Crain's Detroit Archives - Page 2 of 2 - Green Market Report

Dustin WalshJune 23, 2023


This story was reprinted with permission from Crain’s Detroit and written by Dustin Walsh.

Cannabis real estate developer Jeffrey Yatooma could soon have dominance of Auburn Hills’ marijuana market.

Yatooma’s impending dominance comes after a creative and successful ballot initiative that led to Auburn Hills voters approving weed businesses in the city in November 2022.

But the path for the city has not been straightforward. A month before the vote, City Council effectively blocked marijuana licensing, and Yatooma, with an amendment to zoning rules. And now the council is flipping again. The city’s economic development team is expected to recommend a new marijuana ordinance to council next month that would approve licenses for just four properties, three of which are owned by Yatooma.

Auburn Hills Mayor Kevin McDaniel and his economic development team declined to comment on the matter, and more than a dozen emails to members of the Auburn Hills City Council were not returned.

The events in Auburn Hills highlight the fractured world of marijuana licensure where the state allows unlimited licenses, leaving local communities with broad authority to develop their own purported competitive methods to dole them out. Expensive lawsuits against municipalities by motivated operators and their lawyers over those rules are common and, as is the case in Auburn Hills, the players in the marijuana space are more than willing to use all legal means to reduce competition and maximize profits.

‘Say Yes’ pushes

Yatooma and his associates set their sights on Auburn Hills last year as the state’s marijuana industry began to falter under product oversupply and plummeting prices — the grow side of the industry has quickly outpaced the retail side.

In January 2020, an ounce of marijuana flower retailed at an average of $512.05. Oversupply sank prices to an average of just $121.58 per ounce by July 2022, and marijuana companies were getting desperate, looking to open more retailers as fast as possible to have more outlets for product.

When there are limited locations to sell marijuana in a community, that holds potential to boost the value of real estate and marijuana operating licenses.

The city of Auburn Hills had previously banned medical marijuana businesses within its borders in 2010 and followed suit in 2019 for adult-use recreational sales as cultivation and retail operations prepared to begin operation in December that year.

In July 2022, Yatooma and associates created a ballot drive committee in several municipalities in the hope that voters would force city councils to welcome weed businesses.

Yatooma’s “Say Yes” committees cropped up in Sylvan Lake, Brighton, Farmington, Auburn Hills and other communities last summer.

According to reporting by the Livingston Daily, those associated with the ballot drives were Yatooma, under his Canna Zoned MLS real estate business; Joey Kejbou, an attorney who owns dispensaries under the names Consume Cannabis and Mint Cannabis Co. in Michigan, Ohio, Arizona and Illinois and processors in Michigan; Kerri Knipple, a real estate agent employed at Yatooma’s Canna Zoned; Benjamin Bayram, a former partner in the law firm of Yatooma’s brother, Norman Yatooma; and John Janiszewski, a senior attorney representing Yatooma and the Say Yes committees.

Ballot proposals had been successful in other Michigan communities that had previously banned marijuana, including a 2020 ballot referendum in the village of Pinckney.

The Say Yes to Auburn Hills Committee gathered the required amount of signatures and moved a ballot initiative to the election in November last year.

“… there was an overwhelmingly positive response to surveys that were sent out prior to the November vote so it’s clear the majority of people in the city wanted safe and regulated access to cannabis products,” Yatooma told Crain’s in an emailed response sent through his lawyers at Dykema. “Auburn Hills has a really strong business community and a large population. Auburn Hills is in the heart of metro Detroit and thousands of commuters come into and pass directly by the city on a daily basis, so this is all conducive to a strong retail business.”

But as Yatooma fought to legalize marijuana sales in Auburn Hills, he was also setting up to own a majority of the licenses in town.

The city’s new green zone, coincidentally, did not include any of the three properties owned by Yatooma, located at 1801 N. Opdyke Road, 2548 Lapeer Road and 2561 Lapeer Road, according to the latest information available from the Oakland County Register of Deeds.

Yatooma acquired the properties last year under three different LLCs.

A fourth property that qualifies, located at 2705 Lapeer Road, is owned by Green Pastures Land Co. It’s unclear whether that entity intends to be involved in the marijuana business in Auburn Hills. It’s also unclear whether it’s related to a Green Pastures Group LLC that is a co-owner of several Michigan growers and processors.

And that’s where the issue has stood for months.

But behind the scenes, Yatooma and his lawyers have pushed hard against the city, according to emails between Janiszewski of Dykema and city attorney Derk Beckerleg obtained by Crain’s.

In an email to Beckerleg on Nov. 14, Janiszewski urged the city council to reconsider its zoning ordinance as it violated the “will of the people.”

In that email, Janiszewski alleged the new ordinance violated the Michigan Zoning Enabling Act and potentially open meetings rules by not having a public hearing on the green zone. Janiszewski called into question the legality of the move by city council amending the ordinance.

“… the city council did not follow numerous procedural and substantive requirements for enacting a zoning ordinance …,” Janiszewski wrote in the emailed letter.

The lawyer demanded a meeting with city officials, who agreed to a Nov. 28 meeting at Auburn Hills City Hall. City officials copied on the email from Beckerleg were City Clerk Laura Pierce, City Manager Thomas Tanghe, Assistant City Manager Brandon Skopek and Steve Cohen, director of community development.

According to an email from Janiszewski, he planned to attend the meeting with Yatooma, Bayram and Yatooma’s other brother, Gregory Yatooma.

Gregory Yatooma, a Crain’s 20 in their 20s honoree in 2007 and self-employed attorney, holds licenses for grow operation Candid Inc. in several communities throughout the state.

When asked about his brothers’ operations, Yatooma told Crain’s: “I really have no idea what any of my brothers might own. We aren’t business partners and haven’t been for over four years.”

In a phone call with Crain’s, Gregory Yatooma said he was at the meeting representing a client, but declined to reveal who that client was.

And the contents of the meeting remain a mystery as Janiszewski sought to have documents Say Yes provided to the city officials at the meeting exempted from the Freedom of Information Act, which allows the public to access documents drafted and used by public employees and officials.

Handing over the keys

But in May, Cohen from the city’s community development office unveiled a plan to amend the ordinance to give four licenses to the three properties owned by Yatooma and the owned by Green Pastures.

It’s unclear whether a threat of a lawsuit was the impetus behind proposed change or why those properties were selected, other than they could have been the only four properties to meet the criteria set under the ordinance passed by voters orchestrated by Yatooma’s Say Yes.

When asked why the city is pushing those specific properties, Yatooma said he didn’t know.

“I couldn’t possibly speak to the city’s motivation, but I would like to think that the city is following the initiated ordinance and honoring all of the residents that signed petitions in favor of putting it to a vote and the nearly 5,000 registered voters that showed up and voted to pass it,” Yatooma wrote in the email to Crain’s.

Kevin Blair, partner and cannabis attorney for Detroit law firm Honigman LLP, said in an email to Crain’s that he’s confounded by why the city is pushing for near exclusive market access for Yatooma.

“While this certainly isn’t the first time that a cannabis company or real estate flipper has tried creative measures to stack the deck in their favor, what’s somewhat surprising here is that Auburn Hills so far hasn’t done anything to repeal the built-in monopolistic provisions, whereas other municipalities did so immediately,” Blair said.

If Yatooma receives licenses, it’s also unclear whether he would open dispensaries in the locations, become a landlord to another operator or sell the property and licenses — which would likely have an elevated value as he would control three of the only four available licenses in the city.

“If I am fortunate enough to get a license I would certainly explore all feasible options, but I think it’s premature to consider any plans at this point,” Yatooma told Crain’s. “I do think Auburn Hills would be the perfect place to operate a retail store and I would love the opportunity to be a long-term member of the community. I’m an entrepreneur at heart and I’m a supporter of the cannabis industry; I have seen the economic benefits that flow directly to communities, and I also firmly believe in the benefits of cannabis products. I have many friends and family members that use cannabis products for medicinal purposes as well, so providing greater access is important.”

Legal mania

Legal positioning has dominated the local municipal licensure arena since recreational marijuana went legal in late 2019. More than a dozen communities have been wrapped up in expensive lawsuits over their marijuana licensing and zoning rules, including Pontiac, Berkley, Royal Oak and Warren.

Under state law, communities are required to create a competitive process for handing out marijuana licenses if they are limiting the number. Some communities, like Auburn Hills, have used zoning rules to either limit the number of available licenses or simply eliminate the possibility of licensure.

“If a city attorney is paying attention at all, they’ll understand almost any ordinance they put forward will result in a lawsuit against the city,” Lance Boldrey, partner at Dykema, and Janiszewski’s colleague, previously told Crain’s. “They should also know they pay more for fighting the lawsuit than they could possibly earn in licensing fees or revenue sharing.”

Yatooma has been behind several lawsuits against municipalities, including suits against Birch Run Township and Say Yes’ lawsuit against Brighton last fall.

A circuit court judge ordered Brighton’s City Council to certify the ballot language brought forth by Yatooma’s group. Ultimately, the Say Yes ballot drive failed when 57.76 percent of voters in the community rejected the ordinance.

Yatooma also has a history of using creative ways to attempt to gain access to licenses. Beyond the ballot language gambit, Yatooma also reportedly took out a Craigslist ad in Chicago to recruit people negatively impacted by drug laws in Illinois to gain access to an equity license.

The ad, reported on by the Chicago Sun-Times and placed by Yatooma’s Canna Zoned, offered $2,000 to anyone that could prove they were eligible under the Illinois social equity license guidelines.

Canna Zoned offered another $20,000 if that person’s involvement led to a social equity license. A Chicago resident Edna Patterson, who had been a victim of gun violence, received $2,000 from Yatooma’s group to be listed as the majority owner on the application for an equity license. After the Sun-Times reached out to Yatooma and Canna Zoned, Patterson’s contract was terminated but she was offered a $400 referral bonus for others that could qualify.

MSY Capital Partners, another cannabis real estate firm that is run by Gregory Yatooma, gave a $75,000 loan to former Michigan House Speaker Rick Johnson when he was chair of the Michigan Medical Marihuana Licensing Board.

Johnson later voted to prequalify one of Gregory Yatooma’s companies, the Detroit News reported in April.

Johnson pleaded guilty earlier this year to taking bribes from Detroit businessman John Dalaly tied to his chairmanship of the now-defunct licensing board. No criminal charges have been levied against Gregory Yatooma or MSY Capital.

Council in the way?

The ballot language drafted by the Say Yes committee, which was ultimately certified by the city clerk in Auburn Hills, sets boundaries on who can get a marijuana license in the city.

The language reads: “The city shall allow marihuana activities only within a building located on a parcel in which the individual or entity to hold the state license to operate has a recorded interest and CRA pre-qualification status before 30 days after the ballot wording of this ballot question is certified to the county clerk …”

A recorded interest means direct ownership, a titleholder, or a mortgagee on a real property.

Basically, unless a motivated marijuana business or its representatives had control of a property prior to Sept. 9 last year, 30 days after the ballot language was certified, there was no chance of gaining access to a license in Auburn Hills.

Yatooma did not directly answer whether the language was intended to make him one of the only people to have a license under the ordinance.

“I believe this language requires a prequalified entity to have a recorded interest in a property … by a certain date,” Yatooma wrote in an email.

But prior to the election, the Auburn Hills City Council preemptively moved to adopt and amend its existing marijuana ordinance to create a new “green zone,” where marijuana businesses could be located. On Oct. 17, the council conditionally approved the ordinance if voters approved the Nov. 8 ballot measure — which they did with 4,870 voting to establish the new ordinance and 3,653 voting no.

Dustin WalshMay 12, 2023


This story was republished with permission from Crain’s Detroit and written by Dustin Walsh.

Lawyers entangled in the court-ordered receivership of Lansing marijuana giant Skymint continue to battle over the company’s finances.

The alleged trouble stems from Skymint‘s $78 million acquisition of Birmingham-based competitor 3Fifteen Cannabis in April 2022.

Skymint, which primarily operates under the parent company of Green Peak Innovations Inc., owes more than $127 million to Canadian investment firm Tropics LP tied to the acquisition. Tropics has since come on as the primary funder of operations as Skymint works through receivership. But the minority lender in the acquisition, New York-based cannabis investment firm Merida Capital Holdings and a majority shareholder in 3Fifteen, is challenging whether its stores should be involved in the receivership at all.

Its lawyers have sought on several occasions to disjoin the company from the court-order receivership, despite the acquisition closing more than a year ago.

In the days prior to Skymint entering receivership, 3Fifteen Cannabis retook control of several stores acquired by Skymint, including dispensaries in Hamtramck, Grand Rapids, Camden and two in Battle Creek, according to court records.

But the circuit court judge in Ingham County ordered 3Fifteen to cede control back to Skymint, according to court records, as well as return control of bank accounts with nearly $500,000 in funds to Skymint.

Lawyers for Skymint and the receiver argued in a court hearing last week that 3Fifteen had not returned the bank accounts and should be held in contempt of court. 3Fifteen’s lawyers argued the order should be reversed and control of those stores and accounts should remain in 3Fifteen’s control.

“(The March 29 order) … required a return to the status quo, required return of money that was improperly taken, and so if you were to enter a stay of that March 29 order, it would reignite the chaos and the smash-and-grab tactics that we sought this court’s intervention and protection for,” David Dragich, partner at The Dragich Law Firm PLLC and attorney for the receiver in the case, argued in the hearing to the judge.

According to arguments in the hearing, 3Fifteen had used more than $600,000 from the accounts in question at Live Life Credit Union to pay leases and payments linked to the acquisition.

“What we want from the stay pending appeal is these locations to be shut down,” Max Newman, partner at law firm Butzel Long and attorney for 3Fifteen, argued in the hearing. “Smash-and-grab is what the other side is doing, and particularly how we see Tropics and Skymint. These operations under Skymint’s management, and I’d call it mismanagement, are losing hundreds of thousands of dollars a month …”

3Fifteen and Merida accused Skymint’s former CEO Jeff Radway of several misdeeds, including using the company as his personal piggy bank in several extramarital affairs. Radway left the company on an “indefinite leave of absence” on April 7, according to an email to employees from Jeff Donahue, Skymint’s executive vice president and general counsel, that was obtained by Crain’s.

The Ingham County judge, however, did not buy into 3Fifteen’s claims that it should be separated from the receivership or authorize an appeal in another court and refused to reverse the March 29 order, according to the transcript from the May 3 hearing.

“The March 29 order restored the status quo and, again, 3Ffiteen isn’t asking for a stay that would just stop this case from proceeding, they’re asking to reverse parts of the March 29 order,” Judge Joyce Draganchuk said in the hearing. “So I think in balancing harms, there would be greater harm in granting the stay than in not … in my view, businesses should not be thrown into upheaval and the order appointing a receiver and the March 29 order stabilizes the businesses and allows them to continue in smooth operations.”

And with that, the judge denied 3Fifteen’s request. The judge also denied 3Fifteen’s request to enter arbitration over the purchase agreement with Skymint.

The plaintiff and defendant lawyers also argued over the $600,000 in funds 3Fifteen took from accounts to pay itself and expenses for the operations it believes it controls.

3Fifteen’s attorneys argued those expenses needed to be paid and the receiver would have done it anyway. The receiver’s attorney disagreed.

“It’s like robbing a convenience store and saying, ‘Well, we paid the wages of the employee because we gave the guy a $100 on the way out the door,'” Dragich said. “You don’t get to make that decision. You’ve taken the money from the receivership estate and all we’re asking for, again, is that those funds be returned and they be returned promptly.”

3Fifteen’s lawyer, Newman, argued the use of those funds was done because the order appointing a receiver was “ambiguous, vague, overwrought, verbose.”

Judge Draganchuck reminded Newman her signature was on that order.

“I know but it’s got typographical errors in it, misuse of apostrophes, literally repetition of the same phrase twice in a row that suggests that nobody proofread that order and the reason nobody proofread that order is, quite frankly, it’s unreadable,” Newman replied.

The judge ordered 3Fifteen to repay the more than $600,000 to Skymint, including the repayment of $375,000 within 24 hours of the May 3 hearing and the remainder by May 17.

The judge, however, declined to hold 3Fifteen in contempt of court over the ordeal.

StaffSeptember 20, 2022


This story was reprinted with permission from Crain’s Detroit and written by Dustin Walsh.

When the Detroit City Council finally codified its recreational marijuana codes, it was Kim James who drafted the language. She’s worked in code enforcement for the city most of her career. Now as the director of the office of marijuana ventures and entrepreneurship, James must stand up those codes and get recreational dispensaries licensed. But the city itself is behind, as most of the state’s industry has been selling weed for nearly three years.

How did marijuana regulation land on your plate?

After the MMMA (Michigan Medical Marihuana Act) passed in 2008, during the mortgage crisis, all these pop-ups or illegal commercial establishments started showing up. About 300 of them by 2014, 2015. Marijuana sales had been legalized for caregivers but no commercial facilities were legal. (Detroit) Mayor (Mike) Duggan encouraged us to regulate them responsibly because we knew commercial use was coming. So we were tasked with creating a caregiver center model and worked to get these pop-ups licensed, while also closing some. The commercial facilities act (the Medical Marihuana Facilities Act of 2016) came online and we went to work. We then turned to adult use as voters passed that legislation in 2018.

What is your role in this new department in the city?

We’re part of the civil rights and inclusion department in the city. The (recreational marijuana) code requires when someone submits a license application, it must go to a multi-department committee for review … I chair that committee. The committee is made up of many departments in the city and we submit a recommendation to the building department, which issues the license, on whether we think the license should be approved. We also have social equity programming we’ve rolled out and we oversee its implementation.

What was your office’s role in the new ordinances for recreational marijuana sales?

I drafted all the ordinances. Before this role, I was a lawyer for the city. So I worked directly with (then) Counsel Member (James) Tate. We worked for basically a year, every Friday for three hours we would do these Zoom meetings about what would go in the ordinance. That ordinance passed in Nov. 2020. But a lawsuit challenged that ordinance. So we revised it last year to create the equity program we have now. It was introduced by President Pro Tem Tate and passed in April. We’ve been challenged, legally, again, but we think this ordinance is good.

Marijuana prices have collapsed in recent months. Do you worry standing up new companies in Detroit is now going to be difficult?

I do have worries, but not necessarily about that. While supply has increased, demand has also increased. There is not a lack of buyers. I don’t know the reasons the market has happened this way, though. There are a lot of illegal operations, growers who aren’t licensed. That’s a state issue, but it does detract from legal licenses. We’ve seen it happen in California. It’s too expensive and overtaken by competitors who aren’t licensed. I think the market will take care of itself. I’m not so worried about that. We have a robust licensing program and we’re able to issue all the licenses we have.

The city began accepting dispensary licenses on Sept. 1. What’s happening now?

We have two types of licensing. An unlimited license for growers, transporters, etc.. We’ve been licensing them since April. That’s going well. We have an electronic process for that. The limited licensing program, for retailers and consumption lounges, just opened on Sept. 1. The applications period is open for 30 days. So after that 30 days, they’ll be scored and licenses will be issued. That’s extremely exciting for me. We worked so hard getting these laws into place. To me, I have succeeded as a lawyer in getting the program ready. But implementation and getting licenses out is a whole other endeavor. But we’re ready for it.

What lessons have you learned about creating an entirely new industry?

It’s an ongoing lesson. We’re always learning and trying to retool. We use a lot of electronic platforms for processing. We’re doing a lot of back-end changes for us to review things. Those are the things I care about. I am a Six-Sigma, lean-processing person. But we’re also dealing with and are up against city bureaucracy. Things take a long time to change or improve. My lessons are about how aggressive to be when you’re trying to make a change. I’m constantly looking for process improvements and this process has allowed a lot of opportunity. We’re also learning about the social equity program. We have a lot of social equity students and we work hard to meet them where they are — realizing that people that may be interested in this industry, may have no idea how to run a business. So helping them understand what it takes to have such a business has been a learning experience.

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