The owner of one of AppHarvest’s farms wants to terminate the company’s lease, new filing shows
The company which owns AppHarvest’s Berea farm told the Kentucky-based indoor vegetable grower that it planned to terminate AppHarvest’s lease on the property, a public filing Tuesday disclosed.
AppHarvest originally built the greenhouse, which grows salad greens, but sold the property to its distribution partner, Mastronardi Produce, in a cash-generating move back in December. Mastronardi leased the property back to AppHarvest.
Mastronardi helped to sell AppHarvest’s produce into grocery store chains.
Mastronardi, acting as landlord, told AppHarvest in a July 5 letter that the lease would be terminated and that AppHarvest should vacate the property, the filing said. A section of the lease related to “minimum production volumes” had been violated, Mastronardi alleged.
The mega greenhouse company denied violating the lease and plans to “defend its position with counterclaims should any damages result from Mastronardi’s attempted termination of the lease,” said Travis Parman, AppHarvest’s chief communications officer, in a statement.
“AppHarvest believes it has met the terms of its lease agreement for the Berea farm and recognizes that such notices from creditors are not uncommon as a strategy for firms attempting to push their way to the front of the line in case of an actual default,” Parman said.
Operations continue as usual and the lease dispute does not impact AppHarvest’s distribution agreement with Mastronardi, Parman said.
Back in April, AppHarvest’s Berea farm identified an outbreak of the disease-causing bacteria listeria, forcing the company to remove plants and disinfect the farm. The company’s latest quarterly filing said the bacteria outbreak could affect the company’s produce sales in the second quarter.
Tuesday’s filing also provided a brief update on a lawsuit threatening the foreclosure of a different AppHarvest farm in nearby Richmond.
Last month, a company affiliated with Equilibrium Sustainable Foods demanded the immediate repayment of what remained of a $90 million loan to help AppHarvest build the 60-acre, tomato-growing facility in Richmond. Should AppHarvest not repay what remained on the loan — about $66.7 million — then the Richmond farm would be taken as collateral, the lawsuit argued.
At the end of June, AppHarvest decided to defer an interest payment of $455,720 on that loan, the public filing said and added that the non-payment could “constitute an event of default” on the loan agreement. AppHarvest is trying to work with Equilibrium to find a solution to the loan issue.
“Based on ongoing dialogue with Equilibrium, the AppHarvest board has elected to defer an interest payment while seeking resolution to a lease issue,” Parman said.
Aside from the facilities in Richmond and Berea, AppHarvest has farms in Morehead and Somerset.
The disputes over the farms in Madison County come less than a year after AppHarvest — which grows large quantities of fruits and vegetables in massive, climate-controlled greenhouses and employs hundreds of people — said in public filings that it was running low on cash and disclosed “substantial doubt” about its future.