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This story was republished with permission from Crain’s Detroit and written by Dustin Walsh.
A 130-acre marijuana industrial park in Windsor Township, Michigan, which is near Lansing, was billed as the largest of its kind east of the Mississippi when the project was announced in 2017. Named Harvest Park, the property was expected to create upwards of 1,000 jobs across the marijuana manufacturing gamut with grow operations, testing labs, and cultivators.
Six years later, the owners of parcels of the park are struggling, and on April 10, an Eaton County Circuit Court judge ordered control of the entities involved and at least part of the property be turned over to a court-ordered receiver.
The ruling comes after Utah-based CBR Funding, which appears to be a shell company for New York small business lender Windgate Capital, sued Harvest Park’s developers on Feb. 21.
The defendants in the case are:
- Transcend Harvest Park LLC
- Transcend DVentures LLC, doing business as Space Labs Michigan
- Edward Merriman, owner of Transcend
- Tarik Lester, COO of Transcend
- Virginia real estate lender NPA Equity Investments LLC
Crain’s was unable to immediately reach representatives from the defendants. Lawyers for CBR did not respond to requests for comment.
Eye-Watering Terms
CBR Funding lent the defendants $3.7 million in March 2022 to acquire at least portion of the Harvest Park property at 10310 Harvest Park Drive, east of General Motor’s Delta Township plant, from its original developers and open a grow and cultivation operation. It’s unclear in the court documents how many acres of the development was acquired by the defendants.
Space Labs received two licenses from the state of Michigan, allowing them to grow upwards of 4,000 marijuana plants, according to Michigan Cannabis Regulatory Agency data. The property acquired by the defendants included a more than 16,000-square-foot grow facility complete with all the necessary equipment to grow marijuana.
To collateralize its loan, CBR enacted a mortgage on the property shortly thereafter.
Due to the industry’s inability to get loans from traditional bank lenders – marijuana remains a Schedule 1 narcotic federally, largely scaring off banks – the defendants entered into a loan with eye-watering terms.
The 36-month, $3.7 million loan held a 25% interest rate, resulting in monthly payments of $79,285.71 and a final whopping payment of nearly $3.8 million. In total, the defendants would have had to pay back $6.475 million to CBR, according to exhibits in the lawsuit.
Defendants Merriman and Lester personally guaranteed the loans.
But the defendants failed to make the monthly payments, according to the suit.
CBR alleges the defendants also failed to insure the property or pay property taxes.
As of Feb. 8, CBR is demanding repayment of the original $3.7 million loan plus $713,571.39 in interest and another $32,316.31 in back taxes and property insurance.
CBR is asking the court to allow it to foreclose on the property.
The judge put the operations of Transcend and the property in the control of Frank Simon, a court-ordered receiver. Simon has yet to prescribe any method to pay back CBR.
Simon declined to comment on the matter.
Harvest Park was created when Jeff Donahue, a Lansing attorney, and investors acquired the acreage in Windsor Township to build an industrial park for marijuana cultivation. By 2018, the group had sold off the first phase of 10 lots to marijuana firms and moved on to the second phase of the project. It’s unclear how many firms have purchased property in the park.
Skymint Ties
Coincidentally, another major marijuana firm in receivership also operates on a portion of the Harvest Park property.
Skymint, one of Michigan’s largest marijuana cultivators and retailers, is also under the control of a receiver at the behest of a judge in Ingham County Circuit Court as the industry faces an increasingly difficult market in the state.
The Skymint failure is likely one of the largest marijuana company failures in the U.S. in the nearly decade-long span since the substance was legalized in certain states. It is also the largest corporate collapse in Michigan’s brief history of recreational marijuana since the start of the industry in late 2019.
Skymint, which primarily operates under the parent company of Green Peak Innovations Inc., owes more than $127 million to Canadian investment firm Tropics LP, according to a lawsuit filed in the Ingham County court on March 3.
The lawsuit alleges Skymint was burning through $3 million in cash per month and generated only $110 million in revenue in 2022, $153 million below its forecast of $263 million in sales for the year. A second lawsuit was filed concurrently in Oakland County Circuit Court by New York-based cannabis investment firm Merida Capital Holdings and its affiliates against Green Peak and its executives alleging misrepresentation of financials and mismanagement.
Skymint was an early entrant into the market and blazed an aggressive growth strategy, currently employing more than 600 across 24 retail dispensaries around the state and three indoor grow operations in Dimondale and Lansing.
At least five other companies are under a court-ordered receiver in the state, according to data from the CRA.
Marijuana companies across the state continue to struggle under a massive price slump as supply and demand equilibrium remains elusive.
Recreational marijuana retail prices have plummeted from $512.05 per ounce of flower in January 2020 to just $86 per ounce of flower in February – effectively eliminating margins for many businesses.
