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As part of NJBIZ’s latest virtual discussion, stakeholders in New Jersey’s emerging cannabis industry came together to reflect on continuing challenges, as well as some of the successes, within the market.

Moderated by NJBIZ Editor Jeffrey Kanige, the June 27 panel featured:

• Michael DeLoreto, director of the government & regulatory affairs group at Gibbons PC, based in the law firm’s Trenton office;
• Art Hance, president and chief executive officer of Hance Construction Inc., a Franklin Township-based firm that specializes in cannabis construction, offering design and build services for cultivation facilities and dispensaries;
• Peter Murphy, a partner with Saul Ewing LLP, a Ewing-headquartered law firm with a booming cannabis practice, helping clients navigate the complexities related to an evolving industry;
• Amy Peckham, chief executive officer of Etain, a family-run, women-owned, vertically integrated agribusiness and medical cannabis dispensary in New York that plans to open a cultivation site and medical dispensary in North Jersey.

During the 90-minute roundtable discussion, panelists addressed topics such as raising capital, securing necessary local and state approvals, and finding a suitable location, as well as marijuana’s continued classification as an illegal substance by federal regulators, how that impacts financing opportunities for cannabusinesses, and the overall public perception of cannabis.

Additionally, participants weighed in on the New Jersey Cannabis Regulatory Commission’s (CRC) efforts to set up an equitable marketplace and the state’s recent decoupling of corporate business taxes from federal rules prohibiting deductions and credits for cannabis ventures.

While panelists represent different parts of the overall industry, they all agreed that trying to establish oneself in New Jersey’s cannabis space is not easy.

Hance said, “I have an experienced cannabis team behind me and we often say that you’d be better off starting a fast food restaurant. It’s a very tough industry to get into because of the cost and time required. It’s typically much more than most people understand.”

DeLoreto believes there’s generally “an underappreciation for the regulatory requirements that exist” in New Jersey under state law.

“Particularly, because it’s still illegal on the federal level. Every conversation I start off with someone is, ‘By the way, you know this is still illegal under federal law and you’re operating solely under state law?’” the attorney said. “And you need to understand that that oftentimes causes people a little bit of of concern when you put it that way, but it’s the most blunt way to explain it.”

It’s a very tough industry to get into because of the cost and time required. It’s typically much more than most people understand.
— Art Hance, Hance Construction Inc.

“And then the second thing is, are you all capitalized? Are you ready to go through a very rigorous regulatory process? Do you have a location? And once you go through some of those issues, you realize people aren’t as prepared as they once thought that they were, and I think part of our job as attorneys is to counsel people on what not do to instead of what to do in order to save them from themselves.”

Murphy echoed the sentiment, saying aspiring entrepreneurs don’t always grasp the time, money and energy associated with launching.

“In a general sense, the momentum is such that there’s no going back on this. And I think people see it as like, ‘Well, you’re in cannabis and that must mean you’re a multimillionaire or you’re on your way,’” Murphy said. “… There’s also this effort by the states [with legalized markets], in particular, New Jersey, to encourage people to get into the industry, which is not a bad thing in and of itself, but it might not really help them to go into it with open eyes, understanding what it really involves.”

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When it comes to the best way to approach starting a cannabusiness, DeLoreto stressed the importance of getting the capital component squared away first and then securing a location.

“Things start to fall in place from there, but the financing is critical. Without that, you’re going to be stuck in a really bad spot,” he said. “And, you can never have enough capital. I’ve seen cultivation facilities in the state where you’re talking $25 million to $30 million dollars. For a retail facility – even a small one – you’re still talking about probably $1.5 million to $2 million as a minimum. So, this is not something where you can come in with $5,000 and think that you’re going to get up and running. That’s not the way the regulatory system works, it’s not the way the licensing system works and it’s not the way that the industry is designed to operate here in New Jersey.”

So, this is not something where you can come in with $5,000 and think that you’re going to get up and running. That’s not the way the regulatory system works, it’s not the way the licensing system works and it’s not the way that the industry is designed to operate here in New Jersey.
— Michael DeLoreto, Gibbons PC

DeLoreto acknowledged the obstacles may sound “discouraging and gloomy,” but said “there are ways forward.”

“You just have to be smart, in terms of how you approach it and really have a good plan. This is not something where you can just wing it,” he said. “If you’re smart and you have a plan, and you work with the right people, and you have good guidance and advisors, there is a way to come out the other side of this being successful. It is individuals who just kind of think that is going to be easy, and then, once they get into it, realize how difficult it is that it becomes problematic. If you go into it eyes wide open, knowing what the situation is, there’s a potential for a good outcome.”

Even the best laid plans can face challenges though, Peckham cautioned.

“The setback on executing my New Jersey license is that we had a town whose ordinance accepted it. We had a property that was within the ordinance and about 250 people showed up [opposed to it],” she said.

While she has the right to appeal, Peckham said there “was no point in returning to that town” because the community was so against it.

“I did everything I should have with the town board and they indicated everything would be fine because it had already opted in. Not so,” said Peckham. “All of that money was lost along with the eight months of prep that it took.”

Like any company, operating in a mindful way is critical after the doors open, but for cannabis businesses, it’s crucial, according to Hance.

After noting the expense associated with building out a storefront or grow facility, Hance said, “For some reason, everyone building a dispensary lately is trying to build a destination dispensary and they’re doing it in places that aren’t really going to sustain that kind of a facility … I think that, you know, if you’re putting a dispensary in an industrial park, chances are you’re not going to attract a certain group of people that are going to come in and make it a destination.”

Hance said, “It’s got to be sustainable … whatever you design, whatever you build, whatever approach you take, make sure you run your numbers with worst case scenarios and make your design be as absolutely as efficient as possible in cultivation – that means energy, efficiency and labor efficiency.”

A full recap of the panel will be available in the July 10 issue of NJBIZ.