The New Jersey Legislature advanced a proposal on Monday to legalize and regulate marijuana for adults 21 and older. This is a big deal for the Northeast cannabis market. Why? A recent study, conducted by New Jersey Policy Perspective and the ACLU of New Jersey estimated that a regulated marijuana marketplace for adults in New Jersey could generate at least over $300 million in additional tax revenue for the state.
It also concluded that New Jerseyans currently spend up to an estimated $869 million on marijuana in the illegal marketplace every year. Plus, with New York's lack of movement on legalizing adult-use cannabis, it is expected that many New Yorkers will cross the state line to make purchases -- adding to the size of the market.
Bill S-2703, was sponsored by Senator Nicholas Scutari and was approved by the Senate Budget and Appropriations Committee. The Assembly Appropriations Committee approved A-4497, which was sponsored by Assemblywoman Annette Quijano. The next step is to send the legislation to the full chamber for a vote. The state's Governor, Phil Murphy, has been a big supporter of legalizing and regulating adult-use cannabis.
Some believe that recreational cannabis sales could begin quickly after the approvals have been made. However, regulating a recreational market is quite different from a medical market, so that could be very ambitious timeline. The state was initially known for its incredibly strict program under former Governor Chris Christie, but the conditions around it have eased.
A handful of companies are poised to benefit from New Jersey's limited amount of approved licenses. One of those is Acreage Holdings (ACRG.U). Back in May, Acreage signed a letter of intent to enter into a long-term management contract to assist with the expansion and operations of Compassionate Care Foundation, Inc. (CCF) , a not-for-profit entity that operates a dispensary and cultivation facility in Egg Harbor, New Jersey.
CCF is one of only six Alternative Treatment Centers (ATCs) that holds licenses from the state to grow and dispense medical marijuana. CCF was one of the first ATC's to be approved in New Jersey and has been operating since 2013. It runs one of the largest approved medical cannabis growing facilities in the state.
At the time, Acreage President George Allen said, "We are committed to responding to the growing patient need in New Jersey by investing the necessary capital and resources into the Foundation to make New Jersey a healthy, patient-first cannabis market." Acreage declined to comment on the latest developments.
Compassionate Science ATC was recently rebranded as Curaleaf New Jersey (CURA.CN) (LDVTF) . According to the company's prospectus, Curaleaf owns a property that includes 34,200 square feet of cultivation space, of which 17,200 square feet was initially built out for cultivation and processing operations. Curaleaf is now building out the additional 17,000 square feet to meet growing demand in the state.
The new Bellmawr-based dispensary, totaling 6,150 square-feet in size, is the largest medical cannabis dispensary on the East Coast, as well as the largest under the Curaleaf brand. Since the start of sales in October 2015, Curaleaf has established itself as a market leader, dispensing 44% of all product sold in New Jersey in 2017.
The company said it plans to open two more dispensary locations by the end of 2018. Curaleaf also said it is in advanced discussions to lease land in southern New Jersey to accommodate approximately 435,000 square foot of greenhouse space, which is expected to be operational in phases, starting in the third quarter of 2019. The company declined to comment on this story.
Other operators include the non-profit Greenleaf Compassion Center in Montclair, the Garden State Dispensary, Breakwater and the latest entrant, Harmony Foundation of New Jersey. The state has said it would award an additional six licenses, but the department recently missed its Nov. 1 deadline.
"In August 2018, the Department of Health received 146 applications from 103 organizations in response to its request to add up to six additional dispensaries," said Ed Keating, Founder of Cannabiz Media, a company that tracks cannabis licenses. "One name that caught my eye is Colette Bellefleur. She was highly placed in the New York license that ran out of money and was bought by MedMen."
"Based on Cannabiz Media's research into how multi-state operators have scored nationally in eight states, Columbia Care and Green Thumb Industries (GTII.CN) will likely score well, as they lead our list. They also have the benefit of competing in many limited-license environments.," Keating said. "Other multi-state operators like Vireo and Surterra should be in the hunt too."
Market Size
A NJUMR (New Jersey United for Marijuana Reform) study estimated that 365,900 New Jerseyans aged 21 and over (approximately 4% of the state's population) consume cannabis on a monthly basis. New Jerseyans also consume an estimated 2.5 million ounces of marijuana per year (mostly from the illegal market).
The estimated average price in New Jersey for cannabis in the black market in the illegal market is $343 per ounce. The most recent legal prices in New Jersey ranged from $130 an ounce for medium-quality cannabis to $600 an ounce for premium-quality, according to the online site Price of Weed.
For investors looking to take advantage, Curaleaf and Acreage are well-positioned to build market share as New Jersey moves forward with legalizing and regulating adult-use marijuana.
