With little fanfare or advance discover, the Dormitory Authority of the State of New York (“DASNY”) released a request for info (“RFI”) final month to find out curiosity and solicit info from certified events for an funding fund to finance “the institution and improvement of adult-use retail hashish dispensaries (“RCDs”)” for social and financial fairness candidates. That is the $200 million social fairness fund (the “Fund”) that’s referenced within the Marijuana Regulation and Taxation Act which New York Governor Kathy Hochul introduced on January 5, 2022.
Information had trickled out when it comes to what the fund would appear like: earmarked funds for adult-use dispensary candidates, a mixture of non-public and public funding, and so on. Now now we have the RFI itself, which is filled with enlightening info on each the deliberate mechanics of the Fund in addition to the CCB and OCM’s planning for New York’s hashish trade. Let’s dive in:
Private and non-private funds could be used
The anticipated begin date of the Fund could be within the Spring of 2022 (quickly!), with a ten yr time period from full capitalization. Through the Fund’s time period, all capital would stay dedicated, which signifies that buyers wouldn’t have the ability to withdraw their funds. As much as $50m of the Fund could be invested by New York State from income deposited within the Hashish Income Fund (from tax income).
Funding to RCD operators = loans
Through the first 2 years of the Fund, curiosity will accrue on Fund notes (i.e. no principal amortization), with compensation as the only real obligation of the RCD. The RCD could be required to execute a mortgage settlement with the Fund, appearing by way of a DASNY subsidiary because the mortgage servicing agent.
Loans to RCDs could be used for “direct and oblique bills related to the sourcing, leasing, planning, design, building and equipping of the RCD.” A big notice: every mortgage shall be within the type of a non-recourse, basic unsecured debt obligation of the RCD operator (i.e. no private ensures required).
An attention-grabbing nugget, the Fund shouldn’t be supposed to be a worthwhile enterprise for buyers: “Because the Fund’s major goal shall be to advance the general public function of offering social and financial candidates chosen and licensed by CCB with a commercially viable RCD operation, the last word return supplied to Fund buyers could also be restricted and in danger.”
Funds could be used to advance candidates chosen by the CCB
On that notice, the RFI’s wording signifies that the CCB shall be deciding on RCD candidates for this system, presumably based mostly on purposes submitted by candidates. There’s a rooster vs. egg downside on the subject of submitting purposes, what with the MRTA’s actual property requirement (which can not apply to social fairness candidates), however this appears to point that the CCB shall be closely concerned in deciding on the RCDs who obtain loans from the Fund.
Goal funding of $750k to $1.5m per RCD
The RFI tells us that the CCB and OCM count on that it’ll take between $750k and $1.5m to open an adult-use retail dispensary. Given the listed use for mortgage proceeds, this offers us a transparent indication of what New York’s regulatory companies take into consideration start-up hashish prices. It bears noting that this can be a “request” for info by which DASNY and OCM are expressly soliciting enter from the general public on whether or not it’s plans make sense or must be adjusted.
DASNY would change into the largest hashish tenant in New York
It seems like DASNY shall be doing leasing for RCDs itself:
“The leases and sub-leases related to every RCD shall be the belongings of the Fund. DASNY . . . shall have the unique authority . . . to pick out all website areas of all RCDs and negotiate all lease phrases.”
Mechanically, which means DASNY would lease actual property and sub-lease to RCDs, with DASNY answerable for amassing lease from the RCD and paying it to the owner.
Placing apart the truth that this is able to be huge enterprise for DASNY, it additionally raises the query of who could be answerable for notifying the native municipality or group board of the supposed software. It additionally raises the query as to when RCDs shall be chosen for this system given the MRTA’s requirement that candidates for adult-use retail dispensary licenses present discover to the native municipality.