A unit of Portland, Oregon-headquartered real assets firm Equilibrium has purchased a 132,398-square-foot greenhouse in Medford, Minnesota for $11.286 million, according to a senior principal at the firm.
Tom Amis told Agri Investor the deal Equilibrium reached with the seller, Revol Greens, utilizes a sale/leaseback structure not dissimilar to that used in some farmland transactions.
“Operators are capital-constrained and our entire model is based on partnering with the best world-class operators to meet what we think is a huge trend in agriculture; certain crop segments moving to the indoor environment,” Amis explained.
Revol Greens offers non-GMO and pesticide-free leafy greens grown in the greenhouse acquired by Equilibrium. Plans call for a doubling of the facility, which uses radiant heat, supplemental LED heating and rainwater collected on the facility’s roof to support year-round production of arugula, spinach, romaine and other varieties.
Amis declined to address from where within Equilibrium the firm drew capital for the Revol Green investment.
A market source told Agri Investor the capital came from a vehicle dedicated to indoor agriculture. According to a regulatory filing shown in March, Equilibrium is seeking $250 million for a vehicle called the Controlled Environment Foods Fund.
Though vertical farming, such as that pursued by companies like AeroFarms and Plenty, could prove significant over the long term, Amis said, the fact that the traditional horizontal controlled environment greenhouse approach has been perfected over the past 30 years through use in Europe helped the firm narrow its focus on the sub-sector for the near term.
“It’s not a technology play and we like that; that’s what our institutional investors like,” he said. “If a vertical farm comes along that meets our risk/return requirements, we certainly can finance it, but we think there’s plenty of opportunity in the traditional horizontal sector.”
Equilibrium’s acquisition of Revol Green’s greenhouse follows previous controlled-environment investments in berries and vine crops, according to Amis, who added that, going forward, the firm is interested in similar acquisitions of existing controlled-environment facilities and greenfield development projects.
Amis said the late November recall of romaine lettuce by the Centers for Disease Control had already proved a seminal event for the controlled-environment industry, reinforcing the logic of a move indoors for certain crops.
On Wednesday, the CDC declared the outbreak to be officially over, reporting that a total of 62 people had fallen ill, with the largest concentrations in California and New Jersey.
While it may be too soon to say definitively that the recall led to an increase in demand for controlled-environment offerings, Amis said Revol Green has experienced a spike in orders following the recall that claimed its entire existing supply.
“The phone has been ringing off the hook,” he said. “Inevitably, every one of these incidents – some of which are tragic, unfortunately – reinforces the move into a controlled environment. The food safety issue is huge and is increasingly going to be driving investment in this sector.”