NY (finally) secures cannabis investor for $200M social equity fund

New York cannabis regulators have struck a deal with a Chicago-based investment firm to support the state’s social equity fund for cannabis entrepreneurs, ending a yearlong struggle.

Gov. Kathy Hochul announced Friday that the company Chicago Atlantic had pledged to provide up to $150 million in loans for New York’s cannabis retailers to lease real estate and build out their shops. The state will add another $50 million.

The fund is intended to benefit the first wave of retail licensees, all of whom have past marijuana convictions or family members with past convictions.

"New York has always strived to lead the nation in providing opportunities for those who have been unjustly denied privileges and opportunities," Hochul said in a statement on the deal. "Today's announcement reinforces New York's commitment to building partnerships that benefit New Yorkers and setting right the wrongs of the past."

Chicago Atlantic’s team specializes in real estate and has made other investments in the cannabis sector, according to the state’s announcement. The company has already lent out $1.8 billion across its entire portfolio of investments.

Hochul included the creation of the $200 million social equity fund in the state budget a year ago. The New York State Dormitory Authority was tasked with finding a manager for the fund and landed on Social Equity Impact Ventures, a firm led in part by former NBA star Chris Webber.

But the agency had reportedly made little progress on raising money for the fund until now, and some started to question whether an outside investor would materialize.

In the meantime, the dormitory authority began using state funds to lease and build out retail spaces for dispensary owners — although it has been a slow process, with only about a dozen shops opening statewide so far. Critics said the dormitory authority, at times, competed against licensees who sought out retail space on their own.

Several cannabis license holders have said they’re thankful for the opportunities they’re getting from the state. But some in the industry have also criticized how the fund is being administered.

Carson Grant, who has a license to open a dispensary in Queens, told Gothamist he is concerned that the dormitory authority is not being transparent enough about the terms of his loan and how much is being spent on the buildout of his store.

“Businesses fail from not planning, not reviewing numbers,” Grant said.

In a statement on the partnership with Chicago Atlantic, Reuben McDaniel, the president and CEO of the New York State Dormitory Authority, lauded the benefits the arrangement would have for cannabis entrepreneurs. McDaniel announced his departure from the state’s Cannabis Control Board in mid-June, after facing criticism that the dual positions represented a conflict of interest.

“Chicago Atlantic's financial commitment and the partnership we have created, will help open doors for so many who have faced insurmountable obstacles of accessing capital and economic security,” McDaniel said.

State officials call the fund the first of its kind in the nation.