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Ripe for Investment

Nov 26 2012 | National Post [Don Mills, Ont]: FP.1.| Amanda Kwan.

Because its greenhouse is on the roof of a building, Lufa Farms uses half the energy they would normally need to heat it.
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Growing up in Lebanon, Mohamed Hage's mother would send him on a two-kilometre trek, across a chain of small hills, to collect wild asparagus that grew in a valley at the edge of their village. The freshly picked veggies ended up in omelets, some of the "best you could have."

It's a romanticized vision of agriculture, one where communities grow and source their own food from nearby lands. "But we're already past the point where the land we have can suffice for this form of consumption," says Mr. Hage, the co-founder and president of Lufa Farms, which built the world's first commercial rooftop greenhouse in 2010. "What we offer is the next best thing."

Sitting on top of an office building in Montreal is a 31,000-square-foot greenhouse. Inside are rows of hanging vines and trays bearing tomatoes, cucumbers and peppers, which are all grown hydroponically with no pesticides.

In downtown Vancouver, Alterrus has built a greenwhouse on top of a parking garage, where it grows herbs and salad greens in water using its VertiCrop system - a series of stacked trays that move on a conveyor belt. Similar farms are spreading in cities throughout the United States, especially in Brooklyn, N.Y., where at least three commercial rooftop farms are operating, with more planned.

Responding to the growing demand for local food, these farms have the lofty goal of revolutionizing the way cities feed themselves, while also trying to make a profit. "This is the way people want to produce food and this is how they want to get their nutrition - locally," says Christopher Ng, chief executive of Alterrus, which started construction on its 6,000-square-foot greenhouse in August.

Investors seem to agree. Lufa Farms recently secured $4.5-million in equity financing, which will be used to build two more rooftop greenhouses in Montreal and one in either Toronto or Boston. Alterrus is also looking to expand and Mr. Ng says it expects to have a presence in every major North American city within five years.

Basing operations in the city provides these farms with a built-in consumer base, one that will likely expand as urban populations grow. It's also a sustainable way to feed cities, they argue, which is not only good for the environment, but also for the bottom lines of urban farms. Because its greenhouse is on the roof of a building, Lufa Farms uses half the energy they would normally need to heat it. Both farms also recirculate the irrigated water, and their urban location means transportation costs are low.

An important part of Lufa Farms' financial model is how it sells its produce: directly to customers, who pick up their weekly basket at a designated drop-off point. By cutting out retailers, they can maintain higher margins, but more importantly, Mr. Hage says, they can also guarantee their produce is delivered the same day it's harvested.

"We knew this was key for us to be able to differentiate our produce and to bring to our consumers something that is truly fresh." And it seems to be working. Its farm is running at capacity, supplying each of its 1,000 subscribers with enough food to feed two people.

Alterrus has adopted a different model, signing deals with three local supermarkets (although the company won't disclose their names) to supply them with leafy greens. "We're in the produce business, not the retailing business," says Mr. Ng, who expects that all of the produce from its greenhouse, which can grow up to 200,000 pounds of leafy greens a year, will go to its partners.

Some rooftop farms, such as Brooklyn Grange in New York, have been subsidized by public money, leading skeptics to question whether these businesses can thrive at a commercial level. But Joe Nasr, a lecturer at Ryerson University's Centre for Studies in Food Security, says it's not unusual for incubators to get support. "I would say not to treat this any differently from any other industry that's getting R&D funding to jumpstart innovation."

Finding investors wasn't the issue when Lufa Farms got started, Mr. Hage says. Rather, it was dealing with the legal, zoning and engineering aspects of the business that was challenging - a time-consuming process that can deter would-be entrepreneurs. For example, while the City of Montreal was receptive to Lufa Farms' plans, it took the company a year to get a permit allowing it to grow food on the roof of the building.

For both farms, creating a replicable business model - something they can expand to any North American city - was a goal from the start. Alterrus' VertiCrop system is designed to work in under-used spaces, such as on a rooftop or in a warehouse. Having the technology to produce food sustainably is what allows smaller urban farms to grow competitively, Mr. Hage says, "even without having the same resources as mega-growers."

As their business potential becomes more widely recognized, we'll start to see more rooftop farms in cities, Mr. Nasr says. But, he adds, rooftop agriculture alone won't transform our food system. "It will remain just one portion of our local food sources."

Mr. Ng agrees that there are limitations to farming on rooftops, like moving produce down multiple flights of stairs and finding appropriate buildings that can support the weight of a greenhouse. "We don't necessarily see rooftops as the answer," Mr. Ng says, "but we do see that high-efficiency technology, like ours, in urban environments is key."

Credit: Amanda Kwan; Financial Post
Illustration

Graham Hughes For National Post / Mohamed Hage, founder and president of Lufa Farms, recently secured $4.5-million in equity financing to expand his rooftop greenhouse concept.; Alterrus Systems Inc. Handout / Christopher Ng is CEO of Alterrus Systems Inc., which invented a vertical growing system to grow fresh, leafy green vegetables in an urban environment.; Caption:
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Copyright Infomart, a division of Postmedia Network Inc. Nov 26, 2012