Bank loan

Medical Marijuana Establishment Cannot Get Bank Loan

A reminder came last week in the form of a press release that despite the growing acceptance of medical marijuana – and the introduction of a bill earlier this year to legalize the recreational use of marijuana for adults – businesses that grow or sell cannabis always face special challenges.

Calypso Enterprises, the Erie-based company owned by Samuel P. “Pat: Black III and Sumi James-Black, for example, cannot do business with one of Erie’s many federally chartered banks.

Because marijuana is still federally illegal, these banks would risk federal money laundering charges for doing business with a legal producer of marijuana.

Following:Weed growth: Erie’s Calypso Enterprises doubles the size of its medical marijuana grow facility

There are a few options for these companies, including a handful of state-chartered banks that work with the legal marijuana industry, said Neal Devlin, lawyer for Calypso.

“It’s what they (Calypso) use to write checks and pay bills,” Devlin said.

Business loans are another matter.

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“We can’t just go to (the bank) and get a loan,” Devlin said. “This is why you are seeing more unique funding sources.”

This explains the announcement last week from Connecticut-based NewLake Capital Partners that granted the Erie company, doing business as Hero Diversified Associates Inc., a loan of $ 30 million.

The money will be used to pay for a 50,000 square foot addition to Calypso’s growing facility at 910 Downing Ave. The addition, which was cleared this spring to begin producing medical marijuana, has doubled the size of the existing facility.

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This facility will be used to secure the $ 30 million loan, according to NewLake Capital Partners.

The arrangement is not as simple as a traditional loan.

Unless a specific provision is met by August 1 – and Devlin declined to elaborate on the details of that provision – the loan is structured to convert into a 20-year sale-leaseback. In other words, Calypso would lease the property to NewLake.

The arrangement is apparently not unusual. NewLake describes itself as “a leading provider of real estate capital to state-licensed cannabis operators”.

Calypso, like the rest of the legal marijuana industry, might struggle to find a lender or bank to write checks on. But by all accounts, the business is flourishing.

Laura Guncheon, vice president of the Erie Management Group project management office, which includes Calypso, said in May that it was obvious from the start that expansion would be warranted.

Employment at the facility, which started at age 30, has grown to 114, in addition to 22 security and transportation-related positions, she said.

Contact Jim Martin at 814-870-1668 or [email protected] Follow him on twitter @ETNMartin.