December 26, 2013 in City

West Plains warehouse could host East Side’s first legal marijuana crops

By The Spokesman-Review
 
Dan Pelle photoBuy this photo

Jon Jeffreys, of NAI Black Commercial Real Estate Services, is handling the lease of a warehouse building in the West Spokane Industrial Park in Airway Heights to a company that will sublease space to cannabis growers.
(Full-size photo)

With more than 1,100 applications to grow legal marijuana in Washington, the state has no shortage of would-be entrepreneurs eager to jump into the new industry created by voters last year. But don’t expect the successful marijuana-growing businesses to feature aging hippies sporting tie-dyed shirts and vacant looks. Stringent state regulations for security, testing and tracking mean legal marijuana production will consist of more than planting a few seeds or cuttings, watching them grow and harvesting a crop in the backyard.

Some of Eastern Washington’s first marijuana crop might be grown and harvested in converted warehouses between a gravel pit and Spokane International Airport in a West Plains industrial park.

Arbormain, a Seattle-based company, plans to lease three buildings with a total of 63,000 square feet and sublease space to small growers, providing them with the external security and access to large supplies of electricity that indoor growing operations will need. Perhaps equally important to some fledgling marijuana entrepreneurs, it will be a landlord that welcomes them as tenants.

“We heard a lot of complaints from people saying they were having a hard time finding space or finding a landlord,” said Brendan Kennedy, president of Privateer Holdings, the parent company of Arbormain. “We pride ourselves in finding the holes in the marketplace.”

For more than three years, Privateer Holdings has found business opportunities in marijuana without actually growing or selling the drug. It runs Leafly.com, a website that provides medical marijuana patients with information about various strains of the drug and the different types of relief they offer. It helps patients locate a particular strain at dispensaries near their ZIP code, based on the inventories those stores post on the website. It also allows customers to post reviews of a dispensary’s products, service and atmosphere, the way websites like Yelp carry reviews of restaurants.

Legal marijuana “is an industry that hasn’t worked out all the issues of supply and demand and distribution,” Kennedy said. The company expects to provide a similar Web service for Washington’s recreational marijuana stores that open as early as next June.

To stock those stores, however, the would-be growers applying this month for licenses will have to grow the state’s first marijuana crop indoors. The rules for growers adopted this year by the liquor board favor small producers, making the state’s first marijuana producers more like microbrewers and craft distillers than Budweiser and Jim Beam. But small producers will still face large startup costs.

That’s where Arbormain, a new Privateer subsidiary, hopes to fill another marketplace hole with indoor facilities in Airway Heights, Chehalis and Lacey that can be subdivided so new growers – some of whom may be restricted to less than 2,000 square feet of growing space – can sublet, build out and start growing quickly.

Finding available buildings in commercial and industrial zones that can be retrofitted with major electrical upgrades and other design changes wasn’t difficult, Kennedy said. But finding cities or counties that would welcome the new marijuana businesses presented problems. Preparing the three buildings under consideration at the West Spokane Industrial Park will cost about $5 million, Arbormain estimates. If they fill up with small growers and processors, Kennedy estimates the facilities will create about 40 full-time jobs.

“It has been somewhat frustrating to talk with local officials who don’t want these jobs and tax revenues,” he said.

That didn’t happen when Arbormain approached the West Spokane Industrial Park on the south border of Airway Heights. Jon Jeffreys, an agent for NAI Black, the park’s real estate agents, said they looked at the proposal strictly as a business opportunity: Arbormain needed space, and the park had two empty warehouses.

Arbormain brought in consultants from Colorado to scope out the buildings and explain what would need to be done. Some of the details are still being negotiated, Jeffreys said, but no major roadblocks have appeared.

Derrick Braaten, city planner for Airway Heights, wasn’t familiar with all the details of the Arbormain proposal, but said the industrial park is one of the areas the City Council set aside for marijuana growing. It’s more than the required 1,000 feet from schools, parks and places frequented by children; it’s also in an industrial area where noise or odor won’t be a problem.

With the high startup costs for marijuana growers, providing some of the infrastructure seems like “a clever business decision,” he said. “I don’t think there’s going to be an issue.”

It’s too early to tell whether that business decision will lead to Airway Heights being a leading producer of recreational marijuana. There are plenty of uncertainties in the calculations and risks for the new businesses. Arbormain has two potential tenants for Airway Heights and dozens of others across the state, but not everyone who applies for a grower’s license will be approved. The requests far outstrip the state Liquor Control Board’s limit of 2 million square feet of land allowed for growing marijuana, so the licenses that are approved may have their space allotments pared back.

All of the businesses could have trouble establishing bank accounts because of restrictions in federal banking laws for anything connected to marijuana. The board estimates as many as half of the licensees could go out of business in their first year.

As Jeffreys put it: “No one knows how it will work out.”

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