LOUISVILLE, Ky. (WDRB) — Already running short on cash, Kentucky indoor farming startup AppHarvest faces a foreclosure action against its 60-acre farm in Richmond, one of the company’s four high-tech greenhouses in eastern Kentucky.
Equilibrium Capital, a sustainability-focused investor, alleges in a lawsuit filed May 30 in Madison County that AppHarvest breached its obligations to the lender by failing to complete the Richmond facility on time and on budget, among other allegations.
The lender also cited a mechanics lien filed by the general construction contractor on the Richmond greenhouse, Dalsem Greenhouse Technology B.V., to secure $14.5 million the contractor claims it’s owed.
AppHarvest owes Equilibrium $66 million plus interest and costs, for which the lender chose to demand immediate payment on May 30 after AppHarvest did not meet its demand to put $15 million into cash collateral account, according to documents filed in the lawsuit.
The lawsuit seeks to have the massive greenhouse in Richmond, where AppHarvest grows tomatoes, sold in a court auction to satisfy Equilibrium’s debt.
"We believe that we are in full compliance with the loan terms," AppHarvest's Darla Turner said in an email Tuesday. "We are working to resolve the issue directly with Equilibrium, which we believe is based on their misunderstanding of the facts."
Equilibrium did not immediately respond to a request for comment.
The loan on the Richmond facility represents about a third of AppHarvest’s $182 million in debt as of March 31.
Its largest lender, a subsidiary of Rabobank Group, has a $70 million claim against AppHarvest’s flagship greenhouse in Morehead. A default under the Equilibrium could trigger Rabobank to foreclose on the Morehead farm, but AppHarvest has not received notice that Rabobank intends to exercise that right, according to the Monday securities filing.
Rabobank did not immediately respond to a request for comment.
Once valued at $3.7 billion following its 2021 initial public offering, AppHarvest’s sales have fallen significantly below projections amid construction delays and operational challenges. After selling its Berea greenhouse and leasing it back to generate cash late last year and issuing $43 million in new shares in February, the company needs to raise additional capital in the next four months to remain in business.
AppHarvest envisions itself as part of a “reliable, climate-resilient food system,” saying its greenhouses are designed to achieve much higher produce yields than traditional open-field farming while using less water and preventing pollution from agricultural runoff.
It employs about 1,000 people across its four greenhouses, a company official said last month.
Equilibrium representatives visited the Richmond farm on April 28 and came away with “significant concerns regarding the state of the facility,” according to a May 5 letter to AppHarvest that was filed as evidence in the foreclosure action.
Those concerns include an irrigation system and lights that are not complete as well the site not being secured “by permanent external greenhouse doors.”
The lender also described being troubled by AppHarvest’s suggestion that it might hire contractors other than Dalsem to complete the Richmond farm. Equilibrium said it had been informed that the general contractor “has been absent from the work site for extended periods of times, most recently for three weeks in April.”
Dalsem, a greenhouse builder based in the Netherlands, did not immediately respond to a request for comment.
