Lineage Cuts EBITDA Outlook 7% as Cold-Storage Costs Bite

Lineage (NASDAQ:LINE) cut its 2026 adjusted EBITDA outlook by $15 million at the midpoint after transportation costs and a weak cold-storage season dragged third-quarter adjusted EBITDA down 7% year over year to $317 million. The company kept the midpoint of its adjusted funds from operations (AFFO, a REIT-style cash-flow measure) forecast intact at $2.86 to $2.98 per share, thanks to lower spending and taxes.

President and CEO Greg Lehmkuhl said EBITDA landed in line with expectations, supported by favorable administrative expenses, while AFFO beat the company's own bar. Q3 AFFO came in at $188 million, or $0.73 per share.

The new EBITDA range: $1.25 billion to $1.27 billion. The takeaway is simple — occupancy is improving, but costs are rising faster than pricing.

Where is occupancy heading?

Same-store physical occupancy rose 110 basis points year over year to 76.2%, the second straight quarter of gains. Same-store throughput (the volume of goods moving through facilities) fell about 1%, an improvement from declines of roughly 3% in Q1 and 2% in Q2.

Same-store warehouse net operating income (NOI, property revenue minus operating costs) dropped 4.2% to $342 million even as same-store revenue edged up 0.4%. CFO Robb LeMasters pointed to higher power costs, net of surcharges, as the primary driver.

Lehmkuhl said customer inventories had broadly stabilized, though some customers are running leaner because of higher carrying and transportation costs. For the full year, Lineage now expects same-store NOI to decline 3% to 2%, and it anticipates only a 3% sequential occupancy lift in the second half — versus a typical seasonal uplift of 9% and 6% a year ago.

How hard did trade pressures hit?

Same-store container volumes fell 8% in Q3, after drops of 18% and 15% in the first two quarters. Seafood was the standout pain point: Lehmkuhl said NOI from seafood customers dropped more than 14% and accounted for about half of the same-store NOI decline.

Of four top-10 customers consulted recently, two expect inventory levels to stay stable through 2027 and two expect to start rebuilding inventories next year. Pricing and minimum-volume guarantee talks are underway, with most contracts resetting in Q1.

What squeezed the transportation segment?

The global integrated solutions (GIS) segment posted NOI of roughly $56 million, down 13.8%, with margin down 200 basis points to 15.9%. The math is blunt: Lineage won contract pricing gains of 5% to 6%, but third-party carrier rates climbed into an 8% to 10% range by Q3. Lehmkuhl distinguished that from fuel, noting fuel surcharges reset automatically each week.

The company cut its full-year GIS NOI forecast to $231 million to $236 million — a decline of 8% to 6%, versus the prior outlook for a 4% to 2% drop. Lehmkuhl expects margins to recover over the next couple of quarters as customer contracts reprice.

What about the fire and the balance sheet?

Lineage raised its estimate of the 2026 Big Bear facility fire's impact on warehouse NOI and adjusted EBITDA to $20 million from $15 million, including $5 million in lost solar generation during safety reviews. It temporarily de-energized parts of its solar arrays after the Los Angeles fire and expects to re-energize most by early 2027.

Excluding the fire impact and a roughly $7 million California legal settlement in GIS, Lehmkuhl said the company would be guiding near the upper end of its initial full-year EBITDA range.

The balance sheet: approximately $8.1 billion in net debt and $371 million in liquidity at quarter-end. A $500 million unsecured term loan closed after quarter-end repaid revolver borrowings, lifting pro forma liquidity to about $870 million. Insurers have approved $100 million in Big Bear payments since quarter-end, with another $200 million expected before year-end. Lineage is also pursuing $1 billion in recovery through legal action against third-party solar operators.

The company expects cash from strategic asset transactions in the first half of 2027, earmarked first for deleveraging and development. Its $1.1 billion development pipeline spans 17 projects and should generate $130 million in incremental NOI at stabilization — the largest uplift landing in 2028 and 2029.

Lineage runs temperature-controlled warehousing and logistics across North America, Europe and Asia-Pacific, handling cold storage, food processing, blast freezing and transportation for producers and retailers. Its story this quarter: costs bit, occupancy healed slowly, and repricing is the cure it's counting on.