Just two months after its official opening, a high-tech indoor farm in Kentucky is changing ownership.
AppHarvest (Nasdaq: APPH) announced Tuesday it has sold its Berea, Kentucky, farm to Mastronardi Berea LLC — a joint venture between Mastronardi Produce and COFRA Holding — for $127 million. It's a sale-leaseback transaction, meaning AppHarvest will now lease the facility from Mastronardi, which has been the agritech company's exclusive marketing and distribution partner.
As I previously reported, the 15-acre, 654,000-square-foot Berea farm opened in late October, growing lettuce and other leafy greens. The deal includes the farm itself and surrounding property totaling 40 acres, according to a filing with the U.S. Securities and Exchange Commission (SEC).
AppHarvest is getting net proceeds of $57.5 million from the transaction, of which $22.5 million will be set aside for the construction of its fourth farm in Richmond, Kentucky, the SEC filing states. In a news release, the company said the 60-acre Richmond farm is officially open, growing Campari tomatoes. The first harvest is expected next month.
As a part of the deal, AppHarvest is paying $19.1 million for two years of prepaid rent to Mastronardi, as well as the paydown of an outstanding $30 million note owed to Mastronardi Produce-USA Inc., the payment and holding back of amounts owed and estimated to be incurred for completion of the facility located on the property, and transaction fees, taxes and expenses, according to the SEC filing.
Under the lease agreement, AppHarvest will pay $9.5 million annually, with an initial lease term of 10 years, with four renewal options of five years each.
AppHarvest reported net sales of $524,000 in the third quarter ending Sept. 30, down slightly from its $543,000 in net sales for the comparable period last year. The company had a net loss of nearly $24 million for the quarter, which is greater than the $17.3 million it lost in the same quarter in 2021. Its net loss per common share was 23 cents in the quarter.
In the first nine months of 2022, AppHarvest recorded a net loss of $83.3 million, compared to $77.8 million in the first nine months of 2021.
AppHarvest will need to raise additional funds in order to operate its business, meet obligations as they become due and continue the ongoing construction, build-out and start-up of its facilities, the company stated in its third quarter earnings report. In addition to the sale-leaseback of its Berea facility, it is also pursuing additional financing alternatives, which include third-party equity or debt financing, or other sources, such as strategic relationships or other transactions with third parties, that may or may not include business combination transactions, the report states.
In addition to the Berea and Richmond farms, AppHarvest also operates a berry-growing farm in Somerset, Kentucky, and its flagship tomato-growing farm in Morehead, Kentucky.
“The AppHarvest team has worked relentlessly this year to get the four-farm network operational, and those efforts have paid off with the quadrupling of farms in our network and diversifying our crop set,” said AppHarvest founder and CEO Jonathan Webb, in a news release. “The team is now focused on operations to ramp up production and revenue from the four high-tech farms.”
AppHarvest's stock was up by more than 16% in early trading Tuesday. As of 11 a.m., its price per share was more than 66 cents.
That's something to watch, as companies that continue to trade below a bid price of $1 run the risk of being delisted from the Nasdaq stock exchange. According to Investopedia, the delisting process is set in motion when a company trades for 30 consecutive business days below the minimum closing bid price requirement or less than the required market value.
In AppHarvest's case, its minimum has been below $1 since late November, according to historical data available on Yahoo Finance.
