Financing a vertical farm

Real World Assets
1

I was advised on Discord to bring this question here.

I am involved in a vertical farm in Norway. We have a small facility set up, and are looking to finance a larger facility. For all practical purposes we are talking about a factory. Or, more interestingly I believe in the context of Centrifuge, a series of small factories.

The central point is that this facility generates a cash flow that can viably, with good margin, finance a loan that carries 10-15% intrest. (the range depends on size)

The classic choice here is to go for equity. I do however find it much more interesting to see if we can connect this investment opportunity to the defi ecosystem. I am personally invested in both real estate and crypto, and see it as a significant opportunity for both markets to connect. So, I found centrifuge. I have read up on a fraction of the available material, so this might have been addressed earlier w/o me seeing it.

I believe this particular case is not as mature as requested in the guidelines for creating pools. On the other hand, I’m not sure if we should be an asset originator in some pool (not sure which) or if we should set up a “vertical farming pool” - or if the first is a POC and the latter is a longer term opportunity.

We currently believe the optimal facility size and corresponding investment is around 2 mEUR.

In general, in terms of risk, what I can say that can be independently verified, is that Norway imports 50%+ of salads and greens consumed. That market / demand is increasing. The macro / political environment suggest less international trade in this area. And the product is superior, if not for other reasons, at lest because time and transport degrades it.

In short. These factories will be selling all they produce at rates we are already selling for (market price, really)

To me, it would be fantastic if we could finance and scale this business as a DeFi project. Do you see this as an opportunity here?

Also, are there any advice on how to proceed and what direction to take in the question of asset vs pool?

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2

Hello
That would be a good investment in real asset using DeFi.

To get money from investors, what could be the yield of your projet?

3

I could connect you with a swiss company which is building skid farms, if you are not yourself builder.
I guess you are a “farmer”

4

Thanks for submitting.

What’s the investor demand look like this off-chain vs on-chain? Has there been any work done to date on capital raising efforts?

5

Hi! Great to hear from you here :wink:

And I agree, it would be a good investment opportunity for RWA

Are you asking about equity investors, or lenders in this case? I was thinking 10-15% per annum to lenders, but the structure of the pools seem to be to have junior and senior loans, so how this would in the end play out for centrifuge investors is something I hope to learn from this forum. In a sense, I’m asking what it would take to realize this opportunity trough Centrifuge.

This could in turn lead to capital / equity requirement, and / or that we have senior and junior loans with varying collateral.

6

As a follow up to your second question. We are indeed both building and farming. The building part is based mostly on standardised modules and some custom ones (printed or produced to order).
Having said that, I’m not familiar with the concept of “skid farm”?

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Re: ctcunning
The most serious investors we have talked to (off-chain) wanted to gain a controlling stake, which we were not really prepared to provide. In general, the case is either too large or too small for investors, so we have not really found a good match there. The kind of investors I have had contact with previously are all digitally focused, whereas this is very much hardware.

That said, we have not focused on investors for the past 6 months, and instead refined the commercial side of the rig we already have in operation. As of today, we are just starting to have some investor calls again, and I would be curious to understand whether Cetrifuge should be used instead of or in combination with equity. My initial thought here was that it would be instead of, but combining capital sources is of course also an option.

Do you have advice or opinions in this regard?

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I think the equity piece is not a discussion or interest for the Centrifuge community. The debt financing piece of this is where Centrifuge could serve as infrastructure

9

That was my understanding as well. How do you recommend we proceed?

10

I would review the Criteria of the POP Process to see if this is inline with the Community’s expectations: The POP: Template & Criteria

I also think a broader understanding of the process could also be helpful: The POP Process: Proposal (Stage 1)

11

I am working in chemical industry, sometimes we purchase SKID equipment rather building them.
So you have a unit with heating and cooling integrated.

For vertical farms, a container could be a skid.

12

Re: @ctcunning
I have reviewed the POP process earlier. Currently, this business is not in line with the requirements. This is why I’m trying to find out if there is an opportunity to lend from an established pool or if I can have a conversation with someone on what it would take to either qualify trough a POP regardless, and / or whom I could have a discussion about joining an established pool and what that would take (in terms of collateral etc)

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13

Thanks for that context and for sharing so openly.

My sense is that given this is more project finance, and there are no active project financings occuring through the protocol at this time, this opportunity simply may not be a fit at this time.

Perhaps an alternative route could be to work with and through DeFi to find potential investors and grow the base of capital that would finance such a project? or it could be simply that going through traditional channels may be a better alternative to DeFi financing at this moment?

Either way, it’s great to see you hear and hope you’ll keep pushing with the rest of community to build RWAs through Centrifuge.

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