Equilibrium has made an investment of an undisclosed size into Mexican greenhouse company Finka, which marks its first controlled environment venture outside the US.
Equilibrium chief executive and chairman Dave Chen told Agri Investor: “In spite of all the conversations about tariffs and growing regionally, Mexico and the Mexican agricultural community will remain a very important part of the overall North American, and specifically US, produce supply chain. Finka represents our willingness to invest behind that insight.”
Headquartered in the city of Queretaro, Finka is a greenhouse owner and manager. It worked with farm management company United Farms to develop a regional cluster of greenhouses in which owners have the option to operate independently or partner with United Farms on operations.
Equilibrium’s investment will support a 22-hectare expansion of Finka’s existing 30-hectare operation and the company’s broader plans for expansion and consolidation in the Mexican greenhouse industry. A source familiar with the deal told Agri Investor capital was drawn from Equilibrium’s second controlled-environment fund, which is currently seeking $500 million.
Chen said that in addition to the fact central Mexico’s geography helps improve the economics of lighting greenhouses, Equilibrium was keen participate in Agropark’s grouping of greenhouses, which is consolidated in a small area. This approach, he said, is similar to the way the industry evolved in the Netherlands and is conducive to the development of knowledge sharing, services and companies the industry will need as it continues to develop.
The Agropark in Mexico was one of the first sites Equilibrium’s team visited when researching greenhouse agriculture and Chen said it presents a model he expects to see replicated elsewhere. The expansion of Equilibrium’s controlled environment strategy outside of the US, he added, reflects the global nature of the opportunity.
Covid-19-related supply chain disruptions helped sharpen already-growing focus on agriculture and climate adaptation among many import-dependent national governments, said Chen. He added that earlier this year, he made a personal investment in a Middle Eastern greenhouse company in order to stay informed about technical developments related to greenhouse capabilities in extreme climates.
In recent months, Equilibrium has been engaged in conversations regarding investment and national security policy, said Chen, as governments worldwide look to balance in-country availability of ag resources with the leverage of access to global markets.
“As the world now turns to these modalities, we have one of the largest operating portfolios and have amassed one of the – at least in the investment world – most rich understandings and data sets about the economics of this sector,” said Chen of Equilibrium, which closed its first controlled environment focused fund on $336 million in April 2019.
“We are finding the opportunity to leverage that and are finding that we have to make sure that, as a small team, we prioritize where we can spend our time.”
Among investors, he said, growing focus on the need for scale and consolidation within controlled environment agriculture is broadening the scope of risk and return profiles in the market beyond those traditionally focused on land-based assets.
“It [controlled environment agriculture] is reshaping the ag investing program of the largest, sophisticated ag investors and bringing a whole new set of investors into the ag investing world,” he summarized. Chen highlighted former Fox News executive James Murdoch-backed Lupa Systems’ participation in a $28 million Series C for Equilibrium portfolio greenhouse company AppHarvest, as an example of the latter.