Ryan Randazzo Arizona Republic
(CNT) City News Talk #arizona
Marijuana businesses are spending millions to expand their operations and buy new medical licenses in Arizona, as the passage of Proposition 207 by voters on Election Day will allow sales of recreational marijuana to adults in about four months.
The businesses are expected to hire thousands of employees to meet the demand for legal marijuana, one executive said Thursday.
Some existing dispensaries had already started expansions in anticipation of the measure passing, and the unofficial vote tally set off a fresh round of acquisitions this week as companies snap up the limited dispensary licenses available to prepare for a bustling recreational market.
“We are already building walls and pounding nails,” said Steve Cottrell, president of Curaleaf Arizona. Wakefield, Mass.-based Curaleaf has eight medical-marijuana dispensaries in Arizona and 95 medical and recreational marijuana shops in 23 states.
He said the company is spending about $4 million on upgrades at existing Arizona shops in anticipation of recreational sales, and has prepped for about eight months. Its Glendale shop is more than doubling in size to 5,000 square feet, he said.
“These are all construction projects that have been approved by each municipality,” he said.
In the years since a similar initiative failed in 2016, he said dispensaries in the state have gone from having 1.4 million square feet of cultivation space to about 6 million square feet, giving them plenty of capacity to meet the anticipated demand from recreational sales.
“Plants are sprouting and doing their thing,” he said. “We are well underway. When adult use comes to fruition, we will be more than ready to go.”
Curaleaf has a ninth Arizona license and is seeking zoning approval somewhere in the metro Phoenix area to open a dispensary with it, Cottrell said, declining to disclose the municipality.
Thousands of workers will be needed to handle the expected boom in business, according to Steve White, the CEO of Tempe-based Harvest Health and Recreation.
Harvest is expecting to hire hundreds of new employees to work the cash registers and operations at their 15 Arizona shops alone.
Harvest had 37 retail shops nationwide as of Oct. 5, and continues to grow.
On Monday, Harvest announced that it settled a dispute with a company called Devine Hunter Inc. to buy three additional dispensary licenses. The companies initially struck a deal last year to transfer six licenses to Harvest that ended in litigation.
The price was not disclosed. The dispensary licenses are not yet affiliated with operating dispensaries, though Harvest is working to open three new retail outlets with them, which will give the company 18 operating Arizona dispensaries.
“We will be hustling as quickly as we can with two of them,” White said, adding that there is an “outside chance” the third can open next year as well.
Harvest also gets a “right of first refusal” for licenses at three other operating dispensaries and a fourth that doesn’t have an operating shop in the deal. A right of first refusal means if Devine ever decides to sell, Harvest gets first crack at buying the licenses.
White said it was hard to guess how much the company is spending in anticipation of the recreational market opening up because it was spent sporadically at the various shops to prepare them for more customers.
“We’ve already spent a lot of that money,” he said Thursday from a north Scottsdale dispensary where he discussed Proposition 207 with media.
Deal brings Canadian company to AZ
Some new companies are coming to Arizona as well.
With the election results just hours old Wednesday morning, Toronto, Canada-based Ayr Strategies, which runs dispensaries in Nevada and Massachusetts, announced an $81 million deal to acquire the three Oasis-branded shops in Chandler and Glendale.
The deal clearly seemed timed to the passing of the ballot measure. The company isn’t yet sure whether the dispensaries will be rebranded as Mynt, Sira Naturals or The Dispensary like its other shops, according to Chief Operating Officer Jennifer Drake.
“We just entered the Arizona market and are still making decisions pertaining to the branding and integration of the dispensaries,” she said. “We look forward to growing our footprint in the state and building positive, collaborative relationships with all our stakeholders.”
The deal includes a 10,000-square-foot Chandler cultivation facility and an 80,000-square-foot one in development in Phoenix, plus 110 employees of the company.
The Oasis dispensaries are “highly cash-flow generative” according to Ayr.
Copperstate buys Level Up shops
On Thursday, Phoenix-based Copperstate Farms, which runs the Sol Flower marijuana dispensaries in Sun City and Tempe, announced it is buying the troubled Level Up dispensaries.
The owners of those shops in Tempe and Scottsdale had to aggressively reclaim them from MedMen Enterprises Inc., a Canadian company with Los Angeles headquarters, when MedMen failed to pay for the shops as agreed, according to court filings.
The deal includes a 25,000-square-foot growing operation.
The price was not disclosed, but MedMen initially agreed to purchase the locations for $33 million.
These plans all come in addition to the $25 million north Phoenix growing facility the operators of The Mint dispensaries in Guadalupe and Mesa announced to supply the shops with marijuana for the adult-use market.
Retails sales hinge on state action
To begin offering adult retail sales, the Department of Health Services must set up the licensing system as described in the ballot measure.
White said Thursday he is almost certain there will be legal challenges to recreational marijuana, but he and Cottrell said they believe DHS is up to the task of getting the program running.
Deadlines in the measure call for the application process for medical dispensaries to sell recreational marijuana to start functioning in January, with licenses issued within 60 days. That means sales could begin as early as March.
White said he would not be surprised if DHS was already working behind the scenes to implement the measure.
DHS spokesman Steve Elliott would not comment on whether that is the case, but he said the agency is prepared to implement the law if the measure is certified.
“Until the general election canvass is completed, ADHS is unable to engage in a detailed discussion on implementing a ballot measure’s provisions,” Elliott said. “As was the case with medical marijuana, ADHS has the mechanisms and staff expertise to establish a regulatory system should the law require it.”
Still space for medical patients
All of the activity should not displace the nearly 300,000 existing medical-marijuana patients in Arizona, dispensary officials said.
They plan to maintain their medical offerings, which are not restricted by the same rules as recreational marijuana allowed by Proposition 207.
“We will have specific medical stations so adult-use customers are not using the same stations as medical patients,” Cottrell said.
White likewise said medical patients should not be displaced by the onrush of recreational customers.
Dispensary officials said many people likely will choose to maintain their medical cards, despite the doctor fee and two-year registration fee with the state.
Medical cards allow patients to buy 2.5 ounces of marijuana every two weeks, and don’t have the same restrictions on the potency of edible marijuana products that Proposition 207 places on recreational sales.
Phoenix attorney Thomas Dean said many will keep their medical cards because the cards give some protection against being fired for failing a drug test, and they could also offer legal protection to marijuana users fearful of losing some of their rights in child-custody disputes.