After struggling to find a downtown office landlord willing or able to house its headquarters, one of Chicago’s publicly traded marijuana companies has found a different solution: moving to a massive apartment complex.
Verano Holdings (OTC: VRNOF) (CSE: VRNO) signed a 12-year lease for roughly 25,000 square feet in the office portion of Three Old Town Park, a 41-story apartment tower completed last year at 224 W. Hill St., according to sources familiar with the deal. Verano will relocate its headquarters to the property from the 9,000-square-foot office it occupies today in the vintage loft office building at 415 N. Dearborn St.
The deal marks the end of a tricky process for Verano to find a new home in a new or high-quality building in the city. Such leases have been difficult to finalize because marijuana remains illegal at the federal level, even though it is now legal under Illinois law. That has prevented many building owners from getting approval for cannabis company leases from their lenders, particularly large, institutional banks wary of running afoul of federal rules.
Verano was close to finding a way around that challenge earlier this year via the secondary market, negotiating potential sublease deals with restaurant software company Toast and marketing communications firm Dentsu Aegis Network at 515 N. State St. But sources close to the talks said Verano ultimately couldn’t get the blessing of the building’s owner, Boston-based Beacon Capital Partners, whose loan on the property comes from Wells Fargo.
Now Verano has found a taker in Vancouver, British Columbia-based developer Onni Group, which incorporated more than 74,000 square feet of offices into the last of three apartment towers at Old Town Park. Verano will occupy most of the fourth floor in the office portion of the building, sources said, becoming the building’s first office tenant.
The deal comes just a couple of months after Onni refinanced its entire Old Town Park complex with a $550 million loan from Wells Fargo, according to Cook County property records. It’s unclear whether Onni ran into any issues with its lender as it pursued the Verano deal, and spokesmen for Verano and Onni declined to comment.
Verano went public in early 2021 and roughly tripled its headcount at its main office to about 120 over the next year, according to a company source, prompting the need for more space.
Completing the lease could open the door to other potential office options for companies in the weed industry, several of which are headquartered in Chicago. Verano, along with Chicago-based competitors Green Thumb Industries and Cresco Labs are three of the five biggest public companies in the United States that grow and sell marijuana. One of the largest privately held players in the space, PharmaCann, is also based locally.
Many office landlords would love to lease space to them as they grapple with record-high vacancy and remote work weakening demand. Building owners are hoping for help from the federal SAFE Banking Act, a bill that would carve out the ability for banks to do business with cannabis companies. That measure was originally proposed in 2017 and won approval from the House of Representatives earlier this year but has not been able to move out of the Senate.
Verano’s lease also helps validate office space as an amenity in apartment buildings amid the rise of remote work. Just as more office landlords are incorporating co-working space into their buildings to help lure new tenants and offer extra space for existing ones, apartment developers may see workspace as a valuable perk for residents who regularly work from home. Developer Cedar Street recently took that approach in Uptown, striking a deal with WeWork to operate co-working space on the lower floors of a historic bank building it converted into apartments.
Eric Myers and Kathleen Bertrand in the Chicago office of real estate services firm Transwestern oversee leasing at Three Old Town Park, according to a marketing flyer for the property.