I'm Ben Bienvenu. I cover the food and agribusiness sector here at Stephens. Limoneira is here with us today to talk about their business. Limoneira is one of the largest citrus growers and packers in the U.S, and I'm delighted to introduce from the team, Harold Edwards, Chief Executive Officer, and Mark Palamountain, Chief Financial Officer. This will be a fireside chat format. I'll be leading the Q&A, but I'll check in periodically to see if there are questions from the audience, before we proceed with Q&A that we have planned. Harold, Mark, really appreciate you being here and taking the time to talk about your business with us.
Great. Thanks, Ben.
Thanks for having us. So I think a good place to start, you know, we're grateful that Limoneira has been a long time attender of the Nashville Conference, and, and we've seen a lot of change over the last several years and strategy. So I think maybe a good place to start would be talking a little bit about this strategy to migrate the business to a more asset-light model and help us think about what that means in terms of capital returns today versus what we've seen in the past.
So COVID was really tough for our business. Our primary business was lemon production, as well as packing, marketing, and selling to a collection of retail and food service customers. We'd established about a 15% domestic market share that really had been driven by some exciting growth following our commitment towards a format which we called our One World of Citrus business model, whereby producing in different parts of California, Arizona, and then complementing that production with supplies from Mexico, Chile, and Argentina, we'd have year-round supply chains that allowed us to do business with the big buyers of the Walmart, the Kroger, the US Foods, and the big food service buyers.
That strategy had worked really well until really the impact of an oversupplied situation globally in lemons took place, and we first saw it in 2019. Then that was exacerbated in 2020 when the pandemic hit, and every restaurant and bar closed in the world, and 70% of lemons are consumed in restaurants and bars around the world. So that was a negative sort of reality for us. But we hung in there. We pivoted strong to retail. It wasn't enough to recover, but we were about 50-50 50% food service, 50% retail in the lemon side of the business.
As the world began to recover from the pandemic, restaurants and bars reopened, consumption around the world got back to pre-pandemic conditions, we found that the world was just fundamentally oversupplied with this commodity of lemons. And even though we had this great mousetrap that we thought was better than our competition's of having year-round supply, there was really no barrier to entry to that. So anybody that really was committed could create the same format, and we found ourselves just dealing with horrendous commodity pricing, pushing our 40-pound box price, average prices, down to $16-$17 a box, and because of inflationary pressures, costs that were above that for many of the production areas.
As that was going on and we looked forward into the market environment, we realized that, you know, that was probably gonna persist, and there really was not much we could do to change that. Our suboptimal results against the investments that we were making that was being driven by this commodity impact needed to change. So we sat down with the board, and we devised a strategy of beginning to pivot the business from being fully vertically integrated. Originally, it was our idea where you would, you would grow the lemon yourself, you'd buy the dirt, you'd buy the water, you'd grow the lemon, you'd pack it, you'd market it, and you'd sell it, and you get the benefit of that vertical integration, which in a perfect world, creates higher margins and, and better, better results.
The volatility of productive agriculture, then the impact of that commoditization changed our view on that. And so we sat down with the board and devised a strategy of let's shift our focus from being focused on being producers to being more service providers as packers, marketers, and sellers of lemons. And where before we were 80% our own production and 20% grower-partner production, let's devise a strategy of growth, where we'll actually grow into providing services for grower partners. And the implication there is you can keep up with your inflationary costs by changing your charge for the service you provide to those growers. And as long as your returns are better than your competition's, going back to the growers, then you keep those growers.
So that strategy seemed like a much more sustainable strategy for us in this condition of oversupply. So we started that process, and the other part to that was then that allowed us to create an identified list of assets, where we identified $150 million of assets that we'd be able to peel off and divest and sell and not impact our supply chains, which we set on a course to do that. We were very successful in our first year, which was last year, 2023. We successfully monetized $140 million of assets. We had a little over $130 million of debt, so we paid our debt off, which turned out to be fortuitous, given what was going on with interest rates.
And we created a lot of new powder now for expansion and growth. That's what drove it. We've had really tremendous success. We have identified. So the original process, we communicated $150 million of asset sales. We actually achieved more at higher values than we anticipated, so we raised our guidance by another $50 million, which would have implied 100 and 190.
$190 million of total value. We're still running a process on two other significant assets. We have a vineyard in Paso Robles, California, and production assets in La Serena, Chile, that we're working on monetizing right now. We're optimistic that we can achieve greater than that $50 million, but that's kind of what the guidance that we have out there on it. That's what led to the strategy. When we monetized 3,000 acres of our San Joaquin Valley assets, we recorded a $40 million gain on those assets, and we'd acquired those assets, the majority of them, within the last 10 years.
So we really rang the bell, we felt, from a return on invested capital standpoint, and then used that to communicate that we were really committed to getting this value back to our shareholders. And that's why it's a really exciting time for our company now, is we have a board that is open to this strategy, promoting this strategy, and there's really nothing that's sacred or that's untouchable. But this monetization of specific assets is triggering the unlocking of a lot of this value, which has been embedded in these assets for a long time. Anything to add?
I think you did it.
Yeah. That's great. Well, and I want to come back to the kind of asset monetization strategy a little bit. But, maybe if we could, for a little bit, talk about some of the fundamentals that you're seeing in your business. Lemon markets have strengthened as of late. I know there's some seasonality to that business, but maybe talk to us a little about what you're seeing there in that market and what that means for the business.
Yeah. So, lemon markets were challenged this year. I think we're in our fifth year of really tough times for lemons, and at those times, you start seeing bulldozers starting to push out lemons, which, you know, our whole business is a commodity business, so supply-demand is always in play. We saw a bunch of international fruit come in over the years, and this last year when we had these large amounts of rains, there was challenges with the commodity, quality, timing, et cetera. So, over the summer, we saw less lemons being produced, even of our own, and prices start to increase.
And currently now, the season, the District Three, which we'll call the start of the season, which is Arizona, typically starts in September, really started mid-October, and then will carry through most through some part of January. We try to get everything off before the end of the year, just due to freezes and all of that. But the point of all that story is when you have a higher setup of a base price, which we do right now, we're about $5 higher than we've been in prior years, all the way back since 2018, which was our highest EBITDA year of $23 million. We're at that point now, and so you're always coming into supply into December, January, February, March, which is that coastal season.
But if you start at 25 versus starting at 20, you're in a much better position. So we're feeling some tailwinds there from the pricing perspective. Our volume is now just ramping up, so it's been a little bit behind, but our total volumes, we think, will be up year-over-year. When we report in late December, we'll come out with some guidance on the actual volumes. And one note to think as we talk about what the pivot looks like, you know, we are now probably about 30% of the volume going forward, with the goal to get to 20-25, and three years ago, we were 60%-70%, so that pivot is well in play and underway.
Maybe picking up on that comment, just on the volume side of things. Talk a little bit about what have drove the delay that you, that you're talking about, and then, to the extent you have a view, kind of what you're thinking going forward?
Yeah. So we had really a really weird spring in California. We had a lot of rain last year. Some of the most, I think we had 45 inches, and our typical average is about 15 inches. So really good for the water situation in California. All the aquifers are full. That was one of the challenges of our northern properties, which I'm thankful for our buyers, that they're in a good position. And then all down in Ventura County, everything is great. But what it did manifest was some insect pressures. We had something called snail bite, which you'll probably never hear of again, but every lemon grower got snails. Just think of a snail that goes up a tree, usually there's, like, 10. There was probably 1,000 per tree.
They just come and nibble on the lemon. And for a lemon, a lemon's all about aesthetics. Everything inside is generally always the same, and so your quality issues went down, which affected your overall price mix of the fancy fruit versus the choice and the standard. So had a lot more standard fruit, and a lot of fruit that had to go actually to cattle. So that was some of the challenges with fresh utilization. And for those who don't know, fresh utilization is one of our primary metrics in lemons. It's basically a tree grows 100% of a crop, and how much of that crop can you put in a fresh box?
Whether it's a fancy fruit, right now it's averaging 35, a choice is about 25, and a standard is 15. That, the average, depending on your contracts, today, is 23-24, but if you have to send it to the juice market, it's $1.50. So every piece that you can get in is important. Right now, there's not a lot of fruit flowing through the system, but the utilizations are as high as I've seen, in the high 80s, even low 90s, because we're trying to get the contracts filled and everything there.
So... But to the end of the timing question, after the rains, we had a really cool spring, which caused a later bloom across all the cycles, and then we actually had a really big rain in August, which was that monsoon that came through California. And so everything was about four-six weeks behind because of that.
M aybe thinking about the avocado market a little bit. I know this is not necessarily California's time to shine in the avocado market. It's a Mexico market, now, but maybe talk about what you're seeing in terms of the crop, to the extent that you have visibility at this point, and what role you think California will play once it's back in the market as a supplier.
California will have a much bigger crop this year than last year. Last year, for a number of different reasons, it was an off year. Our production was down over 50% last year. It's been a very positive year of rainfall and of bloom and set, so we're... You know, Mark, Mark will bring the guidance in December of what we're anticipating, but we think it's, it's easily double of what we were- where we were last year. And from a pricing perspective, one of the neat things that's happening from, from a California production standpoint is the, you know, the 20,000-pound gorilla in the room is always Mexico. They produce 3 billion, can we say that? 3 billion pounds of avocados annually.
The U.S. market or the U.S. producers collectively will produce anywhere from 170 million pounds - 300 million pounds , so they're a 10x-er of us. So when they come in big, we kinda have to be out of the way. But from a seasonality perspective, California has established this really nice niche from between May to July. That's kind of our time to shine. And it, it's not only a valuable and, I think, sustainable niche, but the market actually allows the California fruit to trade at a premium.
So if you're competing against the Chilean fruit or the Peruvian fruit or even the Mexican fruit, the California fruit is typically capturing a premium now against that other fruit because the buyers just want it. The issue we have in California, because of water scarcity and a lot of the changes that are going on in the industry, as we look forward, you're seeing fewer and fewer producers being able to make it.
San Diego County has finally sort of hit the wall in terms of the cost of their water. You know, the Irvine fruit is now, those are turning into houses. So really, the real game for California production is gonna be in Ventura County, where we are. So one of our responses is a pretty aggressive pivot out of older, more, less productive lemons into more avocados. And you'll basically see a transition of Ventura County from our company going from 2,000 acres of annual lemon production and 1,000 of avocados to 2,000 avocados and one thousand lemons. And you'll see that play out over the next three years.
It'll take us a while to kind of get the benefits of that, but the new planting technology and the way we farm gives us confidence of achieving over 15,000 pounds an acre. If you multiply that by 2,000 acres, you know, you're talking, you know, in excess of 30 million pounds a year. We think we can average somewhere between $13,000 and $15,000 of net operating profit per acre growing avocados versus $3,000-$5,000 growing lemons. So again, it'll take us some time, but we think there's a sustainable niche, and I think that'll really help us as we go forward.
Yeah, that's exciting. What about the avocado market? Just your thoughts, 'cause you're knowledgeable on this, the thoughts about what we're seeing right now in the avocado market. Prices have come off precipitously. To what extent do you think that's supply versus demand, and maybe commentary that you have on the demand that you see in the market?
So it's always supply. I mean, everybody will tell you it's demand, but, but we consume avocados voraciously around the world, and, and the US is no exception. And, everybody tries to blame the retailers for jacking the prices up too high, but, you know, I think I bought an avocado for $3 an avocado, like, recently, just 'cause you gotta have it. But, no, it's supply driven, and it's just basically as we contend with massive amounts of supply coming out of Mexico and out of Peru, there's just sometimes you're in a market where there's less discipline, and there's a lot more fruit out there, and that typically drives the price down.
The great thing, and, we were talking about this earlier, is that there's a lot more discipline coming out of Mexico. There, there's a new supply source. It used to be that just the state of Michoacán provided the Mexican supply chain. Now, the state of Jalisco is certified to supply as well, and there's a lot more certified acres and a lot more supply coming from Jalisco. As the producers in Jalisco sort of grapple with the supplies coming out of Michoacán, they've got to figure out how to create détente so they can balance that supply better. But I think that's what we're seeing, is oversupply, because right now that's still a little bit not organized.
Yeah, makes sense. Okay. Maybe shifting to the lemon market, what are you seeing from a demand standpoint? You talked about some of the supply that's gotten taken out, but if you think about by channel, you know, what are you seeing in either food service or retail demand?
So we, after the pandemic happened, when 70% of bars and restaurants closed, which was 71% of our business—we did a heavy pivot towards retail and moved the business more 50/50. It was almost as simple as getting bags. You see a lot of produce in the these days in bags at Costco and some of the larger markets, and so we really sent our sales force out to go after retail, which was a big move.
The other part of our business, which is sort of the quiet side of our business, is our Raising Cane's business, which is that juice product. It's the, you know, the cousin to Chick-fil-A, Burger King to McDonald's. And they... This year, we should sell them about 1 million cartons of our five million-ish cartons that we had, and that business is only growing. If you look at their business model, they're at, I think, 700 stores on their way to 1,500 over the next three years. And we're their exclusive supplier.
Chick-fil-A went to a model after they got too big, where they, they started, actually processing their own juice versus individually doing it at the store. Raising Cane's is committed to the the flavor profile that that doesn't, that's not as what the customer wants, and so we continue to see that. And that's, that's sort of the, the buoy in the business, if you will, especially when you get into these larger, oversupplied seasons. Now, sometimes, like currently right now, if, if you have a contract, you sometimes have to fill down into a contract, but generally, 90% of the time, we find that it, that it works well for us, and, and we can source in other places.
So, the one area of that we haven't gotten back is our export market into the Asian markets, and really, it's not any effect of demand. That demand has now grown back. It was growing at about 8%-12% a year in Korea and Japan, but the US dollar is really- was really hurting us, so that exchange. And they're, you know, they used to be a bit more picky on the exact quality, but when a Turkish lemon or a lemon from the East comes in at half the cost, you know, they have to start thinking about that. So we've gotten about half of that demand back. We just met with our Japanese partners, and they really want it all to come back, and so as we see the US dollar sort of moderate, hopefully hear that, we'll get that business back as well.
Okay. You noted, you know, fundamentals have been challenged over the last few years in the lemon market. Can you talk about what you've done from a cost standpoint, to make the business more lean, and what you're seeing now with some of the big input costs, particularly labor, and any of the farming costs as well?
Yeah, so we really as we saw inflation coming in, our first approach, we went to a group that really was focused on cost initiative, and it was, you know, a cost-share benefit kind of program. And then it was about a year. We saved about $2 million off cost, just, you know, corrugate, everything, fertilizer, components. We said, "Okay, we can do this ourselves." So we hired a whole internal purchasing group to go through every part of our business and make it all one homogeneous. So if we have purchases from the Central Valley, purchases in Yuma, Arizona, it was all done sort of independently, and now it's all in-house, together.
So we think we've shaved about $4 million of our cost between farming and packing so far, from a materials standpoint, and that really made a difference, especially with our competition. Two other components from the labor side of the business, so we now are using guest workers, and we have been for about five years in the field. But we're also now bringing them into the packing house from an H-2B program side, which is the first time we've done that, and it's almost a similar cost to the current workers, but the effectiveness and efficiency of them being there consistently versus temporary labor that moves in and out, and you have to train them, is much lower.
So the reason why we can do that is because we offer the housing to them. We have 250 of our own farm worker houses that we provide, and that you know prevents people from leaving. So and generally, the cost from both the material and labor side, we've been able to hold, I would say, and which is where everyone else is up, you know, almost double digits. So it's been very helpful.
The other thing I might add, Ben, is we took the opportunity when we recognized the $40 million gain with the disposition of those northern property assets, to actually scrutinize every other part of where we were producing and the cost structure of where we were producing. And we realized that in this environment that we felt was kinda gonna be ongoing, that we were producing in some areas that were really challenged from a cost perspective. So, one example is we were farming 600 acres of lemons in the San Bernardino Desert in a place called Cadiz. We actually took the opportunity to exit that business and write off. We took a $9 million charge in doing that, but that'll save us $3 million a year of negative results because we were just uneconomic there.
And we also reduced our footprint in Yuma, Arizona, by 50% because the hauling costs from Yuma back to Santa Paula didn't make sense. And then we complemented that with a fallowing program, where in return for not taking our water, we actually get paid for it. And so you'll see both that. So with Cadiz gone, that's a big saver, and then with the fallowing program, the Yuma operation has overnight become much more profitable. And so I think when you see the impact. Oh, the other thing we did is we paid off our unfunded pension liability, which saved us about $1 million a year. When you take the combination of all these things, you'll see the first real impact from a cost structure in our 2024 results, so we're excited about that.
Yeah. We talked a little bit about, you know, asset monetization earlier. I'd like to come back to that, and if we could maybe start talking about the Harvest at Limoneira project, the progress you've made thus far, and your thoughts on that.
Yeah, so Harvest has been a really exciting project for us. It's been sleepy for the last, call it 18 months to two years, where before we were selling tranches of 50, 75 lots to home builders like Lennar, Richmond American, KB, et cetera. Once interest rates started to trickle up in, I think, the spring of 2021, things really slowed down. I don't know if you saw, but about two weeks ago, we announced our first sales again at the project, which is great. It feels like, to us, that the spigot is back on. Especially when you saw the 10-year hit 5%, and now it's back towards 4.5% and hopefully going lower. You saw the home builders move pretty aggressively this week.
So, long and short of the story is where this pause was going on for a while, you know, was some of the growth engine, now it's back. And so we had a scenario right before interest rates were going up for our second phase, which is what we're now in and negotiating on, which is 554 lots to have. We put it out for offer. We had 10 builders come in aggressive, and this is in the spring of 2021. It got frothy. We got 10 days away from a $17 million deposit from one of the largest to buy all of it at once, and it fell through. And so right now, we are back at the table with those developers, and it's at better pricing than it was then.
So what a long and short is, is we think 2024, we'll get a material transaction on phase two. And it'll really potentially move the timeline forward of some of the larger cash flows. The cash flows we have out now, so remember, we combined East Area Two and Harvest together to get that $115 million over the next five-seven years. The first part, which was 2023, I think we had a $5 million number. That's gonna slip just a bit into 2024. We've already got the contracts and everything. It's just getting the government contracts with the, for the hospital done, and so we're confident in that number.
Overall, we think if we can execute on a transaction that is a whole phase two, it'll move the project forward by anywhere from 18-24 months, and potentially give us the ability to increase the value. The other thing that's important about the project is we're still working on. Right now, currently, we have 1,500 units entitled. We're working with the city diligently, and they're – everyone's on the same page, to increase that to 2,000. And it's the same footprint of the 550 acres, but would involve a potential apartment project, which we would invest 50/50 with our partner. And the Lewis Group has 10,000 apartments, so they're – this is what they do, and they're very good at.
So that would be give us the ability to think about, do we own it, or do we sell it after rent up, and also increase the total cash flow? And then another 250 units. So right now, we've done about 750 units. We've got 750 more planned, but that looks to go to 1,250. My guess, sometime early calendar 2024, we'll get those approvals, and then be able to come back and talk about what that means from a value perspective.
Just one final note on that. So, when we announced the sale of the lots, we didn't include any of the economics. So we will talk specifically with more granularity when we release our earnings on December 21st. But just anecdotally, the sales price per lot of the first part of phase one versus the 121 lots we just sold appreciated materially, and we'll communicate that. But that gives us great optimism as we now look at these next 554 lots, which, as Mark said, we're running the process to sell those currently.
Continuing on asset monetization, the pool of identified assets, the dollar amount has already grown to $190 million, you just most recently said. Is there continued review of additional assets that could be identified or carved for that asset monetization process? And then you made a comment that you're optimistic relative to the prices that you'd estimated. Maybe help us think a little bit about where that bucket of potential asset unlock goes.
So the home run from a value creation perspective is if you can achieve an entitlement to convert land from an agricultural use to an urban development use, and that doesn't apply to all of our assets, but it does apply to some of our assets. We live in a part of the world that's interesting in that as Orange County and the Irvine Company were developing, and then the Newhall Land and Farming Company in Northern Los Angeles County was developing, a lot of the people that were living in those areas surrounded by beautiful orange trees and, you know, more of a farming, agricultural environment, moved to Ventura County and dug their heels and said, "We don't want urban sprawl here.
We don't want that—this to happen to Ventura County." Mark and I always looked at each other like, "Well, we kind of like Orange County. Like, why wouldn't you want to live here?" So but anyways, they legislated a mandated process that now takes a vote of the people if you want to convert land from an agricultural use to a, an urban development use. And why that's significant is, if you're living in this beautiful place, and you're looking at this beautiful orchard, would you rather look at your beautiful orchard or a strip mall and a condo that would be put into this area? So the art of real estate development in Ventura County is very challenged.
It takes a lot of goodwill, and it takes a lot of very careful consideration, building consensus when you put the development agreements together with the local city officials and what they get in return for letting you change. Since 1991, when the legislation that demanded a public vote went into place, there's only been one project that's ever received that entitlement approval, and that was our project, which is the Harvest Project. So back to your question, we have 3,000 acres that's a mile away from the border of Ventura and a mile away from the border of Santa Paula, that will be the future of those communities. The question is when? And, and there's a sustainable supply of water there.
It's the perfect place for both those cities to grow, and if we could pull off that entitlement, it would go from an approximate value of $100,000 an acre to $1 million an acre, making it a $3 billion dollar asset. So we just throw that out there because I wouldn't set our timelines or our expectations that that's gonna happen in the near term, but we're, we're starting the process to work on that.
What about the water rights that you possess? You talked about the fallowing program. Help us think about the, obviously, the strategic importance of the water rights that you have, and then what options you have to monetize them.
Yeah, so there's a couple options. So just to further touch on the fallowing: so right now, the fallowing program is what we'll call a pilot program. It's a three-year program on the Colorado River. The Feds came in recently and mandated that a third of the use, consumptive use, comes off the river, and used a program to come in and fund those farmers that were willing to fallow that dirt. The accord that was created in 1900 is about to expire at the end of 2025, and so that's with the seven states, California and all the irrigation districts, that has the ability to say who gets what water. Now, we're Class Three water rights.
The Native Americans are above us, and the Mexican government is above us, and then below us is Steve Wynn, Scottsdale, Phoenix, Tucson. So if Steve Wynn's gonna flush his toilets, which I think he will, he might have an opportunity to buy our water. But all kidding aside, we think the next program is gonna be after this pilot. Right now we have 50% of our acres in at 5.6 acre foot credit at $400 an acre foot. All that math turns out to be about $1.4 million today to fallow half our acreage.
What we think is gonna happen in... Sometime before the end of 2025, we'll have the ability to fallow 100% of our acres, so no longer farming lemons into sand. Highest, best use, probably not, at $800 an acre-foot, same 5.6 credit. So that turns into a $6 million coupon for a property that we bought for $18 million back in 2013, with a 6.6% CPI probably. So all in all, that is a... It's in our line of sight. You know, our chair is one of the finest water attorneys in the U.S., and so we're pretty confident that a program like that will come together. The question will be, will you be able to do all of it?
We think, we think probably so, but the $800 number's already been validated in the Imperial District. They just put a deal together there. So you know, then the question, you know, it's a tough question, how do you handle it? Do you sell to an insurance company an annuity that, that 25-year coupon, which is probably a net present value of $70 million-$80 million, something in that range? So that's, that's, that's one, which we think is, is imminent. And then the other is, is the valuable water that we have in our own basin, and there's a few development projects that are looking for water, and we're the only place that has water.
Right now, that water is trading between $35,000-$40,000 an acre foot, and we have 12,000 acre feet of water in that area. Now, you can't bifurcate your land and your water, but you can sell some of it to demonstrate value. So if you, if you sold 500 acre feet and got $20 million of value, that's, that's a pretty good demonstration, I think. So you'll see some of that in the next 12-24 months as well.
Just to be clear, the opportunities around water are in addition to the $190 million that you're talking about?
Yep.
Great.
We've typically tried to guide towards, "Don't give our water any value unless we carve it out as a specific asset." So in Yuma, that will be one that we do that with-
I see.
... but we're currently monetizing our other water by growing stuff, and that seems to be a pretty good model sometimes.
So in light of, in light of the significant reduction of debt that you had, continued cash flow coming in the door, business getting a bit better as well fundamentally, I'd love to hear a little bit about your growth strategy, M&A strategy, to continue to consolidate and, and pivot the business strategically.
So I think the first thing was to fix the fundamentals of the core business, and we're making good progress on that. And once we see that happening, it'll take a little bit of capital, directionally maybe $15 million of investment to expand our avocado production, so that's part of our capital plan. But as we start realizing the benefits of more sustainable and consistent EBITDAs and cash flows and earnings, we'll patiently get back on track to raising the dividend. That was always the story. You know, we fought against one-time large special dividends. That hasn't worked very well for us in the past.
But we're also committed to opportunities to buy the stock back when we think it's significantly undervalued, and so we continue to evaluate that. As far as M&A is concerned, our board has given us a green light to explore the potential of forward integration into the avocado space. We'll be one of the largest... Now, we'll be the largest producer of California avocados, so we think it makes sense to explore the idea of some kind of business combination with a packer and a handler of avocados. For those of you that know where we are, there's some sort of kind of logical, obvious ones that are situated close by to us. But you know, we'll just have to see where the valuations turn out.
You know, we're a complex company from an M&A perspective because if you look at our true value of our breakout value of our assets, it puts a high bogey on sort of the numbers that we expect to get if we're gonna use our, our currency to merge into something. So, but, but, Ben, you know all the players in the space, and we're probably talking to all of them, and, and we'll, we'll see, we'll see where that winds up.
And then the last thing to mention is that we're very interested in potentially developing a packing house in Chile, to pivot from being today just a producer into being more of a packer, marketer, handler of what we believe is about five million cartons of captive supply that we... I wouldn't say we control, but we have access to with our partnerships in Chile. So those are really the big things we're thinking about right now.
In light of the opportunities you're presented with, the de-leveraging that you've, you've been successful with already, how are you thinking about max leverage? And maybe it could be temporarily higher to pursue something strategic or financially accretive. How should we be thinking about your appetite for leverage?
Yeah, it's a great question. So I think typically, we think 3-4 x EBITDA. So as we grow that, you know, that should be up to $100 million and then plus. But really, at the end of the day, we're really focused on not being levered, and I think we'll have a cash problem unless we find a really attractive, accretive acquisition before we have a leverage problem, if you will. So as the timeline of the $115 million of cash come in, executing on $50+ million more of assets, that's a lot to work with, I think, and right now, we have a $40 million dollar piece. It's at 3.5%. You know, it's basically free money at this point, for another three years.
So, I think the timing's really gonna all self-fund everything. So as we plant avocados, that $15 million will be $5 million, $5 million, $5 million free cash flow from the operations. So I think the goal is to stay at one-two, but we would go to three-four if needed, to get something attractive.
Okay, great. I think that's a good place to leave the discussion. Harold, Mark, really appreciate your time, as always.
Thanks, Ben.
Thank you.
Thank you. Thank you, everybody.