‘3-Legged Stool’ Needed to Start Cannabis Business in Nevada – Q&A With Attorney Bruce Gale

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By Fred Dreier

Attorney Bruce Gale began working in Nevada’s budding medical marijuana industry shortly after voters legalized dispensaries in 2013.

Since then, he has helped prospective dispensary operators and cultivators prepare to apply for business licenses – including those seeking permits in Clark County, which accepted applications in April.

Marijuana Business Daily spoke with Gale about starting a medical cannabis business in Nevada, what types of entrepreneurs are getting involved in the industry and how the regulatory landscape might look in Las Vegas.

Q: What are the biggest challenges your clients are running into as they prepare to apply for a marijuana license?

A: I equate the process to a three-legged stool. You need a lot of money, you need a great team and then you need a location. Not too many groups have all three. They have property but no money, or money but no experience, or some variation of that. I think one of the biggest hurdles is that people did not realize it would be this capital-intensive. That, and finding property has been a major hurdle.

Q: How much money will it cost to start a dispensary and a cultivation facility in Nevada?

A: I tell potential clients that it’s about $1 million for a dispensary. You have to have at least $750,000 set aside for property, and then you add in the inventory control system, the improvements, training, attorneys fees and a CPA . If you want to be competitive and get one of the dispensary registration certificates, I’d say the more money you have, the better. With a cultivation facility, it’s entirely different. You’re going to spend more.

mjfactbook14storyhorizontal336Q: How are people funding their operations?

A: It’s not traditional financing, I can guarantee that. It’s equity financing, friends and family or angel investors. Some individuals get involved because they can contribute property in an equity deal. People with money are teaming up with someone who has a marijuana background.

Q: What advice do you have when it comes to these types of shotgun marriages between professionals?

A: Like any group going into business, be careful and circumspect with who you go into business with, because under Nevada law, medical marijuana certificates are not transferable. Under the regulations that the Division of Behavioral Health drafted, if there is a change in ownership of more than 10%, your registration certificate is revoked. So you really want to be careful who you get into bed with.

Q: What obstacles are they running up against specifically with potential landlords and property owners?

A: Landlords don’t want anything to do with medical marijuana, by and large, for a few reasons. They are paranoid that it is a risk to their ownership or a risk to other tenants. The few that have decided to do it have the opportunity to increase the rent significantly. It’s turned into a land grab, really, and it has created a shortage of available commercial properties.

Q: How would you describe the people who are applying for dispensary licenses in Nevada? What are their professional backgrounds and motivations for entering the medical marijuana industry?

A: There are people from all across the spectrum. There are going to be some 800-pound gorillas in the room, that’s for sure. But honestly, I’ve met and dealt with all types.

There are some people with very little money, but they have medical marijuana experience. There are also a good number from out of state who are involved. There are also some who got their preliminary review forms completed but didn’t get the special use permit finished, and that essentially means you’re throwing in the towel. One of my clients just found out that his property in a small strip mall was too close to a church. That was yesterday and he can’t go ahead and file the special use permit.

Q: Clark County recently closed its window for accepting applications, and most of the applications were submitted on the final day. Why did so many groups wait until the last minute?

A: It was the timeline. If you were a land baron or you had been sitting on a plot of land that you owned or had access to in unincorporated Clark County, then you were in a great position. But most people had to scramble around.

Clark County released its zoning regulations on March 19, so you basically had from then until April 17 to comply with the regulations, get your paperwork filed and obtain a business license. And Clark County’s zoning requirements were more strict than what the state had initially released months ago. I worked until midnight on many nights. Some of my applicants had a lot of work to do, specifically lining up the financial structure of their business.

Q: How do you expect this process to play out when Las Vegas begins accepting applications?

A: I don’t know. I’m hoping they get the message to release information early. If I had to commit, I’d guess they would be very restrictive rules. They initially came out with very onerous business ordinances. They had three opportunities for public comments, and there was significant backlash about the fees and restrictions.