As booming cannabis industry leaves behind pricier, high-profile sites, social equity applicants
When the sale of medical marijuana began in Illinois in 2014, cannabis firms typically chose unobtrusive buildings, sometimes hidden in industrial parks, to sell the controversial product.
Nearly 10 years later and with recreational weed now legal in the state, cannabis has become a big business. Dispensaries are shifting from the outlying buildings where they started into some of the hottest retail corners in both the city and the suburbs. National companies have helped buy local dispensaries, and promote expansion and create multistate operators worth billions.
But in the midst of making all the money, one group is being shut down.
The state held a lottery last summer to license marijuana retail stores to “social equity applicants,” business owners in communities or families hurt by the war on drugs. But a judge halted the program after suing several losing applicants, leaving the winning applicants in limbo as the rest of the marijuana industry took off. A judge recently authorized the state to conduct a corrective lottery for applicants who filed suit.
“It’s been disappointing to just sit on the sidelines and see existing operators earn hundreds of millions of dollars,” said Ambrose Jackson, a former hospital administrator who won one of the social equity licenses before the program closed.
Those hoping for social equality keep moving, sometimes leasing or buying properties and perfecting the design of the store, all without being able to operate and bring in revenue. But the price of acquiring real estate for a cannabis-focused business, combined with the industry’s push toward fancier, pricier spaces, threatens to overtake social equity applicants.
“All social equity applicants are bleeding dollars, and every single month, people like me, who should be helping with the program, are getting hurt,” Jackson said.
Securing a site for a cannabis store has never been easier. Many landlords are reluctant to host cannabis retailers, limiting the available spaces. And with banks still raving about cannabis, traditional loans are not an option. This adds up to the high cost for anyone jumping into cannabis, especially startups without financial connections.
But large, multistate dispensary operators like Cresco Labs are flagging along top retail aisles such as East Golf Road in Schomburg, or at the intersection of Skokie Boulevard and Old Orchard Road in Skokie, where there is a 15,000-square-foot flagship dispensary in Kuralief.
“If you walk down a dark alley, you think you’re doing something shady, so we want to be next to a Whole Foods,” said Chima Enya, executive vice president of Cresco Labs.
Progressive Treatment Solutions, which operates 11 dispensaries nationwide, including several in Illinois, became the latest cannabis bigwig to plan expansion into a top retail aisle. The company established 6428 N. It began selling medical marijuana off Milwaukee Avenue, a small building in Norwood Park on the Northwest Side, but now wants to sell its consumer brand of recreational cannabis at Clark’s former Rainforest Cafe and Ohio streets across the river. North, across the street from McDonald’s flagship restaurant in Chicago.
“It’s a vibrant community, and I think everyone agrees that if you want to have a thriving business, you need a vibrant community,” PTS CEO Terry Peterson said at a controversial community meeting on May 10 in River North. I should be.”
If approved by regulators, the firm plans to spend between $7 million and $10 million to turn the vacant building into an ultramodern retail space, according to Peterson, a former 17th Ward alderman and head of the Chicago Housing Authority. to upgrade to.
Paying for the extension will likely not be a problem for PTS. Even if banks steer clear of it, cannabis is such an attractive product that multistate operators can still raise money from more adventurous lenders and investors, and PTS is no exception. County records show that PTS was one of the borrowers on a $56 million mortgage loan secured by Norwood Park Property from the New York-based lender. The same loan, which was revised in March, grew to $106 million, an astonishing amount considering the one-story structure was purchased in 2016 for $750,000.
A PTS spokesperson said the company could not provide financial details about the firm or its assets.
Other cannabis titans are looking to upgrade their vacuums. New York-based Verano Holdings, one of the nation’s largest cannabis providers, bought Greengate Chicago, an independent dispensary in Rogers Park, last year. Verano executives told a North Side community meeting in March that they wanted to move Greengate, now located on a side street, to a former Leona’s restaurant on Sheridan Road, which is a top Rogers Park.
Jackson just wants to get started. In addition to the license his firm, the 1937 Group, won to start a downstate dispensary, he was also granted a license to set up a craft growing operation, as well as the right to transport cannabis products. His team spent many years searching locations, working on designs, floor plans, and meeting government demands for airtight security.
Doing so isn’t easy without steady cash flow, Jackson said. It costs millions to get a full scale operation up and running, so there are always bills to pay. The company pays rent on a 50,000-square-foot industrial property in suburban Broadview, where Jackson plans to grow and package hemp and processing oil from plants, among other activities.
“We’ve been paying $26,000 a month for two years, because we didn’t have enough money to buy the building outright,” Jackson said.
Big cannabis providers are vulnerable to allegations that legalization has mostly benefited large, white-owned firms, and in some cases are lending a hand. Companies such as Cresco and Chicago-based Green Thumb Industries helped many social equity groups get through an initial qualification process or through extended zero-interest loans and other investments.
“It’s about building multi-generational wealth in black and brown communities,” said Wendy Berger, GTI’s board member and head of investment and development firm WBS Equities. “When examining social equity applicants, we wanted to make sure they could run a successful business and were aligned with their starting goal.”
Corey Croft, a social equity applicant One who completed GTI’s cannabis training program said legalization could still prove beneficial for disadvantaged communities. His firm Inlabs 1 won the rights to open a dispensary in the Chicago metro area, and Croft, a hospitality design firm, Sonder, Inc. is also the general manager of the company, intends to open shop on Chicago’s West Side in the Illinois Medical District.
“First and foremost, I believe in the medical benefits of cannabis, even though we have a recreational license, but second, being close to (Illinois Medical District) North Lawndale and other neighborhoods on the West Side where investment is low, So let’s look at it as a way to create jobs and give people a chance to work.”
Still, delays have meant he has spent nearly $200,000 on the effort, which has yielded no results. And he’s not sure the Illinois Medical District locations he discovered will still be available when the social equity program officially closes.
In addition to providing some equity and zero-interest loans to social equity applicants, Cresco, which runs 10 Illinois dispensaries, began hosting training workshops at its former dispensary in the Lakeview neighborhood when it was replaced by a new and larger store. was transferred to. , according to spokesman Jason Arkes.
“But this can’t go on forever, and there’s only so much we can do,” Arks said. “We can only hope that licenses will be issued soon.”
If licenses are issued, Josh Joseph said real estate investors could also lend a hand. He founded Chicago-based Grassroots Cannabis, which was bought by CuraLeaf in a 2020 deal for more than $800 million. He then formed the Nashville-based cannabis company BPH Legacy Partners with former NFL players Jordan Reid and Dominic Isley, and plans to buy properties in several states, leasing them back to social equity operators, allowing them to acquire real estate. Helped to avoid expenses. , Joseph’s firm has about 12 such properties under contract in Illinois and is ready to pull the trigger once the court issues a license.
“We have five locations in Chicago that are closed and loaded at this point,” he said.
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