Discontent & Despair, NY's Cannabis Rollout

Written By: Brad Racino

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Tensions are rising among New York’s recently licensed cannabis entrepreneurs.

A group of Conditional Adult-Use Retail Dispensary (CAURD) licensees have documented in a letter an “alarming and unacceptable” lack of communication and transparency among state cannabis regulators.

The group of seven CAURD licensees, along with the Long Island CAURD Coalition and “several others” who signed anonymously, sent the letter late Tuesday night to:

• The Office of Cannabis Management (OCM) Executive Director Chris Alexander.
• Cannabis Control Board (CCB) Chairwoman Tremaine Wright.
• Dormitory Authority of the State of New York (DASNY) President (and CCB member) Reuben McDaniel.
• A representative from Gov. Kathy Hochul’s office.

The letter was also sent to NY Cannabis Insider.

The bulk of the group’s ire is directed toward DASNY and the structure of its Social Equity Cannabis Investment Fund, which was supposed to provide funding for the identification, leasing and build outs of 150 CAURD sites across the state.

As NY Cannabis Insider has documented repeatedly, the fund – which is overseen by DASNY and managed by Social Equity Impact Ventures – has failed to raise any money since its inception.

Impact Ventures is headed by NBA Hall of Famer Chris Webber and entrepreneur Lavetta Willis, along with a team from the investment banking firm Siebert Williams Shank.

“In the CAURD program, we are consigned to a process that is monopolized by DASNY and the Fund by way of financial information, service providers, and access to real estate,” the authors wrote.

The CAURD licensees cite as grievances DASNY’s obscure and opaque lease agreements, exorbitantly priced build outs for CAURD locations “with no ability by the licensees to negotiate,” delayed or nonexistent site approvals, and more.

“It appears as though we are once again asked to participate in a market that is fundamentally inequitable and counteractive to the purpose of the very initiative the government launched,” the authors wrote.

At the end of the letter, the group asks for a meeting within the next 14 days between CAURD licensee representatives “and key representatives of the OCM, DASNY and the CCB” to address the issues expeditiously.

“As your licensees at the forefront of this industry, we fully expect you to address these concerns and propose a path forward so that the original promises made by the state can be upheld. It is the state’s responsibility to uphold its commitment to social equity initiatives and the promises made to participants in the CAURD program.”

In response to the letter, DASNY spokesperson Jeffrey Gordon told NY Cannabis Insider that the agency and the OCM are committed to providing licensees with the opportunity to succeed through mentorship and support.

“We look forward to meeting with them to address the concerns they have,” Gordon said.

The OCM declined to comment and directed NY Cannabis Insider to DASNY’s statement. A spokesperson for Gov. Hochul’s office did the same.

Speaking openly

On Wednesday morning, several of the letter’s authors spoke with NY Cannabis Insider to offer more details about their experiences navigating the licensing and real estate components of CAURD.

Carson Grant was among the first round of CAURD license winners in November, operating under CGG Enterprises, Inc., in Queens. He said the process so far has been a rollercoaster.

“We’re all scared, we see all the illegal stores and we don’t have any kind of protection,” Grant said. “They’re trying to push us out into the street saying ‘Don’t worry, we’re here for you,’ but realistically no one is here for us.”

Grant said DASNY offered him a space in Bayside, Queens – 3500 square feet upstairs and 6000 square feet downstairs – without sharing details of the loan agreement or timeline.

In fact, none of the CAURD licensees on the call had seen a loan agreement.

That grievance was articulated in the group’s letter:

”CAURD licensees have been asked to agree to leases referencing financing agreements without ever being provided with those financing agreements. No diligent and responsible business owner can be expected to sign a contract under these conditions.”

Grant said he passed on the Bayside DASNY location because “the rent is so crazy.”

“As a businessman, I thought we were supposed to start slow and then grow and build – I don’t know any businessperson that runs out there and puts down this large amount of money.”

Those high costs to build out were also included in the letter:

“Licensees are forced to use contractors identified by DASNY and are provided with no insight into the scope of build outs, nor the details of budgeting for the buildout costs they will be responsible for paying over the term of the lease.

–Construction cost quotes have been very well above market rates with no ability by the licensees to negotiate.

–Contractors are incentivized to quote high buildout costs for a spec that exceeds what is necessary to get a store open …

–The Fund has no incentive to negotiate these costs, which is antithetical to their clearly defined purpose of supporting CAURD licensees.”

Gregory Pereira and his wife were awarded a CAURD license in April to operate Blaze 420, LLC, in the Mid-Hudson region. And what the two have been hearing, Pereira told NY Cannabis Insider, “just frightens us.”

“The interest rates, the square footage – all these things make me very ambivalent about moving forward,” he said.

“I do trust the fact that this is a new market and things will eventually work out, but sometimes we have to hold people accountable. We have to make sure that they’re on our side completely, and the left hand knows what the right hand is doing, and that it’s all transparent.”

“So many people are discontent in this process,” Pereira said.

He added that since being awarded a license in April, neither he nor his business partners have heard anything from DASNY.

Neither has Gahrey Ovalle, who was also awarded a third-round license in April to operate WAO Industries, LLC, in Long Island.

“Our problems in Long Island are unique to Long Island,” Ovalle said. So, as part of his due-diligence, he gathered first- and second-round CAURD holders on the island to learn about their experiences so far.

“I was left with a sense of despair,” he said.

It’s nearly impossible for CAURD licensees to find locations among Long Island’s sea of opt-out communities, Ovalle said, adding, “How are we able to find success if New York State is not carving out space for us?”

From the group’s letter:

”Long Island licensees have been all but left out of the equation with no viable real estate to obtain through DASNY or on their own, unintendedly resulting from a poor mix of the state’s proximity restrictions, Long Island’s commingled zoning map, and combative local community boards.”

The group’s letter is available to read here.