The dispensary room at the Gold Leaf Cannabis Dispensary in...

The dispensary room at the Gold Leaf Cannabis Dispensary in Baltimore. Credit: TNS/Paul W. Gillespie

Retail cannabis licensees will get a year to operate delivery businesses out of warehouses before they need to secure a storefront, state regulators announced Friday.

The state has long planned to prop up its new cannabis entrepreneurs and guide their businesses toward making recreational pot sales by 2023.

The state's construction financing team at the Dormitory Authority of New York was tasked with finding and leasing dispensary locations to these "conditional" licensees. But so far, DASNY has announced just one retail location in Harlem.

Conditional licenses are reserved for New Yorkers who have owned a profitable business and who were convicted of — or are related to someone convicted of — marijuana-related offenses. Businesses with this credential can now set up shop in warehouses approved by regulators and independently find retail locations, rather than relying on DASNY for storefronts, according to the Office of Cannabis Management, which regulates the industry.

It's unclear exactly when such operations and deliveries will begin. These changes will jump-start sales of New York products with "a model that will help them compete," OCM said in a news release. The new policies may allow Long Island licensees to open sooner, but to do so, they'll need to put up more capital, according to those in the cannabis industry. 

"It'll be a lot quicker for these license-holders to find property on their own," said Carmine Fiore, of Levittown, chair of the veterans committee of the Cannabis Association of New York trade group. "That's costly, of course."  

The warehouse search will generally be easier than the hunt for a storefront, according to Matte Namer, founder and CEO of Cannabeta Realty, a New York City real estate firm serving the cannabis industry in the northeast. Still, Long Island businesses will be limited to locations in the four towns that opted to allow retail cannabis operations: Babylon, Brookhaven, Riverhead and Southampton.

After signing a lease, entrepreneurs will need to get site and security plans approved by regulators, according to Osbert Orduña, a Suffolk resident who is seeking a conditional retail license.

"These things are not instantaneous and they require capital," said Orduña, CEO of The Cannabis Place, which is separately launching a dispensary in Jersey City. "The state, as it stands right now, has said that they're not providing operating capital."

Businesses may need to construct walls and vaults to securely store cannabis — projects that would require building permits and may challenge municipal zoning codes, he said. They'll need to create e-commerce platforms, outfit delivery cars with GPS and manually track every step of their operation, including documenting the IDs presented to prove customers are at least 21, Orduña said. All sales must be done digitally or over the phone and paid for before staff can bring products to residential addresses or private businesses, according to OCM guidance.

DASNY hired a group of private investors to raise $200 million by September. The money was budgeted for finding dispensaries, leasing them to conditional licensees and helping them set up their space. DASNY hasn't said how much the fund has raised. 

Licensees who find their own retail space may be able to tap into the fund for renovation projects. But OCM and DASNY didn't immediately answer questions about whether the fund would co-sign or guarantee leases for these retailers or assist them with security deposits or other upfront costs.

Landlords may be more welcoming and offer better terms if a state entity was "securing the lease somehow," Namer said. "But the process has not seemed to have gone very smooth, and I've definitely talked to folks … who really would rather locate a space themselves." 

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