Equilibrium invests $82m to build Appalachia greenhouse

AppHarvest founder Jonathan Webb says previous investment from AOL co-founder Steve Case’s Rise of the Rest Seed Fund helped the company find partners in the Netherlands.

Equilibrium Capital has reached an $82 million agreement with AppHarvest, a rural development-focused start-up, that will see the real assets specialist lead construction of a greenhouse in Morehead, Kentucky.

Work on the 60-acre facility will start immediately and it should be in production by the second half of 2020. It will grow non-GMO, pesticide-free cucumbers and tomatoes. The results will be distributed exclusively by Mastronardi Produce, a supplier headquartered in Ontario, Canada.

“The facility is within one day’s drive of 70 percent of the US population, in a region known for its hard work, ingenuity and tenacity,” said AppHarvest founder Jonathan Webb in a statement.

Webb said Equilibrium’s is an all-cash investment.

Equilibrium closed its Controlled Environment Foods Fund on $336 million early last month, surpassing an initial target of $250 million after securing commitments that included $112 million from the A$11.32 billion ($7.8 billion; €6.7 billion) Australian pension LGIAsuper.

In January, the firm acquired a 132,398 square foot greenhouse in Minnesota for $11.3 million before making an undisclosed investment into Houweling’s Group, a greenhouse grower with facilities in Canada and the US the following month.

Dave Chen, a principal and chairman at Equilibrium, told Agri Investor that on completion, AppHarvest will enter into a long-term lease for the Morehead greenhouse, which Equilibrium will own.

Chen said the facility, the first greenfield project from the Controlled Environment Foods Fund, provided an opportunity to create jobs in Kentucky while addressing demands from key suppliers.

“The long-term issue is our retailers and foodservices industry are looking for regional, resilient and risk-managed food systems,” he said. “You are going to continue to see more and more of this.”

AppHarvest has also closed an undisclosed Series A funding round led by ValueAct Spring Fund and including the Rise of the Rest Seed Fund, an existing investor, which is affiliated with AOL co-founder Steve Case’s investment firm Revolution.

Webb told Agri Investor that after an introduction by Case, AppHarvest worked with the Dutch government to find a designer for the greenhouse.

The Series A capital will be used to support AppHarvest’s operations and educational efforts in Kentucky, Webb said, adding that these efforts are a key part of the firm’s effort to help build a “culture of growing” that can benefit local communities.

“Building a steel and glass structure that Equilibrium has invested in, it’s going to take more than that to really build out the ecosystem here,” said Webb. “We want to grow our own growers.”

AppHarvest benefited from elevated levels of investor interest in agriculture generally and controlled-environment agriculture specifically, Webb said, adding that impact investors were among those who were interested.

“There seems to be a lot of capital out there looking for this kind of effort,” Webb added.