Public Refrigerated Warehouse in York County, Pennsylvania: A USDA Business & Industry Model Study

Model study: an illustrative feasibility analysis built on public data for York County, Pennsylvania; not a client engagement.

Project summary

The credit question

A refrigerated warehouse is an operating business inside a special-purpose building. The building is worth a great deal when it is full of other people's frozen food and much less when it is empty, because its insulated envelope, refrigeration plant and heated slab have few other uses. The lender's question is therefore whether the operator can fill 16,500 pallet positions fast enough, at rates that clear rising labor and power costs, and keep them filled after the first contracts expire. Five narrower questions follow.

First, is the site rural? B&I funds projects only in a rural area, and an application cannot be approved "subject to" meeting that test later [1].

Second, does the loan fit? B&I limits guaranteed loans to one borrower to $25 million [1]; the project costs $48.3 million. The cap, not the program's 20% to 25% new-business equity rule [1], sets the capital stack.

Third, can the ramp be carried? The warehouse opens with empty rooms and a full fixed-cost base. Year 1 covers only 52% of debt service, so reserves and sponsor liquidity must be sized to the slow-ramp case.

Fourth, how much revenue is contracted, and for how long? The credit core is the share of fixed charges that reserved-space agreements cover, and how their expiry dates line up with a 26-year loan.

Fifth, what is the collateral worth without the business? B&I requires going-concern value to be deducted from the appraisal before discounting [1], and on that basis the discounted collateral here is slightly short of the loan.

Location and county economy

York County sits on the west bank of the Susquehanna River between the Harrisburg area to the north and the Maryland line to the south, with I-83 running through it from end to end. For a cold storage operator, the county's value lies in three things: a large and growing food manufacturing base, a warehouse labor pool that has already formed around distribution, and an interstate that runs the length of the county. The data below show the first two.

Population and income. York County added about 16,500 residents from 2020 to 2025, growing roughly seven times faster than Pennsylvania [3], [4]. The warehouse serves a multi-state region, so population matters mainly through the labor pool and a steady township tax base. Median household income of $81,537 in 2024 sits above the Pennsylvania figure of $77,532 [5], so the county is not a low-wage labor market, and the model prices warehouse labor accordingly.

Labor market. A new employer must pay competitive wages, so the model escalates labor at 3.25% a year, faster than the 2.5% rate escalator.

Employment base. In the fourth quarter of 2023, Amazon.com Services was the county's second-largest employer; Giant Food Stores ranked 8th, Utz Quality Foods 12th, FedEx Ground 14th, United Natural Foods 15th, Weis Markets 18th, Snyder's Lance 33rd, Chewy 47th and D F Stauffer Biscuit 49th [9]. Between the fourth quarters of 2020 and 2023, warehousing and storage rose from the 7th to the 3rd largest industry, other food manufacturing from 12th to 10th, and HVAC and commercial refrigeration equipment manufacturing from 40th to 29th [9]. The last ranking is practical for this asset: refrigeration technicians and parts are already in the county, which shortens outages.

Logistics employment. The rise of warehousing and storage in the county's industry rankings [9] shows the mix shifting toward distribution. That proves the corridor works for freight and warns that warehouse labor is contested.

Access. I-83 links the county to the Harrisburg area and the I-81 corridor to the north and to Maryland to the south. Refrigerated freight is time-sensitive, so the site needs direct access to an I-83 interchange, and a traffic study for the actual interchange is part of land development approval.

What this means for the credit. The county supplies a food production base, a trained distribution workforce and interstate access. These make the location plausible for third-party cold storage; they do not prove demand for this building.

Market analysis

Demand drivers

A public refrigerated warehouse serves food processors needing finished-goods storage, importers and distributors staging product, retailers and grocery wholesalers needing seasonal overflow, and agricultural processors needing blast freezing. County Business Patterns measures the first and third groups.

Sources: [7], [8]. Blank cells reflect Census disclosure suppression.

Food manufacturing employment rose 20.0% in York County and 18.0% in Lancaster County between 2019 and 2023 [7], [8]. Across a six-county ring (York, Lancaster, Adams, Cumberland, Dauphin, Lebanon) it rose 6.0%, from 23,730 to 25,159, with Adams declining [7], [8]. York's mix leans to snack and bakery products, much of it shelf-stable, so these counts overstate the local frozen base. The relevant point is that the region is a production and distribution cluster shipping to East Coast population centers, and its frozen and chilled flows need third-party space. Refrigerated warehousing itself employs few people: 204 jobs in three York establishments in 2019 and 199 in six Lancaster establishments in 2023 [8], [7].

Existing supply: the NASS capacity survey

The USDA National Agricultural Statistics Service surveys refrigerated warehouses every two years. Its October 1, 2025 survey is the most current public measure of supply.

Sources: [10], [11]. Maryland's figures are withheld to avoid disclosing individual operations [10].

Four readings matter for the credit.

First, Pennsylvania is a large cold storage state, eighth among the states with published totals in 2025 [10], with 17.5 gross cubic feet per resident against 11.7 nationally [10], [4]. It stores food for more people than live in it, so a York County warehouse competes for regional demand.

Second, Pennsylvania capacity was flat from 2023 to 2025 while national capacity grew 7.9% [10], [11]. That is not simply good news for a Pennsylvania project: a national building wave added about 292 million cubic feet in two years [10], [11]. This is the most important market fact in this study: new space is not scarce nationally, and a lender should not count on pricing to rescue a slow lease-up.

Third, Pennsylvania public space fell from 182.5 to 94.0 million cubic feet and public warehouses from 26 to 15, while private and semi-private space nearly tripled [10], [11]. With total capacity unchanged, reclassification is the likely cause. NASS defines public storage as space for storing food "for others at specified rates per unit" [10]. If facilities truly converted to captive use, less third-party space is open to regional food companies; if reporting changed, the swing means nothing. The model does not rely on it.

Fourth, the project is small against the state. Its storage rooms hold about 4.19 million gross cubic feet (freezer 42 feet and cooler 38 feet to the deck, dock excluded): 1.8% of Pennsylvania's gross space, 4.5% of its public space and 1.9% of its freezer space [10]. At the national usable ratio of 82% [10], usable space is about 3.43 million cubic feet.

Pipeline

No public registry tracks cold storage under construction in South Central Pennsylvania, and this model study did not compile trade-press announcements. A lender should require a broker or appraiser survey of projects within 100 miles, with cubic feet, temperature mix, delivery date and pre-leasing. The model treats competing supply as an assumption, holding rate growth to 2.5% a year and testing a 10% rate cut.

Demand method: share of incremental regional capacity

A public warehouse fills by taking pallets from three places: growth in regional food volume, customers leaving older or full facilities, and food companies converting from captive to outsourced storage. None of these is published directly, so the model uses a capacity-growth proxy and tests the result against what the warehouse must achieve.

If Pennsylvania grew at the national pace, this one facility would absorb about half of a year's growth, a large share. Pennsylvania's flat capacity cuts both ways: regional demand may be soft, or the region may be under-built and a modern facility can take share from older ones. The model does not rely on spot demand for its first tranche of occupancy. Before closing, 41.2% of positions must be under reserved-space agreements (see Anchor contracts below), so market risk sits in the remaining 59%, which must fill to about 80% occupancy within three years. The demand case holds only if the pipeline survey confirms high regional public freezer occupancy.

Pallet-position economics

Cold storage pricing is quoted per pallet, so the credit case is easiest to test in those units.

The table shows the asset's operating gearing. Fixed costs are about $4.18 million in Year 4, roughly 70% of operating expense. Below about 43% occupancy the warehouse loses money before debt service; between 43% and 69% it covers operations but not the loan; above 74% coverage is comfortable. The anchor contracts and the ramp reserve therefore matter more than the stabilized DSCR.

Forecast

Occupancy is 55% freezer and 50% cooler in Year 1, 76% and 72% in Year 2, 86% and 84% in Year 3, and 88% and 86% from Year 4. Stabilized occupancy below full leaves slack for seasonal builds, which customers pay for. Turns are 7 a year in the freezer and 14 in the cooler. Rates escalate 2.5% a year from Year 2, an illustrative assumption justified only by contract escalators.

Site and technical

Site selection and B&I rural eligibility

A rural area for B&I is any area outside a city or town of more than 50,000 people and outside the urbanized area contiguous and adjacent to such a city, by the latest decennial census. Excluded areas are delineated on USDA Rural Development's Property Eligibility Map, and an application cannot be approved subject to meeting the test later [1]. York city's April 1, 2020 estimates base was 44,801 and its July 1, 2025 estimate 45,342 [12], so York itself is below the threshold. Two neighbors are not. Lancaster city, across the Susquehanna, had a 2020 base of 57,983, and Harrisburg city, north of the county line, a 2020 base of 50,070 [12]. Their contiguous urbanized areas are the ones the rule can exclude, and the second sits close to the northern end of the corridor this model uses. This model study did not test individual parcels against the map.

The model places the site in the northern I-83 corridor between Exits 28 and 34, outside York city and the built-up boroughs around it, for three reasons. Open township land is the most likely place to find map-eligible parcels. The corridor sits between the York market and the I-81 and Harrisburg distribution cluster, where Cumberland County warehousing jobs rose from 5,434 to 7,166 between 2019 and 2023 [8], [7]. And 16-acre industrial parcels with three-phase power are easier to assemble outside built-up boroughs. Because eligibility must be met at approval [1], and because the corridor's northern end lies nearest the Harrisburg urbanized area, the application should include a parcel printout from USDA's map showing the site outside any excluded area.

Site requirements

The model assumes 16 acres of industrial zoning for the building, 24 dock doors, a trailer court for 60 to 80 trailers, stormwater basins and an expansion pad; direct or signalized access to an I-83 interchange; utility-confirmed three-phase service for an assumed 1.5 to 2.0 MW of peak load; public water for fire protection and condensers; soils suited to heavy rack loads and a heated freezer slab; and buffers from residences for ammonia safety, noise and lighting.

Zoning and permits

Each York County township administers its own zoning and land development ordinances. A cold store is usually permitted or conditional in an industrial district and rarely in the agricultural districts that cover much of rural York County. The model assumes industrial zoning and six to eight months for land development approval, including a traffic study.

• Construction stormwater. Construction with earth disturbance of one acre or more needs NPDES permit coverage under Pennsylvania's Chapter 102 program [13].
• Refrigerant. EPA's May 2026 amendment to its technology transitions rule, effective July 27, 2026, set an interim global warming potential limit of 700 for new cold storage warehouse systems until January 1, 2032. From that date the limit returns to 150 or 300, depending on charge size and cascade position, with 150 applying to systems of 200 pounds or more [14], [15]. A 2028 system should use ammonia, CO2 or a cascade of the two; the $68 per sf budget assumes a low-charge design.
• Ammonia safety. Above 10,000 pounds of anhydrous ammonia, OSHA process safety management and EPA's risk management program apply [16], [17]. Staying below that threshold lowers compliance cost and the risk a lender must evaluate.
• Federal environmental review. B&I actions must comply with 7 CFR part 1970, including historic preservation and endangered species review [1].

Construction approach

The model assumes a design-build contract with a guaranteed maximum price from a contractor experienced in freezers: insulated metal panels on a steel frame, a heated sub-slab against frost heave, racking to 42 feet in the freezer, a refrigerated dock and an engine room. The budget carries a 6% contingency, an illustrative assumption.

Schedule

The first full payment falls about 29 months after the note, inside the 3-year B&I limit [1]. A freezer must be pulled down slowly over several weeks, and the budget carries $650,000 for pre-opening labor and pull-down energy.

Development budget and sources and uses

Building and site construction totals $31.8 million, or $265 per sf. Construction unit costs are assumptions to be replaced by the contractor's guaranteed maximum price. The guarantee fee is loan amount times guarantee percentage times fee rate [1], at the FY2026 rate of 3.0% [2]. Interest during construction is modest because equity funds roughly the first half of construction draws before the loan funds the rest.

The loan is at the $25 million borrower limit [1] and equity fills the gap. A sponsor wanting less equity could use a subordinated note under a life-of-loan standstill, which B&I counts as equity [1], or a junior loan from another lender, whose position behind the guaranteed loan would need Agency review because all collateral must secure the entire guaranteed loan [1]. Neither is modelled.

Revenue build and operating expenses

Assumptions

Every figure below that is not cited is an assumption. The rationale column explains why each one is set where it is.

Year-by-year revenue build

Storage is about 61% of stabilized revenue, handling 29% and accessorial services 11%. Reserved storage is the most predictable stream; handling and accessorial revenue move with customer volumes.

Operating expenses

Labor is 33.6% of revenue at stabilization. Fixed salaries ($1.70 million in Year 1) exceed variable handling payroll in the first year because a freezer is staffed around the clock from the first pallet. Total employment of about 37 stays below the 50-employee level at which B&I's job-transfer and market-capacity tests apply [1].

Energy is 9.5% of operating expense and 5.5% of revenue at stabilization: 3.96 million kWh at 14.25 cents in Year 4. The starting point is already rising. Pennsylvania's industrial average was 10.82 cents per kWh for January to August 2026, up 18.8% from 9.11 cents, and the commercial average rose 14.1% to 13.90 cents [18]; the August industrial figure was 10.47 cents against 9.66 a year earlier [20]. Pennsylvania industrial power now exceeds the national average of 9.09 cents [18]. Power matters less to coverage than labor, which is three times larger, but a cold store cannot cut it in a downturn.

Retention fee. At the FY2026 rate of 0.55% on the guaranteed share [2], the fee costs $110,000 in Year 1 and declines with principal. The lender may pass it to the borrower [1]; the model treats it as operating expense, slightly lowering DSCR against the regulatory definition.

10-year pro forma

Year 1 is interest only ($1,812,500); from Year 2 the loan amortizes at $2,200,816 a year ($183,401 a month), and the balance falls to $20,090,783 by the end of Year 10. Margins peak at 41.9% in Year 4 and drift to 39.8% because labor, power and insurance escalate faster than rates, but NOI still grows in dollars. The Year 1 shortfall of $877,386 is drawn from the $1.5 million reserve; the remaining $622,614 and the $1.25 million of working capital return to equity at exit.

Debt structure under the program

Terms

As of November 11, 2026, the Federal Register listed no FY2027 OneRD fee notice; the only FY2027 guarantee fee notice found was for the separate SPUR program, published October 27, 2026 [21]. The model therefore uses FY2026 terms. The retention fee rate in effect when the loan is obligated stays in place for the life of the guarantee [1], so the terms that apply will be set in the conditional commitment.

Equity injection and its basis

A new business without long-term sales contracts, not seeking the guarantee before completion, needs at least 20% balance sheet equity (or debt-to-equity of 4 to 1 or less) or an investment of 25% of eligible project cost; seeking the guarantee before completion raises the test to 25% [1]. The 10% test for new businesses with sales contracts as long as the loan [1] does not fit cold storage, where agreements run a few years. The modelled $23,308,843 is 48.2% of cost, with debt-to-equity of 1.07 to 1, passing every version of the test. Equity must be cash or earning assets and cannot include appraisal surplus [1], so contributed land counts only at cost. The Agency may raise equity for higher-risk loans after weighing contracts, collateral and the feasibility study [1]; the surplus equity answers that review.

Anchor contracts: the credit core

The model assumes reserved-space agreements signed before closing for 6,000 freezer and 800 cooler positions, 41.2% of capacity, with five-year initial terms, minimum monthly storage billing on all reserved positions, and minimum annual throughput of 5 turns in the freezer and 10 in the cooler.

The contracts cover debt service on their own but, net of the labor they consume, pay only about half of the fixed charges that exist whether rooms are full or empty. Spot business must cover the rest, and the anchor-exit stress under Sensitivity and stress tests drives the contract-term conditions.

DSCR and break-even

B&I defines debt service coverage as earnings before interest, taxes, depreciation and amortization, less reasonably expected replacement capital expenditures, divided by annual principal and interest [1]. The model uses that definition, with the retention fee included in operating expenses.

Cooler occupancy is two points below freezer occupancy in each case. Revenue can fall 21.6% from the Year 4 base before coverage reaches 1.00x, a cushion that does not exist in Year 1. Debt yield is 17.2%, loan to cost 51.8% and loan to an income-based value of $59.2 million 42.2%. Those ratios reflect the $25 million cap, not a conservative lender; the collateral test is less comfortable.

Collateral

For construction projects the lender needs "as is" and prospective values, with business or going-concern value deducted before discounting [1]. The income-based value includes handling margin, which is business income, so it cannot be the basis. On cost or real-estate-only value, discounted collateral covers 88% to 93% of the loan. The rule requires discounted collateral adequate to secure the loan and leaves discount factors to the lender [1]. Guarantees [1], contract assignments and the 48% equity cushion close the gap; a lender might also ask for outside collateral.

Returns

Placing all cost at time zero, although construction runs 16 months, understates both IRRs slightly. The levered return is only 1.8 points above the unlevered because the loan is small and its rate is close to the 8.9% stabilized yield. Of the $62.9 million returned to equity, $48.8 million arrives at sale in Year 10, so the sponsor's return depends heavily on the exit. If the project qualified for the B&I reduced fee of 1.0% upfront and 0.50% retention [2], available, subject to annual limits, for projects that process, distribute, aggregate, store or market locally or regionally produced agricultural food products and promote access to healthy foods [1], closing costs would fall $400,000 and the levered IRR would rise to 12.1%. The model does not assume it.

Sensitivity and stress tests

DSCR in Year 4: interest rate against freezer occupancy

Occupancy dominates the rate: six points of occupancy move coverage about 0.27x, while 50 basis points of rate move it 0.07x to 0.09x.

DSCR in Year 4: electricity price against rate level

Doubling the power price costs 0.26x of coverage; cutting all rates 15% costs 0.68x. Energy can sometimes be passed through by surcharge; a competitor's lower rate cannot.

Downside scenarios

Slow ramp. Filling a year behind plan produces cash deficits of $2,212,181 in Year 1 and $1,045,136 in Year 2. The reserve covers less than half; the sponsor must inject about $1.76 million. This is the most likely downside and drives the liquidity condition.

Anchor exit. If the anchor leaves when its five-year term ends, Year 6 freezer occupancy falls to 43% and coverage to zero, recovering to 0.98x in Year 7 and 1.69x in Year 8. The sponsor funds deficits of about $2.27 million, and cash flow over Years 6 to 8 falls about $6.8 million short of the base case. One customer holding 41% of capacity is the largest concentration in the file.

Rates down 10%. An illustrative pricing shock, this takes stabilized coverage to 1.37x and the sponsor's return to 5.0%. Equity bears pricing risk first.

Combined and overrun. The combined case leaves 1.21x at stabilization but 0.75x in Year 2. A 10% overrun funded with equity does not change coverage, because the loan is capped, but cuts the levered IRR to 10.0%; an overrun the sponsor cannot fund is the real risk.

Program compliance

Risks and mitigants

Model determination

Financeable as structured, with conditions.

The modelled project meets B&I's loan size and equity tests, and its location test turns on one document. The site still has to be shown rural on USDA's map [1], the loan is at the $25 million limit [1], and equity of 48.2% is about twice the new-business requirement [1]. At stabilization the project covers debt service 1.83 times on the regulatory definition and stays above 1.00x until freezer occupancy falls below 69%.

Those numbers do not settle the credit. The ramp cannot cover interest in Year 1 and depends on the sponsor if lease-up runs late. The anchor agreements cover debt service but only half of fixed charges, and a five-year term leaves a cliff in Year 6. Excluding going-concern value [1], discounted collateral is about 90% of the loan, so guarantees and contract assignments are part of the security.

A lender reviewing a file like this would likely set these conditions:

1. Executed reserved-space agreements for at least 6,800 positions before closing, with acceptable counterparties, initial terms of at least seven years or staggered expiries, and 18-month renewal notice.
2. A $1.5 million lease-up reserve at completion and sponsor liquidity of at least $2.0 million, tested annually until two consecutive quarters at 1.25x.
3. A cash sweep into a re-leasing reserve beginning 24 months before any anchor expiry.
4. A guaranteed maximum price contract, proof of overrun funds, and lender construction inspections [1].
5. A parcel-level USDA eligibility printout and the FY2027 guarantee and fee terms in the conditional commitment.
6. An independent feasibility study [1] with a 100-mile pipeline survey, current regional rates and occupancy, and a utility-confirmed power plan.
7. An appraisal with going-concern value removed and guarantees from each 20% owner [1].
8. A natural refrigerant design compliant with EPA rules [14] and a documented ammonia safety plan [16], [17].
9. A fixed-price electricity supply contract for at least three years and surcharge language in customer agreements.

With these conditions, stabilized cash flow covers debt comfortably, equity absorbs the first losses, and the weakest periods are carried by reserves and contracts. Without them, the project is a bet on spot demand in a market where national supply grew 7.9% in two years [10].