Business & Real Estate

Not too long ago, a marijuana supplier was a drug dealer. Now it’s a ‘creditworthy tenant,’ as weed companies grow.

Medical marijuana company Verano Holdings was out of room at its headquarters in Chicago's River North. It was just that simple.

Earlier this year, the company found a new home. At 9,500 square feet, the new office is almost four times larger than the previous space. It's decorated for a cannabis company, with bright, stylized marijuana artwork and a sign that reads "Please keep off the grass" near the co-founders' door. Verano has an option to take over more room in the building if needed.

"We just had no space. People were working at home because we had no place to go," said Tim Tennant, Verano's chief marketing officer, as he coordinated the delivery of an oversized leather couch for the co-founders' office. "It was exploding faster than anybody could get their arms around."

The marijuana industry is surging in Illinois and around the country. Cannabis companies based in the Chicago area have matured into multistate operators, gone public and been acquired. But despite all the growth, many of those companies have continued to operate in the same spaces they launched in, until now.

At least half a dozen marijuana companies in Chicago have moved or expanded their headquarters in the past several months. Some doubled their space or more. A couple moved downtown from the suburbs, a tactic deployed by companies in many industries to better woo talent.

For many operators, moving into spaces outfitted specifically for them – with marijuana art on the walls and plenty of flexible space to grow into – is a sign the industry has come into its own. But finding the best space has had more challenges than your typical office search.

Cannabis company PharmaCann looked at about 50 properties before finding a landlord that was OK leasing to a corporate marijuana company, said Chris Atkinson, director of real estate and facilities.

Landlords were concerned that having a weed company as a tenant would cause issues with the banks that hold their mortgages, she said. Federally regulated banks hesitate to lend to businesses involved with a federally illegal substance. Landlords also wondered whether product would be handled in the office.

"We did get a lot of questions if we were going to be dispensing or were we going to have patients," Atkinson said. "We had to reiterate ... this was a business office and a corporate office and nothing else was going on."

On April 1, PharmaCann moved to the Loop from a co-working facility in suburban Oak Park, Ill.

"We're going to be in the financial district," Atkinson said. "It really has a big impact when we're hiring."

Other companies said their searches for office space were smoother. Peter Slaven is partner at Centrum Realty and Development, which manages the River North building where Verano is now a tenant.

"We really just cared about the fact that this would be general office use, just like any other office tenant, and their financials were strong," he said. "Honestly, I don't have a preference over whether it's a law firm, or an architect's office or in this case, corporate offices for a cannabis company – which, as it turns out, is an extremely creditworthy tenant."

For some companies, the move was overdue. Executives had been waiting for certainty in an industry built on sales of a still federally illegal drug.

Gov. J.B. Pritzker favors legalizing recreational use of the drug, and lawmakers introduced a bill that would do just that last weekend. They hope to pass it by the end of May.

Illinois' medical program has also expanded, adding more than 12,500 patients since February, when the state dropped fingerprint and background check requirements for patients, allowed people prescribed opioids access to medical marijuana, and started granting provisional access while medical card applications are reviewed.

The growth track that the industry is on gave Verano the confidence to commit to larger office space.

"As soon as we knew the year was going to end right, it was like we knew we couldn't wait any more," Tennant said. "It's not uncertain. ... You see the whole market changing."

Verano moved into its new River North space at the end of February, weeks before Phoenix-based Harvest Health & Recreation agreed to acquire it for $850 million.

Cresco Labs had 12 employees in 2015 when it moved into its River North headquarters. The company recently found a 21,000-square-foot interim space two blocks away. With about twice as much space, the interim office is more fitting for its roughly 130-person-and-growing corporate team – at least until it finds something permanent.

Also in River North, Green Thumb Industries, or GTI, has been adding to its space little by little. It started out in August 2017 with a small office on the second floor big enough to hold about 15 people, and now rents roughly 13,000 square feet throughout the building. And it needs more.

Almost 90 people work out of the headquarters daily, but it's expecting 130 by the end of the year. And that's just the corporate head count – nationally, GTI employs more than 670 people, and expects that to double this year.

"We manage the entire country from this office," said Jennifer Dooley, chief strategy officer, sitting in one of the office's conference rooms.

On a wall across from Dooley was a map of America. States with GTI facilities were outlined in marker, and thumbtacks marked its operations around the country – green for the operational dispensaries, and blue for the soon-to-open ones. It's illegal to transport marijuana across state lines, so multistate cannabis companies usually set up robust operations in each state.

As GTI's reach has expanded, so has head count at its headquarters. The company knew it would outgrow its space eventually, Dooley said. Now, it needs a space that will give it room to expand.

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