Now that New Jersey has voted in favor of the legalization of adult-use cannabis, investors want to know who the winners will be among cannabis providers.
Voters in the state approved New Jersey Public Question 1, Marijuana Legalization Amendment (2020), which legalizes the recreational use of non-hemp cannabis for persons age 21 and over. It also permits possession, cultivation and sales of retail non-hemp cannabis. The constitutional amendment is set to take effect on Jan. 21, 2021.
Patrik Jonsson, regional president of the Northeast for Curaleaf Holdings (CURLF) , said the transition to adult-use in New Jersey will take some time as regulators look to implement appropriate regulations, testing and consumer safety standards. He said Curaleaf is working closely with state leadership and regulators to help create a successful and sustainable adult-use market and it believes this could be achievable be the end of 2021.
Jonsson said based on the company's experience in Illinois and Massachusetts it expects there to be a large surge in demand, something for which all operators need to prepare. He also said the company believes legalization of adult-use in New Jersey could kick off a wave of legalization in the Northeast, with New York, Connecticut and Pennsylvania likely to seriously consider adult-use legalization.
Patricia Baldwin Gregory, general counsel of Pennsylvania medical marijuana company Keystone Canna Remedies, agrees.
"If New Jersey votes in favor of adult-use cannabis, then the pressure will be on Pennsylvania, New York, and even Connecticut to also legalize adult use," Baldwin Gregory said. "Otherwise, they will lose significant tax revenues to New Jersey as customers cross state lines to purchase cannabis," even though it remains federally illegal to return from out of state with cannabis.
Baldwin Gregory said she would expect to see Pennsylvania, New York and Connecticut pass adult-use legislation by 2022.
Typically, existing medical marijuana license holders stand a strong chance of receiving a recreational license as well. There are six companies operating alternative treatment centers or medical marijuana dispensaries in New Jersey. The publicly traded companies include Columbia Care (CCHWF) ; Compassionate Care, which operates as The Botanist and is owned by Acreage Holdings (ACRHF) ; Curaleaf NJ;, Rise, owned by Green Thumb Industries (GTBIF) ; and TerrAscend Corp. (TRSSF) . The private companies are Greenleaf Compassionate Center, Garden State Dispensary, Harmony Dispensary, Breakwater Alternative Treatment, and Zen Leaf, which is owned by Verano NJ.
The profiles of the public companies are as follows:
Columbia Care
- Opened first dispensary in Vineland, N.J., in June and completed its first harvest in its 50,000-square-foot cultivation facility in July.
- Plans to open two additional dispensaries in the second half of 2020.
- Expects to materially expand cultivation and production capabilities in anticipation of conversion to adult-use cannabis sales in 2021.
- Extraordinary month-over-month growth rate expected to result in positive adjusted EBITDA in the fourth quarter of 2020.
Acreage Holdings
- Operates one of New Jersey's largest indoor growing facilities, primarily for high-end flower, in Egg Harbor, N.J.
- Plans to expand this facility to serve existing demand for medical cannabis and in anticipation of adult-use legalization and to build a robust wholesale business.
- Holds licenses to operate two retail dispensaries, one in Egg Harbor and one on the iconic Atlantic City Boardwalk.
Curaleaf
- Operates the state's largest medical cannabis dispensary as well as more than 51,000 square feet of cultivation and processing space in Bellmawr, N.J., through its integrated license.
- Plans to open two additional New Jersey dispensary locations as well as an additional cultivation and processing operation, for which the company has secured a facility in Winslow, N.J.
Green Thumb Industries
- There is currently one principal license category in New Jersey: vertically-integrated ATC license.
- Licensed to operate one medical cultivation and processing facility and up to three retail medical cannabis dispensaries in the state of New Jersey.
TerrAscend
- Approved by the New Jersey Department of Health to begin cultivating cannabis in August; started initial planting of this facility with the first harvest anticipated to occur during the fourth quarter of this year. The 37,000-square-foot greenhouse is the first approved for medical cannabis cultivation in the state.
- Expansion of Its Boonton facility will increase the company's New Jersey capacity to a total of 140,000 square feet and add indoor cultivation and post-harvest manufacturing capabilities.
- The first Apothecarium-branded ATC is expected to open in Phillipsburg, N.J., in the fourth quarter, followed by two additional ATCs upon regulatory approval. The company's Phillipsburg ATC will be the state's first in Warren County.
Charles E. Menifield, dean of the School of Public Affairs and Administration at Rutgers University-Newark, said the school has tried to determine the size of the adult-use cannabis market in New Jersey and what it could mean for tax revenue in the state. He estimates New Jersey will collect between $118.2 million and $173.5 million per year after recreational marijuana is legalized and when the market is fully saturated. This estimate includes funds collected from sale taxes and excise taxes as well as license and application fees.
