success stories and the
Cannabis Landscape
In any emerging market, there are growing pains. As businesses adapt to regulations and changing operating dynamics, there are bound to be some pitfalls and problem areas.
Arguably, none are as prevalent as those in today’s cannabis market. Despite current growth estimates projecting a near 13% compound annual growth rate for the five-year period between 2021 and 2026, the market continues to be very troubled.
In states like California, where the market for legal cannabis products faces fierce competition from illegal operators, local regulators and law enforcement confront the endless task of monitoring cannabis operations and attempting to remove the bad actors who continue to operate illegally.
With the black market for cannabis flourishing and some cities unable to keep up with the hundreds of illegal cannabis players, Douglas Wilson Companies has developed a receivership strategy to alleviate this problem.
A new need for receivers
Due to the decriminalization of marijuana, cities are strapped by their jurisdiction when they encounter an illegal cannabis dispensary.
In most cases, they can confiscate inventory, but they are not able to confiscate the infrastructure of the operation. As a result, illegal operators often reopen nearby within mere hours of being shut down. In some instances, this is a repeated process reopening multiple times, leaving the city without a long-term solution.
In two recent scenarios, Douglas Wilson Companies was appointed as a receiver to help one Los-Angeles area city to address this growing problem.
In this particular city, it is illegal to operate a cannabis dispensary altogether. Yet the city had identified two commercial properties with separate illegal cannabis dispensary operations onsite. For years, the city had attempted to shut down more than 80 illegal operators by issuing citations and penalties and conducting raids — but with little success. The owners of the real estate were of no help, given they would often continue to collect rent from the tenants without any significant penalty or disruption.
“Our solution as a receiver is to pursue the landlord — the property owner,” says Ryan Baker, DWC Vice President. “The landlord has a lease with the illegal dispensary and after a history of attempting to shut the illegal business down, including trying to evict the tenant, the city files a lawsuit and the court can appoint a receiver to take control of the property and ensure the illegal activity ceases.”
douglas wilson companies
success stories
In the recent cases completed by DWC, we worked with the local law enforcement to shut down the illegal operations, and take control of the property. As receiver, we then can ask the city to confiscate the infrastructure to be held per the court order so that the receiver can secure the property and prevent the operator from re-opening in the same location.
The receiver can then move the court to sell the property to a new owner who will ensure that the illegal dispensary does not reemerge. Through the lawsuit and the sale proceeds of the property, the city can then obtain penalties and recoup the costs they have had to spend evicting the tenant and securing the property from illegal activity.
In both recent cases, DWC was able to complete the assignment within a matter of a few months, in comparison to the several years the city had spent attempting to stop the operators.
“It requires an experienced receiver and team who understand the nuances of the market and the court system in these cases,” Baker says. “But so far we have had tremendous success with this new avenue.”
