Lineage Logistics is a global leader in operating temperature-controlled warehouses.
The sector has faced several headwinds since the REIT's initial public offering in late 2024.
W.P. Carey's more diversified portfolio lowers its risk profile.
Lineage Logistics (NASDAQ: LINE) is a leading global provider of cold storage solutions. The real estate investment trust (REIT) owns over 485 temperature-controlled warehouses with a total of 88 million square feet of space across North America, Europe, and the Asia Pacific. It leases space in these facilities to food and beverage producers, retailers, and distributors, supporting the global food chain.
I think the industrial REIT is a very interesting company. However, I'd buy fellow REIT W.P. Carey (NYSE: WPC) instead. Here's why.
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Lineage Logistics went public in July 2024, raising $4.4 billion in the biggest IPO of the year at the time. The industrial REIT priced its shares at $78 each. The company had grown from a single warehouse more than a decade ago into the industry's leading player through a series of strategic acquisitions. It also built several cold storage facilities from the ground up.
Unfortunately, Lineage's IPO price marked the high-water mark for the shares. They've gone on to lose more than half their value since the IPO. As a result, the stock now trades at a much cheaper valuation and higher dividend yield (5.8%).
The company has battled challenging conditions in the cold storage market since going public. High levels of available cold storage space have weighed on utilization and pricing. Additionally, the company has battled headwinds from tariffs, which have caused customers to hesitate in signing new agreements. On a more positive note, Lineage Logistics is optimistic that market conditions will improve as demand for frozen food grows and the industry completes fewer new cold storage warehouses.
W.P. Carey is a much larger-scale and more diversified REIT than Lineage Logistics. It owns more than 1,600 single-tenant industrial, warehouse, and retail properties with 183 million square feet of space across North America and Europe. Additionally, W.P. Carey owns other real estate investments, including self-storage properties and a stake in Lineage Logistics.
It focuses on investing in properties secured by long-term net leases with built-in rent escalations, which generate stable and steadily rising income. This income supports its high-yielding dividend (5.5% current yield). The REIT aims to increase its dividend each quarter. It has raised the payout by 4.5% over the past year.
The REIT's diversification enables it to invest where it finds the best opportunities. It has invested over $1.6 billion this year, primarily on single-tenant industrial properties. It has a strong deal pipeline to continue making new investments. This outlook, combined with the embedded rent growth of its portfolio, drives W.P. Carey's view that it can continue growing at an attractive rate next year.
An investment in Lineage Logistics is a bet on the rebound and long-term growth of the cold storage industry. W.P. Carey, on the other hand, offers built-in rent growth backed by its long-term net leases. Additionally, its diversification provides it with considerable investment flexibility. These features make W.P. Carey a lower-risk investment compared to Lineage. It should produce a steadily growing income stream and less volatile returns, characteristics I highly value.
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Matt DiLallo has positions in W.P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.