Cost of Debt Decline
In January of 2021, the average cost of debt paid by the largest MSOs was 15%+. These same large MSOs have consistently secured debt between 7%-10% in recent months, a significant decline. In April, Green Thumb captured the best rates, securing a 7% rate on a three-year, $217 million loan. “History has taught us that the winners in new industries are those with the lowest cost of capital and the strongest balance sheets,” GTI founder and CEO Ben Kovler said in a news release announcing the deal. Unfortunately, this low cost of debt has been for only the large MSOs. Smaller operators are stuck paying interest rates between 13-15%. Investors see smaller operators as much riskier investments which is why they end up paying substantially more. Amber Littlejohn, Executive Director of a DC-based minority cannabis organization, noted the vast majority of minority businesses at a similar stage in their development “either get stalled because they don’t have the money to go further,” sell out entirely, self-fund, or give up equity in exchange for capital from private investors.
RI Next?
Top Rhode Island senator Dominick Ruggerio (D) says lawmakers are very close to reaching a deal on recreational legalization, which will be taken up during a special session this fall. “We’ve had people working on that issue since we’ve left the session this year,” he said. “We sent legislation—which we think is a very good piece of legislation—over to the House before we left in June,” the senator said, referring to a legalization bill that his chamber approved in June. “They are working on that legislation with some of the House people at this point.” Negotiations are still ongoing between both parties, but a deal is probable to pass by the end of 2021.
NJ Slow Rollout
In New Jersey, there have been several setbacks in the process of sales commencing. On top of the fact that municipalities can opt-out of sales, several restrictions exist on what can be sold. Brownies are out, and cookies are out, gummies are out – though lozenges are in. “This is an opportunity for people to get used to the notion of legalized cannabis without having to worry about the children or seniors and them accessing edibles, sweets, anything that contains THC, whether intentionally or accidentally,” said Edmund DeVeaux, president of the NJ CannaBusiness Association. These rules are much stricter than current states which have legalized and will hopefully shift to more lenient as NJ public support grows.
