Pubdate: Thu, 05 Jul 2018
Source: New York Times (NY)
Copyright: 2018 The New York Times Company
Author: Lisa Prevost


Finding a place to house a medical marijuana dispensary is rarely an
easy task, but MariMed Advisors, which specializes in developing
cannabis businesses, encountered especially aggressive pushback
working for a client in Annapolis, Md., last year.

The company reviewed several hundred potential locations for the
client's proposed dispensary before finally finding one that met
nearly every one of the strict requirements demanded by officials of
Anne Arundel County. It had the proper zoning classification and the
necessary road access. It was not within 1,000 feet of a school. And,
as an added plus, the storefront was discreet, located below ground
level and behind another building.

The only problem was that it sat within 1,000 feet of several houses
across a busy highway. The proximity was a county restriction. MariMed
applied for a variance, citing the dearth of other options available.
In February, a hearing officer granted the request, noting in his
lengthy written decision that "no one will see it, hear it or smell

But MariMed's client will not be pursuing its dispensary there anytime
soon - if ever. Since the variance approval, neighboring property
owners have filed an appeal, and the county executive, Steve Schuh,
has pushed through legislation banning variances for marijuana

What's more, the hearing officer who granted the variances for MariMed
and several other dispensary applications was let go, as Mr. Schuh
felt he "was granting variances basically to anybody that applied for
them in a way that was outside of his judicial function," according to
a spokesman for Mr. Schuh, Owen McEvoy.

The case is one of the more extreme examples of the uphill battle to
establish a medical marijuana dispensary even as more states are
setting up processes to license them. At the local level, would-be
dispensary operators routinely encounter layers of regulations, if not
moratoriums or outright bans, as well as wary landlords and angry neighbors.

MariMed has had success finding solutions for its licensed partners
and distributors in Delaware, Maryland, Massachusetts, Rhode Island
and Nevada. For instance, the company helped the First State
Compassion Center in Delaware create business plans and submit
applications for the state's first two medical cannabis dispensaries
in Wilmington and Lewes.

"We are trying to educate local communities that this pot is not the
devil coming," said Robert N. Fireman, the president and chief
executive of MariMed, based in Newton, Mass. "All we really are is a
glorified CVS that's highly regulated and secure. But it's not getting
any easier on the real estate side."

The resistance seems to run contrary to national trends. More than
half of all states have approved marijuana for medical uses. Nine, as
well as the District of Columbia, have further legalized it for
recreational use. Sixty-one percent of Americans said marijuana use
should be legalized in a survey conducted in October by the Pew
Research Center, compared with 31 percent in 2000.

But when they turn up in voters' backyards, dispensary proposals are
often as unwelcome as pornography shops and liquor stores. And fear
that medical dispensaries will pave the way for retail pot shops is
causing many municipalities, especially in Eastern states, to slam the

In Massachusetts, for example, where voters approved legalized
marijuana in 2016, about 60 municipalities have banned cannabis
businesses, and twice as many have temporary moratoriums in place,
according to a count by The Boston Globe.

"There is this divide between the theory of legalization and the
practice of it locally," said Kevin A. Sabet, the president of Smart
Approaches to Marijuana, which opposes legalization. "Some might say
we are losing when it comes to state ballot initiatives, but we are
killing it on the local level."

Officials in Westport, Conn., spent three years drafting a zoning
amendment adopted last year that allows for two medical marijuana
dispensaries. The public took little notice until the Planning and
Zoning Commission began hearings this spring on five dispensary
applications. All needed zoning approval to apply for licensing from
the State Department of Consumer Protection, which plans to issue up
to 10 dispensary licenses statewide this fall. (The state currently
has nine dispensaries for more than 26,000 patients.)

Residents packed the hearings, many vocal in their opposition. "We
have opportunists coming into this community to try and play the
medical marijuana card to make money," Jimmy Izzo, an elected member
of the Representative Town Meeting, said at an April hearing where
tensions ran so high that a police officer had to warn the crowd to
"act appropriately."

Last month, the commission approved a single dispensary application,
from a Westport resident who operates a cannabis production facility
in West Haven, Conn., and formed a partnership with a dispensary
operator in nearby Branford. (The proposal still requires state
approval.) Another application, from a local pharmacy owner, was
denied in a 4-to-3 vote on the grounds that it did not comply with the
requirement that it be 1,000 feet from any public building - in this
case, a state-owned sand storage barn and garage with gas pumps.

The applicant, Phil Hein, declined to comment, but his lawyer had
argued that the state property should not be an issue because it was
not a public gathering space.

Finding a landlord willing to lease to a dispensary can also be a
challenge, because many are fearful of federal prosecution, said
Morgan Fox, a spokesman for the National Cannabis Industry
Association. In January, the attorney general, Jeff Sessions,
rescinded a Justice Department memorandum issued during the Obama
administration that directed United States attorneys not to focus
their limited resources on enforcing federal marijuana prohibitions on
individuals operating in compliance with state laws.

Lawsuits are also a looming threat, as some property owners are trying
to use racketeering laws to go after cannabis businesses. Raj Dhanda,
the owner of several commercial property holding companies in Harvard
Square in Cambridge, Mass., filed a federal lawsuit last September
accusing a neighboring dispensary, Healthy Pharms, of conspiring to
sell marijuana in violation of federal law. The suit also names the
dispensary's landlord, the city, the state health department and the
state attorney general, Maura Healey.

The suit claims damages of roughly $27 million, mainly because of
reduced property values, but seeks triple that sum, as allowed under
the Racketeer Influenced and Corrupt Organizations Act. Similar suits
have been filed against cannabis businesses in Colorado and Oregon.

"The ultimate goal is to preserve and protect the value of our
client's significant holdings," said Scott A. Schlager, Mr. Dhanda's
lawyer. "Prospective tenants have decided not to locate. Prospective
lenders and equity groups have decided not to invest in improvements.
He's definitely sustained tangible damages."

Healthy Pharms and its landlord, who is also an owner of the
dispensary, are seeking to have the lawsuit dismissed, said Emma
Quinn-Judge, their lawyer.

Ms. Quinn-Judge called Mr. Dhanda's claim of declining property values
"patently absurd," given the booming Harvard Square real estate
market. The appraiser who calculated the damages made a "baseline
assumption" that marijuana use carries a stigma in Massachusetts,
which is "hard to support" given that voters have approved its
legalization, she said.

But Mr. Schlager argues that these RICO lawsuits pose a real threat to
marijuana businesses - and to their landlords.

"The overarching lesson for real estate owners is to be very cognizant
of uses," he said. "If dispensaries locate next to valuable property,
they're taking a risk."
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