After months of newly licensed weed retailers clamoring for information about the financing New York had promised-to help them open stores, word about the first loans finally came out in an earnings call by a private lender.
On that call last week, Chicago Atlantic, which in June invested $150 million into the $200 million loan fund, with $50 million in public money, New York created as part of its social equity plan — revealed that it had already awarded $19 million for 17 retail dispensaries.
That fund is meant to help support conditional license holders the state put at the front of the line, including “justice-involved” people who could document that either they or a family member had been convicted of a marijuana-related crime and had experience running a business. In total, the state has awarded 436 of those conditional CAURD licenses but only 21 stores have actually opened across the state so far.
“This is really the culmination of six months of work that DASNY started, even before we were seriously involved,” Peter Sack, the managing director of Chicago Atlantic, told THE CITY, referring to the state Dormitory Authority’s efforts to choose sites for the retail license holders. “We just have to keep getting more stores up and running now.”
Sack said the stores are expected to open over the fall as the fund continues to review more potential loans.
The Office of Cannabis Management, or OCM, which awards the licenses and sets regulations for the industry, has said that support from the fund is only guaranteed for the first 150 conditional adult-use retail dispensary licensees.
As part of the state’s social equity plan, the fund’s goal is to provide turn-key locations selected by DASNY. When Chicago Atlantic came on board, they helped finalize locations for the stores and provide loans to the fund to cover location and construction costs at DASNY-approved sites, with OCM deciding which sites go to which licensees.
Those licensees sign ten-year loan agreements with a 13% annual interest rate, said Jeffrey Gordon, a spokesperson for DASNY. Buildout estimates are about $1 million for each store — critical financing since access to traditional loans is difficult for a business selling a product that remains illegal under federal law.
Chicago Atlantic is guaranteed at least a 8% return on its loans, according to a request for proposals that DASNY issued last May.
The license holders’ stores must be built out by DASNY-approved contractors, which gives licensees little control over the process.
Carson Grant, one of the DASNY loan recipients, expressed frustration about not knowing the costs related to the buildout of his store at a meeting with state officials in June.
“I don’t know what a light bulb costs. I don’t know what anything costs,” said Grant. “If you guys keep using this word transparency, just tell us the numbers. That’s it. That’s all I’m asking for.”
Some licensees have decided not to accept the loan because of the costs related to the buildout. Jeremy Rivera, who is opening a cannabis store soon in Astoria, Queens said that he was able to launch his forthcoming store for far less money.
“We didn’t spend a million dollars to do what we did. We spent well under what everybody said that we had to,” Rivera said.
Both Rivera and Grant cannot open their stores right now because of an injunction that prohibits any conditional licensee from opening a new store. That injunction came as a result of a lawsuit against New York that alleges the program violates the state constitution by excluding military veterans from early consideration for licenses even though they are one of the groups, along with justice-involved people, specifically mentioned in the law that legalized recreational marijuana sales in the state.
The next hearing in that case is August 25.