CuraLeaf dispensary acquisitions in Illinois “still pending state approval”

The sale of multiple Illinois dispensaries included in CuraLeaf’s $830 million acquisition of Grassroots Cannabis are “still pending regulatory approval” from the state, confirms a spokesperson for CuraLeaf.

On July 23, CuraLeaf, based in Wakefield, Mass., said in a press release announcing the completed sale that regulatory approval from the State of Illinois “to transfer certain retail assets is expected imminently.”

More than 100 days later, it remains unclear which of the eight dispensaries with licenses to sell medical and recreational cannabis in Illinois, as well as eight additional recreational-only dispensaries, currently operated by Chicago-based Grassroots will ultimately transfer to CuraLeaf.

Cannabis corporations operating in Illinois are limited to owning no more than five medical dispensary locations. As Illinois authorized recreational cannabis consumption and sales on January 1, 2020, incumbent medical dispensaries were extended licenses to sell recreational cannabis at those locations, as well licenses to open one additional recreational dispensary often referred to as a “plus one” location.

CuraLeaf’s acquisition of Grassroots includes eight medical dispensary locations currently operated by Grassroots-affiliated companies Greenhouse and Windy City Cannabis. According to multiple industry sources speaking to Grown In on background, CuraLeaf is in the process of divesting medical dispensaries and plus one locations to comply with state ownership caps of five medical dispensaries and five plus one recreational locations.

Existing Greenhouse medical dispensary locations in Illinois include Deerfield, Mokena, Morris, and Litchfield, where a cultivation facility owned by Grassroots transferred to CuraLeaf in July. Greenhouse in recent months has opened up “plus one” recreational locations in Skokie and Northbrook with an additional pot shop in Melrose Park “coming soon”. Windy City Cannabis currently operates medical dispensaries in south suburban Homewood, Justice, Posen, and Worth. Windy City also operates a plus one retail location in Chicago at a conveniently named address of 923 W. Weed Street.

The Illinois Department of Finance and Professional Regulation as of press time has not replied to questions about the asset transfer status of any Greenhouse or Windy City Cannabis dispensaries to CuraLeaf. The IDFPR has also yet to approve a $28 million sale of one Chicago-based medical dispensary and one Chicago-based recreational dispensary from local independent operator MOCA Cannabis to Boston-based multi-state operator Ascend Wellness Holdings.

A CuraLeaf spokesperson would not answer questions about which assets it plans to divest, saying “the company is unable to comment at this time” as the asset sale is still awaiting Illinois regulatory approval.

Potential suitors

Companies licensed to cultivate cannabis in Illinois see value in owning five retail medical dispensaries and associated “plus one” recreational dispensaries.

Verano, among the largest cultivators in Illinois with retail and grow operations in multiple states, currently operates a Zen Leaf medical dispensary in St. Charles and a recreational dispensary in Aurora. The Zen Leaf website points to an additional Evanston location. Currently, the only operating dispensary in Evanston is MedMen Evanston. An October 20 press release announcing the opening of the Aurora location said “Verano anticipates rapidly expanding the Zen Leaf brand over the coming months in Illinois with several planned additional retail locations throughout the state.”

While Verano’s proposed $850 million sale to Arizona-based Harvest Health was killed earlier this year, cannabis investors tell Grown In that Verano is well-capitalized for expansion.

Ascend owns a cultivation facility in Barry, Illinois, medical dispensaries in Collinsville and Springfield, Illinois and a plus one recreational dispensary in Springfield. Those assets were acquired in January 2019 from HCI Alternatives and operate under the Illinois Supply and Provisions brand.

In addition to the pending MOCA acquisition, Ascend CEO Abner Kurtin is interested in acquiring more dispensaries in Illinois. He told Grown In in August that the company is focusing on Chicago suburban locations. Ascend’s Collinsville location across the Mississippi River from St. Louis, say multiple sources with knowledge of its operations, is generating more than $1 million in sales per week. The company also secured an additional $68 million venture capital this summer at a $300 million valuation to, in part, fund the MOCA acquisition.

Beyond regulatory approval, sources tell Grown In that CuraLeaf is looking to sell multiple medical dispensaries in a package deal, precluding options for operators already near the cap.

Chicago-based multistate operator Green Thumb Industries owns cultivation facilities in Rock Island and Oglesby, Illinois, in addition to medical dispensaries in Naperville, Canton, Mundelein, and Effingham and three additional “plus one” dispensaries. The publicly traded company has a multi-billion dollar market cap, and has the financial resources to make acquisitions.

Chicago-based multistate cannabis company PharmaCann, which operates Verilife medical dispensaries in Arlington Heights, North Aurora, Ottawa, and Romeoville in addition to a cultivation facility in Dwight, Illinois, remains privately-owned after its proposed $680 million acquisition by MedMed was halted last year. The company’s investors include high frequency financial trading entrepreneurs Dan Tierney and Stephen Schuler.

Chicago-based Cresco Labs, publicly-owned and well-capitalized, owns Sunnyside medical dispensaries in Chicago, Buffalo Grove, Champaign, Elmwood Park, and Rockford and presumably is not able to acquire additional medical dispensaries. Four of five plus one recreational dispensaries are also open across the state, and Cresco plans to soon open an additional Naperville location.

Chicago-based multistate operator Revolution Global owns a cultivation facility in Delevan, Illinois and a New Age Care medical dispensary in Mount Prospect. The company is facing capital constraints and in October filed a lawsuit against a real estate asset trust corporation seeking $3 million in damages for a $28 million sale-leaseback transaction that is currently sideways.

Sources tell Grown In that Revolution did not financially qualify to participate in a process to acquire medical dispensary assets from CuraLeaf.

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