Ayr Wellness Signs Agreement to Acquire Dispensary 33 in Chicago

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AR: What drove Green Dragon to the northern Colorado market?

AL: So we have decent coverage across the state. We have a lot of things in western Colorado, central [Colorado], and a bit east of Denver with [the] Aurora [dispensary]. Telluride is southwest of Colorado, [and] Boulder is a little further north, but we’ve never had anything this far north. Fort Collins is a huge population center in Colorado, and we looked around for a while, but it hasn’t worked out until now. As I said, we were able to close this deal and got the license and we are very excited to be in Fort Collins.

AR: I noticed that Green Dragon opened its first pharmacy in Colorado in 2009. Is that correct?

AL: Yes, and then the company was [called] Green plant. So, [it had] something else [owners] and different brands. But yes, the company that is now called Green Dragon has existed continuously since that time.

AR: Can you describe some of the major changes now compared to when you bought a license and opened a pharmacy?

AL: It was interesting then because the further you go back in time, the more organic licensing opportunities there were, which means that more cities were actually licensing for the first time. So I would say there were fewer license trading hands. In 2009 in particular, there were no licenses to trade as people were getting the first round of medical licenses, so to speak. But with the years and the cities that have imposed moratoria or license caps, one begins to trade in these licenses more, to the point where applicants are even given licenses for the sole purpose of turning them around, for example to get them and then sell immediately.

Another big change, historically, was in the days of medicine and, at the very beginning of recreational sports, there were vertical requirements, which meant you couldn’t get those licenses without being able to grow. And it was like that for years and years and years. … When recreational sports started in Colorado, basically not only could you get a recreational license, you had to have a medical license beforehand, and that preference was given in most cities for almost a year. … So it was really restrictive. … Also, while it was medical, there was this provision called 70/30. Basically, you had to grow 70% of your own product. That said, if you had growth problems or were not good at growing it limited the amount you could buy wholesale. If you had more patients than you [could] grow for, you couldn’t wholesale your way out of the problem. You couldn’t just buy flowers to meet demand. You were very limited by what you could grow.

Another thing is that until recently, Colorado had some of the most restrictive outside-of-state ownership rules in the country. Colorado stayed a little in the dust as other states let investment flow. So if a group of operators want to apply for a license or expand or grow their business, then this is it [had to get] Funding from outside the state. Remember, we can’t get traditional funding from banks or anything like that, so we are [pretty much] pay everything in cash. So because of these restrictions, cannabis is very cash intensive and people have to raise a lot of money. But states like Colorado restricted it to investments within the state. So not only did you have to be entirely Colorado resident, but you also had to raise all of your money in Colorado, which is extremely restrictive as there is only as much capital as we are talking about private sources of capital. So, Colorado, I kind of guess [saw that] other states overtook [its] Growth and [that it] really hampered and hurt the cannabis operators in Colorado, and they changed the rule [to allow outside investors].

AR: Can you describe the process of expansion via the acquisition of an existing license versus acquiring a license in the application process?

AL: I think it’s easier, more difficult in some ways than in others. Obviously the industry matured in the later stages and has been around for some time; there are just fewer options [win new licenses]. If there were ways to apply for licenses at Fort Collins, we definitely would, and we did [that elsewhere]. In other words, as in Aurora, for example, we have two licenses, one of which we issued by the city through a performance-based application process and one of which we acquired. So, like even in this one city, we’ve done it both ways and in some other cities as well. In Fort Collins there really weren’t any other ways to go for one [license] organic. In this case, we immediately went in the direction of ‘OK, this has to be a takeover of an existing business’ and [in working with] a couple of other operators out there, this definitely seemed like the best solution.

this [process] has to deal with a whole host of other problems and difficulties, [compared to] if you only apply for a license. When you apply for a license, it’s pretty easy. They only work with the government and local government. [You’re working with] Licensing, you work with their planning department, you are looking for real estate. Usually, finding suitable real estate is one of the most difficult aspects. [Still] In almost every community in Colorado, the zoning requirements for cannabis are extremely restrictive. … so you don’t have to deal with all that stuff [when acquiring an already existing license] because the location already exists. So that’s not that worrying. but [when] You have to negotiate a purchase, this will open its own can of worms. [Each process] has its different problems.

Nobody is easy. I think the main differentiator is that getting a license from scratch is usually a lengthy process. So it will cost you more time. But the tradeoff is that it usually doesn’t cost that much money. I mean, yes, there are real estate costs, you have to buy a property, get a lease, stuff like that, and there are the application costs, but that’s usually a lot less than having to [make] a full takeover. Usually acquisitions are faster, but they cost more money, but you also get a business that generates revenue from day one. So it’s a whole series of compromises. I think in general it is better to try to get licenses organically.

AR: What is the company looking forward to with the expansion?

AL: Well, we are one of the top providers in the country and to maintain that position we have to keep growing. We know our competitors are, so we have to keep up with them.

We have a working business model. We’re pretty confident in what we’re doing, so we feel like there is no reason for it [not] keep expanding here, keep growing [and] keep doing what we do … We obviously love these new markets. [Still], we plan to dig deeper into the markets we are already in. … We attack them from all sides. So, [the] new markets, places that were already there but somehow gain more market share and acquire or apply for more licenses where we can.

AR: Is there anything else I didn’t ask you that you think is important to mention?

AL: I think like in general when we [make] Acquisitions What We Are Looking For [is to] generally be able to increase sales. I would say this to almost, if not every single acquisition we’ve ever made that takes over operations and not only can we maintain the revenue that was in the business before, but we can almost always grow those revenues , sometimes significantly higher than the previous operation. We definitely plan to do the same in Fort Collins.

Editor’s note: This interview has been edited for style, length and clarity.