John Schroyer
Documents related to the ongoing lawsuit brought by four service-disabled veterans in New York also reveal more data points about the OCM’s larger plan for the state’s cannabis market. It’s a rare reveal for a board that has been plagued by accusations around a lack of transparency.
For instance, in a deposition affidavit, OCM Chief Equity Officer Damian Fagon stated that the OCM envisions about 2,000 licensed retailers for all of New York state, and 125 service-disabled veterans will be in line for priority licensure when it opens in October.
“The Office estimates that New York’s adult-use market will require a minimum of 2,000 adult-use retail dispensaries and 800 adult-use cultivators dispersed throughout the state to meet market demand,” Fagon said in his deposition. “By the time the Office begins issuing non-conditional adult use retail dispensary licenses … open CAURD retail dispensaries will account for less than 5% of the total number of adult-use retail dispensaries required to meet the total market demand in New York.”
Fagon also said the OCM projected that less than half of CAURD licensees are expected to open within two years of licensure, and “at most 100 CAURD licensees” will be operational by January, but likely “fewer than 75.”
“It is reasonable to project an even lower conversion rate for granted retail licenses and a longer timeline from final authorization to grand opening. The average time to open an adult-use retail dispensary in comparable urban markets such as Los Angeles and San Francisco is 18 to 24 months, for example,” Fagon said.
In addition, the state’s social equity fund has thus far entered into just 23 leases for cannabis dispensaries, with another four lined up to be executed. A total of 57 sites are also in final lease negotiation, according to a deposition provided by William Thompson Jr., the general partner of the fund.
But many of those could be at risk depending on the outcome of the lawsuit, Thompson warned.
“Under existing leases, the Fund Group is obligated to pay rents totaling approximately $500,000 per month,” Thompson said. “The Fund Group has taken on these liabilities in reliance upon the State’s ability to match licensees to Fund-sponsored dispensary locations. Under many of the leases, a failure to timely open and operate a dispensary could cause the Fund Group to breach operating covenants, triggering defaults.”
“If unable to finalize these leases, the Fund faces the risk that landlords will put the sites back on the market and all of the Fund Group’s efforts to negotiate these leases and expenses incurred to conduct site assessments by construction teams would be lost,” Thompson said.
