After Oakland pot permit, a race for space

Marshall Crosby, a personal trainer who’s been trying to break into the cannabis industry for 15 years, hit the jackpot this week. He won one of eight permits issued by the city of Oakland to open a marijuana brick-andmortar retail store. “I couldn’t believe it,” he said after the Wednesday lottery awarded him one of the coveted chances to open a store. He smiled as people congratulated him inside City Council chambers, where the drawing was held.

But the celebration was short-lived.

Now, Crosby, a 53-year-old East Oakland native, has a 90-day deadline to find a building for his store.

And that’s no easy task, because warehouse and building prices have jumped in the past few years.

The clock was already ticking.

“We’re going to get on this building — like yesterday,” Crosby said.

Gene Gorelik, a commercial real estate agent who specializes in green zone listings, told me there’s plenty of retail space available in Oakland. But, he added, many building owners are hesitant to lease to cannabis businesses because they fear that banks could require property owners to immediately and fully pay off their loans if they learn that a cannabis business is operating on the premises.

“You’re getting a much-

better-off deal if you can buy,” Gorelik said. “Nobody wants to lease for cannabis, because everybody’s scared. Maybe once these guys have their permits in hand, they can be more credible for these owners.”

Gorelik has seen buildings selling for $200 to $600 a square foot. To purchase a building that costs, say, $1 million, a buyer would typically put down $300,000 to $500,000, Gorelik said.

That’s money Crosby doesn’t have.

“I’m going to have to have investors,” he said. “That’s the only way it’s going to work.”

Still, he’s confident he’ll successfully find a location because he has an experienced team.

Before the drawing, Crosby and Sabir AlMansur, who was also seeking a permit through the lottery, had struck a business partnership to open a dispensary together if either one was in the last four.

That’s something I’ve noticed as the permit process has played out, and I predict we’ll see more businesses combining forces because it gives them a better chance for survival.

One of Sabir’s partners, Amber Senter, said they’ve already got a few properties in mind.

“There were a few people here that had lines on dispensaries, but now that’s not going through,” she said. “There’s a bunch of spaces now being freed up.”

Senter, former chief operating officer at Magnolia Wellness, one of the eight grandfathered dispensaries already operating in Oakland, emphasized the importance of owning a retail space and producing products to stock the shelves.

Because of delays in the local permitting efforts, small, boutique cannabis businesses — edibles, extracts, clones and more — have been squeezed out of the market, upsetting the retail supply chain.

“We got to own the whole chain, because we need to make sure our products are being produced and then being put on the shelves,” Senter said. “We need to own the whole pipeline.”

The tension was thick for the life-changing drawing.

Alexis Bronson, who sells clones and seeds, told me in a text message that he was too nervous to attend the lottery. There were 36 individuals vying for a chance — and the last four balls drawn were the winners.

Bronson’s ball — B10 — was the 32nd ball drawn, making him first in line if one of the winning businesses can’t find a space in 90 days.

Charles Byrd’s familyrun company, which I wrote about last month, is seventh in line.

The lottery was held only for equity-permit seekers, which is the Oakland program reserved for applicants who were convicted of a marijuana-related offense in the city, earn an income less than 80 percent of the city average, or have lived for 10 of the past 20 years in a city neighborhood that saw a disproportionately high number of cannabis arrests.

When we chatted, Byrd pointed out that the equity program’s zero-interest business loans aren’t available, which could mean an uphill battle for the four winners.

The funds won’t be available until the assistance program, funded by expected cannabis business tax revenue, reaches $3 million.

“It’s going to be difficult to start a cannabis store from scratch and not have immediate access to the promised funding from the city,” Byrd said.