New York Governor Kathy Hochul announced on June 30 that Chicago Atlantic Admin LLC has committed an investment of $150 million in the state’s Social Equity Cannabis Investment Fund. The funds will be disbursed as low-interest loans and provide hope for needed financing for justice-impacted individuals leading companies that have received Conditional Adult Use Retail Dispensary (CAURD) licenses. These licensees consist of over 200 new licensees that have not yet been provided with previously promised financial assistance and locating storefronts for their dispensaries, which was proposed back in March of 2022. Despite the several hundred licenses having been issued, there are still only 19 legal dispensaries that have opened in the State.
Chicago Atlantic is a private market investment firm that caters to agriculture, retail, healthcare, real estate, and cannabis sectors. The group has been known to bridge the gap between cannabis and real estate. Chicago Atlantic Real Estate Finance Inc., which is Chicago Atlantic’s flagship investment vehicle, works with cannabis companies in several legal states across the U.S. Their supportive investment into the New York social equity fund “[aims] to pair progressive licensing with progressive and innovative capital solutions,” says Chicago Atlantic’s founding partner, John Mazarakis. Chicago Atlantic hopes that their support of the development of the legal cannabis industry in New York will benefit the nationwide industry.
The Social Equity Cannabis Investment Fund, which is a public-private limited partnership, was authorized as part of the FY 2023 Enacted Budget. The Fund is one part of the three-part program announced by Hochul back in March of 2022, known as the Seeding Opportunity Initiative. The intention of the Initiative since its conception has been to “position individuals with prior cannabis-related criminal offenses to make the first adult-use cannabis sales with products grown by New York farmers.” The investment fund is the third part of the Initiative and serves the purpose of providing CAURD licensees with stores. The fund was always intended to consist of $200 million total- $50 million from the state, and $150 million from private investors. Chicago Atlantic’s investment marks the fulfillment of this goal.
The Dormitory Authority of the State of New York (DASNY) will oversee the expenditure of the funds and the subleases to CAURD licensees by DASNY owned or leased facilities. According to the original Initiative[RK1] , DASNY is responsible for providing support with leasing and construction services to renovate prime dispensary locations that meet health, safety, and security standards. Much remains unknown as to the mechanics and logistics of funding, including expected loan terms for dispensary owners, how and when Chicago Atlantic will actually advance funds, how Chicago Atlantic will be compensated, and what management fees will be paid by the fund.
Now that the planned $200 million in funds has been secured, there is an expectation for DASNY to finally jump into action by providing retail spaces for CAURD licensees. Reuben McDaniel, the president and CEO of DASNY, seems to be excited about the hope the new fund brings: “I am proud to partner with Chicago Atlantic, an experienced company that will help fulfill the Governor’s and Legislature’s vision of providing opportunity and hope for individuals hurt by the draconian drug laws of the past. Chicago Atlantic’s financial commitment and the partnership we have created, will help open doors for so many who have faced unsurmountable obstacles of accessing capital and economic security.”
The rollout of the entire Seeding Opportunity Initiative has been much slower than intended, which has caused real difficulties not only for retailers hoping to open but for growers who were granted conditional licenses and now are holding substantial amounts of product with a still very limited retail market. However, the $150 million investment provides hope that the Social Equity Fund will finally serve its intended purpose, which is to jumpstart entrepreneurship among justice-impacted individuals.
Maeve Mariotti, a student at LIM College in New York and an intern with Feldman Legal Advisors PLLC and Skip Intro Advisors LLC, provided substantial assistance in preparing this article.
[RK1]Refers to the Seeding Opportunity Initiative
