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High rent and heavy competition appear to have challenged profitability.

Pleasantrees is selling two fully legal dispensaries in Massachusetts – and it looks like the company is practically giving them away.

The Michigan-based cannabis company sent out an email last week looking for someone to take over the leases at two operations in Massachusetts: one in Amherst and one in Easthampton. Pleasantrees said it is selling the locations because it wants to focus on Michigan, where the company has five locations.

Green Light Special

The email stated that no down payment is required, and both businesses are fully staffed and operational. Both businesses are in the early stages and “have shown promising signs of sales growth, but require proper marketing and operational efficiencies.”

Pleantrees said the Amherst location makes revenue of $100,000-$150,000 a month, but the lease is $34,901 per month. With overhead costs for employees, insurance, security, etc., this location doesn’t look as if it’s making much profit. It opened in August 2021 directly adjacent to the University of Massachusetts (main campus) and in close proximity to Amherst College. So it certainly sounds like a sweet spot with potential.

Not as sweet is the Easthampton location, which makes even less revenue at an estimated $75,000-$100,000 a month. The rent there is a whopping $40,580 a month. This dispensary opened in March 2022 and is located immediately across the street from the new River Valley Co-op development. It has a co-located processing license and an additional 10,000 square feet of warehouse space suitable for cannabis or noncannabis use.  But it isn’t difficult to see that the monthly sales are not much more than the rent.

Massachusetts Slows

The Massachusetts market has slowed considerably since it first opened up for business. Cantor Fitzgerald analyst Pablo Zuanic, using Headset data, noted that sales growth in the state has consistently slowed in year-over-year terms (+1% yoy in 3Q22 vs. +7% in 2Q22 and +22% in 1Q22). Retail prices, as per the official state data, also has slid downward to $9.70/gram on average in the third quarter (-29% yoy) vs. $11/gram in the second quarter (down 12% sequentially).

The state has continued to add retail licenses, with 456 licensed retail operators now licensed and 28 more pending. In 2021, there were just 194 marijuana retailers that generated more than $1.3 billion in sales. Sales topped $3 billion just eight months later. However, it’s obvious by Pleasantrees’ pitch that not everyone’s enjoying the green rush.

There are many suggestions as to what happened to the Massachusetts market. Too many licenses made for too much competition. The meteoric proliferation of illegal dispensaries in New York City where the illicit market has run amok has been blamed as well. Plus New Jersey kicked off its legal adult-use sales drawing, traffic away.

Theory Wellness CEO, Brandon Pollock said, “As the first adult-use market on the East Coast, Massachusetts had several years of an undersupplied market. However, as production capacity has caught up to demand, prices have become more competitive, which is terrific for our customers. Statewide, total sales are holding steady, though, with lower pricing, there are more cannabis and cannabis products being sold every day, supporting the idea that previously higher prices kept many potential customers away from the regulated market.”

Charlotte Hanna, a founder of the Great Barrington MA dispensary Rebelle said, “What we are seeing in Massachusetts is the result of a perfect storm – more licensed operators coming online in parallel with nearby states legalizing recreational cannabis. This has only accelerated the market maturing that we always knew was inevitable.”

Any one of these – and all of these – could have created the perfect super storm not named Sandy. Now the question is whether a new operator can make more green selling green at these two locations.

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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