Green Or­ganic suf­fers ma­jor set­back with re­jec­tion of ex­pan­sion

Hamilton coun­cil votes down re­quest for zon­ing ex­emp­tion for green­house

Windsor Star - - FINANCIAL POST - MARK RENDELL

A plan to build a 13,000-square-me­tre cannabis green­house on the agri­cul­tural out­skirts of Hamilton, Ont., was re­jected by the mu­nic­i­pal­ity on Fri­day, caus­ing a set­back for mar­i­juana grower The Green Or­ganic Dutch­man Ltd., and high­light­ing an emerg­ing risk for the in­dus­try. Green Or­ganic, known by its ini­tials TGOD, spent months tout­ing a ma­jor ex­pan­sion to its ex­ist­ing 650-square-me­tre fa­cil­ity in An­caster, Ont., just west of Hamilton. How­ever, one of the planned build­ings, the green­house, would have greatly ex­ceeded the 2,000-square-me­tre cap for new mar­i­juana green­houses in agri­cul­tural ar­eas laid out ins Hamilton’s zon­ing by­laws.

Green Or­ganic had ap­plied for a zon­ing ex­emp­tion, which was sup­ported by city hall staff. But the re­quest was voted down by city coun­cil, with councillors cit­ing con­cerns about odour, traf­fic and wa­ter use as well as pro­tec­tion of prime agri­cul­tural lands. Green Or­ganic did not re­spond to re­quests for com­ment. The com­pany has pre­vi­ously said it would ap­peal a mu­nic­i­pal ‘no’ vote with On­tario’s Lo­cal Plan­ning Ap­peal Tri­bunal, a process likely to take months.

Hamilton’s re­jec­tion ap­pears to be a siz­able set­back for Mis­sis­sauga, Ont.-based Green Or­ganic, a com­pany with a mar­ket cap­i­tal­iza­tion of more than $1 bil­lion, but al­most no as­sets ac­tu­ally pro­duc­ing mar­i­juana.

The com­pany, which raised eye­brows in April when its ini­tial pub­lic of­fer­ing raised $131 mil­lion, is build­ing an 76,000-square-me­tre fa­cil­ity in Val­ley­field, Que. But re­cent im­ages of the con­struc­tion site show that the build is still in its early stages. Only one small build­ing on the site, used for cannabis breed­ing, has re­ceived a li­cence from Health Canada. In Hamilton, the com­pany’s 650-square-me­tre li­censed fa­cil­ity can only pro­duce up to 1,000 kilo­grams of cannabis an­nu­ally. The com­pany will still be able to build a smaller 2,000-square me­tre ex­pan­sion on the Hamilton site, al­lowed by the zon­ing by­laws. But with the larger ex­pan­sion on hold — at least un­til af­ter the ap­peal — the com­pany will be with­out sig­nif­i­cant grow­ing ca­pac­ity when com­peti­tors are fin­ish­ing the con­ver­sion or con­struc­tion of mas­sive green­houses, stock­pil­ing prod­uct and se­cur­ing key sup­ply con­tracts with pro­vin­cial whole­salers. Green Or­ganic stock dipped nearly seven per cent Fri­day af­ter­noon, be­fore re­cov­er­ing and fin­ish­ing the day down one per cent. The news could also im­pact Aurora Cannabis Inc., which owns nearly 18 per cent of Green Or­ganic, and whose green­house en­gi­neer­ing sub­sidiary, Aurora Larssen projects Ltd., was slated to build Green Or­ganic’s Hamilton ex­pan­sion. Aurora did not re­spond to re­quests for com­ment.

The is­sues faced by Green Or­ganic in Hamilton may sig­nal fu­ture prob­lems for the rapidly ex­pand­ing cannabis in­dus­try, in which pub­licly traded com­pa­nies have raised mil­lions of dol­lars promis­ing mas­sive ex­pan­sions, while lo­cal gov­ern­ments are still try­ing to come to grips with the new le­gal regime.

“These cities and mu­nic­i­pal­i­ties are go­ing to be in a re­ac­tive mode with their reg­u­la­tions,” said Dan Row­land, prin­ci­pal con­sul­tant for Cal­gary-based 420 Ad­vi­sory

There’s go­ing to be a lot more scru­tiny of these types of busi­nesses, now it’s some­thing that lots of peo­ple are try­ing to get into.

Man­age­ment and for­mer di­rec­tor of pub­lic af­fairs with the City of Denver, Colorado’s Of­fice of Mar­i­juana Pol­icy. “You’ve had a rel­a­tively few num­ber of cul­ti­va­tion fa­cil­i­ties op­er­at­ing in Canada up un­til this point, and they were all per­mit­ted un­der a fairly ba­sic struc­ture that al­ready ex­ists in mu­nic­i­pal­i­ties’ zon­ing and li­cens­ing codes,” said Row­land. “There’s go­ing to be a lot more scru­tiny of these types of busi­nesses, now it’s some­thing that lots of peo­ple are try­ing to get into.” The best way to man­age push­back from lo­cal au­thor­i­ties is to en­gage early and of­ten, be in­volved in the com­mu­nity, and work to re­duce things like odour, Row­land said. Nav­i­gat­ing zon­ing by­laws could prove even more chal­leng­ing for en­trepreneurs angling to get into re­tail side of the busi­ness in provinces al­low­ing pri­vate dis­pen­saries, he said.

SEAN KILPATRICK/THE CANA­DIAN PRESS

With its larger ex­pan­sion now on hold pend­ing an ap­peal, Mis­sis­sauga, Ont.-based Green Or­ganic will be with­out ma­jor grow­ing ca­pac­ity while its com­peti­tors are fin­ish­ing the con­struc­tion of green­houses, stock­pil­ing prod­uct and se­cur­ing sup­ply con­tracts.

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