Green Organic suffers major setback with rejection of expansion
Hamilton council votes down request for zoning exemption for greenhouse
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.
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.