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It’s been more than a year since Gov. Kathy Hochul announced the Dormitory Authority of the State of New York (DASNY) would play a prominent role in the development of the state’s cannabis marketplace.
DASNY, a public finance and construction authority, originated in the 1940s after then-Gov. Thomas Dewey created the agency to build dormitories at state colleges. It has since grown to become one of the largest financiers and builders of social infrastructure facilities in the U.S., and today maintains a multi-billion dollar construction portfolio.
Because of its expertise in building and financing, Gov. Hochul tasked the agency with a key component of the Conditional Adult-Use Retail Dispensary (CAURD) program: finding, securing and retrofitting retail locations across the state for use by licensed cannabis dispensary operators. DASNY would also provide “low interest” loans to these entrepreneurs to get their businesses up and running.
All of this funding would come from a $200 million pot of money – $50 million from the state and $150 million to be raised from the private sector. DASNY was also put in charge of finding a fund manager to raise and secure that $150 million and last June the agency selected Social Equity Impact Ventures for the job.
However, as time went on and there was little-to-no movement among the fundraising or construction components of DASNY’s involvement, industry insiders began to question the agency’s role in the process, and NY Cannabis Insider sought information from DASNY about its progress, decisions, contracts, and more.
While the authority did provide some information over the past year, the majority of our questions went unanswered despite multiple follow-ups.
As a result, we are publishing a list of the major questions that DASNY – more than a year into the process – has refused to answer.
This is not a comprehensive list of all unanswered questions (there are more) and also not a list of all the unfulfilled record requests submitted to the agency pursuant to the state’s Freedom of Information Law, which is meant to ensure public access to government records.
DASNY staff size related to cannabis
There are roughly 500 salaried employees at DASNY, but there is no information available about how many are allocated to the agency’s cannabis program. While DASNY’s president and CEO, Reuben McDaniel, has been front-and-center at meetings, ribbon cuttings and press releases, the rest of the authority’s staff has operated in the background.
NY Cannabis Insider asked the agency for that information on June 7, 2023,: “How many people within DASNY are working on the CAURD program, or just cannabis in general?”
Despite a follow-up request for the same information on June 14, 2023, the agency would not answer.
A rough budget
DASNY’s proposed operating budget for the 2022-2023 fiscal year was roughly $116 million. But along with the question of staff allocation, there’s the question of budget allocation: “How much of DASNY’s budget is allocated to the cannabis program?”
NY Cannabis Insider asked for that information on June 7, 2023, and followed up on it again a week later. DASNY has not responded.
The state’s $50 million kick-in
Gov. Hochul said the Seeding Opportunity Initiative would be supported by up to $50 million in licensing fees and revenue from the adult-use cannabis industry when she made the announcement about the program in March of 2022.
As time progressed and the market rollout stalled, the $50 million became more of a pledge from the state. It was also the only money available to fund CAURD leases and build outs.
On Feb. 23, 2023, DASNY did disclose to NY Cannabis Insider that it has spent “approximately $3 million” of the $50 million “on site assessments, pop-up stores, and security deposits for leases that have been finalized.”
However, in the months following, the agency would not provide updated numbers regarding how much it had spent despite requests in April, May and June.
A $5 million loan
DASNY President Reuben McDaniel and Office of Cannabis Management Executive Director Chris Alexander unveiled a $5 million loan program in early June that would offer up to $100,000 for CAURD holders who opt out of turnkey storefronts.
NY Cannabis Insider sought clarity on the day of the announcement, and a week later, about where that money was coming from – DASNY or the state’s $50 million pledge?
DASNY has not responded to the question.
How much money is Social Equity Impact Ventures making?
Buried within the Request for Proposal for the Cannabis Social Equity Investment Fund lies a term sheet that contains a section called “General Partner Management Fee.”
Social Equity Impact Ventures was picked to manage the fund last June, so this term sheet should be updated by now to lay out the specifics of SEIV’s involvement in the fund – namely, how much are they making from this?
Despite asking for this information on March 5, 2023, and again a week later, DASNY has not responded.
The kitchen sink
On July 14, 2022, NY Cannabis Insider emailed DASNY a list of outstanding questions gathered from real estate experts, social equity applicants and the public regarding the social equity fund and CAURD build outs.
The questions concerned rental rates, conditions of default, probationary occupancy periods, capitalization rates, timeline, and more (full list below).
Three weeks later, after several follow-up emails, a DASNY spokesperson emailed NY Cannabis Insider:
”For many of your questions, we are in active negotiations that we cannot discuss at this time. Fund development and site selection are ongoing.” The spokesperson also said that “answers to a number of your remaining questions can be found here in the regulations.”
To be clear, there are few if any answers to the questions asked in that document.
Questions:
1. May qualifying CAURD applicants who own complaint real estate use their desired properties, or must they only use provided locations?
2. What is the licensee’s relationship to DASNY? (ie Sublandlord/Subtenant?)
3. What is the rental rate for CAURD licensees? Are they responsible for additional rent costs: real estate taxes, common area maintenance charges, insurance?
4. What are the conditions of default for a CAURD licensee? What is the cure period?
5. How many sites are currently under lease by the state?
6. Does the CAURD licensee pay rent on Day 1 of occupancy?
7. Is the CAURD licensee responsible for repairs and maintenance costs?
8. Is there a probationary occupancy period to allow licensees to build its business?
9. What happens if there is an insufficient supply of products?
10. How will the State determine Cap Rate on these locations or fair market rent for these social equity applicants?
11. Do operators get their name on the lease, or is it subleased from the State?
12. When will the construction contracts be awarded?
13. Has the design been finalized? Are the renderings and plans available for public review?
14. How is DASNY interacting with local municipalities considering the MRTA gives these municipalities the ability to “time, place and manner” dispensaries?
15. Why wasn’t there a mandate for diverse real estate brokerage engagements to encourage all aspects of the supply chain, including service providers?
16. How much of the Fund has been raised to date?
17. Are there any other major RFPs we can expect to see?
18. What is the current timeline?
19. What distance requirement, if any, will dispensaries be required to maintain from one another in order to apply and qualify for a license? In other words, how many properties will be zoned out from cannabis dispensaries by the placement of each CAURD dispensary location?
Today
On June 30, 2023, Gov. Hochul announced that Chicago Atlantic will invest “up to $150 million” in the cannabis social equity investment fund.
“Today’s announcement reinforces New York’s commitment to building partnerships that benefit New Yorkers and setting right the wrongs of the past,” Hochul said in a press release at the time. “I welcome Chicago Atlantic’s participation in this program and applaud their recognition of the value that New York’s cannabis program will provide to so many.”
However, there are many, many unanswered questions about the details of this commitment, such as:
1. Will this loan from Chicago Atlantic have a premium placed on it?
2. Is there a management fee? If so, what is it?
3. Is there a term sheet available from Chicago Atlantic?
4. What is the interest rate and how many years will it take to pay off?
5. When will Chicago Atlantic provide the funding, and will be a lump sum or phased in over time?
6. What is the collateral?
7. What if any role will Chicago Atlantic play in replacing potentially defaulting CAURDs?
8. Are there triggers/amounts necessary for money to get transferred to a bank?
9. Where will the money be banked?
10. Is there any timeline related to any of this?
NY Cannabis Insider emailed these questions to DASNY on July 6, 2023.
We’ll report back if they’re ever answered.