By Andrew Kaye, Sweet Leaf Madison Capital
According to New Yorkers, 2023 will be the year of cannabis. Although it has been almost two years since New York voted to legalize recreational use and sales, the state has been slow in setting up processing facilities and dispensaries. As of February, only three of the 66 licensed locations were operational. New York is a potential market for cannabis. New York City expects over 50 million visitors this year, many of whom are looking for legal cannabis.
While everyone can see the benefits New York brings to the industry’s economy, why do they seem to be slow to get something done?
The state might have taken on more than it can handle.
Due to a lack of knowledge about the complexities involved in securing commercial cannabis real property, and slow capital raising, cultivators have now too much supply without the means to distribute it.
Great intentions, slow implementation
New York’s retail licensing program is a major step forward in the cannabis industry. It focuses on social equity and helps those who have been directly affected by the failed war against drugs. The Cannabis Adult Use Retail Dispensary licenses aim to prioritize these underserved communities. Licenses will be awarded to people who have been convicted or have a family member charged with marijuana-related crime. These licenses are also available to non-profits who work with these communities.
One of the most appealing aspects of these licenses is the Dormitory Authority of the State of New York’s (DASNY), which has been charged with finding storesfronts for entrepreneurs who have been granted licenses, and even building them out. The state contracted 10 companies to design and build each dispensary. The state is still slow to get dispensaries operational. DASNY seems to have realized that it may be harder than expected to find landlords willing and able to lease a cannabis business.
This only increases the sense of urgency that has persisted for the past two years. New York City’s underground market is growing rapidly and businesses are eager to catch up. New York currently has approximately 1,400 unlicensed sellers. The unregulated sale of marijuana means that it could be sold to minors, tainted, and ultimately not being taxed. The delayed rollout has caused problems for New Yorkers as well as the state. However, there are still opportunities to improve things.
The state is offering licensees the opportunity to search for a property on their own, as there are not enough spaces for those who wait for DASNY to determine the real estate landscape.
This is because the good news comes with a caveat. If a licensee decides that they want to forgo the public-private fund of $200 million DASNY has set aside to support operating costs, they will have to forfeit their share. The fund is basically a state loan, which each retailer will have the responsibility to repay, plus interest. The problem is that DASNY is yet to raise the funds necessary to distribute to retailers. The only amount the public knows about is the $50million that the state provided.
The million-dollar question is: Do these entrepreneurs want to be the first on the scene? Do they believe that the real estate and money issues will be solved?
It’s hard to know. It is difficult to say. However, we know that new processing and cultivating licenses have been secured for this year. There is also a large backlog of weed in storage. This means that there will be plenty of product when the doors open to the public.
Maybe NYC should let go of its own path, allow more cannabis to be sold, and let 1,000 flowers bloom!
Andrew Kaye is involved in all aspects the financial services industry as an investment banker, fund portfolio manager, family office investor, attorney, and investment banker. He has extensive experience in investing in cannabis and has assisted start-ups with their initial raises through global companies that offer stock options worth billions of dollars. Andrew is currently Sweet Leaf Madison Capital’s Chief commercial Officer. His expertise is used to create middle market financing solutions in the cannabis industry for equipment and real estate financing.
Sweet Leaf Madison Capital offers non-dilutive and asset-based lending solutions for the underserved middle markets of the cannabis industry. They originate real estate loans, equipment financing and many other loans for entrepreneurs and businesses. The company is located in Denver, Colorado, and has offices in New York City, West Palm Beach, Florida, and New York City. Sweet Leaf Madison Capital is available online to learn more and complete loan applications. You can also continue the conversation via LinkedIn, Twitter, Facebook, and Facebook.
Andrew J. Kaye serves as Chief Commercial Officer at Sweet Leaf Madison Capital. He can be reached at akaye@sweetleafmadison.com.
The post Member blog: What Ever Happened to the New York Minute in Cannabis Industry? was first published by The National Cannabis Industry Association.
