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Oregon pot shops attract outsiders

Florida biofuel firm is marijuana dispensary investment pioneer


by: COURTESY OF MARIJUANA HOLDINGS INC. - Craig Frank's Marijuana Holdings Americas Inc. is backing a Southeast Portland medical marijuana dispensary to be called the 'Kaya Shack.'Craig Frank is bullish on Oregon’s leafy green future.

Frank thinks Oregon will be the next state to approve recreational use of marijuana, and his small Hollywood, Fla., biofuel company is trying to establish a toe-hold here. He says his company is backing a Southeast Portland medical marijuana dispensary so it can get in on the ground floor of what he expects to be a lucrative future for the recreational marijuana market.

“We see the opportunity, and we think it’s the right move,” Frank says. “We’re surprised that others haven’t seen the same thing.”

There’s only one catch: Frank’s Alternative Fuels America Inc., parent company of Marijuana Holdings Americas Inc., can’t operate the medical marijuana dispensary. Under Oregon’s medical marijuana dispensary rules, the out-of-state company can only back the dispensary and must have a state resident as the person legally responsible for the shop.

“I don’t think we’re going to see a lot of out-of-state companies move into Oregon,” says Anthony Johnson, executive director of the Oregon Cannabis Industry Association, which represents growers and facility operators. “The medical marijuana law imposes some difficulties on how the businesses can be structured.

“It’s going to be tough for them to navigate the state’s system and all the requirements.”

Oregon’s medical marijuana law includes restrictions on who can get a medical marijuana card, which physicians can authorize the cards, how much marijuana each cardholder can buy from an authorized grower (who also is subject to limits on the number of plants) and how much a grower can be paid for their products.

Since the medical marijuana registry started in May 1999, the state has signed up nearly 60,000 patients. About 30,000 caregivers are registered with the program.

Portland attorney Paul Loney, whose legal practice focuses on marijuana law, agrees with Johnson. “I don’t see that many out-of-state companies even thinking about coming here, if they do their due diligence,” Loney says. “But, we might be surprised.”

If Oregon voters follow Colorado and Washington and approve recreational use of marijuana for adults, that could change the picture, Loney says. “Then it would be a different story.”

All those state rules and regulations on medical marijuana dispensaries are not a big problem, says Frank. The company has received a provisional license for a dispensary it hoped to open in a 1,000-square-foot storefront near Southeast 17th Avenue and Hawthorne Boulevard, under the brand name “Kaya Shack,” a reference, Frank says, “immortalized by Bob Marley and the Wailers” that refers to “the feeling experienced while making the connection with your inner self.”

The company has an Oregon resident responsible for the Hawthorne-area dispensary, and plans to hire a manager to run the shop.

A tangle of rules

It’s Marijuana Holdings Americas’ first venture outside of Florida, and the selection of Oregon for its first shops was not random. The company looked around the nation for places to establish its new business opportunities, Frank says, and Oregon came up, well, very green.

“Our analysis showed that Oregon was the next state of any significance,” Frank says. “So we focused on Oregon.”

Think of the future of marijuana businesses as a couple of trains, Frank says. “Oregon is at the station ready to take off,” he says. “Florida is just pulling into the station. Our strategy is to focus on emerging states, and Oregon is the leader.”

Three initiatives are trying to qualify for the November general election ballot: a constitutional amendment to legalize personal use of marijuana for adults and two measures to legalize it and tax both marijuana and industrial hemp.

Campaigns are hiring petition signature gatherers to qualify for the ballot.

Marijuana Holdings Americas is one of only a few out-of-state companies that have ventured into Oregon’s medical marijuana market in the past 16 years, since voters approved use and distribution of medicinal weed.

Another company, Medical Marijuana Inc., is a San Diego firm with operations in Oregon mainly selling hemp-based products. Company officials did not return repeated calls for comment.

Oregon’s Medical Marijuana Dispensary Program in Salem has so far approved about 150 permits for dispensaries across the state. The agency, part of the Oregon Health Authority, has received about 355 applications for the shops. About 160 applications have been filed for dispensaries in Multnomah County, 14 in Clackamas County, six in Washington County, one in Columbia County, 15 in Marion County and two in Yamhill County.

Besides the strict rules on who can operate the dispensaries, 128 cities and 25 counties across the state have imposed moratoriums on the shops under a new state law that lets cities ban the facilities until May 1, 2015. Portland has not considered a ban on the shops, but several suburban cities have imposed bans in the past couple of months.

In addition to those hurdles, Marijuana Holdings Americas must negotiate with local growers to provide products for the Kaya Shack. It also must abide by a sales structure that doesn’t give any one shop an advantage in the marketplace.

“There’s no commercial production license for an out-of-state company to supply a facility, so they would have to network with Oregon growers for their supply,” Johnson says. “That seems like they would be at a disadvantage.

“It’s difficult enough for an in-state company to manage its own growth.”

Frank doesn’t see that as a problem. “We will have to grow here, but in the beginning we will buy from existing growers,” he says.

The company is talking with several suppliers so it can get a variety of products for its shop. “Our plan,” Frank says, “is to develop a powerful and appealing brand and provide a friendly and knowledgeable consumer experience, making our medical marijuana facilities the first choice for all patients in Portland.”

Most of the local medical marijuana business is filled with mom-and-pop stores, and Frank says his company isn’t trying to dominate the market. “We’re not looking to hurt the mom-and-pop shops,” he says. “If anything, the stronger the industry, the better it is for us and everybody.

“We’re happy with the way it is now. We like mom and pop.”

‘Why not marijuana?’

It’s all part of Marijuana Holdings Americas’ long-term strategy, Frank says. The company hopes to expand beyond biofuels and into other “seed” markets — primarily those with pending initiatives to legalize recreational marijuana use.

The company is backing Florida’s ballot referendum to provide medical marijuana in that state. Marijuana Holdings Americas formed the Florida Cannabis Industry Association to promote the referendum.

Marijuana Holdings Americas was born as part of a company push into new markets, Frank says. Alternative Fuels Americas is a seed-to-pump company that leases about 40,000 Jatropha trees in Costa Rica, converting the fruit into biofuel. It expects to sell about 3.7 million gallons of biofuel each year. The company announced late last year the sale of about $14 million in biofuel, mostly to buyers in Central America.

About a year ago, as Colorado’s Amendment 64 was gaining political speed, Frank says his company decided to jump into the medical marijuana/recreational marijuana market.

“Biodiesel has its challenges, and we were looking around for other things we could grow,” Frank says. “So we said, ‘Why not marijuana?’ and we went from there.”

No one in the company had any experience with marijuana production or sales, but Frank drew on his financial background as an exporter to guide the new venture. His attention turned to Oregon and California, where recreational marijuana initiatives are likely to succeed.

“We’ve always been in favor of legalizing marijuana,” Frank says. “We believe in personal choice. We believe in medicinal use.”