Pubdate: Thu, 03 Dec 2015
Source: SF Weekly (CA)
Column: Chem Tales
Copyright: 2015 Village Voice Media
Author: Chris Roberts


A curtain made from milk jugs cut into various patterns and shapes 
hangs in the locked doorway of 70 Second Street, a drab, three-story 
white brick building a few steps from Market Street in downtown San 
Francisco. Behind this middle-school-worthy art project is one of San 
Francisco's most lucrative business opportunities, advertised by a 
handwritten sign hanging in a nearby window.

Commercial real estate in San Francisco is currently fetching $703 a 
square foot, according to LoopNet, which would peg this 
7,600-square-foot building's value at a little under $5.4 million. 
But the asking price for this opportunity is rumored to be $15 
million or higher.

John George, the agent for the owner, Ondyn Herschelle of Palo Alto, 
did not disclose the desired sale price, but confirmed that bids have 
been north of $10 million - or almost double the going rate for 
commercial real estate in good condition, which the aging 70 Second 
Street is not.

However, it does have a dispensary permit. And with its prime 
location - steps from BART and easily accessed by the Bay Area's 7.5 
million people - 70 Second Street has the potential to be the biggest 
weed club in the United States.

The problem is that under city law, you're not supposed to be able to 
buy and sell city-issued medical cannabis dispensary permits.

But a few savvy cannabis entrepreneurs have figured out how.

To legally sell cannabis in San Francisco, you need approval from the 
city's Planning Commission to entitle the land use for the sale of 
weed, and a medical cannabis dispensary permit from the Department of 
Public Health.

Unlike liquor licenses, which are bought, sold, and transferred to 
different locations all the time, city law does not allow the same 
treatment for dispensary permits.

Getting a DPH permit at the same address transferred to a different 
operator is easy, though, requiring just a "director's hearing" with 
a handful of people in the room. The land use entitlement - which 
requires running the gauntlet of a public hearing before the Planning 
Commission, which can be swayed to reject - is the hard part.

Here's the workaround: Purchase a building with a dispensary. Either 
evict the dispensary or, for a price (cash under the table) have the 
dispensary permit transferred to you, the new owner. Then, start 
selling California's biggest cash crop.

It's as simple as that, and much easier than the alternative: finding 
available real estate in the limited area in which dispensaries are 
permitted - the city's "green zone" - and going through a Planning 
process that can take more than a year, with no guarantee of 
approval, all while burning money on rent and lawyers.

This solution appears to have been hit upon by an Oakland businessman 
named Marty Higgins.

Higgins is a real estate developer who owns apartment buildings in 
the East Bay, as well as the downtown Oakland restaurant Cosecha. (He 
has also been sued by one of his residential tenants who alleges 
harassment, but that's another story, well-documented in the East Bay 
Express.) Higgins is also the frontman for Harvest, the new 
dispensary taking over operation of the former Hemp Center at 4811 
Geary Boulevard.

After its building was purchased by a limited liability corporation 
controlled by Higgins - the sale price has not been disclosed, but a 
transfer tax of $25,500 puts the sale price at roughly $3.5 million - 
The Hemp Center was evicted earlier this year. Harvest will soon 
begin operating in The Hemp Center's old location, having surpassed 
the headache - and very real risk of disapproval - at the Planning Commission.

Similar tactics have been used at a former dispensary on Tenth 
Street, where a building was virtually demolished and rebuilt during 
a "renovation." (The cannabis dispensary in the now-unrecognizable 
downstairs, Urban Pharm, will reopen under new management.) And 
Higgins appears to be involved in another such venture at Bernal 
Heights Collective at 33 29th Street.

There, the dispensary is also "under new management" - an ertswhile 
delivery-only service called Quil now runs the joint. The building's 
new owner, according to property and business registration records, 
is an LLC with the same Los Angeles lawyer and Oakland business 
address as Higgins' apartment management company. According to 
Planning records, Higgins was the point of contact for several 
inquiries as to the building's permitting status.

Higgins is busy making the goodwill rounds in the local cannabis 
scene. He provided the marijuana at a recent three-course industry 
dinner with cannabis pairings, and sponsored a booth at a recent 
conference at the Parc 55 Hotel. But after an initial conversation 
with SF Weekly - in which he denied involvement with Bernal - Higgins 
did not return subsequent telephone calls requesting an interview.

It could be because he does not want to draw attention to his novel 
business tactic. But with demand for cannabis dispensary permits at 
an all-time high - there are only 22 permitted dispensaries in San 
Francisco, but 11 new applications have been received in the past 
month - this cat is already out of the bag.
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MAP posted-by: Jay Bergstrom