A practical LOI framework built for temperature-controlled warehouse and 3PL acquisitions — covering purchase price, real estate, refrigeration equipment, earnouts, and food safety compliance contingencies.
An LOI for a cold storage or refrigerated warehousing acquisition is more complex than a typical business purchase. You are simultaneously evaluating a real estate asset, a capital-intensive equipment portfolio, a food safety compliance framework, and a customer contract book — often rolled into a single transaction. Getting the LOI right sets the tone for due diligence, protects you during exclusivity, and signals to the seller that you understand the industry. This guide walks you through each LOI section with language specific to cold storage deals, including how to handle the real estate structure (purchase vs. sale-leaseback), refrigeration system condition carve-outs, customer concentration risk, and SBA financing contingencies. Cold storage transactions in the $1M–$5M revenue range typically trade at 3.5x–6x EBITDA, and deal structure matters as much as headline price. Whether you are financing through SBA 7(a), SBA 504, or a combination with seller financing, this LOI framework will help you move from handshake to exclusivity with clarity and credibility.
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Identify the buyer entity, seller entity, and the specific assets or business being acquired. In cold storage deals, clarify upfront whether the transaction includes the real estate, is structured as a sale-leaseback, or separates the operating business from the property. This prevents scope ambiguity during due diligence.
Example Language
This Letter of Intent is submitted by [Buyer LLC], a [State] limited liability company ('Buyer'), to [Seller Operating Entity] and [Seller Real Estate Entity] (collectively 'Seller'), with respect to the proposed acquisition of substantially all operating assets of [Facility Name], a temperature-controlled warehousing and 3PL operation located at [Address], including [Option A: the underlying real property and improvements OR Option B: under a concurrent long-term triple-net lease to be negotiated]. The transaction will be structured as an asset purchase unless otherwise mutually agreed.
💡 Sellers of cold storage operations frequently hold real estate in a separate LLC for liability and tax purposes. Clarify from the first conversation whether you are buying the real estate or leasing it back. If you are pursuing SBA 504 financing, owning the real estate is typically required for the CDC portion. If the seller insists on a sale-leaseback, ensure lease term, rent escalation caps, and renewal options are addressed in the LOI — not left to post-exclusivity negotiation.
Purchase Price and Valuation Basis
State the proposed purchase price, the EBITDA multiple or asset-based rationale behind it, and how price is allocated between operating assets, real estate (if included), and goodwill. Cold storage valuations are sensitive to equipment condition and customer contract tenure, so anchoring the price to verifiable EBITDA with adjustment mechanisms is critical.
Example Language
Buyer proposes a total purchase price of $[X,XXX,000], representing approximately [X.Xx] times the Seller's trailing twelve-month adjusted EBITDA of $[XXX,000] as represented by Seller. The purchase price is allocated preliminarily as follows: (i) tangible operating assets including refrigeration systems, racking, dock equipment, and vehicles: $[XXX,000]; (ii) real property and improvements: $[X,XXX,000] (if applicable); (iii) customer contracts, goodwill, and intangible assets: $[XXX,000]. Purchase price is subject to downward adjustment based on findings from equipment condition assessments, deferred maintenance schedules, and customer contract verification during due diligence.
💡 Cold storage sellers often anchor price to real estate appraisals rather than EBITDA multiples, especially when the facility is owner-occupied and partially underutilized. Push to separate the real estate value from the business enterprise value in your LOI. A refrigeration system inspection may reveal $200,000–$500,000 in deferred capital expenditure, which is a legitimate basis for a price reduction mechanism. Include explicit language that the purchase price is contingent on EBITDA verification and equipment condition findings.
Deal Structure and Financing Contingency
Outline the proposed financing structure, including SBA loan type, equity contribution, and any seller note or equity rollover. Cold storage acquisitions frequently use SBA 7(a) or SBA 504 programs, and lenders will scrutinize customer concentration and equipment condition. State your financing plan and timeline clearly.
Example Language
Buyer intends to finance the acquisition through a combination of: (i) SBA [7(a) / 504] loan proceeds of approximately $[X,XXX,000]; (ii) Buyer equity of approximately $[XXX,000] representing [10–20]% of total consideration; and (iii) a Seller note of $[XXX,000] on [10-year] terms at [6–7]% interest, subordinated to senior SBA debt per SBA guidelines. Closing is contingent upon Buyer obtaining SBA lender approval and commitment letter within [45–60] days of execution of this LOI. Seller agrees to provide all financial documentation, equipment records, and customer contracts reasonably required by Buyer's SBA lender within [10] business days of request.
💡 SBA lenders underwriting cold storage deals will require independent equipment appraisals, real estate appraisals, and often a Phase I environmental report. Budget 45–60 days for SBA commitment. If the seller has significant deferred maintenance, the lender may require an equipment reserve holdback. Include seller note language that complies with SBA standby requirements — the SBA typically requires seller notes to be on full standby for 24 months in 7(a) transactions. Sellers unfamiliar with SBA may push back on standby terms, so address this in the LOI to avoid surprises.
Earnout Provisions Tied to Customer Retention
Define any earnout structure tied to post-close customer retention, particularly for anchor tenants representing significant revenue concentration. Cold storage businesses with one or two large grocery or food production customers carry meaningful post-close revenue risk, making earnouts a common and appropriate deal structure element.
Example Language
In addition to the base purchase price, Buyer agrees to pay Seller an earnout of up to $[XXX,000] contingent upon the following milestones during the [12–24] month period following closing: (i) $[XX,000] payable if [Anchor Customer A] executes a storage and handling agreement with Buyer for a minimum term of [24] months within [90] days post-close; (ii) $[XX,000] payable if aggregate annualized storage revenue from customers representing the top [3] accounts at closing is no less than [85]% of trailing twelve-month revenue from those accounts at the end of month [12]; (iii) $[XX,000] payable if facility capacity utilization exceeds [75]% at the end of month [18]. Earnout payments will be calculated and verified within [30] days following each milestone measurement date.
💡 Sellers will resist earnouts they perceive as speculative or buyer-controlled. Frame earnouts around objective, measurable customer contract milestones rather than total revenue or EBITDA, which sellers view as manipulable. For cold storage, customer retention is the most legitimate earnout trigger because anchor tenant contracts are the primary value driver. If the top customer is already on a signed multi-year contract, consider reducing the earnout and increasing the base price — it signals confidence and simplifies closing.
Due Diligence Scope and Timeline
Specify the due diligence period, key workstreams, and seller cooperation obligations. Cold storage due diligence is more intensive than most service business acquisitions because it encompasses real estate condition, mechanical systems, regulatory compliance, and customer contracts simultaneously.
Example Language
Buyer requests an exclusive due diligence period of [60] days from the date of full execution of this LOI. During this period, Seller agrees to provide Buyer and Buyer's advisors with prompt access to: (i) three years of CPA-prepared or reviewed financial statements and monthly management accounts; (ii) all customer storage and handling contracts, renewal terms, and rate schedules; (iii) all refrigeration, HVAC, and mechanical system maintenance logs, service records, and capital expenditure histories; (iv) utility consumption records by month for the prior [36] months; (v) all FDA, USDA, and food safety inspection records, certifications, and any outstanding notices of violation or corrective action plans; (vi) real estate title, survey, environmental reports (Phase I and Phase II if applicable), and lease agreements if applicable; (vii) employee org chart, compensation records, and any collective bargaining agreements. Buyer reserves the right to commission independent mechanical inspections of refrigeration and ammonia or refrigerant systems, a Phase I environmental site assessment, and real estate appraisals at Buyer's expense.
💡 Sixty days is the minimum realistic due diligence timeline for a cold storage asset. Refrigeration system inspections require specialized engineers familiar with ammonia systems or commercial HVAC — do not rely on a general contractor. Energy cost trends are a critical underwriting variable: if utility costs as a percentage of revenue have been rising over three years, your operating model must reflect that risk. Always request food safety inspection records for the prior five years, not just the current certifications — past violations reveal how the operator manages compliance culture.
Exclusivity and No-Shop Provision
Establish an exclusivity period during which the seller agrees not to solicit or entertain offers from other buyers. Given the complexity and length of cold storage due diligence, protecting your investment of time and third-party costs with a meaningful exclusivity window is essential.
Example Language
In consideration of Buyer's commitment to proceed in good faith and incur due diligence costs estimated at $[15,000–$40,000], Seller agrees to grant Buyer an exclusive negotiating period of [60] days from the date of full execution of this LOI ('Exclusivity Period'). During the Exclusivity Period, Seller and Seller's representatives agree not to solicit, encourage, or enter into negotiations with any other party regarding a sale, merger, recapitalization, or transfer of any material interest in the business or its assets. If Buyer and Seller have not executed a definitive Purchase Agreement by the end of the Exclusivity Period, either party may terminate negotiations without obligation unless the parties mutually agree in writing to extend exclusivity.
💡 Sellers who have been approached by multiple buyers may resist a 60-day exclusivity window. You can offer a shorter initial exclusivity of 30 days with a right to extend upon reaching defined milestones — such as completing the refrigeration inspection and receiving an SBA lender term sheet. Tying exclusivity extension to objective milestones gives the seller confidence you are moving with urgency and not using exclusivity to shop financing.
Real Estate Structure and Lease Terms (if Applicable)
If the transaction involves a sale-leaseback rather than real estate purchase, define the key lease parameters in the LOI. Leaving lease terms to post-exclusivity negotiation is one of the most common and costly mistakes in cold storage acquisitions.
Example Language
If the parties agree to structure the real estate as a sale-leaseback, Buyer and Seller agree that the following lease parameters will be incorporated into a long-term triple-net lease executed concurrently with the business asset purchase: (i) initial annual rent of $[XXX,000], representing a [6.5–7.5]% capitalization rate on the agreed real estate value of $[X,XXX,000]; (ii) initial lease term of [10] years with [two] renewal options of [five] years each; (iii) annual rent escalations capped at the lesser of [CPI or 3%]; (iv) Tenant responsible for all taxes, insurance, and maintenance including refrigeration and mechanical systems; (v) Landlord responsible for structural repairs to the building envelope and roof. Seller acknowledges that Buyer's SBA lender will require a minimum remaining lease term of [10] years plus renewal options to underwrite the business acquisition loan.
💡 SBA lenders financing cold storage operations require lease terms that cover at minimum the loan amortization period. If you are pursuing a 10-year SBA 7(a) loan, you need a 10-year base lease with renewal options. Sellers who own the real estate often underestimate how much of the business value is embedded in the real estate, and they may price the leaseback rent at market rates that create margin compression. Model the rent payment as a percentage of projected EBITDA before agreeing to any sale-leaseback structure — rent above 8–10% of revenue in a cold storage operation will stress cash flow significantly.
Representations, Warranties, and Indemnification Framework
Outline the seller's key representations and the indemnification framework that will be formalized in the Purchase Agreement. In cold storage, food safety compliance history, equipment condition, and environmental matters are the highest-risk representation categories.
Example Language
Seller will make customary representations and warranties in the definitive Purchase Agreement, including but not limited to: (i) accuracy of financial statements; (ii) title to and condition of all tangible assets free and clear of undisclosed liens; (iii) no material deferred maintenance on refrigeration, HVAC, or cold storage systems beyond amounts disclosed in Schedule [X]; (iv) current and valid status of all food safety certifications including FDA registration, USDA approval (if applicable), and SQF or other third-party food safety certifications; (v) no outstanding regulatory violations, EPA notices, or environmental remediation orders; (vi) customer contracts are in full force and effect as represented with no undisclosed termination notices or disputes; (vii) all refrigerant handling practices comply with EPA Section 608 regulations. Seller agrees to an indemnification holdback of [10–15]% of purchase price held in escrow for [18–24] months to cover indemnifiable claims.
💡 Food safety compliance representations are non-negotiable in any cold storage acquisition. A single undisclosed FDA warning letter or USDA suspension can result in facility shutdown, destroying the business value within weeks of closing. Require the seller to represent current certification status and disclose all prior inspection findings going back five years. The 10–15% escrow holdback is standard market practice; sellers who resist any escrow are signaling concern about skeletons in the diligence. Environmental representations are equally critical — refrigerant leaks and ammonia systems create remediation liability that can dwarf the deal value.
Conditions to Closing
List the specific conditions that must be satisfied before the buyer is obligated to close. In cold storage, conditions beyond standard legal requirements should include SBA financing approval, satisfactory mechanical inspection, and transfer of key regulatory certifications.
Example Language
Buyer's obligation to close the transaction is conditioned upon satisfaction of the following: (i) Buyer obtaining SBA lender commitment letter and final loan approval on terms acceptable to Buyer; (ii) completion of due diligence with no material adverse findings in Buyer's sole judgment; (iii) independent refrigeration and mechanical system inspection confirming deferred maintenance does not exceed $[XX,000] in aggregate, or a purchase price adjustment mechanism is agreed upon for amounts above that threshold; (iv) Phase I environmental site assessment returning no Recognized Environmental Conditions, or Seller providing remediation at Seller's cost for any identified conditions; (v) transfer or re-issuance of all material food safety certifications, FDA registrations, and USDA approvals in Buyer's name or confirmation that such certifications transfer with the facility; (vi) execution of a [non-compete / non-solicitation] agreement by Seller for a period of [3–5] years within [geographic radius]; (vii) key employee retention agreements executed with [Operations Manager and/or Maintenance Technician] on terms acceptable to Buyer.
💡 The refrigeration mechanical inspection contingency is the single most important buyer protection in a cold storage LOI that most first-time buyers omit. Aging ammonia or Freon-based refrigeration systems can require $300,000–$800,000 in replacement capital. Define a dollar threshold above which you have the right to renegotiate price — not just walk away. FDA and USDA certifications do not always automatically transfer to a new owner entity; in some cases, the new operator must reapply. Confirm transferability with the relevant agencies before closing and include this as a condition precedent.
Real Estate Ownership vs. Sale-Leaseback Structure
Whether you buy the real property or lease it back from the seller fundamentally changes your capital structure, SBA financing eligibility, long-term flexibility, and operating cost base. Owning the real estate provides collateral value for SBA 504 financing and eliminates rent escalation risk, but requires higher equity. A sale-leaseback preserves seller liquidity but transfers rent risk to the buyer. Negotiate lease cap rates, escalation limits, and renewal options in the LOI — not after exclusivity is granted.
Refrigeration Equipment Condition Adjustment Mechanism
Cold storage refrigeration systems — whether ammonia-based, CO2, or Freon — are the core productive asset of the business and the largest capital replacement risk. Negotiate an explicit price adjustment mechanism in the LOI that reduces the purchase price dollar-for-dollar for deferred maintenance above an agreed threshold. This is more practical than simply retaining a walk-away right, as most sellers will accept a price adjustment rather than lose a credible buyer.
Anchor Customer Contract Assignment and Earnout Triggers
If one or two customers represent 30–60% of revenue, their willingness to assign contracts to the new owner is a material condition of value. Negotiate introductions to anchor tenants during due diligence, and structure earnout payments specifically tied to whether those customers execute new agreements with the buyer entity. This aligns seller incentives with successful customer transition rather than leaving the buyer exposed post-close.
Energy Cost Normalization in EBITDA
Energy costs in cold storage operations can represent 20–35% of revenue and fluctuate significantly with utility rates and equipment efficiency. Before accepting the seller's stated EBITDA, negotiate the right to recast energy costs using a 3-year average and to commission an independent energy audit. If energy costs have been rising as a percentage of revenue, this should drive a lower EBITDA multiple or a larger seller note component that gives you time to stabilize margins through equipment upgrades.
Non-Compete Scope and Duration
Cold storage operators often have deep relationships with local food producers, grocery chains, and distributors. A seller who opens a competing facility within your market within two years can significantly damage customer retention. Negotiate a non-compete covering a defined geographic radius — typically 50–150 miles depending on market density — for a minimum of three to five years. Include non-solicitation of key employees and existing customers as separate covenants with independent enforceability.
Seller Transition and Training Period
Cold storage operations depend on institutional knowledge of refrigeration system quirks, customer handling preferences, and regulatory protocols. Negotiate a formal transition assistance period of 90–180 days with the seller, with clear expectations about time commitment, compensation (if any), and deliverables such as customer introductions, vendor transfers, and staff training. Document this in the LOI and formalize it in a Transition Services Agreement at closing.
Food Safety Certification Transfer Timeline
FDA facility registration, USDA approvals, and third-party certifications such as SQF or BRC require applications and in some cases facility inspections under the new owner entity. Negotiate a closing condition that gives you a defined timeline — typically 30–60 days post-close — to complete re-registration, with the seller's active cooperation and the ability to operate under a temporary arrangement in the interim. Failure to plan for certification transfer is one of the most common post-close operational disruptions in cold storage acquisitions.
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Cold storage and refrigerated warehouse businesses in the $1M–$5M revenue range typically trade at 3.5x to 6x trailing twelve-month adjusted EBITDA. Facilities with modern refrigeration systems, diversified customer contracts with 3–5 year terms, owned real estate, and specialized certifications such as USDA organic or SQF command multiples at the higher end of that range. Operations with aging equipment, significant customer concentration, or owner-dependent management typically trade at 3.5x–4.5x EBITDA. Always normalize EBITDA for energy cost volatility and non-recurring maintenance before applying a multiple.
Buying the real estate is generally preferable if you have access to SBA 504 financing, which separates the real estate loan from the business acquisition loan and typically offers lower rates and longer amortization on the property component. Owning the real estate also eliminates rent escalation risk and provides long-term location control — critical for a capital-intensive facility where moving is extremely costly. A sale-leaseback makes sense only if the seller is insisting on liquidity from the real estate and you can negotiate a long-term lease at a cap rate and escalation structure that does not compress operating margins below 10–12%.
Address customer concentration directly in the LOI through two mechanisms: a due diligence condition requiring full review of all customer contracts and renewal terms, and an earnout structure tied to anchor tenant retention post-close. If the top customer represents more than 25–30% of revenue, consider requesting seller-facilitated introductions to that customer during due diligence as a condition of proceeding. You may also negotiate a price reduction at closing tied to the weighted average remaining contract term of the top three customers, so the base price reflects actual contract certainty rather than projected revenue.
Budget $15,000–$40,000 for third-party due diligence costs in a cold storage acquisition, including a specialized refrigeration and mechanical systems inspection ($3,000–$8,000), Phase I environmental assessment ($2,500–$4,500), real estate appraisal ($4,000–$8,000), equipment appraisal ($2,500–$5,000), and legal and accounting review ($5,000–$15,000 depending on complexity). Plan for a minimum 60-day due diligence period — 90 days if real estate is included or if the facility has complex ammonia refrigeration systems or environmental questions. Compressing due diligence to close faster is the single most expensive mistake buyers make in cold storage acquisitions.
Yes, cold storage and refrigerated warehouse businesses are SBA-eligible. SBA 7(a) loans can cover up to $5M and are commonly used to finance the combined business and real estate acquisition in smaller deals. SBA 504 loans are well-suited when real estate is included, providing up to 40% of the project cost through a Certified Development Company at fixed rates and 20-year amortization. Lenders will scrutinize customer concentration, energy cost trends, and equipment condition during underwriting. Most SBA lenders require a minimum 10–15% equity injection from the buyer and will require the seller note (if any) to be on full standby for at least 24 months per SBA guidelines.
Before submitting an LOI, confirm that the facility holds current FDA food facility registration (required for any operation storing human food), and verify whether USDA inspection approval applies if the facility handles meat, poultry, or egg products. Third-party certifications such as SQF (Safe Quality Food), BRC Global Standard, or AIB are increasingly required by grocery chain and food manufacturer customers — losing these certifications post-close can trigger customer contract termination clauses. Ask the seller to provide the most recent third-party audit reports and any open corrective action items before you enter exclusivity, not after.
For cold storage acquisitions, a non-compete covering a 50–150 mile geographic radius (scaled to the facility's customer draw area) for three to five years is standard and generally enforceable. Include both a non-compete on operating competing temperature-controlled storage facilities and a non-solicitation covenant covering existing customers and key employees. Sellers who resist non-compete terms entirely are a significant red flag — an experienced cold storage operator who retains their industry relationships can rebuild a competing customer base quickly. Courts in most states will enforce reasonable non-competes in the context of a business sale, so do not accept vague or narrow terms to close faster.
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