties where we have other buildings that are owned next to or close to, so ease of moving product, so when leases come up, rents go up.
If they're underutilized facilities that we can move the inventory cut cost, avoid the lease increases and move it into own facilities. That's what we want to do. We want to run our business on our own facilities and some leases are coming up, and we're taking advantage to put the inventory and own facilities and save the cost and avoid any potential increases in rent.

George Chappelle

Yes. I would say this is just good portfolio management, right? If you've got two facilities and you're in the environment where we're in and one is leased, one is owned, you can consolidate, it's just a smart move, which is going to take certain advantages in times like these to manage our portfolio in a way that creates more NOI for us.
And I think Jay made the comment earlier that we can make money in almost any environment. We've proven that over the last two years, we can grow margins in almost any environment through productivity and other things. In this environment, one of the other things we can do is manage our portfolio a little better. And that's what we're doing, and that will also contribute to the bottom line.

Operator

Nick Thillman, Baird.

Nick Thillman

Hey, good morning, guys. Maybe touching a little bit more, Rob, on the new business sort of pipeline. I know at the end of last year, you're commenting on less aggressively pricing sort of new business versus customers in the box. Has that kind of spurred the demand that you've been seeing? Has it really been a more cost-conscious sort of customer? And then maybe along those lines, it seems as though most of that mix is just market share gains, but maybe you could comment if there's any sort of new business that you're seeing as well?

Robert Chambers

Sure. Yes. So I think to the first question, it's a number of factors, right? So certainly, we have an activity-based pricing model that also reflects current market demand. And so we are certainly pricing the business to reflect the current market, and that helps spur some demand, which I think is very helpful and contributes to our pricing guide for the year.
But also when you think about our value proposition, I mean from an operations standpoint, as George talked about, we've never been operating better than we are today, our customers recognize that, and we mentioned a few of the public recognition that has been awarded to us that we're very proud of. And so that leads to market share gains.
And so we're seeing a number of reasons contributing to the success we're having from a new business acquisition standpoint. And some of it beyond just market share gains is going to customers, being able to talk to them about the benefit of outsourcing to Americold and we're seeing some customers that have historically done the business on their own outsourcing to us.
And as I mentioned, an area that's probably particularly biased towards that is retail. And so we're having a lot of success growing that sector of our business, which over the last couple of years, has been one of the fastest growing. And there's a bit of a moat around that because that is very operationally intensive, but it -- there's benefits associated that with throughput and turns. And so because we have a proven track record of being successful there, we're seeing more and more customers in that sector be looking to Americold to provide that service.

Nick Thillman

That's helpful. And then maybe, Jay, just flushing out some of the seasonality in your assumptions. It sounds as though occupancy is going to be down year-on-year in the first half, potentially some build in the second half, and that's going to be partially offset by more service revenue per pallet as you've kind of price that you're lapping that in the first half of the year. Is that kind of the right way to think about those two components?

Jay Wells Wells

No. I think you have it right. Again, we talked a lot last year about the 2023 build and that a little bit was still on our books to start last year. So we're going to be lapping that. On top of that, just pure seasonality. That's the part of the that go down to (inaudible) have two things affecting that. But we'll definitely be recovering that in the back half of the year.
And then on top of that, we are seeing as we move through the year, positive trends on throughput, as Rob discussed, the overall mix of our business becoming more and more retail, which does drive increased throughput.

Operator

Greg McGinniss, Scotiabank.

Greg McGinniss

Hey, good morning. Just looking to the development pipeline, could you touch on the relative attractiveness and expected returns for (inaudible) versus customer expansion versus tapping into the strategic partnerships and then the relative size of each of those components in the $1 billion-plus pipeline?

George Chappelle

Yes. We've always said in the past that we believe that the combination of CPKC strategic partnership and our strategic partners with DP World combined with over $1 billion worth of development. Rob in his section of the script describes progress we've already made against that $1 billion opportunity. And obviously, by the size of what's outstanding, there's more opportunity outside of our partnerships.
All of them our underwriting is geared to a 10% to 12% return. We don't vary the return based on size of the building, based on segment, et cetera. So that's a standard in our underwriting that we would take a very unique situation for us to not underwrite to, so unique. It hasn't happened in the last couple of years. So that's a standard that likely will remain.
And every opportunity is different, right? I mean if you look at Port St. John, which we just announced, the size of that facility is different, and the scope of that facility is different than the one we're building in Jebel Ali outside of Dubai. So each opportunity is unique.
The consistency that we underwrite to the 10% to 12% return, but the opportunities are unique because every business we look at, whether it's the same company in a different geography or [50] different companies, the requirements change pretty dramatically based on where the buildings are and what they're tasked to do.

Robert Chambers

And one thing I would add to that, that we're very encouraged by the fact that when you look at the current development projects, just as an example, that are in the ground. And as we mentioned, there's over $0.5 billion of growth capital in the ground at the moment. They cover all three of those priorities. So we have expansions in major markets. We have customer dedicated capacity that's being added. Obviously, we have over $0.25 billion in partnership builds in the ground.
There -- in any way you cut the pipeline they're international projects, projects domestically, they are automated projects and projects conventionally. So regardless of how you segment our pipeline, there are opportunities in every one of those segments.

Greg McGinniss

Thanks. And just a follow-up on Port St. John. Could you give some color in terms of how that deal came to include two of your strategic partners? Who approached who? And are there more opportunities for this kind of collaboration?

George Chappelle

It's a good question. It was a very unique set of circumstances. I mean it's essentially a DP World project that just so happens to have a railhead right at the Port of St. John owned by CPKC and created a very unique situation where we could take the capabilities of both companies combine them with ours and create what I think is going to be one of our most successful customer on builds and solutions.
So it was, I would say, fortuitous. Are there other opportunities, there are. There's -- the West Coast of the US is one where that might be another opportunity. Other areas in North America are potentials. But it's not necessarily a stated goal to combine CPKC and DP World opportunities. We don't view it that way. But when the opportunity exists, we're not blind to it. And this is a very encouraging first step.

Robert Chambers

And one of the areas that made this opportunity stand out, in particular, with the investment that DP World has made, that CPKC has made, that the Canadian government has made in this location, literally hundreds of millions of dollars have been spent to make Port St. John at a destination port, and it just made sense that Americold will be there as well. We're seeing a lot of customer demand early out of the gate right post our announcement. And so this is going to be a great project for us, and we expect to continue to do more in the future.

Operator

Ki Bin Kim, Truist Securities.

Ki Bin Kim

Thank you. Good morning. So going back to your guidance for non-same-store NOI of [0 to $7 million] in 2025, just help me understand that a little better because you have a lot of projects that are nearing stabilization, development pipeline. But I would have thought it would be much higher than [0 to 7], maybe there are some others that could be tracking. So maybe you could help us understand that better?

Jay Wells Wells

I'll cover that one and George or Rob, if you want. If you look at our Lancaster facility and PA, that's due for stabilization end of Q3. So you're going to see a full benefit roll through in Q4. Up in Connecticut, stabilization at the end of Q4. So really not even seeing a full quarter benefit of that, you'll really see that in Q1 of next year.
That's being offset by our Kansas City facility coming online. Our Allentown facility come online because at first until they get the sufficient throughput through that new capacity, they run a bit of a loss to start up, but they ramp up quickly as they get to stabilization also to offset it.
So you're seeing the normal profitability roll in when the two retail facilities come online and hit stabilization, but there's the timing of it. So we'll get full year benefits of both of those next year, but then you're seeing a little bit of an offset as those two other facilities come online at the end of Q2 and are ramping through the back half of the year.

George Chappelle

Yes. I think that's the story. It's just the individual timing of ramp-ups of very large developments. That's all in, I think, as Jay said very well by the time we get to next year, we're in full run rate mode.

Ki Bin Kim

Okay. And this is just a comment, but I'm not sure if there's competitive reasons why you wouldn't want to show like occupancy on these projects, but that would be helpful to people modelling it. And the second question, can you just talk about the yields of 10% to 12%, as I understand it, for your development metrics.
It doesn't include the cost of land, I understand like for the St. John project, maybe one of your partners contributed to the land, so maybe it doesn't matter for that particular project. But just overall, if you did include the cost of land, how much impact does that have on the 10% to 12% yield projection?

Jay Wells Wells

Well, I'll cover that one to start off with that. I mean you look at if we are buying land to do a project, we do include it in the cost base, if we are renting the land as part of it, we include the rent in our models. So -- or we're just expanding the existing land that we've already paid for and included in the previous model. So that's how we look at it.
But if we do own the land and include it, we don't include it. But if you want to say how much would affect it, -- and last year in the middle of Sydney, Australia, it's not a major part of the cost and would not significantly change the return metrics that we disclose.

George Chappelle

But to be clear, Ki Bin, when you look at the supplementals, it includes all incremental cost for that development. So incremental costs would be buying land to support it. That would be in the business case. It would be in the 10% to 12% return.
Renting land or leasing land would be an incremental cost that would be in the business case inside the scope. Land banks that we may have bought [10, 12], who knows how many years ago, that's typically not in there. That's the only case.

Operator

We have reached the end of our question-and-answer session, which concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.