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Americold Realty Trust (NYSE:COLD)
Q4 2019 Earnings Call
Feb 20, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the Americold Realty Trust's fourth-quarter 2019 earnings conference call. [Operator instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Scott Henderson, investor relations.

Scott Henderson -- Investor Relations

Good afternoon. We would like to thank you for joining us today for Americold Realty Trust's fourth-quarter 2019 earnings conference call. In addition to the press release distributed this afternoon, we have filed a supplemental package with additional detail on our results which is available in the investors section on our website at www.americold.com. On today's call, management's prepared remarks and answers to your questions 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.

More information about these non-GAAP financial measures and reconciliations to the comparable GAAP financial measures is contained in the supplemental information package available on the company's website. We also would like to note that numbers presented in today's prepared remarks have been rounded to the nearest million, with the exception of per share amounts. This afternoon's conference call is hosted by Americold's chief executive officer, Fred Boehler; and executive vice president and chief financial officer, Marc Smernoff. Management will make some prepared comments, after which, we will open up the call to your questions.

Now, I will turn the call over to Fred.

Fred Boehler -- Chief Executive Officer

Thank you, and welcome to our fourth-quarter 2019 earnings conference call. This afternoon, I will provide highlights of our full-year results and comment on current market conditions. I will then take a moment to update you on our growth activity in a few exciting internal developments here at Americold. Marc will follow with a review of our fourth-quarter and full-year results in more detail and then discuss our balance sheet and outlook for 2020.

After our prepared remarks, we will open the call for your questions. Our full-year 2019 results reflect the continued execution of our strategy to drive long-term cash flow growth and shareholder value. We did this in three ways. By organically growing our core business, by completing and integrating strategic acquisitions, and by developing advanced temperature-controlled warehouses.

We are very pleased with our results on all fronts and ended the year with a portfolio that contains in excess of 1 billion refrigerated cubic feet. This significant growth is even more notable in light of our ability to maintain our financial flexibility and low leverage. For the full-year 2019, we grew total revenue by 11.2% and total company NOI by 17.9%. This was driven by growth in our warehouse segment revenue and NOI of 17% and 19.5%, respectively.

These strong results came from our recent acquisitions and organic growth. I'm also very pleased to report that our global warehouse same-store pool generated total revenue growth and NOI growth of 3.5% and 5.1%, respectively, on a constant-currency basis. We delivered same-store NOI growth that was approximately 160 basis points higher than our same-store revenue growth, and we believe this highlights the strength of the Americold operating platform. Now, let me discuss our acquisition and development activity in more detail.

In 2019, we acquired 27 facilities which added approximately 170 million cubic feet to our portfolio for a total of $1.4 billion. This comprised of PortFresh Holdings, a single-facility and development land parcel, in Savannah, Georgia; Cloverleaf Cold Storage, a 22-facility portfolio that was previously the fifth largest cold storage operator in the U.S.; Lanier Cold Storage, a two-facility operator outside of Atlanta; and MHW Group, a two-facility operator in Chambersburg, Pennsylvania and Perryville, Maryland. With respect to these 2019 acquisition, we remain focused on integration. We spent much of the second half of 2019 in transitioning Cloverleaf's SG&A functions to our headquarters and are on track to capture the expected synergies.

For all four transactions, we are focused on implementing our commercial business practices to drive revenue growth and rolling out the Americold's operating system to drive efficiency gains. We are very pleased with our progress to date, transitioning these acquisitions onto our platform and expect that we will fully capture the upside from these investments by year three of our ownership. We are off to a strong start in 2020. We acquired Newport Cold, a single facility located in St.

Paul, Minnesota for $56 million. Additionally, we expanded our infrastructure and presence in Canada through the completion of our acquisition of Nova Cold Logistics which consisted of four facilities in Toronto, Calgary, and Halifax, for approximately 257 million US dollars. Finally, we announced today that Americold will be entering into a strategic joint venture with SuperFrio, a leading temperature-controlled storage operator in Brazil. Brazil is a key market in the global food chain as it is a leading exporter of beef, poultry and other commodities.

This joint venture provides an attractive entry point in a high-consumption market with a population of 210 million people in the world's ninth largest economy. SuperFrio is the leading operator in the country and is very similar to Americold in their strategic approach to running their business. SuperFrio currently operates in 16 locations comprised of 35 million cubic feet. Under the terms of the agreement, Americold will acquire 15% of SuperFrio, for approximately 28 million US dollars.

SuperFrio is currently owned by Patria, an experienced Brazilian-based private equity firm, affiliated with Blackstone. The company is executing an acquisition and development growth plan in the Brazilian market. We will co-invest at our pro rata share. Americold will have a foot on SuperFrio's storage and retains the exclusive option to acquire the remaining 85% of the company, starting in 2023.

We are investing with a best-in-class local market operator in SuperFrio and partner in Patria, both of which have strong market knowledge of Brazil. We are excited to expand our global platform with this and our Canadian investments. Now, turning to our development pipeline. We delivered our state-of-the-art expansion project in Chicago, at the end of the second-quarter 2019.

We are now fully focused on ramping the project with stabilization. Our expectation is unchanged from last quarter. We expect this asset to continue to ramp throughout 2020 and deliver its underwritten stabilized returns in fiscal year 2021. We will continue to update you on our progress.

Also, during the fourth quarter, we completed two of the expansion projects that we purchased as a part of our Cloverleaf acquisition at Chesapeake, Virginia and North Little Rock, Arkansas. In the first quarter of 2020, we also delivered the expansion project in Columbus, Ohio. We believe we are on track to achieve stabilization at each of these facilities over the first 12 months. We continue to make progress on the rest of our active development pipeline which consists of two projects currently under way in Savannah and Atlanta, totaling approximately 33 million cubic feet and representing approximately $211 million of investment.

Now, I'd like to take a moment to update you on our activities in Australia. At this time, we are not moving forward with the development contemplated under the previously announced letter of intent we executed with the top customer. This is because the scope of the project materially changed. Let me emphasize that we maintain a good relationship with this customer that we have served for over 30 years.

We continue to work with them on their future supply chain needs. And to that end, we are announcing a new 42-million US dollar expansion project in Auckland, New Zealand. This expansion will add 4.6 million cubic feet to an existing facility that exclusively houses the same customer. We have signed a definitive agreement under which they will anchor the new expansion with room to upsize in the future.

Construction is scheduled to start at the second quarter of 2020, with completion in the second quarter of 2021 and stabilization is expected one year thereafter. As this agreement demonstrates, we have plenty of opportunities to grow our customer base over the long term. At this time, our development pipeline remains robust with over $1.2 billion of potential opportunities. All of this external growth was supported by our strong, low-levered balance sheet.

Throughout 2019, we remain good stewards of capital. We de-risked our growth by proactively raising capital to fund acquisitions and development with forward components where possible. We issued private placement debt and now benefit from multiple investment-grade credit ratings which reduced our cost of capital. We transformed our shareholder base and increased our flow through the successful secondary offering completed by our legacy financial sponsors who have fully exited their investment.

Additionally, we launched an ATM program to further diversify our capital sourcing option. As we stand now at the start of 2020, market conditions underpinning the temperature-controlled storage industry remain attractive. Demand growth is tied to population and consumption growth along with customer-driven shifts in supply chain optimization strategies. This is coupled with the continued shift toward -- and consumer preferences toward healthy, perishable food which increases the need for temperature-controlled storage.

We are well positioned to capitalize on these trends with our outsized market share in our fully integrated infrastructure. From a supply perspective, barriers remain high for new development. Over the course of many years, we have invested millions of dollars in technology, process and infrastructure in our facility. Just as important is our deep relationship with our customers who trust us to maintain the integrity of their brand.

Our customer-centric focus and leading supply chain innovation, combined with our portfolio that has the right assets in the right locations, will serve us well as we deliver consistent and profitable growth over the long term. Before I turn the call over to Marc, I'd like to comment on a few exciting internal developments here at Americold. As an organization, we continue to focus on our corporate responsibility to serve the public good by maintaining the integrity of the food supply and reducing weight. Further, we remain committed to sustainability as we seek to reduce our energy consumption.

In 2018, the Global Cold Chain Alliance awarded 56 of our facilities, Gold and Silver certification as a part of their Energy Excellence Recognition Program. We are pleased to announce that in 2019, the GCCA has certified an additional 76 facilities. We now have 132 sites certified by the GCCA which represents 77% of our warehouse segment portfolio. I'm very pleased with our team's dedication to this important sustainability effort.

From a personnel standpoint, we continue to promote safety for our Americold associates as a top priority. 2019 was another exceptional year in terms of record-low incidents at our facilities. This is our fifth consecutive year of reduction, and we are very proud of our industry-leading safety performance. Additionally, we continue to ensure our bench of executive talent is deep and positions us for growth.

Over the course of 2019, we made several key executive hires and welcomed three new directors to our board. During the first quarter of 2020, we announced the hiring of Rob Chambers as chief commercial officer, to head our business development efforts. Rob was most recently at a publicly traded logistics company. Prior to that, he was here with us at Americold as vice president of commercial finance, where he was instrumental in developing our commercial business rules and underwriting process.

Rob will lead global business development and focus on growing and expanding our customer base. We are excited to have Rob back on our team. In summary, 2019 was another exciting and transformative year here at Americold. We are very grateful to our entire team for their efforts to lead innovation in our industry, continue to serve our customers, drive same-store growth, complete acquisition and execute on our development.

We are off to a great start in 2020. I'll now turn the call over to Marc, who will provide more details on our quarterly results, balance sheet and outlook for 2020.

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Thank you, Fred, and good afternoon, everyone. Today, we will provide updates on our actual performance, as well as certain metrics on a constant-currency basis. I will also provide details on our guidance for 2020. For the fourth quarter, we reported total company revenue of 486 million and total company NOI of 138 million which reflects a 16.9% increase and a 26.8% increase year over year, respectively.

Core EBITDA was 109 million for the fourth quarter of 2019, an increase of 28.8% year over year. This was driven by our 2019 acquisitions and solid growth within our core portfolio. Our core EBITDA margin grew by 208 basis points to 22.4%. Please note, our strong core EBITDA growth and margin improvement overcame the following factors.

The J curve associated with implementing and aligning our recent acquisitions to the Americold operating system and practices, the start-up expenses related to our recent development projects, and the currency translation impact of the strengthening of the U.S. dollar. For the fourth-quarter 2019, we reported net income of 21 million, compared to net income of 3 million for the same quarter of the prior year. Our fourth-quarter core FFO was 65 million or $0.33 per diluted share.

Our fourth-quarter AFFO was 60 million, or $0.30 per diluted share. As a reminder, the full definition and reconciliation of core EBITDA, core FFO and AFFO to reported net income can be found in our supplemental. For the fourth quarter of 2019, global warehouse segment revenue was 384 million which reflects growth of 25.6% year over year. Global warehouse segment NOI was 130 million which reflects growth of 28.9%.

Global warehouse segment margin was 33.8% for the fourth quarter, an 86-basis point increase, compared to the same quarter of the prior year. This increase in margin was primarily due to improvements in our core business, accretive acquisitions, same-store economic occupancy growth and the benefit of the Americold operating system. At year-end, 251 million of our rent and storage revenue was derived from customers with fixed-commitment storage contract as compared to 244 million at the end of the third quarter of 2019 and 220 million at the end of 2018. For the fourth quarter of 2019, 40.6% of rent and storage revenue was generated from fixed commitment storage contract on a combined pro forma basis which is a 60-basis point increase over the sequential quarter.

As of December 31, 2019, our global portfolio consisted of 178 facilities, two more than we reported at the end of the third-quarter 2019 due to the acquisition of the Pennsylvania and Maryland facilities completed in November. We ended the year with 167 facilities in our global warehouse segment portfolio and 11 facilities in our third-party managed segment portfolio. Now, I will turn to our same-store results in the global warehouse segment. For the fourth-quarter 2019, our same-store global warehouse segment revenue was $308 million which reflects growth of 3.4% year over year and 4.5% on a constant-currency basis.

Same-store global warehouse NOI was 107 million which reflects growth of 9.1% year over year and 10% on a constant-currency basis. Same-store global warehouse NOI margin increased 182 basis points to 34.8%. Drilling into these results a little further for the fourth quarter, same-store global rent and storage revenue grew by 1% year over year or 1.8% on a constant-currency basis. This was driven by improvements in economic occupancy, partially offset by business mix and the impact of the strength of the U.S.

dollar. Our same-store economic occupancy was 84.6% which reflects an increase of 112 basis points from the prior year. Our same-store rent and storage NOI grew by 1.4% year over year or 2.2% on a constant-currency basis. Same-store global rent and storage NOI margin increased 30 basis points to 69.3%.

The NOI growth and margin expansion was a result of continued portfolio management combined with our efforts to grow our fixed commitment storage contracts and disciplined cost controls through the Americold operating system of our power- and facility-related costs. Same-store global warehouse services revenue for the fourth quarter increased 5.2% year over year or 6.5% on a constant-currency basis. This revenue increase resulted from a favorable mix which generated 6.9% growth in our same-store warehouse services revenue for a throughput pallet on a constant-currency basis. Our same-store global warehouse services NOI increased 85.8% year over year or 88% on a constant-currency basis, driven by cost control embedded within the Americold operating system, better pricing and a more favorable customer mix.

Finally, the same-store warehouse services NOI margin was 9.4% for the quarter, an expansion of 406 basis points, driven by the same factors. Within our global warehouse segment, we had no material changes to the composition of our top 25 customers, who, on a pro forma basis, account for approximately 60% and of our global warehouse revenue and who have been with us on average for over 30 years. Additionally, our churn rate was approximately 3% of total warehouse revenue, a 40-basis point reduction from the prior year-end. We continue to focus on customer service and active portfolio management as we seek to optimize our customer mix and retain customers over the long term.

Corporate SG&A totaled 33 million for the fourth quarter of 2019 as compared to 28 million for the comparable prior-year quarter. This increase is primarily a result of additional investments made to support our expanded development pipeline, the SG&A absorbed with our recent acquisitions, net of realized synergies, higher stock compliance costs and increased stock compensation expense. Additionally, we incurred total cost of $10 million for the fourth quarter as shown in the acquisition, litigation and other line within our statement of operations which primarily reflects M&A-related professional fees, litigation costs and severance costs. Finally, we believe the best way to measure our success is on an annual basis due to the seasonal nature of our business.

To recap our full-year 2019 growth, total revenues were 1.78 billion, and global warehouse segment revenues were 1.38 billion, an 11.2% and 17% increase, respectively. Total contribution or NOI was 478 million, an increase of 17.9%. Global warehouse segment NOI was 448 million, an increase of 19.5%. For the same-store pool, global warehouse segment revenue grew 1.9% or 3.5% on a constant-currency basis and same-store segment NOI grew 3.9% or 5.1% on a constant-currency basis.

Core EBITDA was 367 million, an increase of 19.7%, or 21% on a constant-currency basis, net income was 48 million. Core funds from operation was 220 million, or $1.19 per diluted share, and AFFO was 215 million or $1.17 per diluted share, using a weighted average share count of 184 million. Now, let me update you on our development and acquisition activity. In aggregate, we spent 211 million in 2019 on expansion and development capital, including 56 million in the fourth quarter mostly related to spending at our Atlanta major market expansion and our Savannah, Georgia newbuild.

We delivered our automated expansion project in Chicago in late second quarter and two of the expansions that we acquired as part of Cloverleaf in late fourth quarter. We delivered the third acquired development project in Ohio, shortly after year-end. In our supplemental, we have provided additional disclosure on expected yields and target stabilization dates for these projects. Also, at the end of 2019, we acquired two facilities in Pennsylvania and Maryland for 54 million.

Post quarter end, we completed the previously announced acquisition of Nova Cold Logistics in Canada for 337 million Canadian dollars which translates to approximately 257 million US dollars. Also, we completed the acquisition of Newport Gold in Minnesota for 56 million. Again, we have enhanced the disclosure in our supplementals and now outline our expected net entry NOI yield and our expected year three yield at stabilization. Today, we also announced that we'd be entering into a strategic joint venture with Brazil-based SuperFrio, whereby, we'll invest 118 million Brazilian real which translates to approximately 28 million US dollars, or a 15% ownership in the business.

This transaction will result in an implied 9% forward NOI yield for the entire in place business which we expect to improve through accretive acquisitions and development in that market. We believe this valuation reflects the quality of the operator and the facilities and our exclusive call rights to purchase the remainder of the business in 2023. We expect to fund our pro rata share of the joint venture's acquisition and development activity over the next two years which we expect to be up to 127 million Brazilian real, or approximately 30 million US dollars. The investment is accretive on a leverage-neutral basis, and we intend to fund it with cash on hand.

We will not hedge our currency exposure at this time, and we expect to close the transaction in the first quarter. Finally, regarding our customer in Australia, as Fred mentioned, we are starting a new expansion project in New Zealand with this customer for 65 million New Zealand dollars, or approximately 42 million US dollars. Also with regard to the projects, for which we will not be moving forward, our customer is expected to reimburse us for certain development costs that have been capitalized, including our cost for the purchase of land in Sydney. Now, turning to our balance sheet.

As of December 31, 2019, total debt outstanding was 1.9 billion, of which 76% was in an unsecured structure and 92% was at a fixed rate. Our real estate debt has a weighted average remaining term of 6.3 years and carries a weighted average contractual interest rate of 4.23%. At quarter end, we had total liquidity of approximately 1.4 billion, and we had no activity on our ATM program. Our net debt to pro forma core EBITDA was approximately 4.2 times which demonstrates our commitment to prudent balance sheet management as we maintain modest leverage while executing our growth plans.

Pro forma for the closing of our Nova Cold and Newport acquisitions on January 2, and the initial upcoming SuperFrio investment and our New Zealand development, our total liquidity is approximately 1 billion, consisting of the revolver availability, cash on hand and approximately 136 million of equity forwards from our September 2018 offering. We used our April 2019 forwards to fund a portion of the Nova Cold acquisition on January 2 which increased our fully diluted shares outstanding to approximately 205 million. Our pro forma net debt to core EBITDA was approximately 4.5 times as a result of these transactions. I'd like to remind you that our recent acquisitions, the initial Brazilian joint venture investment and remaining development, Savannah, Atlanta and just announced the Auckland, New Zealand projects are all fully funded at this point.

Now, I'd like to take a moment to provide our outlook for 2020. First, I'd like to discuss the integration of the 32 facilities that we have acquired since the start of 2019, as well as our development activity, both of which have a meaningful impact on our 2020 expectations. First, by the end of 2019, we have taken action to eliminate all 10 million in total cost savings that we expected to realize from the Cloverleaf integration. The capture of these synergies is reflected in our SG&A guidance.

Second, let me note that we continue to incur meaningful expenses as we work to bring all of our recent acquisitions on to the Americold operating platform. We view these costs as critical to achieve our targeted yields stabilization by the end of year three and believe the work we do in 2020 will set the stage for long-term growth. Given the size of these acquisitions relative to our overall portfolio, none of which are in our same-store pool, we have incorporated this impact into our guidance. Finally, during 2020, we expect to continue to incur start-up expenses in our completed developments as we hire and train employees, bring down temperature, calibrate our systems and automation, where applicable, and onboard new customers.

We typically expect this ramp period to stabilization to take 12 months. As we previously mentioned on our last call, we expect our Chicago project will take between 12 and 18 months. During part of this period, our operational expenses, including our start-up expenses, may exceed the revenue generated from that site. This is reflected in our guidance.

With this in mind, for the full year, we expect AFFO per share in the range of $1.22 to $1.30. Our assumptions are as follows: global warehouse segment same-store revenue growth to range between two and 4% on an actual and constant-currency basis. Global warehouse segment same-store NOI growth to be 100 to 200 basis points higher than the associated revenue growth. Managed and transportation segment NOI in the range of 28 to 31 million.

Total SG&A expense of 135 to 140 million. Current income tax expense of 11 to 13 million. Deferred income tax benefit of 1 to 3 million. Non-real estate depreciation and amortization expense of 66 to 68 million.

Total recurring maintenance capital expenditures in the range of 65 to 75 million. Development starts of 75 to $200 million. And finally, please refer to our supplemental for currency translation rates embedded in this guidance. Please keep in mind that the ranges for these metrics do not include the impact of acquisitions, dispositions or capital markets activity beyond which has been previously announced.

Lastly, in 2020, we have revised our methodology around our same-store pool which will reflect 136 facilities at the beginning of the year. Our revised definition now requires that for a facility to be in the same-store pool, it must meet that definition at the beginning of the year. Now, let me turn the call back to Fred for some closing remarks.

Fred Boehler -- Chief Executive Officer

Thanks, Mark. Since the start of 2019, we have closed six acquisitions completed four development projects, started three additional development projects and entered into a new joint venture. As we move into 2020, we are starting with strong momentum, and we will continue to expand our platform to position Americold for our customers around the globe. We would like to welcome the many new associates to the Americold family, who joined us as a part of our recent acquisition.

And I'd like to thank all of our team members for their continued hard work and dedication to our success. Finally, we thank our shareholders for their continued support as we focus on driving growth and creating value through 2020 and beyond. Thanks again for joining us today, and we will now open the call for your questions. Operator?

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first questions come from the line of Nate Crossett of Berenberg Capital Markets. Please proceed with your question.

Nate Crossett -- Berenberg Capital Markets -- Analyst

Hey, guys. Good evening. And I guess, just question on the Sydney project. What does it mean when you say the scope of the project changed? I mean that was a $600 million potential project.

It sounds like that tenant is going to be at this other location. So, what's the total scope of that new project, I guess?

Fred Boehler -- Chief Executive Officer

Yeah. I think if you go back, gosh, it's been a year and a half, almost two years now, and we entered into an LOI with this particular customer. And it was more than one site. It was multisite, it was looking at their supply chain.

Once we entered that LOI, we start to get into detailed design and as we get on through detailed design, things kind of changed and shifted. And remember that we continue to do the current work for them today. This was talking about potentially getting into a new infrastructure, if you will, for the future. And we've gone through several different iterations with them.

And as I sit here today, we look at it and we say, we're probably not going to proceed in the way that was originally intended. However, we continue to work with them as evidenced by the newbuild that we're doing over in Auckland, New Zealand for them, with a new 15-year commitment, anchoring that facility. And then, we continue to work with them around the rest of Australia, if you will, but at this time, we know that that's not going to be like what we originally had hoped. And we'll continue to work with them as we move forward.

Nate Crossett -- Berenberg Capital Markets -- Analyst

OK. So, when we -- that's helpful. So, if we're thinking about the drivers of growth this year, is it more just M&A and same-store and margin improvement? Because it looks like there's less development capex spend that you're guiding to. We all know the trends in this space seem to be good, but I would have thought there have been more kind of new starts or development capex spend if there was a lot of new demand out there for cold storage?

Fred Boehler -- Chief Executive Officer

Right. It's hard to comment on timing in specific. And so, we've been guiding 75 to $200 million in new starts for the last two years here. Our pipeline is still in excess of $1.2 billion.

We have several great projects that are out there. And I know that some of those will come to fruition here. It's a matter of timing and again, the size and the scale of those differ depending on the particular customer that we're building for. Another key attribute and a reminder to everyone is, we don't build on spec.

And so, most of our builds, most of our development projects are driven by real customer demand and engagement with those customers. And as a result, that timing can kind of move around a bit.

Marc Smernoff -- Executive Vice President and Chief Financial Officer

One thing I would just add to that as it relates to external growth. We also don't provide guidance on M&A. So, as you've heard us say over the time that M&A in our industry can be somewhat lumpy. That's not to say we're not active having already completed two transactions this year, but there is no further guidance than what's been put forth in the overall guidance.

Fred Boehler -- Chief Executive Officer

Fair enough. I'll get back in the queue. Thanks.

Operator

Our next question comes from the line of a Emmanuel Korchman of Citi. Please proceed with your question.

Emmanuel Korchman -- Citi -- Analyst

Hey, everyone. Maybe Fred or Marc, just following up on that. You talked about the pipeline of development. Can you talk about what your pipeline on acquisitions looks like and split that between U.S.

opportunities and international ones?

Fred Boehler -- Chief Executive Officer

Yeah. I mean, what I would say is kind of what we always say, the pipeline of acquisition opportunities is plentiful, both in existing countries, as well as the potential to expand into others. We work with and talk to a lot of different folks. And I think I've joked before, you got to kiss a lot of frogs to find the right one that we're looking for.

And remember, we're not just acquiring to get big, we're pretty picky and choosy, if you will, in terms of identifying the right acquisitions that we know that can be fully integrated into our enterprise, so those are going to be lumpy. I can't comment on size and scale of those because it's so unpredictable in terms of when or if those will come to fruition.

Emmanuel Korchman -- Citi -- Analyst

Great. And just switching to guidance. We do appreciate the added line items that you've given us. I am going to be annoying for a second and say what you haven't given us is the payout ratio.

So, what you used to give us, you don't give us. So, how do we think about the dividend and the payout ratio in comparison to the new AFFO per share guidance that you have given us?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. Yeah, absolutely. Our board evaluates our position on a quarterly basis and determines the dividend, so we would expect further guidance around the dividend to be announced later this quarter, consistent with prior years.

Emmanuel Korchman -- Citi -- Analyst

But I guess, just as you think about the guidance for the year and sort of cash flow allocation, what level are you assuming in the guidance that you've given?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

At this point, I think, especially given the robust development pipeline that Fred mentioned, we would expect payout ratios to be consistent with prior periods, roughly in that 65 to 68%.

Operator

Our next questions come from the line of Michael Carroll of RBC Capital Markets. Please proceed with your question.

Michael Carroll -- RBC Capital Markets -- Analyst

Yeah, thanks. I just want to go back to the Woolworths project in Australia. So, what is that customer plan on doing right now, if they don't want to have the, I guess, the three large automated facilities? Do they still have, I guess, growing needs for temperature-controlled space? Are you going to be providing that for them?

Fred Boehler -- Chief Executive Officer

Yeah. Remember, as a reminder, we currently have all of their infrastructure for the bulk of their temperature control needs, so we continue to operate those facilities. And, like I said, we're kind of exploring other alternatives. So, is it -- for example, hypothetically, is it better to build a single greenfield automated facility or is it better to expand on to an existing facility, or is it better to add a conventional facility instead of automation? So all three of those things continue to be explored, but we have the bulk of their business today, and we'll continue to do so as we have for the last 30 years.

Michael Carroll -- RBC Capital Markets -- Analyst

OK. And then, should we expect, I guess, some smaller projects to be announced? Because, obviously, they had a pretty big growth strategy before that seems to be off the table. But should we still expect and when? I know they did, what, a $40 million project in New Zealand. Is there other 40to 50 million projects on tap for the rest of this year?

Fred Boehler -- Chief Executive Officer

Potentially, our pipeline is over $1.2 billion.

Michael Carroll -- RBC Capital Markets -- Analyst

OK, great. And then, just last one for me. Can you talk a little bit about your plans with Brazil. I mean how much do you want to -- or can you scale in that market, or do you plan on just making this initial investment with that joint venture partner and see where that goes currently?

Fred Boehler -- Chief Executive Officer

Yeah. We're really excited about this partnership with Patria, down there in Brazil. SuperFrio is one of the leaders in there and they're very much like us. They use the same operating systems, have a lot of similarities in terms of customer base and how they commercialize that business.

So, we really like that platform down there. It's currently 16 sites. And as we mentioned, they've got growth expectations, both from a development and from an acquisition standpoint. The marketplace down there is very similar to what we see here in the U.S.

It's very fragmented, so there are lots of opportunities. And again, they'll go about it pretty much the same way that we do here. And we'll continue that partnership over the next two years, and we have that ability to buy it out in 2023.

Operator

Our next questions come from the line of Dave Rodgers of Baird.

Dave Rodgers -- Baird -- Analyst

I wanted to ask about the physical occupancy and the trends there. You had been trending lower in the first three quarters of the year, year over year in the fourth quarter on the same-store basis, you did that back up. So, can you talk a little bit about kind of what your expectations are for physical occupancy as you move into next year? The 2 to 4% revenue guidance, does that assume some increase in occupancy and rate? And can you kind of talk about where that occupancy increase would come from?

Fred Boehler -- Chief Executive Officer

Yeah. I think the number we reported this quarter was the economic occupancy. Remember, we continue to shift our business and you saw the progress in the fixed commitment. Economic occupancy, yes, we continue to expect it to pick up.

We like where it settled into the fourth quarter. As you'll recall, we don't really want it to get that much higher because then you start to drive inefficiency within the operations which actually results in less cash flow, so we're trying to drive four-wall cash flow as our primary focus. And you can see that we're doing that regardless of what the physical occupancy might be. And that's just a function of how we commercialize our business.

So, rate throughput, fixed commitment. So, yes, we expect that it will continue to make progress as we do our portfolio management and onboard new customers and then, of course, open up new capacity to our development opportunities.

Dave Rodgers -- Baird -- Analyst

I guess just looking to that answer, Fred, with 2 to 4% revenue guidance on the same-store, do you expect most of that then to come through rate if you're happy with where occupancy is today?

Fred Boehler -- Chief Executive Officer

Yeah. Again, I think, there's lots of occupancy opportunities because of the seasonality of our business, right? So we're always trying to find ways to find off-cycle type of business that we can put into facilities that maybe have a lower physical occupancy during the summer, for example. So, we believe that there's still whitespace to fill. Most of our occupancy is driven by key markets during the fourth quarter.

So, actually, if you look at core markets, where our major distribution points are getting product to the consumer during the most critical time of the year, those markets are -- and during the fourth quarter, as we've talked about, those are pushing 90, 92%, right? So the number we're quoting is across our entire enterprise. So, we do have sites that have lower physical occupancy during the fourth quarter than the 85%. Yes.

Marc Smernoff -- Executive Vice President and Chief Financial Officer

And Dave, just to reiterate, as you've heard us say before, we're working on maximizing the mix. As Fred said, that drives the most four-wall cash flow there. So, if there's one metric more than anything other, not rate, then occupancy is how do we drive actual four-wall cash flow.

Dave Rodgers -- Baird -- Analyst

Great. And then, maybe just a follow-up on that. Is there a mechanism where you would take out Patria? Has there been a predetermined price for that? And the second is, can you just comment on the income tax expense and deferred benefit in the 2020 guidance versus what you did in 2019 and the reason for the change there?

Fred Boehler -- Chief Executive Officer

Yeah. So, just on the first part, in terms of the takeout of Patria, yes, as we said, we have the exclusive option to buy out the other 85% of the business because we've bought in at 15% come 2023.

Marc Smernoff -- Executive Vice President and Chief Financial Officer

And then as it relates to the taxes, so the taxes reflect growth in the overall business, as well as our recent acquisition into Canada which , obviously, we will be paying corporate level tax for our operations in Canada at that level, consistent with what we pay in Australia. So, the combination of tax reflects growth of our core businesses abroad, where we do pay cash taxes.

Dave Rodgers -- Baird -- Analyst

Thank you.

Operator

Our next questions come from the line of Ki Bin Kim of SunTrust Robinson Humphrey. Please proceed with your question.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Going back to the Australia development for $600 million. I was wondering if you can just provide a little more detail behind it? Because it was a big deal. It was an important catalyst for your company and your stock. So, I'm just curious, how much is the scope change? Did you lose any of that business for the three buildings to competing developers or other owners? Was it a point of pricing or just something very different than that?

Fred Boehler -- Chief Executive Officer

It's a combination of things, quite frankly. They do own their own wide network. They brought up a fully automated facility that they were tied up with. They've had some other things going on their business changes that I can't really comment on, but you can read the press on them.

They've made a lot of divestitures and some other adjustments to their business. And then, just during this time horizon – No. 1, I just want to remind everybody, it was a letter of intent. It wasn't a binding contract.

It is an intent to work with each other, so we did not lose the business to anybody else. That wasn't what was at play. But over the course of the two years, automation costs certainly increased, steel prices went up. So, construction costs in Australia, land costs in Australia, all of that kind of factored into, if you will, the dances we are going through, detailed design and negotiation, so no, we haven't lost the business.

We have all the business and proceed continuing to, as I mentioned, we'll continue to work with them. And again, that strong pipeline that we have, I'm confident that we'll have additional ways to put capital to work.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

So you're saying the three buildings that were originally contemplated, there isn't another party doing part of that business? Is that a fair --

Fred Boehler -- Chief Executive Officer

There are not three automated buildings going up for this customer.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

OK. And is that micro-fulfillment center part of the reason at all just going a different route instead of like a centralized warehouse, maybe doing that -- or was that part of the equation at all?

Fred Boehler -- Chief Executive Officer

No, that's, I mean, kind of a separate process. I know they are experimenting with micro-fulfillment, but remember that micro-fulfillment's done in the back end of the store and doesn't really supply -- it doesn't really change the supply chain in terms of the physical distribution centers, so I can't comment further on what they may be doing. And that's probably something for you to look at.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

OK. And it sounds like in the comments, though, you left yourself a little bit of an opening that you might do further development business with them. Could you just expand upon that?

Fred Boehler -- Chief Executive Officer

Yeah. I mean, again, I would say that we have a pipeline of $1.2 billion. They are a part of that. We just announced the 42 million that's -- that we're going to put to work in Auckland which is on their behalf.

So, we currently house them in several facilities across New Zealand, often being the largest one. We're expanding that site to support their growth. And we've entered into a definitive agreement, not an ROI, a definitive contract for 15 years for them to be the anchor on that expansion. So, I think that just shows the continuing working relationship that we have with them and our partnership with them as we continue to move forward.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

I see. But it's not like there's a chance for the development to happen again in Australia. That's not what you meant, right?

Fred Boehler -- Chief Executive Officer

There's always a chance. We continue the -- the conversations have not been called out, I guess, is the way that I would describe it, so there isn't an end. We just don't see it happening right now. So, we're just kind of taking that off, and hopefully, it develops into something into the future, but we can't control that 100%.

We're kind of at their timing and at their mercy when it comes to that.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

OK. Thank you guys.

Operator

Our next questions come from the line of Michael Mueller of JP Morgan. Please proceed with your question.

Michael Mueller -- J.P. Morgan -- Analyst

Yeah, hi. If we start off with your AFFO guidance and the capex and then back out the non-real estate depreciation and the tax benefit, we get about $1.21 to $1.32. Is that your core FFO guidance for the year?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. What we did is we provided the core reconciling items and that's not inconsistent with our thought. I think, Mike, the key thing we really do want to emphasize about our business, since we believe AFFO is the best metric, is to understand our overall business. Just because there's a significant operational component, as well as true cash capex in the business that we want to make sure is being captured which isn't necessarily captured in either the navy definition of FFO or even our adjusted definition of core, so we view as the most relevant metric for our business that best approximates the cash flow we generate to be our adjusted funds from operation.

Michael Mueller -- J.P. Morgan -- Analyst

Got it. Yes. It's just the FFO numbers get reported a lot and obviously come up in discussions quite a bit, so.

Fred Boehler -- Chief Executive Officer

Yes.

Michael Mueller -- J.P. Morgan -- Analyst

OK. And the second question was for Brazil, what's the magic about 2023? What happens then, where you can buy it out?

Fred Boehler -- Chief Executive Officer

Marc?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. Yeah, it's -- we're investing with a private equity investor that has a finite life of their funds. And so, we're working with them, and we have a plan with them to grow the business through that period, and that was an ideal day for us to make a decision. And as Fred mentioned earlier, we have an exclusive call right, if we want to purchase in the rest of the business.

Michael Mueller -- J.P. Morgan -- Analyst

Got it. OK. Thank you.

Operator

Our next questions comes from the line of Bill Crow of Raymond James. Please proceed with your question.

Bill Crow -- Raymond James -- Analyst

Good evening guys. I apologize for asking one more on Australia. As you underwrite the health of the tenant, has anything changed with them? Is the scope changing because their outlook has changed?

Fred Boehler -- Chief Executive Officer

No, absolutely not. They're the premier grocer in that marketplace. Their business continues to be strong, so no, no underwriting concerns there whatsoever.

Bill Crow -- Raymond James -- Analyst

That's fine. I think seasonality came up earlier. And I'm just wondering if you could help us think about the seasonalities evolves into 2020. Should we consider that kind of the same contribution per quarter that we saw in 2019 would play out again in 2020, or has that changed because of your acquisitions?

Fred Boehler -- Chief Executive Officer

No, it's pretty much the same pattern. I mean there's some commodities that have different types of patterns, but -- like ice cream or like some of the harvest, if you will, the vast bulk of our product follows the same cyclicality every single year. Fourth quarter, kind of, the end of third quarter, fourth quarter is the busy time of the year for us. That's when all the volume is getting pushed out to support Thanksgiving and Christmas.

And I think you saw that in our fourth-quarter results. And if you go back a year ago, you see the same thing.

Bill Crow -- Raymond James -- Analyst

All right. And then, two quick financial questions for you. G&A continues to ramp up. And given the J-curves we're dealing with and postponed developments and different things, I'm just -- I'm trying to get my arms around the pace at which it's ramping up vis a vis that what it's delivering to the bottom line? And at the top end of your guidance, I think, it'd be about 8.5% increase in 2020.

So, at what point do you get to the size of the headquarters that you need so we don't see G&A continued ramp-up at this rate, that's four or five times CPI?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. No, absolutely. And I think there's two things around that, just to understand, so we maintain a lot of our own in-house development resources. So, the engineering teams, our project management offices that are working on our development project.

We have a tremendous -- as we just announced, we have effectively four completed projects where we don't even have the benefit of the stabilized earnings yet in our stream, so those will be ramping up throughout this year and really beginning to stabilize in 2021 and beyond. And then, we have other development projects under way. So, I think what you see -- and this is typical of development, you see those costs come on in advance. And then, you get the benefit as those projects ramp and reach stabilization which you'll then start to see the G&A leverage, especially as you're looking at as a percentage of revenue.

Bill Crow -- Raymond James -- Analyst

All right. And then, finally for me. Since we spent an hour last quarter talking about a 3 million healthcare cost, the $10 million acquisition litigation and other charge, if you could give us some details on that? And I think it's 40 million bucks for the year. So, how do we think about what was in there for the fourth quarter? And what happens going forward?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. If you turn -- if you look at Page 22 of our supplement, it's broken out. The vast majority of that 40 million bucks for the year is M&A-related costs, specifically for professional fees, success fees to bankers, synergies related to rationalizing the headcount from the Cloverleaf facility. So, we have a lot of severance costs which we see down in the line below.

And then, litigation which is disclosed in our 10-K, but we did settle one outstanding litigation case that we had in the quarter which was roughly the $3 million charge you see in Q4.

Bill Crow -- Raymond James -- Analyst

OK. Thanks, Marc.

Operator

Our next questions come from the line of Emmanuel Korchman of Citi.

Emmanuel Korchman -- Citi -- Analyst

Marc, just a couple of guidance follow-ups. You spoke about the forward drawdowns that you've taken so far. How do we think about the rest of the timing of the forward drawdowns?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. So, our capital plan does not have a drawdown, the forward, to meet the guidance. Now, as Fred mentioned, we have a significant amount of both development and M&A opportunities we are looking at, so we may draw that down to support those growth opportunities as we move forward.

Emmanuel Korchman -- Citi -- Analyst

So in the past, I think you've given us the share assumption in your guidance number. What is that share assumption for the year and now for 2020?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah, roughly, as I mentioned, pro forma for having completed the acquisitions we completed this January, we mentioned that we had roughly 205 million shares outstanding.

Emmanuel Korchman -- Citi -- Analyst

And there's nothing beyond that assuming the guidance number?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

There's regular dilutive impact of your annual equity grants with these.

Emmanuel Korchman -- Citi -- Analyst

OK. And then, a follow-up on Bill's question or joke, the -- should we think about any other sort of outside costs on healthcare or other that would be -- we'd be tapping just thinking this year's and replicating for next year?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. No, look, as I said, one of the things, and I think we mentioned this on Q3, and it gave us guidance -- or comfort, we're really proud, like, we delivered 3.5% same-store revenue growth on a constant-currency basis, net 5.1%. And those overcame, as we said, we would -- the headwind we saw in healthcare throughout the year, as well as the unfavorable comp we had in the first quarter as it relates to workers' comp. And so, those actual -- those results I gave you are the actual results, they're not pro forma for those items.

So, as we mentioned, one of the reasons you hear us say over and over and over again, please look at our business on a full-year basis. It does reflect out the seasonality and usually, those types of expansion, when you look on a full-year basis, will be normalized through the overall business.

Operator

Our next question comes from the line of Ki Bin Kim of SunTrust Robinson Humphrey. Please proceed with your question.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Thanks. I promise it's not a question about Australia. So, can you just talk about the business trends that you're seeing? Just if you can expand on those. And it was interesting to see your economic obviously pick up a little bit for the first time in a while.

What kind of drove that? Do you think that's sustainable into 2020? And conversely, your same-store revenue growth for your rent revenue growth decelerated a little bit. I don't want to split hairs here, but if you can talk about what drove that?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Yeah. You usually don't see that expand too much in the fourth quarter because you're already -- we're already established, if you will, so yes. And speaking specifically, this is some of what the impact of mix will be within our business. So, you can see we'll have different mix.

And as we said, we focus on mix and profiles that maximize cash flow. So, sometimes you'll -- that will manifest our occupancy. Sometimes it will manifest through the throughput of the business that we're doing. And I think if you look, the real headwind on the rate, on occupancy, in the fourth quarter was actually FX.

So, if you look on a constant-currency basis, the rate continued to grow. So, we had some headwind from the strength of the U.S. dollar.

Fred Boehler -- Chief Executive Officer

But the business as a whole continues to be strong, so the same fundamentals that we've talked about over the last two years remain there. Our churn rate is extremely low. So, we're providing outstanding customer service, customer satisfaction. We continue to expand our penetration with customers through these acquisitions and commercialize them onto our Americold standards,, as well as continuing to roll out the Americold operating system, so business fundamentals are -- continue to be strong.

Consumption, population growth continues to remain steady, and we continue to feed off of the trends that you see in the industry toward fresh and healthy products. So, yes, the pipeline hasn't flinched. We continue to have over $1.2 billion worth of development opportunities. So, yes, I'd say that the business and the industry, as a whole, is strong.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

And on G&A guidance for 2020. How much of that is real cash dollars increasing versus capitalization of G&A rolling off?

Marc Smernoff -- Executive Vice President and Chief Financial Officer

There's very limited G&A that we capitalized in the year. It's probably less than $2 million or so a year that is capitalized into our development projects, so it's not a lot of G&A rolling from what was been capitalized or not. Remember, we've completed, as Fred mentioned, a significant number of acquisitions since the beginning of 2019, that reflects the impact of those businesses onboarding, because some of those acquisitions, two were platform acquisitions in new markets, where we didn't operate. So, obviously, part of what we're investing in is those strong teams in those markets where we hope to partner with them and grow those businesses.

Operator

We have reached the end of the question-and-answer session. I will now turn the call back over to management for any closing remarks.

Fred Boehler -- Chief Executive Officer

Great. Thank you. And thanks, everyone, for joining us. We are very excited about what we were able to accomplish in 2019.

And just to reiterate some of those things, the strong same-store sales results of three and a half and 5.1% showed that we continue to show great leverage in our business. And we're excited about being able to continue that as we head into 2020. The six acquisitions, seven development projects, the new JV that we just entered into and a strong development pipeline just really sets us up well for 2020, so very excited heading into 2020. And just to -- like to thank all of you for your continued support.

Operator

[Operator signoff]

Duration: 67 minutes

Call participants:

Scott Henderson -- Investor Relations

Fred Boehler -- Chief Executive Officer

Marc Smernoff -- Executive Vice President and Chief Financial Officer

Nate Crossett -- Berenberg Capital Markets -- Analyst

Emmanuel Korchman -- Citi -- Analyst

Michael Carroll -- RBC Capital Markets -- Analyst

Dave Rodgers -- Baird -- Analyst

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Michael Mueller -- J.P. Morgan -- Analyst

Bill Crow -- Raymond James -- Analyst

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