{"id":2994,"date":"2021-12-13T11:07:13","date_gmt":"2021-12-13T11:07:13","guid":{"rendered":"http:\/\/CBMie2h0dHBzOi8vd3d3LmhhcnRmb3JkYnVzaW5lc3MuY29tL2FydGljbGUvbWEtYWN0aXZpdHktaGVhdHMtdXAtaW4tY3RzLW1hcmlqdWFuYS1pbmR1c3RyeS1haGVhZC1vZi1yZWNyZWF0aW9uYWwtbWFya2V0LWxhdW5jaNIBAA"},"modified":"2021-12-13T11:07:13","modified_gmt":"2021-12-13T11:07:13","slug":"ma-activity-heats-up-in-cts-marijuana-industry-ahead-of-recreational-market-launch-hartford-business","status":"publish","type":"post","link":"https:\/\/thcinct.com\/?p=2994","title":{"rendered":"M&A activity heats up in CT’s marijuana industry, ahead of recreational market launch – Hartford Business"},"content":{"rendered":"
<\/div>\n

By Christina H. Davis <\/p>\n

\n

It was only a few months ago that Gov. Ned Lamont<\/b> signed into law legislation clearing the way for recreational, adult-use marijuana in the Nutmeg State.<\/p>\n

But already market forces inside and outside the state\u2019s borders are moving rapidly in anticipation of a multimillion-dollar business opportunity.<\/p>\n

Those forces include a series of acquisitions involving out-of-state companies looking to gain a foothold in the state in advance of the Department of Consumer Protection (DCP) opening applications for recreational marijuana licenses.<\/p>\n

One notable deal includes Chicago-based Verano Holdings Corp.\u2019s acquisition of two medical marijuana dispensaries as well as one major marijuana cultivation operation.<\/p>\n

\u201cFor us, it\u2019s a really exciting market and I think there\u2019s a ton of opportunity,\u201d said Brian Ward, CFO for Verano<\/b>.<\/p>\n

On Nov. 10, Verano announced it had closed on its purchase of Meriden medical marijuana dispensary Willow Brook Wellness. On the same day, Verano also announced plans to acquire Waterbury dispensary Caring Nature LLC as well as Connecticut Pharmaceutical Solutions Inc. (CTPharma), a marijuana cultivation and production facility in Rocky Hill.<\/p>\n

Previous acquisitions by out-of-state firms included New York-based Greenrose Acquisition Corp.\u2019s March 2021 purchase of Theraplant, another Connecticut cannabis grower.<\/p>\n

In Dec. 2020, Chicago-based Green Thumb Industries purchased medical marijuana dispensary Southern CT Health & Wellness of Milford.<\/p>\n

By buying medical marijuana companies these large multistate operators are also securing a spot in the state\u2019s recreational market.<\/p>\n

That\u2019s because medical marijuana dispensaries and cultivators can bypass the lottery system that will ultimately determine which companies can get licenses to establish a legal recreational marijuana business in Connecticut.<\/p>\n

Instead, medical marijuana companies can apply and then pay for a hybrid license to serve both markets.<\/p>\n

Bigger is better<\/h4>\n
\n
\n

Rino Ferrarese<\/p>\n<\/p><\/div>\n<\/article>\n

CTPharma\u2019s President, COO and co-founder Rino Ferrarese<\/b> said the Verano deal was a \u201cnatural evolution\u201d of his company\u2019s growth.<\/p>\n

\u201cAs we became larger it made sense to partner with a larger organization,\u201d he said.<\/p>\n

Verano is indeed larger. The company, which specializes in vertical integration, has approximately 1 million square feet of indoor marijuana cultivation across the United States and has cannabis licenses in 15 different states.<\/p>\n

Verano, which is a publicly traded company on the Canadian Securities Exchange, reported $207 million in revenues for the quarter ended Sept. 30, more than double the revenues it reported in the year-ago period.<\/p>\n

On its own, CTPharma has also grown. Its approximately year-old Rocky Hill cultivation facility totals 217,000 square feet, more than half of which is currently occupied.<\/p>\n

\u201cAs there\u2019s more demand for product, we will contemplate further expansion,\u201d Ferrarese said.<\/p>\n

Employment at CTPharma has also increased. At this time in 2020, the grower had 35 or 40 employees. Today, that total stands at 120.<\/p>\n

Going solo<\/h4>\n

All the M&A activity has Ben Zachs, owner of Fine Fettle<\/b> \u2014 which operates medical marijuana dispensaries in Willimantic, Storrs and Newington \u2014 feeling like one of the last independent operators left standing.<\/p>\n

However, he doesn\u2019t begrudge any operator in the cannabis space from taking advantage of the predictable interest in the state.<\/p>\n

\u201cIf someone is willing to pay you good money for your business, good for them,\u201d Zachs said.<\/p>\n

Zachs is also quick to point out that the acquisitions in Connecticut are not unique.<\/p>\n

\u201cThis is not just a Connecticut story,\u201d he said. \u201cIt\u2019s happening all over.\u201d<\/p>\n

As far as Fine Fettle\u2019s future, Zachs said his plan is to \u201cbe the best operator there is.\u201d<\/p>\n

He said he intends to convert to a hybrid operation when the licensing is made available by the state, meaning his locations will offer both medicinal and recreational marijuana.<\/p>\n

In preparation, Fine Fettle has already secured local approvals in Willimantic and Newington to expand sales to recreational customers.<\/p>\n

The hope is that adult-use sales will be up and running in Connecticut by late 2022. But before that can happen, the licensing process must get underway.<\/p>\n

Businesses that meet social equity guidelines, which aim to give minorities a chance to enter the market, will be granted priority for 50% of all marijuana-related licenses released by the Department of Consumer Protection.<\/p>\n

Those licenses fall into nine different categories including sales, cultivation and hybrid licenses, and will be available via lottery on a rolling basis.<\/p>\n

Finding funds<\/h4>\n

Part of what is driving the acquisitions may be access to capital. Starting and running a marijuana company is atypical, mainly because the business is still technically prohibited by federal drug laws. That means many banks have opted not to lend to marijuana-related businesses.<\/p>\n

An entrepreneur looking to start a business in the industry, or an existing business that is interested in growing, needs to get creative when it comes to financing.<\/p>\n

\u201cThe money is an interesting question,\u201d said Bob Lickwar, a partner at accounting firm UHY Advisors<\/b>, which has an office in Farmington and specializes in advising marijuana-related businesses. \u201cEven if you can get a bank to lend you the money, you\u2019re looking at a 15 to 16 percent interest rate.\u201d<\/p>\n

In addition to the capital-raising issues, marijuana dispensaries or growers also need to be aware of specific federal tax regulations, like 280E, which prohibits drug-related operations from deducting typical business expenses.<\/p>\n

Beyond accounting issues, licensing fees are another major potential hurdle.<\/p>\n

\u201cThe reality is the license fees are probably going to be a barrier to entry,\u201d Lickwar said.<\/p>\n

For example, a medical marijuana dispensary looking to go hybrid and sell recreational marijuana needs to pay a $1 million licensing fee. That cost is reduced by half if the business creates a \u201csocial equity joint venture.\u201d<\/p>\n

Medical marijuana cultivators looking to go hybrid need to pay a $3 million licensing fee, or half that amount if they have a social equity partner.<\/p>\n

With that level of incentive, established dispensaries may be on the lookout for social equity partners to help reduce startup costs. Included in that category is Verano Holdings.<\/p>\n

\u201cWe\u2019re excited to partner with social equity applicants,\u201d said Ward, Verano\u2019s CFO.<\/p>\n

The social equity provisions in the legislation were designed to give a leg up to Black and brown communities in the state that have long shouldered the biggest burden when it comes to the nation\u2019s failed drug policies. But there are people who are concerned that Connecticut\u2019s program, while good on paper, will fail to live up to its promise and continue to leave the disadvantaged behind.<\/p>\n

To that end, some groups are forming to spread awareness and education, including the recently announced Alliance for Cannabis Equity (ACE).<\/p>\n

ACE is a joint venture between two workforce and economic development agencies \u2014 The Connecticut Community Outreach Revitalization Program (ConnCORP) of New Haven and The WorkPlace of Bridgeport.<\/p>\n

Its first mission is to create a manifesto outlining the opportunities related to recreational marijuana in Connecticut and conduct informational sessions throughout the state targeting Black and brown communities.<\/p>\n

The project\u2019s initial budget is approximately $100,000, according to Joseph Carbone, president and CEO of The Workplace<\/b>.<\/p>\n

\u201cWe see the enormity of the opportunity and the potential that it has,\u201d Carbone said. \u201cWe want to make sure it\u2019s not wasted.\u201d<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

By Christina H. Davis It was only a few months ago that Gov. Ned Lamont signed into law legislation clearing the way for recreational, adult-use marijuana in the Nutmeg State. But already market forces inside and outside the state\u2019s borders are moving rapidly in anticipation of a multimillion-dollar business opportunity. Those forces include a series of acquisitions involving out-of-state companies looking to gain a foothold in the state in advance of the Department of Consumer Protection (DCP) opening applications for recreational marijuana licenses. One notable deal includes Chicago-based Verano Holdings Corp.\u2019s acquisition of two medical marijuana dispensaries as well as… <\/p>\n","protected":false},"author":1,"featured_media":2995,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[2],"tags":[],"class_list":["post-2994","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured"],"jetpack_featured_media_url":"https:\/\/thcinct.com\/wp-content\/uploads\/2021\/12\/ma-activity-heats-up-in-cts-marijuana-industry-ahead-of-recreational-market-launch-hartford-business.jpg","_links":{"self":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/posts\/2994","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2994"}],"version-history":[{"count":0,"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/posts\/2994\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=\/wp\/v2\/media\/2995"}],"wp:attachment":[{"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2994"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2994"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thcinct.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2994"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}