John Steinbeck’s quintessential California novel “East of Eden,” about pain and poverty in an agricultural paradise, cast this setting in near biblical tones, depicting it as a place of mystical breeze and light, “full of sun and loveliness” and warm like “the lap of a beloved mother.”
He wrote “the top soil lay deep and fertile” and “the whole valley floor, and the foothills too, would be carpeted with lupins and poppies.” Here, Steinbeck called the fields of lettuce “green gold,” and to this day, the productive valley – between the Gabilan Mountains to the east and the Santa Lucias to the west – is known as “the Salad Bowl of the World.”
But it has seen challenging times. In the 1980s, producers of cut flowers erected cavernous greenhouses south of Salinas. Heated and cooled by abundant sunshine and ocean breezes, these buildings created the perfect micro-climate for growing lilies, tulips, delphiniums and orchids. Then global competition, particularly from Latin America, decimated the market. The downturn, occurring over the past two decades, left tracts of vacant, collapsing structures and helped to push the recent unemployment rate to more than 11 percent, well above the state’s 5.1 percent average.
Now, however, many of those valley greenhouses are blooming again with a new flower, as cannabis production moves into one of the world’s most fabled agricultural areas.
Even before a large majority of voters in November approved a local initiative to tax commercial marijuana cultivation at a rate starting at $15 per square foot of plants, marijuana entrepreneurs already had begun snapping up aging or retrofitted greenhouses, causing real estate prices for these structures to spike. Currently, more than 20 ventures are seeking large-scale commercial growing permits, and officials predict pot agriculture could bring in $20 million to $30 million annually in new tax revenues, with the county able to step up the tax rate after 2020 to a maximum of $25 per square foot.
Dave Potter, a former five-term supervisor, served on a committee that developed a framework last year to facilitate the boom. “There was a desire for growers to come out of the shadows and become legitimate, permitted and tax-paying – and the county was starved for tax revenues,” he said. “I see a conversion of greenhouses that were growing flowers to greenhouses that are growing cannabis as nothing more than crop rotation.”
The unfolding phenomenon in the Salinas Valley follows frenetic cannabis real estate speculation in Southern California desert communities, including Desert Hot Springs and Adelanto, where struggling warehouse districts have been transformed into indoor pot-growing centers. The Fresno County town of Coalinga went a step further by offering up a former prison, the Claremont Custody Center, for a cannabis oil extraction plant.
But the same pot boom isn’t taking place in California’s largest agricultural region. Other than in limited industrial locations, the San Joaquin Valley is considered too hot, dusty and politically unfriendly to marijuana.
Under Monterey County rules, marijuana cultivators only can grow in greenhouses in certain areas by converting existing structures or building new ones where old ones used to stand. They can’t plant outdoor farms or otherwise upset the county’s signature $5 billion agriculture economy for leaf lettuce, strawberries, broccoli, cauliflower, celery, artichokes and wine grapes.
Nevertheless, the cannabis greenhouses represent a significant cultural shift in the farming region. New agricultural mavericks include big players with political connections.
Steve DeAngelo runs thriving medical marijuana dispensaries in Oakland and San Jose that ring up $44 million in annual transactions. With two long braids sneaking out from under his trademark fedora, and trailed by two chihuahuas, Goliath-Golly and Clara Bell, DeAngelo recently toured the cavernous greenhouses for his new venture, FLRish Inc. The company is backed by investors from Silicon Valley, and its board members include Willie Brown, the former San Francisco mayor and speaker of the California Assembly.
Inside a vast growing facility, spanning more 52,000 square feet and humming with humidity-controlling fans, DeAngelo leaned down to inspect the flowering buds of a classic California strain called “Grand Daddy Purple.” “This is a dream, man,” he said. “Oh my goodness, this is beautiful cannabis.”
In March 2015, DeAngelo and his business partners secured a $3.5 million option to buy 47 acres south of Salinas that had 335,000 square feet of greenhouses, many of them dilapidated and in serious need of reconstruction. They closed the sale last July, well after prices for similar properties had more than doubled.
Under the most permissive license in state medical marijuana regulations signed by Gov. Jerry Brown in 2015, FLRish Inc. plans to grow four acres – 174,240-square feet – of marijuana to be marketed under Harborside Farms, named after the dispensaries DeAngelo operates.
So far, the Monterey County rules only allow the production of medical marijuana, not the recreational variety approved by California voters who passed Proposition 64 in November. Still, the FLRish crop is expected to generate $2.6 million annually in new tax revenues for the county, and DeAngelo says his venture may lease space to other cultivators. He also is planning to build a solar farm on the property, promising to produce sun-grown cannabis with zero carbon-footprint.
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DeAngelo, 58, is a former Youth International Party member who in the 1970s chained himself to a White House fence during Fourth of July “smoke-ins” advocating for marijuana legalization. His chief business partner is Jeff Brothers, 57, who worked for the Republican National Committee in Washington D.C. while Ronald Reagan was president, and came of age politically during the “Just Say No” era of Nancy Reagan’s famous anti-drug campaign.
Brothers spent two decades in the cut-flower industry, operating greenhouses for Monterey Bay Bouquets and serving as western division manager for USA Floral Products before leaving to work in renewable energy. He is the CEO for FLRish – DeAngelo is the executive chairman – and is directing the conversion of greenhouses that once produced ivy topiaries, including some that were sculpted into living works of art at the White House.
But since that market collapsed, “ivy topiaries are right up there with buggy whips, unfortunately,” Brothers said.
Brothers, a former California Coastal Commission member appointed by Republican Gov. Pete Wilson, began studying the state’s medical marijuana industry in recent years, wondering if pot could be the next economic opportunity in the Salinas Valley. Rusty Areias, a political consultant who formerly served as a Democratic Assemblyman and chair of the Coastal Commission, put Brothers in touch with DeAngelo, who was actively searching for cultivation locations and potential partners.
“This is a destiny relationship,” Brothers said of their partnership. “We both have similar principles. We believe in sustainable, large-scale agriculture and doing it the right way. And I absolutely believe the temperate climate of the Salinas Valley – slightly inland with cool coastal air, just a little air conditioning kicking in – is perfect for cannabis.”
The marijuana business climate is seemingly perfect as well for James Fryn, whose family runs System USA, a Watsonville company that repairs and builds floral greenhouses. The firm, with 60 employees, is working overtime to put new venting roofs on Monterey County greenhouses and adding irrigation and shade systems for pot growing.
“We’re backlogged for eight months with all six of my crews fully booked,” Fryn said. “I’ve never seen this before.”
Near Salinas, veteran real estate broker Chuck Allen also is amazed at what he is seeing as he finds new clients in current or former cut-flower producers who are suddenly eager to sell or lease their properties to cannabis growers.
Allen, 76, closed his first marijuana-related sale 2 1/2 years ago on a 10-are property with 150,000 square feet of greenhouses. He said the $1.2 million price immensely pleased the seller.
Last month, however, Allen was shepherding around cannabis entrepreneurs looking at similar-sized properties for around $5 million. They were checking in by cell phone with investors from New York. On another recent sale, Allen said, the property closed after a wire transfer of investment funds from Asia.
“The people that are contacting me now are looking at commercial scale production,” Allen said. “They’re all cash purchases. It’s amazing the quantity of capital that is out there.”
He added: “It’s a Green Rush like the Gold Rush. And, like the people who sold the picks and the wheel barrels, now it is the leasing companies that are making money and the electrical people and the contractors who are as busy as fleas in a frying pan.”
Green dreams
DeAngelo sees the cannabis industry’s move into the Salinas Valley as another example of pot’s growing legitimacy in California.
Though marijuana remains federally illegal, he insisted he isn’t worried about a crackdown by Attorney General Jeff Sessions – no fan of cannabis liberalization – because a critical mass of 26 states have legalized marijuana in some form.
“What we’re seeing as a result of this legal reform is the ability to now bring cannabis into traditional agricultural areas,” DeAngelo said.
DeAngelo says FLRish plans to invest $10 million upgrading growing facilities in the valley and potentially as much as $25 million. The firm’s investors include Richard Kimball, a former banker for Morgan Stanley and Goldman Sachs, and venture capitalist Roger McNamee, co-founder of the Silicon Valley firm Elevation Partners.
The venture will supply marijuana for Harborside’s dispensaries, including a third location to be opened in San Leandro, and a cannabis concentrates business set to open in Oakland under a state licensing tier that permits large marijuana companies three retail locations, one manufacturing plant and four acres of cultivation.
Hezekiah Allen, a former Humboldt County cannabis farmer who heads the California Growers Association industry group, says Monterey County is attracting growers of “commercial grade marijuana” in a business model akin to major breweries of beer.
He expects the large-scale greenhouses to churn out middle-shelf quality pot for dispensaries and concentrates manufacturers. While the mass produced buds will serve a significant market demand, he said, the products may remain less appealing to many discerning consumers who prefer boutique marijuana strains grown by niche farmers in far reaches of California.
“I think there are several businesses that are going to thrive and make it work (in the Salinas Valley),” Allen said. “But I don’t see a lot of existing growers relocating there.”
Veteran Monterey County farmer and restaurateur Mike Hackett, 51, didn’t need to relocate. Hackett grew up in the valley, the son of a lettuce and celery farmer. He graduated from North Salinas High School and has worked in nearly every aspect of agriculture, including planting, picking, property leasing and farm-pallet manufacturing.
Most recently, in an area surrounded by strawberry and broccoli fields near the Salinas River – the “crossroads of heaven,” he calls it – Hackett was growing poinsettias, succulents, carnations and snap dragons in aging greenhouses. Now he is converting family property to produce cannabis in a venture called Riverview Farms.
Hackett never has grown pot before, but has no shortage of confidence. “I have the best agricultural scientists right here in the Salinas Valley,” he says. “I have the best soil scientists. This is a plant just like anything else. There is no reason we shouldn’t be able to use our technology here and incorporate that into cannabis.”
Hackett says one of his greenhouses did “a sizable trial” with marijuana cultivation last year and he was “very pleased with the results.” He is planning on going into the business in a big way, exploring expansion beyond cultivation to a potential retail dispensary and a concentrates manufacturing facility.
He marvels that “iceberg lettuce today goes for 15 cents a pound and a pound of weed goes for $1,000 to $2,000.” But he retains skepticism about this emerging industry. Hackett is reluctant to lease out his unused greenhouses to out-of-town speculators, wondering if they’ll pack up and leave should the cannabis market decline.
“I’ve been approached by many people from outside our area wanting to rent our property,” Hackett said. “But they’re not putting down any roots here. I’m afraid that when things hit the fan, they’re not going to pay their taxes. They’ll just up and leave.”
Hackett says he wants to pursue his place in the pot business to the maximum extent his county and state will allow, assuming the feds don’t intervene. If it goes bust, he says, he’ll go back to cut flowers and other produce without regret.
“If I can’t grow weed in those greenhouses, I’ll grow lettuce and mixed lettuce. I’ll grow orchids,” he said. “Maybe I’ll even grow green orchids – ones that you can smoke. You never know.”
Peter Hecht: 916-326-5539, @phecht_sacbee
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