GRAND RAPIDS — Idled and deteriorating industrial buildings across the city are being transformed with multimillion dollar investments to support cannabis growing operations.
Two commercial growing sites recently held ribbon-cutting ceremonies in industrial corridors on the city’s south and northeast sides, while four additional sites have been licensed and are in various stages of development. Companies have promised hundreds of jobs to launch the grow operations.
The buildings are spread across the city and comprise hundreds of thousands of square feet of industrial property. Each of the six sites are licensed to grow up to 1,500 plants, while five of them have applied for recreational grow licenses.
After securing industrial property, companies then make large investments in the high-tech indoor growing process the line of business requires. In doing so, obsolete or underused buildings are often rehabilitated while the operation can create up to dozens of jobs.
Oak Flint LLC is one of the six companies that has been approved for a medical cannabis grow facility in the city, which is required before recreational approval. Oak Flint President John McLeod hopes to secure recreational licenses this fall for what will be a growing and processing facility and provisioning center at 701 Ann St. NW.
“That site was obsolete, there is no traditional user that is going to come in and take that site and occupy that amount of square footage,” McLeod said. “Its highest and best use is for cannabis.”
Oak Flint plans to invest at least $20 million to renovate the deteriorating 260,000-square-foot building situated on 11 acres in the city’s northwest side. The goal is to have the first phase of cultivation up and running in six months, McLeod said.
“When people talk about what the benefits are to municipalities and the state for recreational cannabis, they focus on the tax revenue,” McLeod said. “The real benefit of the recreational cannabis industry is rehabbing these large underused sites and creating jobs.”
Oak Flint — whose retail business operates under the Cloud Cannabis Co. brand — also has a cannabis cultivation facility in Flint and a provisioning center in Muskegon Township. McLeod expects about 100 people will be hired to work at the company’s Grand Rapids grow facility once it’s fully operational.
The first commercial cannabis grow facilities in the city were opened recently by Colorado-based Terrapin Investment Fund III LLC at 2055 Oak Industrial Drive NE and Fluresh LLC at 1213 Phillips Ave.
Fluresh opened its flagship medical provisioning center in February in Grand Rapids, located in the same building as its new grow facility, which was formerly a Benteler Automotive plant. Some of Fluresh’s founders were from the area, which was part of the decision to focus on Grand Rapids, said Fluresh CEO Tom Benson. They had planned all along to develop a grow facility at the site.
“We developed an existing building with a storied history and beautiful interior,” said Chris Anderson, Fluresh’s general counsel and chief regulatory officer. “It was a complete overhaul of the facility that had been vacant for about 10 years.”
Fluresh expects to create 100 or more jobs at the facility, Anderson said.
Terrapin opened its growing and processing facility in June. The Colorado company paid $1.4 million for the building, which used to house the nonprofit Kid’s Food Basket. The company estimated it would hire 30 people to work in the 35,000-square-foot building.
The three other grow facilities that have been approved by the city — owned by Green Skies – Healing Tree LLC at 330 Ann St. NW, Edenz LLC at 925 40th St. SE, and Green Dragon at 2350 29th St. SE — are not yet fully operational.
“Because of the intensity of the process, we’re not operational yet and are still working on renovating the building,” said Green Skies spokesperson Andrea Hendrick.
Finance, property obstacles
While Oak Flint has been self-funded to this point, McLeod said the company likely will need outside investors to complete the build out and renovation at 701 Ann St. NW.
“Sometimes when that funding comes in it’s at ridiculous rates,” McLeod said. “Fortunately, we have boot-strapped this whole thing ourselves so far, but in order to execute this project we’ll have to seek some outside funding.”
Access to capital is one of the biggest barriers to entry for cannabis businesses, especially smaller entities, because most banks are unwilling to work with a business that is still considered illegal under federal law, said Ben Wrigley, partner at Grand Rapids-based CannaLex Law. While large companies aren’t exclusively getting into the growing business, they have the upper hand with capital resources to acquire property, Wrigley said.
“(Larger companies) also have the experience, which gives them a leg up over people who are trying to get into this industry,” Wrigley said. “Small businesses still want in and there are opportunities if you find the right spot, the right piece of property and work with your local municipality.”
Pharmhouse Wellness is a locally owned cannabis business and its founder, Casey Kornoelje, is planning to open a grow operation at 819 Wealthy St. SW. The company operates a medical cannabis provisioning center at 831 Wealthy St. SW.
“The difficulty of locating a building is an obstacle right out of the gate,” Kornoelje said. “These facilities also require significant capital investments, purchase of real estate, capital expenditure of industrial equipment — it’s really expensive.”
The city of Grand Rapids has proceeded into cannabis regulation with caution, deliberating for months over zoning and other regulatory details for both medical and recreational businesses.
Kornoelje wants to maintain business ties in Grand Rapids rather than consider locations where real estate is less expensive, he said.
“I believe in Grand Rapids and want to operate and invest here,” he said. “When an opportunity presented itself to operate nearby (to the provisioning center) it was a no-brainer to pursue this.”
At 3,822 square feet, Kornoelje’s grow facility on Wealthy Street would be relatively small compared to larger grow operations that can span several hundred thousand square feet. Meanwhile, it’s easier for larger companies with more capital to create economies of scale, Kornoelje added.
“The larger the facility, the cheaper it is for you to produce more product,” he said. “For the mom and pops that want to grow, I think there’s opportunity but you’re going to be forced to play in a totally different market segment.”
Like Pharmhouse Wellness, Fluresh also was challenged at first with finding locations for its provisioning center and grow facility that met all of the city’s requirements.
“We actually looked at a number of locations in Grand Rapids and were hoping to have multiple locations, but ended up just having the one location,” Benson said. “It was challenging on the grow side as well — we looked at a number of pieces of real estate but chose where we are for the location and the neighborhood. We thought it was an area that we could bring jobs to.”
Kornoelje plans to invest $1 million to repurpose Pharmhouse Wellness’ building, and hire 10-15 people once the facility is operational.
“It’s located in an industrial complex, which really intrigues me and I believe cannabis falls into that in a unique mixed-use kind of way,” Kornoelje said.
Opening a grow facility makes sense for Pharmhouse because it will allow the company to control costs better by producing its own product and controlling the supply chain, Kornoelje explained.
“The state of Michigan has an unpredictable supply situation for provisioning centers,” he said, “so this just allows a little more control.”