Why Can’t Legal Cannabis Sellers Open Shops? Sometimes NY State Is Their Adversary
Business owners looking for retail space to site licensed weed stores say the state Dormitory Authority is rejecting locations deemed too close to competing state-leased storefronts.
Osbert Orduña should have been all set to open a legal pot dispensary in New York.
His company, The Cannabis Place, secured a coveted state license to operate in Queens — one of 150 issued to companies whose leadership includes people who were prosecuted for cannabis crimes in the pre-legalization era.
The state Dormitory Authority, which is orchestrating the rollout of storefronts for legal weed dealers, this winter offered Orduña’s team a location for a dispensary, in Jamaica. The authority has pledged to pay to build out any stores it secures, through a public-private investment fund.
But The Cannabis Place turned it down, after concluding that bus lanes fronting the store would make delivery logistically tricky. His team located another site, in Astoria, subject to approval by the Dormitory Authority’s Social Equity Cannabis Investment Fund.
Orduña presented that location to the investment fund — then didn’t hear back for three weeks, he said. By the time the fund representative replied, the landlord had already walked back his interest in leasing them the store.
What’s more, the representative responded that the Astoria storefront potentially conflicted with another location the fund was already sponsoring in the area. They never said which. But one legal dispensary has already been publicly announced for the neighborhood: Blaze, expected to open sometime this year on Steinway Street near Northern Boulevard.
Nearly two months after the state gave The Cannabis Place a license, it’s still without a location.
So far, not a single one of the individuals awarded a “Conditional Adult Use Retail Dispensary” (CAURD) license who want to open on their own have done so. The fund itself has only managed to get two dispensaries up and running — both of them temporary pop-ups, including one that opened in Ithaca on Thursday.
Meanwhile, nonprofit groups have opened two licensed dispensaries in Manhattan: the Union Square Travel Agency, which is partnered with The Doe Fund, and Housing Works Cannabis Co.
Openings lag Gov. Kathy Hochul’s pronouncement in October that 20 dispensaries would be up and running by the end of 2022, with 20 more each following month. Meanwhile, about 1,500 smoke shops are selling cannabis illegally in New York City alone, city officials estimate.
Worries about getting Social Equity Cannabis Investment Fund approval still shadow Orduña as his hunt for a storefront stretches on. State law prohibits the shop from opening closer than 500 feet from a school or 200 feet from a house of worship. The applicant has to check that a location complies with that and other restrictions.
Orduña and his team have since submitted a new location in central Queens that they hope will be supported by the fund.
Said Orduña, “Ultimately, the fund is the one that then reviews it and says, ‘Yeah, we like it,” or “No, we don’t like it.’”
Indeed, an FAQ for license-holders posted on the Dormitory Authority website reads: “these locations will be reviewed by the Fund for proximity conflicts with Fund identified sites.”
The Dormitory Authority did not respond to a question from THE CITY about why it insists on reviewing sites. But one clearly interested stakeholder is the Social Equity Cannabis Investment Fund, which is a financial partner in outfitting the retail stores, working with a private investment group called Social Equity Impact Ventures LLC. The state has a $50 million stake.
But even licensees who find their own stores and don’t ask for support for the fund still must get sign-off on the location from the Dormitory Authority, as well as the state Office of Cannabis Management.
And the competition is about to get tougher. Earlier this month, the Office of Cannabis Management announced that it will double the number of Conditional Adult-Use Retail Dispensary licenses, to 300.
Lawyer David Feder, the founding partner of Weed Law, representing license-holders, said that the fund can turn down stores it worries might compete with its own future retail outlets.
He points to pending regulations that preclude dispensaries from being less than 1,000 feet from each other. (Office of Cannabis Management spokesperson Aaron Ghitelman said the state Cannabis Control Board can override the requirement “if it was determined it was in the public convenience and advantage to do so.”)
“The scenario is that DASNY is out there trying to court CAURD awardees to get them to go to their properties,” Feder said, referring to the Dormitory Authority. “And whether or not CAURD awardees are interested in doing that, they’re competing with the other CAURD awardees in the same region. So it’s now become people versus the state.”
The Dormitory Authority has said the fund has been working with real estate services firm CBRE to vet retail spaces, and shortlisted 350 sites for dispensaries by the end of last year.
After signing a lease, the fund is supposed to begin construction, while the Office of Cannabis Management finds a license-holder to match with a location, according to the FAQ.
But those storefronts have been slow to open. Dormitory Authority CEO Reuben R. McDaniel announced during a December board meeting that the fund had signed its first lease, for a property on 125th Street in Harlem across from the Apollo Theater. But when THE CITY visited last week, the site remained vacant, without evident construction.
Social Equity Impact Ventures, led by former basketball player Chris Webber, entrepreneur Lavetta Willis and former city comptroller William Thompson, has faced well-publicized challenges raising money.
Galina German, who received a license for the Capital Region, which includes Albany, said she will not open a fund-supported site, pointing to state disclosures of a 10% interest rate to repay construction costs.
Instead, German said her team has signed a lease for a dispensary in Albany. But first, she crossed paths with McDaniel — and his policy of putting the Fund-sponsored sites first.
The two met during a meeting of license-holders in Manhattan in January at Smacked in Greenwich Village, the first fund-supported adult-use shop to open. She had a landlord interested in renting to her company, and informed McDaniel she had been waiting weeks for someone at the Office of Cannabis Management to verify that the location met state criteria.
McDaniel told her she was contacting the wrong person — and that she should run it by him personally, to ensure the location does not conflict with any Dormitory Authority-sponsored site.
She followed up, and got the all-clear within two days. The landlord backed out anyway.
“That’s the fear, the fear that they’re just going to make it so difficult for you,” she said about fickle landlords. “And we have a year to get our dispensary going.”