This story was reprinted from Crain’s Chicago with permission and written by John Pletz.
For most of the past two years, High Haven was on the outside of the marijuana business looking in.
The would-be pot shop operator failed to achieve the social-equity status that was a de facto requirement to get a license in Illinois. Applications were scored and 185 retail adult-use cannabis licenses were awarded in three lotteries.
High Haven was in no-man’s land, one of 70 applicants trying to get back in the game by appealing in court in a case that dragged on across many months and jurisdictions. Against all odds, the group won big, pulling in five retail licenses in special lotteries held for applicants who were excluded from the original drawings.
Only three of 901 applicants who qualified for the lotteries won more licenses. But winning the lottery wasn’t enough. High Haven also had to win in court, which it did early last month.
“We had to lose twice before we had any success,” says co-founder Monsaur Othman, who also is CEO of Schaumburg-based Allied Professionals Home Care, a home health care company. “It was brutal. Some of those times it almost felt easier to give up.”
The legal issue was whether co-founder Mahja Sulemanjee-Bortocek qualified as a social-equity applicant because of an arrest more than a decade ago for possession of cannabis paraphernalia, rather than possession of marijuana itself. The social-equity provision gave applicants extra points if an owner or family member had been convicted of a cannabis-possession offense. Without the social-equity points, applicants couldn’t score high enough to qualify for the lotteries.
“It’s been such a roller coaster: One minute we thought we’d gotten somewhere, then we had to start again,” says Sulemanjee-Bortocek, who also worked in health care before spending four years in marketing at Grassroots Cannabis, a large marijuana company based in Deerfield that was acquired by Curaleaf for $830 million. “It taught us what grit needs to look like for a small company.”
High Haven illustrates the challenges that have marked Illinois’ three-year-old experiment with legal weed, in which the state has struggled to get new owners, especially people of color, into the industry quickly. The lack of new dispensary licenses has started to hamper the industry’s growth, as other, smaller states, such as Michigan, have grown faster. Illinois, however, has maintained the highest prices in the nation for pot—nearly $3,600 per pound at wholesale, according to Cannabis Benchmarks data—which is good for retailers now entering the industry.
High Haven still has plenty of obstacles to overcome: It will have to come up with capital and talent to line up the locations for its dispensaries, from Chicago to St. Louis. State law requires license holders find a location within six months but allows a six-month extension. High Haven will be battling it out with winners of the other 185 licenses, including deep-pocketed competitors, such as Planet 13, to find locations that meet zoning regulations and get the stores open.
Now that it has fought its way into the business, High Haven plans an unconventional approach, opening a retail shop and consumption lounge together. Illinois law allows for such lounges, but only a couple have opened. Conventional wisdom holds that there isn’t as much money to be made from providing a place for people to smoke weed as there is in just selling it to them.
Sulemanjee-Bortocek and her partners plan to test that idea. While High Haven was slogging through the courts and red tape in Illinois, it bought a bowling alley in Bay City, Mich., that’s attached to a bar and restaurant. It’s building a dispensary next door.
“We’re an entertainment cannabis company,” she says. “(The lounge) becomes extension of retail space. People are consuming. They’ll find places that aren’t safe to consume if we don’t provide them something. In cannabis, we’re also missing the environment for connoisseurs to be able to shop.”
The company hasn’t yet settled on locations in Illinois, where it plans to open dispensaries and consumption lounges side by side. “We’re hoping to have one in the city and one in the suburbs. It’s up to what the municipality and the state what they’ll allow us to do,” Sulemanjee-Bortocek says of the consumption lounge idea.
Consumption lounges were included in Illinois’ recreational marijuana law when it was passed three years ago, but they’re largely dependent on local zoning rules. Only a couple of companies, including Green Thumb Industries, have opened lounges so far.
“It’s a tough business model at this point, and it hasn’t really been proven out,” says Kris Krane, director of cannabis development at KCSA Communications and former president of 4Front Ventures, which opened a Mission dispensary in Chicago.
The Chicago City Council hasn’t yet come up with a law that would allow consumption lounges, although the idea was floated two years ago.
“Cannabis is a positive for tourism. Tourists need a legal place to consume, and there’s no legal place to consume,” says Bryan Zises, founder of Dispensary 33, which has two locations in the city and who is involved with Green & Foster, which won zoning approval to open a retail store at 2114 S. Wabash St. Both have contemplated adding consumption lounges. “I think it’s a value to the city.”