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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings and welcome to the Americold Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steve Sweat [ph]. Please go ahead.
Good afternoon. We would like to thank you for joining us today for Americold Realty Trust’s fourth quarter and full year 2017 earnings conference call. In addition to the press release distributed this afternoon, we have filed the supplemental package with additional detail on our results, which is available in the Investor Relations 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 that 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 which speaks 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 reconciliation to comparable GAAP financial measures is contained in the supplemental information package available on the company’s website.
This afternoon, this 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.
Thank you, Steve. Welcome to the fourth quarter and full year 2017 earnings conference call, our first since we completed our IPO in January. This afternoon, I will begin with a brief overview of our company and our strategy. I will then review details on key operating metrics, which underlie Americold’s performance and results and provide an overview of current market conditions. Then, I will turn the call over to Mark to summarize our recent results and review our balance sheet and liquidity position. After our prepared remarks, we will open the call for your questions.
Americold is the world’s largest owner and operator of temperature-controlled warehouses and is the only publicly traded REIT focused solely on this business. While our origin dates back more than 100 years, in 2010, Americold acquired a second largest competitor, effectively doubling the size of the company and kick-starting the opportunity we have today. Beginning in 2013, we brought in best-in-class talent from a variety of industries to run the organization. Since then, we have acquired and developed new facilities to grow and diversify our portfolio, while focusing on developing critical operational infrastructure to efficiently and effectively service our customers. We believe size and scale of our network when combined with operational excellence are keys to the successful temperature-controlled business and provides a meaningful competitive advantage. As important, our system, people and experience provides the keys to driving revenue growth and enhance margins into the future.
Now, let me review several critical elements of our company, which we believe provides the building blocks for superior performance. I will start with our size. Today, we are the leader in the temperature-controlled warehousing in the U.S., with over 20% market share and a global market leader with just under 5% market share. At December 31, 2017, our portfolio consists of 158 mission-critical facilities, which serve over 2,600 customers globally. Our 25 largest customers who are the leading food producers, distributors and retailers account for approximately 61% of our global warehouse revenue, each utilizing multiple facilities in our network and have been with us for an average of 32 years. The U.S. is our largest market and comprises 82% of our global revenue. Outside of the U.S., we have operations in Australia, New Zealand, Canada and Argentina.
Within our portfolio Americold operates three complementary businesses within the global cold chain temperature-controlled warehouses, third-party managed warehouses and transportation. This allows us to service the specific needs of each of our customers while enhancing our knowledge and experience in the cold chain. The largest and most profitable segment is our temperature-controlled warehouse business. The warehouse business comprised approximately 74% of our revenue and 93% of our 2017 contribution or NOI. This segment is mission critical for our customers and includes rent, storage and complementary logistics services. As of note, contribution for our company includes company level NOI for the global warehouse segment plus the net profit contribution for the managed services, transportation and quality segment before SG&A expenses.
I will refer to our combined contribution as NOI and NOI as NOI going forward. These logistic services include the receipt, handling, placement and retrieval of product, blast freezing and other associated services. Our warehouse segment is diversified across geographic markets and customers. And no customer represents more than 9% of our global warehouse revenue. Regarding product type, we are also well diversified across all major commodities. The second component is our managed segment which comprised approximately 3.4% of our 2017 NOI. This was the management of customer owned warehouses where both food retailers and producers, which allows us to leverage our operating expertise and provide the complete outsource logistics solution. This was an asset life business and the revenue from this segment reflects operating cost which we pass-through to our customers as well as the management incentive fees. We operate eight managed facilities in the United States, three in Canada and one in Australia.
The third segment we operate is the transportation segment. This includes consolidation, management and brokerage services to facilitate the movement of goods for our customers. Similar to the management segment this is an asset life business and complements the warehouse segment and allows us to help our customers achieve efficiency and reduce their overall supply chain costs. The transportation segment comprised 3.5% of our 2017 NOI.
Our next building block is our superior operational platform, which we call Americold operating system. This provides temperature controlled storage with optimized processes, procedures and continuous improvement. This standardization is the key advantage over our peers. We use our scale and our expertise to implement best practices across our entire network. This applies to all aspects of our business from the maintenance of our infrastructure and material handling equipment all the way to our employee retention and safety programs. Additionally, over the past 6 years we have invested over $60 million to develop the proprietary IT system that has revolutionized our customer interface, internal decision making and warehouse management. This was the major differentiator for Americold and allows us and our customers to manage our space, analyze data and identify trends for growth.
Let me now discuss multiple drivers of growth. Internally, we seek to optimize utilization of our facilities and to ensure our business complies with our commercial and underwriting standards. We also continue to transition from an as-utilized on-demand contracts to contracts in which our customers reserve critical space that they will need during the peak season. On the cost side, we hope to continue to improve labor productivity, manage utility costs and leverage our fixed operating costs. We are also well positioned to drive growth in the development of new warehouse space as well as acquisition. We have disciplined and consistent internal underwriting parameters and we expect that our platform will yield attractive risk adjusted return.
We have proven development capabilities. To that point, in 2017 we completed the construction of our 6.8 million cubic foot facility in Clearfield, Utah. This facility continues to ramp operations and we expected to stabilize the yield of 12% to 15%. In the third quarter, we broke ground on our 5.2 million cubic foot facility in Middleborough, Massachusetts and a 15.7 million cubic foot expansion to one of our suburban Chicago facilities, which will be a high-bay fully automated addition to an existing facility. We have many opportunities within our portfolio to support our customers evolving business needs through development of new warehouse space or expansion of existing facilities on the 600 plus acres of land we already own. We expect total investment to range between $100 million and $200 million annually and we project un-levered stabilized returns in the 10% to 15% range. Further, we continue to evaluate and assess our active and shadow pipeline which represents more than $1 billion of opportunities.
Our final building block is the acquisition. The temperature-controlled sector is very fragmented and it lends itself well to consolidation. With our institutional quality management and platform now in place, we are well-positioned to integrate potential acquisitions quickly and enhance the value of each facility that we buy. As the only public player in our sector, we have access to multiple sources of capital, including the issuance of LP units as acquisition currency. We believe we are well-positioned to be the logical consolidator of smaller operators. In addition, from time-to-time, we may also buy triple-net lease facilities such as the San Antonio facility we purchased back in 2017. In total, our 2017 spending on new facilities, acquisitions and growth projects was $93.8 million. Through our process of active portfolio management, we strive to optimize our network and will from time-to-time dispose or exit facilities that are no longer core to our strategy. During 2017, we did sell three of these facilities, two were idle. In addition, we also exited a lease facility in New Zealand. As a result of these sales, we expect to benefit from reduced property operating costs and from the redeployment of this capital.
Now, let me touch on the strong industry fundamentals. On the supply side, barriers to entry are significant with new construction costs for a traditional temperature-controlled facility ranging from $130 to $180 per square foot compared to approximately half of that for drawing industrial space. Further, successful execution in this business is location-specific and requires a deep operational knowledge and customer relationships. On the demand side, we continue to see solid growth from retailers, producers and distributors. We expect the demand will continue from retailers as margins become tighter due to increased competition. Utilizing our warehouses and our expertise enables them to gain efficiencies and reduce costs, while allowing them to put their capital towards their customer-facing efforts, including their stores and reducing their prices.
Further, our business is not meaningfully impacted by cyclical swings in the economy as our warehouse network fulfills customer needs at all points of the cold chain. Even if demand from end-users shifts through the cycle from restaurants that may benefit from a stronger economy to grocery stores in a weaker economy as consumers eat more at home, the product still needs to be preserved by and moved through the temperature-controlled distribution chain. In addition, we believe the growth of e-commerce activity only helps us by providing expanded opportunities to service consumers.
Let me now review some of the key metrics that are most important to understand our performance. First, our facilities are measured in cubic feet. We measure occupancy as a percentage of pallets occupied relative to the pallet capacity of the facility. Our average optimal physical to occupancy is about 85% of our pallet capacity, which allows for room for efficient operations and normal throughput of goods. Next, our warehouse business historically experienced the seasonality within the fourth quarter due to the holiday season and the benefit of the third quarter harvest. While our recent trend towards a greater mix of contracts with fixed rent and storage commitment have reduced the traditional seasonality impact, we expect the fourth quarter to represent approximately 26% to 27% of our annual Global Warehouse segment revenue and NOI. Regarding margins in our Global Warehouse segment, we have focused on our same-store segment NOI percent. Our margin on rent and storage revenue is about 65% and our warehouse services, is about 4%. On a blended basis, this is approximately 30%. Keep in mind that the rent and storage revenue and warehouse services revenue are predominantly linked as customers tend to leverage our infrastructure for the mission-critical storage needs and rely on our services to help them efficiently serve their supply chain needs.
Turning to contracts, we have implemented underwriting standards which we referred to as our commercial business rules, which help improve the quality and visibility of our contracts. As part of these new contracts, we have included typical annual escalators on rent, new storage and associated services. Further, we continue on our work to transition our contracts from an as utilized on-demand to fixed storage commitment. We believe this shift benefits Americold as well as our customers. It provides more visibility and stability for us on our revenue and for our customers on their supply chain comp. It ensures that our customers have the space they need in their peak period.
Now let me turn the call over to Marc.
Thank you, Fred. I will start with an overview of our fourth quarter and full year 2017 financial results and then discuss our pro forma balance sheet and liquidity. Americold has completed its IPO in January of this year. Therefore, our reported results for the fourth quarter and full year 2017 reflect our pre-IPO structure. For the fourth quarter 2017 reported revenue was $401.7 million, 1.8% increase from the same quarter of the prior year. Please note our fourth quarter 2016 revenues were favorably impacted by the timing of revenue recognition associated with certain annual customer contractual volume commitments totaling approximately $5 million. Normalizing for this item, our year-over-year growth for the fourth quarter would have been 3.1%. For the full year 2017, our total revenue grew to $1.54 billion, an increase of 3.6% over 2016.
Our fourth quarter 2017 net income was $8 million compared to $12.4 million for the same quarter of the prior year. For the full year 2017, the company reported a net loss of $0.6 million compared to net income of $4.9 million for the prior year. Included in the fourth quarter and year end results is a $5 million charge for an excise tax settlement. Total NOI for the fourth quarter was $100.4 million compared to total NOI of $101 million for the same quarter of the prior year. As discussed our results for the fourth quarter 2016 were favorably impacted by the timing of revenue related to annual volume commitment. Excluding this impact total NOI improved $4.4 million or 4.4% over the same quarter of the prior year. We continue to move our customers to a fixed contractual commitment for storage in which they contractually reserve pallet position. We expect this will reduce the variability in the timing of revenue recognition going forward. For the full year 2017 total NOI was $374.1 million, an 8.2% increase over 2016.
Core EBITDA was $78.7 million for the fourth quarter of 2017 compared to $82 million for the same quarter of the prior year. Our fourth quarter 2016 core EBITDA benefited from the same revenue related annual volume commitment and approximately $2 million of other income related to business interruption insurance proceeds. Excluding these favorable 2016 items, core EBITDA improved $3.7 million or 5% from the same quarter of the prior year. For the full year 2017, core EBITDA grew 9.9% over 2016 to $287.1 million. Our fourth quarter FFO was $32.7 million compared to $31.5 million for the same quarter of the prior year. For the full year 2017 core FFO totaled $106.1 million compared to $69.2 million for the prior year.
Turning to AFFO, our fourth quarter AFFO was $24 million compared to $28.3 million for the same quarter of the prior year. For the full year 2017, AFFO totaled $94.6 million compared to $71.1 million for the prior year. The full definition and reconciliation of core FFO and AFFO can be found in our supplemental. Our core FFO and AFFO results for both years are net of preferred dividend of $7.1 million and $28.4 million for the quarter and full year respectively. These preferred shares were converted to common shares at our IPO.
For the fourth quarter of 2017, Global Warehouse segment revenues grew by 2.3% year-over-year to $297.6 million. Segment NOI totaled $93.9 million, a 31.6% of segment revenue for the fourth quarter compared to $92.2 million or 31.7% of revenue for the same quarter of the prior year. This represents a 1.9% improvement in segment NOI over the fourth quarter of 2016. Normalizing for the portion of the revenue recognition associated with certain annual customer contractual volume commitment associated with our Global Warehouse segment, the year-over-year improvement in revenue and NOI would have been 3.7% and 6.4% respectively. Additionally, normalized NOI margin would have expanded 100 basis points to 31.7% from 30.7%. This improvement in segment margin is largely due to contractual rate increases, new customer wins, a shift to a higher mix of fixed commitment contracts, productivity improvement and further leveraging of our fixed expenses. For the full year 2017, our Global Warehouse segment grew 6% to $1.15 billion of revenue. Segment NOI was $348.3 million, a 10.9% improvement over the prior year. Segment margins expanded 130 basis points to 30.4% for the full year 2017. The improvement in segment revenue and NOI results for the year, are consistent with the growth drivers previously highlighted for the quarter.
Turning now to our warehouse network and same-store results, our global network at the end of 2017 consisted of 158 facilities, including 146 from our Global Warehouse segment and 12 managed warehouses. We define same-store as facilities that have at least 24 months of normalized operations. Of the 146 facilities in our Global Warehouse segment, 139 met our definition and are reported as same-store. In the fourth quarter, our same-store revenues were $291.5 million, a 2% increase over reported results for the fourth quarter of the prior year. This revenue growth was driven primarily by higher average rates, favorable customer mix and a 10 basis point increase in average occupied pallets. These favorable items were offset slightly by a 1.4% decrease in throughput pallets relative to the prior year. Please note Q4 2016 revenue results included the $4 million in annual customer contractual volume commitment.
For the full year, same-store revenues grew 6.1% to $1.12 billion. This increase reflected a 140 basis point increase in average occupied pallets, a 4.1% increase in rent and storage revenue per occupied pallet, a throughput pallet increase of 1.8% and revenue per throughput pallet increase of 4.7%. These improvements reflect the annual impacts of certain top 25 customer contract renewals completed in 2016 on market terms, improved mix of contracts with fixed rent and storage commitments and new business won in 2017.
For the quarter, same-store NOI was $93.2 million, an increase of 1% over the prior year reported results. Normalizing Q4 2016 results for the $4 million in annual customer contract volume commitment, same-store NOI growth would have been 5.6%. For the full year, same-store NOI was $346.9 million, a 9.8% increase over the prior year. For the year, same-store warehouse occupancy increased 110 basis points to 78.3% and same-store throughput pallets increased 1.8% to $27 million. Returning to our Global Warehouse segment, we had no material changes to the composition of our top 25 customers. Additionally, our current rate for 2017 was approximately 5%, a 130 basis point improvement from the prior year.
I’d next like to comment on our pro forma balance sheet and capital markets activity [indiscernible]. In January, we completed our IPO and issued 33.4 million common shares of beneficial interest inclusive of the full exercise of the underwriters’ options to purchase additional shares at $15 per share. This resulted in aggregate net proceeds of approximately $494 million to the company after deducting underwriting discounts and operating expenses.
Simultaneous with the IPO, we closed on a new $925 million senior secured credit facility consisting of a 5-year $525 million term loan A facility and a 3-year $400 million revolving credit facility. Borrowings under the entire facility for interest at a floating rate of one month LIBOR plus 250 basis points at origination, the spread varies between 235 basis points and 300 basis points based on the leverage grid. In addition, the credit facility has a $400 million accordion option which brings total potential capacity to $1.325 billion. We used the proceeds of the IPO and the term loan A facility to repay our term loan B facility and outstanding construction loan debt aggregating $827.5 million. In February, we have simultaneously repaid $50 million of our outstanding term loan A facility and expanded the availability on our revolving credit facility by $50 million to $450 million resulting in no impact to total liquidity.
At March 23, 2018, we had total liquidity of $609 million including cash and available capacity on our revolving credit facility. The company had total debt outstanding of approximately $1.57 billion with the weighted average interest rate of 5.52% and a weighted average term of 4.4 years. At this time 54% of our debt including capital leases is at a fixed rate. Additionally, we had no material debt maturities during the remainder of 2018 and all of 2019. Over the past several years we have worked diligently to strengthen our balance sheet based on our 2017 core EBITDA and pro forma capital structure post IPO, our net debt to core EBITDA is approximately 4.8x. It is our intention to maintain relatively low leverage, access to multiple capital sources and well laddered debt maturities. From time-to-time we expect that we will uncover meaningful opportunities to expand and grow our warehouse network and we will maintain our balance sheet in such a manner that allows us to ask on these opportunities.
On March 15, 2018, our Board of trustees declared a pro rata dividend of $0.13958 per common share for the first quarter of 2018. This dividend is payable on April 15, 2018 to shareholders of record on March 30, 2018. The dividend represents an annual dividend rate of $0.75 per share. Finally, we have recognized as this call comes near the end of the first quarter. We will discuss the specifics of our results on our first quarter call, but would note that the quarter is tracking for our expectation.
I would now turn the call back to Fred.
Thanks Marc. In closing, we are extremely proud of the business we have built. And I would personally like to thank all of our team members for their dedication and hard work to get us to this point. With the completion of our IPO in January combined with our high quality portfolio, operational excellence and a deepened experienced team, we believe we are positioned better than ever to grow our portfolio and drive superior performance to create shareholder value.
Operator, this completes our prepared remarks, please open the call for questions.
Thank you. At this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Ki Bin Kim with SunTrust Robinson Humphrey. Please proceed with your question.
Good afternoon, everyone. Could we first start off with just talking about the underlying tenant demand and where are you seeing pockets of the growing demand, is that the manufacturers, the CPG companies or you guys made a alluded to e-commerce, what are you seeing from that business as well?
Right. So, this is Fred. Thanks for your question. So, look, overall strength we are seeing across the portfolio if you think about it, it’s the food producers and manufacturers are doing well. It needs to go to that point of consumption, which is going to be the retailers and the distributors and the e-commerce folks. So, we see that strong throughputs working all the way through the supply chain channels. Remember, 96% of everything if you find in your grocery store comes through a third-party such as ourselves, so all that product is moving through us and as long as consumption continues to sustain, which we expect it will, we expect all sectors to rise from there.
And is it too early to talk about 2018 guidance in terms of your warehouse rent or services businesses?
Well, we are committed to providing transparent disclosure and believe we have provided significant information to help you understand to model our business. Yes, at this time, we will continue to look at adding additional disclosure and we will consider providing appropriate guidance metrics as well, but we will not be providing formal guidance.
Okay. And could you talk about what will be the drivers to increase the service revenue per pallet going forward, what will cause that?
So, a number of things, clearly, we continue to manage our portfolio and bring on new business sometimes exit business that’s less profitable. So, a lot of it comes down to just the overall mix of the customer base that we have flowing through our facilities is a big driver of that component. Yes, the other thing if I tack on to that, Fred, as we see more work content happen through our network and we are seeing that as SKUs continue to proliferate and as we start to do more work with e-commerce providers that are moving from kind of the case picked down to each, all that work content you will see come through, through higher services right now.
Okay, thank you.
Thank you.
Our next question comes from the line of Michael Carroll with RBC Capital Markets. Please proceed with your question.
Yes, thank you. Can you guys talk a little bit about the current available space in the market in general and can you highlight what specific markets where the market is currently tight right now and are you able to push rents harder in those areas?
Yes. So, when you look at this industry in aggregate, this industry as a whole is pretty tight from a capacity standpoint. Remember, in some of our earlier conversations that the barriers to entry the cost of this infrastructure, is such where people don’t build on spec in this business. So, typically they are building with focus for specific customers or for specific excess demand in our particular market segment. So, as we look across and we have roughly a 140 sites here in the U.S. if I just speak to the U.S. every one of our markets are pretty much at full capacity. So that hence is the opportunity to grow and to develop with our customers in terms of pushing rents necessarily obviously as new commercial arrangements come up and capacity continues to be tight, we take all of that into consideration when we price new business.
And are there any other players today that are looking to start any project on spec given the current fundamentals?
Yes, we really don’t see that in the marketplace. It’s a pretty disciplined industry. Again, building on spec is very dangerous given the infrastructure cost associated with the buildings themselves plus the utilities to be able to maintain it at that temperature until the business comes. So, typically we just don’t see people doing that on spec, it’s usually pretty targeted.
And then do you think you could ramp up your development activities given those fundamentals and it seems pretty conservative your development expectations, are you just being cautious there or is it that you want to make sure you have a tenant before you break ground on any additional building?
Yes. I would say we are measured and disciplined. We certainly we use tools like sales force for example to capture demand out in the marketplace, so we have a pretty good understanding market by market, what type of business demand that we have had, but we have had the turn away due to no capacity. We are obviously very, very close with the big national accounts and monitoring those sides and understanding their needs. So when we are ready to enter a market which we will refer to as market development is very measured. We have that left of the pipeline candidates to come into there and we are currently working with kind of our core anchor tenants if you will to understand that need. So by the time we enter a market on a market driven basis, we feel pretty good about it.
Okay. And could you exceed your development guidance?
Absolutely, if the opportunities are there, right. So when we look at our opportunities from a development standpoint, it’s a combination of customer driven demand, so built-to-suit expands into existing facilities, adding on the manufacturing infrastructure, etcetera. Those projects tend to ebb and flow and you are kind of at the customers largely in terms of when they are ready to start that process. So that can kind of fluctuate from year-to-year. So for example, I think our guidance in general on development is $100 million to $200 million annually. It’s not to say that 1 year like $98 million and next year maybe $200 million. It’s just may depend on how those opportunities flow together.
Okay, great. Thank you.
Our next question comes from line of Dick Schiller with Robert W. Baird & Company. Please proceed with your question.
Thank you. Good afternoon guys and congrats on completing the IPO here.
Thank you. I appreciate it.
I had a quick one from the IPO launch presentation, if I recall the 2018 and 2019 lease expirations, they were rather elevated around 20% for both years, in the supplement this afternoon that that’s down to 7% around both 2018 and 2019, so can you speak to the renewals that were signed there, the overall terms and how it compares to prior lease economics and where a lot of those contracts now, are they the fixed storage committed contracts or was the on-demand type?
Yes. Fairly, we are constantly looking at contracts and renewing the agreements. For example, we are currently in the middle of working a new deal with a customer that’s got a 5-year agreement and were near 3 years. So if opportunities come to us that is the best interest of both parties to open up that contract and extend for another 5-year commitment or a 7-year commitment, we are going to do that. I will remind you that when you look at the vast majority of our business, right, you look at our top 25 customers that represent 61% of our revenue, those customers, the average length of those contracts is 5 years. Such the average length of time that they have been with us is 32 years. So it’s a continual process with us. In addition, when you look at new business that we have been bringing in over the last couple of years, I think we have had 3 years or 4 years straight of record new business acquisition. Everyone of those new business opportunities that come to us are being put together with our new commercial business roles in our underwriting standard. So I would say that each one of those contracts renewals is slightly healthier than the last time we made them doing business with our customer. So, I hope that answers your question?
Yes, definitely good to hear. Looking to margins, it looks like it was driven by a combination of average occupied pallets and are both rental rate increases, in your opinion looking forward, do you see greater potential to push on rate or occupancy of pallets?
Yes. Right now, we are obviously focused on both of those. Our commercial business will ensure that we have appropriate escalation in our contracts going forward. And we have a sales force that’s constantly out selling and working to optimize and bring additional customers into our network.
Great. And last one for me the construction project here in Suburban Chicago, much in your press release the state-of-the-art automation capabilities, how does that change the economics of that specific lease of that facility and would you explore doing similar CapEx investments in other existing properties?
Yes, absolutely. We do see this as a future avenue in select markets, right this isn’t something you are going to see popping up everywhere. It’s usually the big logistics corridors like your Chicago’s, your Atlanta’s, your Northeast Pennsylvania’s, Dallas’ etcetera that you would see this type of investment. This automation will bring us greater efficiencies. It’s also going to help provide better quality and service and reliability if you will for our customers. So, our expectation is and we are already having conversations with our customers both current tenants as well as new tenants that want to come into that facility about longer term agreements.
Great. Thanks, guys.
[Operator Instructions] Our next question comes from the line of Michael Mueller with JPMorgan. Please proceed with your question.
Yes, hey. Marc, I appreciate the comments you made about, it’s about guidance – sorry, I think there is an echo in our line here.
Yes, there is.
Yes, I apologize for that, if somebody on line can you please mute here? Thanks. So, yes, Marc, I guess for the guidance data points now putting them out definitely get that, but if at all possible, I think it would be really helpful, if you could go through and lay out the 2017 quarters, the key stats for the warehouse and services business to publicly get them out there, just because it is a year-over-year business, I mean, most of the stats you put out were year-over-year and it will be helpful to kind of get to the quarter. So, for whatever that’s worth I think that would be very helpful. The second thing is I was wondering, can you talk a little bit about market pricing for some of the acquisitions that you acquired in terms of feedstock multiples plus what you are seeing in the market?
Yes, let me hit the first thing. I would refer you to our supplement. We have provided – all those corresponding metrics are provided in the supplement that’s available on our website. So, I’d please refer you to the supplement and we did provide all of those – the detailed same-store, non-same-store core drivers in our supplement. We also expect to file our 10-K tomorrow and we will have a full MD&A in the 10-K as well. So, I think that will be helpful. So, if you are having trouble of not seeing that, please let me know, but you should be able to see that in the supplement. As it relates to what we are seeing in terms of market pricing on potential acquisitions, not too consistent with our conversation in the past, we are seeing transactions again happened on the cap rate basis in that 6.5% to 8%. The market of spread tests continues to be tight whether it’s based for quality assets in quality markets. Obviously, we are focused now on making acquisitions an important part of our growth plan as we go forward.
Got it. Okay, thank you.
Our next question comes from the line of Joshua Dennerlein with Bank of America/Merrill Lynch. Please proceed with your question.
Hey, good evening guys.
Hey, Joshua.
Can you remind me how much of your debt is floating and doesn’t have hedges on it and if you are looking at like maybe locking in interest rate balance from that un-hedged floating rate debt like swaps or anything, how do you guys think about that?
Yes, we are very comfortable with our debt as we are positioned as I mentioned in our prepared remarks, 64% of overall debt is fixed today, but we obviously continue to evaluate on an ongoing basis to optimize for our structure.
Is that 64% that includes like hedges?
Yes, that would be what’s fixed in the overall business.
That’s it for me. That’s it for me. Thanks.
Okay, thanks.
Our next question comes from the line of Ki Bin Kim with SunTrust Robinson Humphrey. Please proceed with your question.
Thanks. Just a couple of quick ones, how does your tenant watch list look like right now?
I am sorry, can you say that again, Ki Bin.
Do you have any tenants in your credit watch list radar?
No, historically, yes, we don’t – we have historically had seen this in our financials. We had very, very strong collections on our receivables, historically a very low charge-off rate on $1.5 billion I think our target is less than $1 million a year. The other thing I would know for our typical warehouse client very often we receive a warehousing and glean, which gives us a very preferred position in the event that there is our tenant runs into difficulty. Remember, we are providing mission-critical storage in order to keep that product preserved and have value ultimately for the creditors very often and historically we have seen customers we have been afforded critical vendors status which allows us to realize our selection.
Okay. And are you seeing any labor wage pressures in your warehouses given the kind of low unemployment rate environment and maybe some earlier signs of inflation?
I don’t think we have seen big risks as of yet. We are continuously monitoring and assessing our total compensation and total rewards package with the areas that we operate with them. So, I would expect that will continue to see escalation in that as minimum wage rises and that type of thing, but we have protection in our agreements for the most part that if that does get accepted, we are able to pass that forward.
Okay. Thank you, again.
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