With support for Proposition 64 trending high, a variety of organizations are laying the groundwork for a marijuana industry they say would boost California’s economy, create jobs and enhance public safety.
The initiative would legalize marijuana use for adults 21 years and older. A recent statewide poll shows it is supported by 58 percent of likely voters, but the measure will be put to the test today when voters go to the polls.
INVESTORS SHOW SUPPORT FOR PROP. 64
“The support has been enormous,” said Steve Gormley, founder and CEO of Seventh Point LLC, a Los Angeles-based private equity fund focused on the acquisition of legal and compliant cannabis industry assets in Los Angeles County. “We’re focused on distribution through dispensaries and opportunities for manufacturing through cultivation. Over the past 18 months a number of more traditional investors have come off the sidelines for what we feel will evolve as a historic industry.”
Gormley wouldn’t name the investors, as the fund is a private investment vehicle, but he said they are putting their money into a variety of areas that will help move the industry forward.
“It’s things like dispensary licenses, dispensary businesses, cultivation buildouts, technologies that address inefficiencies in marijuana products, hydroponics, security … a lot of very different verticals,” he said. “I liken this to what it must have been like to invest in alcohol three to five years before Prohibition was repealed when companies like Seagram’s emerged.”
INDUSTRY IS PROJECTED TO GENERATE BILLIONS OF DOLLARS IN SALES
New Frontier Data estimates California’s marijuana industry will generate $7.6 billion a year in direct sales to consumers by 2020, and that’s not including sales generated when growers sell to processors and when processors sell to dispensaries.
“That also doesn’t include sales of cannabis products like T-shirts and bongs,” said John Kagia, New Frontier’s executive vice president of industry analytics.
Seventh Point plans to deploy $75 million to $100 million over the next 24 to 36 months to begin acquiring properties in Los Angeles with a goal of building out cultivation centers for each acquired dispensary and remaining active as their managers and owners.
L.A. BASIN SEEN AS SILICON VALLEY OF POT USE
“California is the most important and nascent market for marijuana use,” Gormley said. “Twenty-five states have marijuana laws on the books and half of the revenues from that are coming out of California — and half of that comes out of the Los Angeles basin.”
Gormley put it in simple terms.
“We believe that the L.A. market will be to marijuana what Silicon Valley is to technology,” he said. “Moving forward, we think this will be as big as Southern California’s entertainment industry. And as L.A. goes … so goes the rest of the country.”
Kagia said California ranks among the top 15 states in the country in cannabis usage rates and it also has the oldest established medical marijuana program in the nation, which was launched in 1996. Illegal marijuana operations in Humboldt, Mendocino and Trinity counties are already generating significant revenues, he said.
NEW JOBS WILL BE CREATED
“There will be a lot of new jobs created around professional services in ancillary segments of the market, like accounting, legal services, security services and testing for quality control,” Kagia said. “The state has had 20 years to grapple with medical marijuana as it makes the transition into legal use for adults.”
Nate Bradley, executive director of the Sacramento-based California Cannabis Industry Association, said the time has clearly come for the legalization of pot.
“We want to see the industry pulled out of the underground market and into the light with a regulated market,” he said. “We believe it will be a huge boon to public safety and to the economies of local cities and counties.”
SOME GROWERS WILL REMAIN UNDERGROUND
Kagia acknowledged that some pot growers will opt to remain underground to avoid paying fees and grappling with environmental regulations and specific land-use mandates that will be required. But others, he said, are looking to make the transition.
“The cost of being compliant will be a challenge for existing operators,” he said. “But we spent some time in California and met with some growers up north who are deeply invested in making the transition and doing it right. But it’s certainly not all of them.”
POT CAUSES FEWER PROBLEMS THAN ALCOHOL
Bradley, who previously served as president of a medical cannabis consulting firm and as a city police officer, deputy sheriff and criminal defense investigator, said marijuana will be the source of far fewer problems than alcohol.
“When I was a police officer we never took one domestic violence case that was related to cannabis,” he said. “They were 100 percent related to alcohol use.”
Passage of Prop. 64 would allow California adults 21 years and older to possess up to 1 ounce of marijuana or 8 grams of concentrate at any given time. Each person would be allowed to grow up to six plants. Commercial retailers and manufacturers of marijuana products would need to be licensed and could not have their operations near schools or child care centers. Marijuana sales would be subject to a 15 percent state tax, but additional local taxes could be levied on top of that.
