Adult-use Cannabis Licenses

Lawyers at the firm Foley Hoag held a webinar on the New Jersey conditional conversion adult-use cannabis company license conversion process.

Most of the licenses awarded thus far have been for conditional licenses.

Attorney Jesse Alderman noted that recently the NJ Cannabis Regulatory Commission (NJCRC) has awarded many conditional licenses. He said applicants will have 165 days to submit their conversion applications.

Cannabis lawyer Jeremy Mesinger said they worked with numerous winners. He said the conversion process might not be easy.

“The hard work begins. It’s not downhill from here,” he said.

“It should be easier to find funding after winning a conditional license,” cannabis attorney Mike McQueeny said.

He explained local approval and real estate remain the top problems that need to be solved when an applicant submits to convert. He noted conditional application licenses are prioritized.

“You will continue to get that priority,” McQueeny said, calling it a very unique facet of New Jersey cannabis.

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“Navigate the local licensing process, which in many municipalities is changing by the day,” McQueeny said.

He added that in New Jersey, there is only a three percent vacancy rate of industrial properties, with only 1/3 of New Jersey towns permitting cannabis companies.

McQueeny explained some towns are more open than others.

“How much money do I want to spend on a carrying cost, not knowing how long it will take me to get to the final round of final licensure,” he said is a question applicants need to answer.

While the NJCRC has said they want to get applications approved within 90 days, McQueeny brought up the worst-case scenario of the 2019 medical cannabis application round, which took 29 months to resolve.

“Think about what those carrying costs are,” he said.

Conditional Adult-use Cannabis Licenses and Towns

The attorneys explained it’s very important to secure local approval from the town. Two things are needed from a town: a municipal resolution and a zoning letter. A letter from the mayor was previously sufficient versus a resolution passed by the council.

“There’s a lot of confusion with towns,” McQueeny said.

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Towns are putting Zoning letters going into the letter of support nothing their location is zoned properly. The notice itself says you need a separate zoning letter.

“We’re just flagging that for folks,” he said. “We don’t know if the CRC will accept that.”

“In theory, towns shouldn’t be giving 100 different resolutions of support,” he said, noting something similar has already happened.

“That can be onerous in its own right,” he said.

Many towns have high application fees, McQueeny said, and local approval represents a de facto cap.

Many towns have a Request for Proposal (RFPs) process like a micro version of the NJCRC.

McQueeny also noted the need for companies to conduct local awareness campaigns, like a political campaign to build support and pledge to benefit a community.

“Is there a resource other than you… of municipalities that have opted in and municipalities that have opted out?” Alderman asked.

(The Heady NJ Patreon has the best list!)

“The towns… want to see some level of investment in the individual community. Not that you’re some sort of outside business,” McQueeny said.

Financing

McQueeny asked rhetorically, “How are you going to finance your company?

He said you need to show you can get the capital to open and a Financial Source Agreement (FSA) compliant agreement along with others.

The majority interest must remain the same from application for two years until after operations.

The NJCRC requires disclosure of their ownership in other companies and limits one individual’s influence in five companies.

It will be interesting to see whose agreements fail to stand up to scrutiny.

Mesinger explained expert accountant advice is needed for an application.

McQueeny said if an applicant has a powerful state lobbyist that doesn’t understand the concerns of the town, then they are not helpful.

“It takes a village. It takes a team,” he added.

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