Commerical real estate investment trust Realty Income will partner with Softbank-backed vertical farming startup Plenty Unlimited Inc to invest up to $1 billion to build farming space leased to the startup, the companies said on Tuesday.
As part of the agreement, Realty Income will invest $42 million into Plenty’s strawberry farm near Richmond, Virginia, marking the South San Fransciso-based startup’s first facility on the East Coast.
“Probably the greatest challenge indoor vertical farming faces…is the significant expense of building new farms to increase production,” said Arama Kukutai, chief executive at Plenty. “Access to this new stream of capital from Realty Income will accelerate the expansion of Plenty farms and the impact we can have.”
Vertical farms with stacked layers in a controlled indoor environment have been promoted as a sustainable way of growing fruit and vegetables closer to the point of consumption using less water. Still, the costs on average yield remain high, as startups in the space raise capital to build facilities and invest in research and development. Plenty last raised $400 million in early 2022 at a valuation of $1.43 billion, according to PitchBook.
To date, it has raised over $940 million from investors including Softbank and Walmart Last year, Gotham Greens, another indoor farming startup, raised $310 million led by BMO Impact Fund and Ares Management Fund. New York-based Bowery Farming raised $300 million in 2021 at a valuation of $2.3 billion.
Capital intensive vertical farms, which have been largely unprofitable, are trying to cut costs and find more effective capital solutions to grow.
Kukutai said Plenty is not actively raising venture funding right now. It has received a $20 million grant from Wyoming to expand a research facility while continuing to explore other farm locations.
(Reporting by Krystal Hu in New York and Niket Nishant in Bangalore; editing by Christian Schmollinger)