Erie medical weed business booming

But company still can’t ask banks for loan because of federal laws

A reminder came last week in the form of a news release that despite the growing acceptance of medical marijuana — and the introduction of a bill earlier this year to legalize recreational marijuana use for adults — companies that grow or sell cannabis still face special challenges.

Calypso Enterprises, the Eriebased company owned by Samuel P. “Pat” Black III and Sumi JamesBlack can’t — for instance — do business with one of the numerous federally chartered banks in Erie.

Because marijuana is still illegal at a federal level, those banks would risk charges of federal money laundering for doing business with a legal marijuana grower.

There are a few options for those companies, including a handful of state-chartered banks that work with the legal marijuana industry, said Neal Devlin, a lawyer for Calypso.

“That is what they (Calypso) use for writing checks and paying bills,” Devlin said.

Commercial loans are a different matter.

“We can’t just go to (the bank) and get a loan,” Devlin said. “That is why you are seeing more unique funding sources.”

That explains the announcement last week from Connecticut-based NewLake Capital Partners, which has provided the Erie company, doing business as Hero Diversified

Associates Inc., with a $30 million loan.

The money will be used to pay for a 50,000-square-foot addition to Calypso’s grow facility at 910 Downing Ave. That addition, which was licensed this spring to begin producing medical marijuana, doubled the size of the existing facility.

That facility will be used to secure the $30 million loan, according to NewLake Capital Partners.

The arrangement isn’t quite as simple as a traditional loan.

Unless a specific provision is met by Aug. 1 — and Devlin declined to spell out the details of that provision — the loan is structured to convert to a 20-year sale-leaseback. In other words, Calypso would lease the property from NewLake.

The arrangement apparently is not unusual. NewLake describes itself as “a leading provider of real estate capital to state-licensed cannabis operators.”

Calypso, like the rest of the legal marijuana industry, might have a difficult time finding a lender or a bank on which to write checks. But by all accounts, the business is thriving.

Laura Guncheon, vice president of the project management office at Erie Management Group, which includes Calypso, said in May that was apparent early on that an expansion would be justified.

Employment at the facility, which began at 30, has grown to 114, in addition to 22 security and transportation-related positions, she said.