A $200 million fund to support social equity marijuana retailers is now certain to be fully funded, following a new $150 million investment deal with Chicago Atlantic, Gov. Kathy Hochul’s office announced Friday.
Chicago Atlantic Admin LLC committed up to $150 million in senior secured capital for the Social Equity Cannabis Investment Fund, which will be used on a rolling basis to lease dispensary space for qualified cannabis retail locations.
The funding deal delivers on a pledge made by Hochul in March 2022 to provide conditional adult use retail dispensary (CAURD) licensees with shops as a major leg up on their new road to entrepreneurship. Those shops were to be largely paid for by the $200 million Seeding Opportunity Initiative, Hochul’s office said, and the plan was even written into the 2023 New York state budget.
“Today’s announcement reinforces New York’s commitment to building partnerships that benefit New Yorkers and setting right the wrongs of the past,” Hochul said in a press release. “I welcome Chicago Atlantic’s participation in this program and applaud their recognition of the value that New York’s cannabis program will provide to so many.”
The move isn’t Chicago Atlantic’s first venture into cannabis; the company’s real estate portfolio already bulges with “extensive experience” in marijuana real estate and lending. The firm’s prime investment vehicle, Chicago Atlantic Real Estate Finance (Nasdaq: REFI), works with cannabis companies in several states across the U.S.
The news is a victory for the embattled Hochul administration and the New York Office of Cannabis Management, which have come under fire for the rollout of the state’s recreational marijuana industry.
Until now, the Social Equity Cannabis Investment Fund had only received $50 million in state money, with the rest always intended to be made up by private investors. The lack of funding for social equity retailers that had been promised had been morphing into a flashpoint.
Chicago Atlantic could be guaranteed up to an 8% return on its $150 million investment, per a request for proposals that was issued by the Dormitory Authority of the State of New York in May 2022 concerning the fund. That’s how much DASNY – which will oversee the disbursement of the funds and subleases to CAURD license holders – estimated that private investors would want in exchange for capital.
The new investment could also now speed up the rate at which DASNY authorizes new locations and leases for CAURD license holders, since to date only a handful of state-sponsored dispensary funding loans have been publicized out of the 251 CAURD licensees.
William Thompson, principal at Social Equity Impact Ventures, which is helping DASNY find dispensary locations, said in a release that the team has been “conducting evaluations of thousands of potential store locations across New York State. The effort has led to dozens of executed leases, while at the same time effectuating the design-build process, training, and operations for store operators.”
The money for social equity dispensaries won’t be grants, however, contrary to an apparently widespread misunderstanding among some stakeholders. Rather it will be in the form of “low-interest loans” through the fund, the Friday press release reiterated.