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A unique business, Md. cannabis industry still trying to find its footing

By one estimate, it's already a $200 million industry in the state

So far, the Maryland Medical Cannabis Commission has licensed a combined 102 growers, processors and dispensaries in the state. (AP Photo)

So far, the Maryland Medical Cannabis Commission has licensed a combined 102 growers, processors and dispensaries in the state. (AP Photo)

A man with a dark beard and wearing a winter cap, long hair extending out the bottom, and with tattoos peeking out from the sleeves of his T-shirt answered the front door of a row home in Baltimore’s Little Italy neighborhood. After a slight hesitation he identified himself as David Ryder, the property’s owner.

The home, which Ryder purchased for nearly $400,000 in 2016, according to property records, is listed as the principal office of Bills Fresh LLC. Articles of incorporation filed with Maryland Department of Assessment and Taxation in April portray the company’s purpose as “Home delivery of fresh produce and flowers to customers.”

Bills Fresh is a delivery service that initially launched in Washington and drops off packages, including homemade candles, votive and incense. Those deliveries, according to the firm’s website, also include “gifts” of marijuana.

Website WheresWeed.com lists Bills Fresh as a marijuana delivery service in Baltimore. Bills Fresh posted a cellphone number with a 443 Baltimore area code for clients to text to arrange delivery.

Despite receipts reviewed by The Daily Record indicating the firm’s already delivering locally, Ryder, who described himself as an investor in Bills Fresh, said the company’s not operating in Baltimore. Their plans, he said, involve potentially opening a storefront once Maryland legalizes recreational marijuana use.

“We have to mind our Ps and Qs,” Ryder said.

whats-to-comeBills Fresh is just one illustration of how Maryland’s medical cannabis industry, now reaching its second anniversary of operation, is a business like no other.

In their first full year of operation, the state’s medical marijuana dispensaries completed nearly 2 million transactions, according to the Maryland Medical Marijuana Commission, which regulates the industry.

Many believe that’s just the start of what’s to come because they believe Maryland will eventually legalize recreational marijuana use. Approving recreational marijuana use, boosters argue, will create a boom of new business and investment creating what some call the “Green Rush.”

That optimism, however, is largely based on speculation. No one has yet produced a serious study of the economic boost Maryland’s medical marijuana market has provided during the roughly two years since dispensaries opened.

The only information regarding medical marijuana’s contribution to the state’s economy comes from sales figures provided by commission and from projections by recreational cannabis interests.

The commission’s report to the General Assembly in early 2019 found dispensary sales between Dec. 1, 2017, and Nov. 30, 2018, totaled $96.3 million. During that same time dispensaries sold 729,309 marijuana infused products and 10,800 pounds of flower in more than 1.99 million transactions.

A report by Leafly, a website for marijuana enthusiasts, and Portland, Oregon-based Whitney Economics, estimates Maryland’s medical marijuana market totaled $164 million at the end of 2018. The report projects the market to reach $200 million by the end of 2019.

Number of licenses

But there’s also anecdotal evidence that medical marijuana’s impact on the state economy remains muted. Potential reasons for the modest economic stimulus range from the limited scope of operations to some jurisdictions’ hostility toward marijuana-related businesses.

So far, the state commission has licensed a combined 102 growers, processors and dispensaries. State law caps the number of licenses at 152. Currently, there are 85 dispensaries operating in Maryland, which has a population of more than 6 million residents.

Of Maryland’s 23 counties and one independent city, Montgomery County has the highest number of dispensaries in the state, with 19 licensed retail operations for its roughly 1 million residents. That’s followed by Baltimore County, which has 15 dispensaries and a population of nearly 828,500. Baltimore City, with a population of about 600,000, has nine dispensaries within city limits.

Not all of Maryland’s local jurisdictions have embraced medical marijuana operations. Certain local governments have made it extremely hard to open such a business. Even some of the state’s major metropolitan counties have not been particularly accommodating.

Shad B. Ewart, academic chair and assistant professor at Anne Arundel County Community College, has taught a course on marijuana entrepreneurship for the last four years. (The Daily Record/File Photo)

Shad B. Ewart, academic chair and assistant professor at Anne Arundel County Community College, has taught a course on marijuana entrepreneurship for the last four years. (The Daily Record/File Photo)

Prince George’s County, with a population of 909,308 residents has eight dispensaries, according to commission records. Howard County, by comparison, has a population of 323,000 but approved six dispensaries. Currently Talbot, Somerset, Garrett and Caroline counties, according to commission figures, don’t have a single dispensary.

Austin Eber, an associate with commercial real estate services firm Lee & Associates, represented one company with two dispensary licenses in separate deals. His clients, he said, experienced serious opposition from local governments who used zoning and other regulations to prevent businesses from opening.

“One of my clients also bought a building they thought was going to work, closed on it, and couldn’t get the right amount of parking. So we’re talking about a couple parking spots … I think the county got wind of it … and (they) were denied the parking variance that they needed,” Eber said. “Where if they were a traditional restaurant or … convenience store they would have gotten the variance, no problem.”

Dealing with the hassle of finding a place to operate a medical marijuana business, he said, could have been much worse. But he said his clients had one major advantage. These businesses were extremely well-financed, and could make do with a spot other businesses lacked the capital to transform.

“At the end of the day, these build-outs were costing anywhere from $150,000 to $300,000. And the clients just had the capital to pay cash,” Eber said. “They had the money. It was just a matter of figuring out a deal that would work.”

Cost of entry

Some believe that level of capitalization is a symptom of a larger problem in the market, an issue that legalizing recreational use may exacerbate.

Shad B. Ewart, academic chair and assistant professor at Anne Arundel County Community College, has taught a course on marijuana entrepreneurship for the last four years. About 20 to 25 students a semester, he said, take the course.

“The interest in the class has been tremendous,” Ewart said.

So far that enthusiasm hasn’t resulted in a plethora of new medical marijuana enterprises. Only 20 to 25 of those students, he said, have found work in the field, and most of those are part-time jobs. Those who do get a foothold in the industry are providing equipment or transportation services.

The biggest barrier to students becoming marijuana entrepreneurs in Maryland, Ewart said, is simply the cost of entry. He estimated the price tag to open and license a growing operation to be upwards of $15 million.

“They simply don’t have the wherewithal,” Ewart said.

Registration errors

The cost of entering the industry, and opposition from some communities, may also be fueling the rise of medical marijuana enterprises that violate the spirit, if not the letter, of the law.

The Maryland Medical Marijuana Commission’s most recent compilation of providers, health care professionals who can approve a patient to use marijuana medicinally, lists 1,028 podiatrists, dentists, nurse practitioners, and doctors.

Under Maryland regulations health care professionals who approve patients for medical marijuana use must register with an office address. Several addresses on the list posted by the commission, however, are for residential properties, including apartment buildings that generally ban commercial uses in lease agreements.

In several instances health care professionals with addresses in Baltimore area suburbs listed a correct street address but then recorded the property as within city limits.

By providing inaccurate addresses some providers, who according to prices listed online can charge as much as $200 to greenlight a patient for medical marijuana use, may be using certification sessions as supplemental income, and dodging complaints from neighbors.

The list of medical marijuana providers released by the commission is riddled with errors. A spokesman for the commission initially was unable to explain why health care professionals were able to list P.O. boxes and residential addresses when state regulations stipulate prescribers provide the state an office address.

William Tilburg, interim executive director of the state’s medical cannabis commission, said regulators are aware that there is a contradiction regarding address requirements between the state’s statute and subsequent regulations. The panel will look to rectify that, he said.

Jim Caronna, principal at commercial real estate services firm NAI KLNB, said the region has the properties to support the industry if Maryland approves recreational use. It’s questionable, he said, whether legalization will create the economic windfall marijuana boosters expect.

“Part of the challenge is that it’s taxed at such a high level (in states like California) that people (who) use marijuana recreationally probably already have their distribution outlet. Even though it may not be legal they probably know where to get their supply, and so if you suddenly add 45% to the cost of that product, because of taxes and other regulations placed upon it, how big will the demand ultimately be?” Caronna said.

‘Excellent product’

Whether the “green rush,” comes, there’s no disputing that the medical cannabis industry has created its own brand of entrepreneurs.

As of late October three customers left reviews on WheresWeed.com about service from Bills Fresh, including one who recently raved about the service.

“Great professional and quick service, effective communication and excellent product. Loved Bruce banner (a strain of marijuana that Leafly calls ‘dense nugs that pack the power of very high THC content),'” a customer called B.Y. wrote on the site on Sept. 4.

On Sept. 7 Bills Fresh responded: “Thank you so much for your feedback!! We sincerely hope you decide to ‘stay fresh’ with us in the future! Keep an eye out for new strain releases and special offers coming soon! Sincerely, The Bills.”

Ryder, when asked about clients who claim they have ordered from Bills Fresh, said it wasn’t his company making the deliveries.

“It’s an impostor,” he said before asking a reporter to email additional questions in order to verify he wasn’t law enforcement.

 

 


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