It’s fair to say that cannabis has officially entered the mainstream. There are 36 states that now allow medical cannabis, and 18 have approved legislation that legalizes adult recreational use…
Across the country we are seeing multi-state operators (MSOs) like Green Thumb Industries (OTC:GTBIF) gobble up competitors, as it did with Fiorello Pharmaceuticals in 2019 to give it one of only 10 vertical integration licenses in New York. That license allows Green Thumb to host a full supply chain from cultivation to sales of products. The company continues to set its expansion sights via acquisitions, but also through real estate purchases. One such purchase presents an interesting opportunity.
In April of this year, Green Thumb jointly announced with the Orange County Industrial Development Agency in New York that it would purchase a business park complex in Warwick, New York from the state. Here, the company plans to build out a cultivation and manufacturing facility. What’s interesting about this purchase is that the complex is a former medium-security prison that once housed inmates responsible for crimes related to drugs, among other offenses.
The prison closed in 2011. Three years later, New York legalized medical marijuana. Fast forward to this year — March 2021 — when New York legalized recreational-use cannabis for adults. Sales of recreational products are expected to begin in 2022.
The former prison turned cannabis facility provides Green Thumb with a vast complex of 40 acres, and will bring 125 new jobs related directly to the facility.
According to the press release, the local development agencies offered Green Thumb various state-offered incentives, including sales and use tax exemption, mortgage recording tax exemption, a 15-year property tax abatement, and the issuance of taxable revenue bonds. These savings could amount to an estimated $27 million in tax breaks over the course of the 15-year project.
Under the approved legislation made by New York in March for recreational cannabis licenses, cannabis companies looking to operate in the state would either be a processor and distributor, or a retailer. A significant advantage for Green Thumb is that it was already an established medical cannabis operator in New York prior to the state legalizing recreational-use cannabis.
That pre-established existence allows the company to grow and sell products in the recreational-use market as a vertically integrated operator, meaning more scalability and control over its supply chain. It will also benefit from having a relationship with and the support of state and town officials with a mutual effort toward growing the cannabis market in New York.
The current medical cannabis market in New York is estimated to be in the neighborhood of $70 million, with a total estimated cannabis market value of more than $1.8 billion. By 2025, behind a compound annual growth rate (CAGR) of 14%, the estimate for the total value of the cannabis market in New York is $7 billion. That number represents a significant jump from the estimated $1.8 billion value as of 2018.
The pending start date for sales of recreational-use cannabis in New York is anticipated for…
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