Lineage, Inc. and the Perils of Overvalued REITs: A Cautionary Tale of Misaligned Narratives and Market Realities

The story of Lineage, Inc. (LINE) is a stark reminder of the dangers inherent in overvalued real estate investment trusts (REITs) when their narratives outpace operational reality. In July 2024, Lineage executed what it hailed as the largest REIT IPO in history, raising $5.3 billion at $78 per share. The company's pitch was compelling: a “recession-resistant” leader in the cold-storage logistics sector, poised to capitalize on a market projected to grow from $159.7 billion to $427.6 billion by 2030. Yet, by August 2025, its stock had plummeted to $40.70—a 50% drop—exposing the fragility of its business model and the risks of overreliance on optimistic projections.

The IPO Narrative: A House Built on Sand

Lineage's pre-IPO narrative was anchored in two pillars: market inevitability and technological superiority. The company argued that the global cold chain—critical for food, pharmaceuticals, and e-commerce—was immune to economic cycles. It also touted its proprietary LinOS automation system as a game-changer, promising efficiency gains that would outpace competitors. These claims were amplified by the post-pandemic surge in cold-storage demand, which masked underlying structural weaknesses in the sector.

However, the IPO's success hinged on a critical assumption: that the pandemic-driven demand spike was a permanent shift, not a temporary anomaly. This assumption proved fatal. As global supply chains normalized and companies adopted lean inventory practices, Lineage's occupancy rates fell from 86% in 2023 to 83% in 2024, while storage revenue per pallet dropped by 1.7%. The company's failure to acknowledge these trends—instead framing them as a “return to normal”—exposed a disconnect between its public messaging and operational realities.

Operational Resilience: A Myth Exposed

Lineage's post-IPO performance revealed a lack of operational resilience. By Q1 2025, revenue had declined 2.7% year-over-year to $1.29 billion, and the company reported a $751 million GAAP net loss in 2024. Competitors like Americold Logistics and Burris Logistics, which focused on cost control and incremental innovation, maintained healthier margins. Lineage, by contrast, overextended itself with speculative greenfield developments and acquisitions, such as ColdPoint Logistics and Luik Natie, which failed to offset declining demand.

The company's technological claims also unraveled. LinOS, once hailed as a breakthrough, was criticized for underdelivering on efficiency gains. Internal restructuring and layoffs followed, while the abrupt dismissal of its auditor, KPMG, raised governance red flags. These missteps compounded investor skepticism, leading to a 50% stock price collapse and a class-action lawsuit alleging material misrepresentations.

Broader Implications for REITs

Lineage's case is emblematic of a broader trend in the REIT sector: the overvaluation of assets based on speculative demand forecasts. REITs, by nature, are sensitive to interest rates and economic cycles. Yet, many have adopted narratives that downplay these risks, instead emphasizing “structural growth” in sectors like cold storage, data centers, or industrial real estate. This approach can create a false sense of security, particularly when valuations are driven by short-term trends rather than long-term fundamentals.

The key lesson for investors is to scrutinize the alignment between a REIT's narrative and its operational metrics. For Lineage, metrics such as same-warehouse occupancy, rental growth per pallet, and capital deployment efficiency deteriorated sharply post-IPO. These indicators should have served as early warnings, yet they were overshadowed by the allure of a $427.6 billion market.

Investment Advice: Caution in the Face of Optimism

For investors, the Lineage saga underscores the importance of due diligence in high-growth REITs. Key questions to ask include:
1. Is the company's growth driven by structural demand or cyclical factors? Post-pandemic cold-storage demand was a one-off surge, not a permanent trend.
2. Does the REIT have pricing power in a competitive market? Lineage's failed price increases and declining occupancy rates suggest otherwise.
3. How does the company allocate capital? Lineage's speculative acquisitions and overbuilding highlight the risks of aggressive expansion without clear ROI.

Investors should also monitor governance risks, such as auditor changes or leadership instability. Lineage's abrupt dismissal of KPMG and internal restructuring signaled deeper operational and cultural issues.

Conclusion: The Cost of Misalignment

Lineage's collapse is a cautionary tale for investors and a warning for the REIT sector. When narratives outpace operational realities, the result is not just a stock price drop but a erosion of trust and capital. The company's experience highlights the perils of overvaluation in a shifting demand environment and the need for disciplined, data-driven investing.

As the cold-storage market evolves, the winners will be those REITs that adapt to leaner supply chains, innovate sustainably, and prioritize long-term resilience over short-term hype. For Lineage, the path to recovery remains uncertain, but its story serves as a vital lesson: in investing, the gap between promise and performance is often where value is lost.