Equilibrium has filed a lawsuit aiming to force the sale of a Kentucky greenhouse operated by AppHarvest as part of its effort to recover a debt of $66.7 million from the company.
Equilibrium’s complaint was filed in Madison County Circuit court and asked the court to carry out a sale of a greenhouse in Richmond as called for under the terms of a July 2021 credit agreement, Nasdaq-traded AppHarvest explained in an early June filing. The Morehead, Kentucky-headquartered company disclosed that Equilibrium cited increases in the construction budget and schedule without approval, existence of a mechanic’s lien and alleged construction deficiencies as reasons for a default it learned of in early May.
Equilibrium declined to comment.
AppHarvest declined an interview request and said in an email that the company was in compliance with the Equilibrium loan’s terms and operations were continuing as normal.
“We are working to resolve the issue directly with Equilibrium, which we believe is based on their misunderstanding of the facts,” a representative wrote in an email.
The 60-acre greenhouse in Richmond is devoted to tomatoes and is among a network of 165 acres across four facilities operated by AppHarvest, according to a March presentation. A 15-acre leafy greens facility began production in Berea, Kentucky in late 2022, followed soon after by opening of a 30-acre berry-focused greenhouse in Somerset, Kentucky and the Richmond tomato facility, which began production in January.
In May 2019, Equilibrium lent $82 million to support construction of the Morehead greenhouse operated by AppHarvest that the company purchased for $125 million in March 2021. In December 2022, AppHarvest agreed to sell its Berea affiliate to a joint venture between distribution partner Mastronardi Produce and Zug, Switzerland-headquartered COFRA Holding.
The Madison County Court where Equilibrium’s suit regarding the Richmond facility was filed did not reply to messages seeking further detail and limits public records requests to local residents.
The Lexington Herald Leader cited court documents in reporting a claim that although the facility’s construction was supposed to have been completed by the end of March, an AppHarvest representative told an April visitor to the site it would not be completed until August or September in part due to a dispute with Dalsem Greenhouse Technology, a Dutch equipment provider.
Dalsem, which did not reply to messages seeking further detail, was acquired by COFRA in January 2022.
An April filing by AppHarvest noted the existence of a $14 million mechanic’s lien on the Richmond property filed by Dalsem. The filing also highlighted that the covid-19 pandemic had resulted in supply chain disruptions that delayed construction of AppHarvest facilities in Berea and Richmond.
“We are currently assessing any long-term effects on our ability to build our greenhouses in a timely manner,” executives wrote.
David Lee, a former Impossible Foods executive who joined AppHarvest as president in early 2021, currently describes himself on his LinkedIn profile as AppHarvest’s “former president and current board member” and the current chief executive of Inevitable Tech, an artificial intelligence and plant science-focused business-to-business agtech platform backed by Zero Carbon Partners, Breakthrough Energy Ventures and others. Inevitable launched in May and has partnered with AppHarvest and Revol Greens, an Austin, Texas-based controlled environment ag producer in which Equilibrium has invested.
Portland, Oregon-headquartered Equilibrium managed $1.4 billion as of December 2022, according to a March filing. The second iteration of its Controlled Environment Foods Fund closed on $1 billion in mid-2021 after drawing commitments from a mixture of new and existing investors that included the Alberta Investment Management Corporation.