Chicago Atlantic is feeling good about its hefty investment in New York’s cannabis industry.
During an investor call on Wednesday, the company offered its first major public updates about its efforts to fund for Conditional Adult Use Retail Dispensary (CAURD) licensees in the state.
“Last week, we advanced our first capital, nearly $19 million to fund the opening of 17 dispensaries, at least 15 of which should be operational in the fall,” Peter Sack, managing director & REIT co-president of Chicago Atlantic, said during the investor call.
Gov. Kathy Hochul announced on June 30 that Chicago Atlantic Admin, LLC was tapped to invest “up to $150 million senior secured capital” in the state’s Cannabis Social Equity Investment Fund. Hochul first announced the fund in January 2022 as part of the state’s effort to directly “promote equity and economic justice.” The Dormitory Authority of the State of New York (DASNY) contributed $50 million in seed funding.
“This partnership with New York is a whole new ball game and perhaps the largest commitment to social equity initiatives in the history of the industry. We are fortunate to be the capital provider in the cannabis industry that has the operational, financial, legal and underwriting expertise, not to mention the capital to come alongside the state of New York and make this happen,” Sack said.
“If this works the way we all envision, there could be future opportunities to replicate this partnership in other states.”
This fund is meant to offer help in the form of turnkey cannabis storefronts to the first 150 CAURD licensees.
“Our investment is subject to the identification and due diligence of dispensary locations. We have a highly skilled real estate team that has lent our expertise to picking and building the right locations. And they have been working on these sites for several months,” Sack said on Wednesday.
The fund, the first of its kind in the nation, has hit plenty of turbulence since its inception. For more than a year after Hochul announced its creation, little information was made public on fundraising efforts. Then in May, DASNY CEO Reuben McDaniel, and former Cannabis Control Board member, outlined at the Board meeting that the fund would need to recalibrate how it was raising funds due to market headwinds.
“The markets have changed quite a bit” since the fund was initially announced, McDaniel said. “The equity markets in the cannabis space have also become much more difficult than they were a year ago, partly because of a national settling, if you will, of wholesale prices in cannabis, but also just the equity investors seem to be waiting to see how different states go, including New York.”
McDaniel abruptly resigned at the June Cannabis Control Board meeting, without explanation. Cannabis Wire later obtained his resignation letter, which cited a need to focus on other DASNY projects as his reason for stepping down.
Soon after came Hochul’s announcement on Chicago Atlantic, and the company appears to be optimistic about its work in New York.
“Our partnership with New York is a great example of taking the right opportunity backed by strong credit and an appropriate return that could potentially lead to other partnerships,” said John Mazarakis, a founding partner of Chicago Atlantic, on Wednesday.
CAURD hopefuls have expressed concern about the difficulties they’ve faced both in identifying potential locations, due to a variety of factors like nearby schools and houses of worship, and also financial hurdles. To date, 463 CAURD licenses have been issued.
“There’s no guarantee beyond that first 150,” said Chris Alexander, the executive director of the Office of Cannabis Management, at the July 19 opening of Statis, the first legal shop to open in the Bronx. He added that some licensees have “passed” on available funding, which has meant that regulators can “extend support” to others, though regulators will have to “wait and see how things play out” when it comes to allocating funds to additional licensees.
As of this week, adding more turmoil to the CAURD rollout, licensing has been temporarily halted due to a lawsuit filed by a group of veterans. They argue that the CAURD program requirements are “unconstitutional” and that this group of veterans and “other individuals that the MRTA was designed to benefit have been prevented from applying for an adult-use license, and have been (and continue to be) irreparably harmed.”
