Owners jockey for remaining real estate
Original article By Kathleen McLaughlin on The Bulletin Jul 28, 2019.
The Bend marijuana shop Creative Crops has faced nearby competition for the duration of its two-year existence, and now, the business and its Scott Street building are for sale.
Co-owner Denise Drazil said her customer base is increasing, despite the fact that a large chain, Mr. Nice Guy, bought out her competitor around the block on Davis Avenue late last year. Drazil and her partners — her three grown children — decided to list the shop for sale because of unexpected changes in their lives. “If we do keep the business, we’re going to do OK,” she said.
Marijuana business owners say a dwindling supply of eligible locations and a backlog of applications before the Oregon Liquor Control Commission has created an opportunity for shop owners to sell.
It’s been almost four years since the Oct. 1, 2015, start of recreational marijuana sales in Oregon. Since then, more than 600 shops have sprung up around the state. By now, those pioneering retailers can see that “things are going well, or they’re not,” said Kale Gray, co-owner of Tokyo Starfish, which has three locations in Bend [and one in Salem]. “We’re seeing consolidation in the marketplace.”
Yet marijuana’s retail footprint is expanding in Bend, which is home to 24 shops, according to the Oregon Liquor Control Commission. A new store is under construction in the former Riverbend Brewing sports pub building at 2650 NE Division St., just up the road from The Herb Center. Frye of Bend LLC applied for a retail license at 2650 NE Division, but it has not yet been issued, according to the OLCC.
Entrepreneur Jacob Jenkins said he hopes to open his first store, CannaVida, at 325 NE Franklin Ave. by Sept. 3. The location is the former home of the medical marijuana shop Garden Kings.
“There’s still a lot of people that think you can make a lot of money at it, and you can,” said Josh Kelleher, a Southern Oregon real estate broker who works with cannabis businesses, including Creative Crops.
While some shop owners who’ve been in business from the start of legalization are looking for an exit, plenty of entrepreneurs still want in, Kelleher said.
There’s an advantage to starting a marijuana business at this stage of the industry’s evolution, Jenkins said. “Now, there’s some actual statistics to base your future on.”
The CannaVida store on Franklin Avenue will be part of a vertically integrated business that includes production and processing, Jenkins said.
Jenkins hopes to set CannaVida apart from the competition with a technology-centered sales floor. The store will be equipped with iPads where customers can learn more about the inventory and see suggestions based on past purchases, Jenkins said.
As with other types of retail, location is key to marijuana stores’ performance, Kelleher said. A store with “decent” performance will have gross sales of $1 million per year, he said.
In Bend, there aren’t many places left where one could legally open a store, said Nick Harsell, former owner of High Grade Organics on Davis Avenue, just east of the Bend Parkway. That made it easier to market his shop, which he sold to Mr. Nice Guy for an undisclosed amount.
In May 2018, the Oregon Liquor Control Commission declared it was too backlogged to process new marijuana license applications of any kind after June 15 that year. The “pause” only added to High Grade Organics’ value, Harsell said.
The OLCC does not allow marijuana retailers to transfer licenses, but the agency will facilitate the surrender of one license and issuance of another for an existing business, spokesman Mark Pettinger said.
“It was definitely a leveraging play,” Harsell said of the licensing backlog. “There was no other way to get a dispensary.”
The “pause” that OLCC enacted is still in effect for retail businesses, Pettinger said. “You may remember that we had a surge of applications in the run up to that date,” he wrote in an email. The agency is still assigning those applications to investigators, and until that’s complete, it won’t work on anything that was submitted after June 15, 2018.
Separately, the state has placed a moratorium on processing new applications for marijuana production. That could be in effect until Jan. 2, 2022.
Bend’s larger marijuana businesses are looking to expand in other parts of the state.
Oregrown Industries, which has a store downtown, will open three locations between Labor Day and the end of the year in Cannon Beach, Portland and Eugene, CEO Aviv Hadar said.
Buying out existing stores might have been quicker, but Hadar said the company and its investors wanted premium locations. The Eugene store at 211 W. Sixth Ave. is near the Hult Center for the Performing Arts, he noted.
Oregrown intends to pair the high-traffic locations with expensive interiors.
In Portland, the vaporizer company Pax Labs will build a store within Oregrown’s store at 1111 NE 12th Ave., Hadar said. “That Portland location’s going to be a tourist mecca.”
Tokyo Starfish is looking for opportunities in the Willamette Valley, Gray said.
“We opened up multiple locations in town because we feel that people shop for cannabis like they go to 7-Eleven — the one they like the most, nearest to them.”