Northwest Marijuana Guide
Three years ago, local businessman Ian Eisenberg bought a defunct restaurant and a car wash at 23rd Avenue and East Union Street, a key junction in Seattle's Central District. "I kept complaining that somebody needs to do something to clean it up," he recalls. "The car wash had a chain-link fence, and the Philly [cheesesteak] shop was boarded up."
Now Eisenberg has plans for a pot shop on those properties—or other parcels he bought nearby. But why place a pot store there? The intersection has a notorious history of open-air drug sales, gang violence, and failing businesses.
When the City of Seattle released maps earlier this year showing where pot businesses could open in compliance with the strict zoning requirements in Initiative 502, which legalized recreational marijuana last fall, most of the city was off- limits. But 23rd and Union, it turns out, is one of the few pockets of town more than 1,000 feet from a school, park, library, or recreation center—meaning Eisenberg had unknowingly bought some of the hottest properties in town to open a marijuana retail store.
"I just want to make sure it's done correctly, that it's done nicely," says Eisenberg, a real-estate investor and co-owner of a natural soft drink company who got his business start running adult phone chat lines in the 1990s.
But Eisenberg isn't certain where he will obtain the products. He explains, "It's not like if you open up a liquor store, you go to Southern Wine & Spirits. I assume they'll put out a list of people."
On that list could be Shawn DeNae, who, along with her husband, Bill, hopes to grow and process cannabis. They are currently closing a deal for a property that complies with the law for growing facilities, and she says they could be up and running 15 days after receiving a license from the Washington State Liquor Control Board—which the agency expects to issue in late February. Liquor board rules will allow newly licensed producers 15 days to get pot plants from anywhere, no questions asked. "The little... elves will just sprinkle it upon us," she jokes.
But seriously, all that pot will come from existing grows, most of them medical, says DeNae. And we're not just talking about little cuttings—serious cultivators are planning to have plants three or four feet tall ready soon after licensing. "Obviously we're going to move in plants that are ready to pop," she says.
Their business, the Washington Bud Company, could have product ready in 8 to 10 weeks, but she worries that regulatory requirements and the newness of the process could slow the first batches of legal pot.
"There's going to be a dearth of I-502-compliant products for a while," predicts Brandon Hamilton, who plans to get production and processing licenses for his hash-oil-extraction company called WAM. "A good extract takes a long time to make because it takes a while to cure," he says, but he thinks hash oil could hit retail shelves two to three weeks after first harvest.
Both Hamilton and DeNae say that finding property that complies with I-502 zoning is the single biggest roadblock for potential pot businesses and, ultimately, an adequate supply of product for the legal cannabis market.
Robert McVay, an attorney with Canna Law Group, tells me about one-third of their clients hope to open pot shops, while the rest intend to seek production licenses. That may be because retail licenses could be subject to a lottery, and many pot people want their business success tied to something more predictable than government-drawn lots.
"There's going to be winners and losers," McVay says, speaking not only of the lottery, but also about the prospects for any nascent market. "In any sort of business—restaurants, hotels, construction—the majority of start-ups will fail. Capitalism is a cruel mistress."
But some will certainly succeed, and an ability to weather uncertainty may be their distinguishing feature. "Businesses with financial flexibility and money behind them are going to do well," predicts McVay.
Meanwhile, Eisenberg predicts that federal tax laws, which prohibit normal business deductions to pot sellers, will be the highest hurdle to running a successful cannabis retail business. "You can't deduct payroll," he says. "If you're going to run the place correctly, you need good retail clerks, security, back office."
If the tax code doesn't change, the would-be cannabis entrepreneur is uncertain that retail pot will pan out. But on the local level, he thinks the state rules for pot sellers are well-written and easy to comply with. "A lot of other industries sure have a lot more regulation than this," he says.
All of the people interviewed for this article think the liquor board has done a decent job with rule-making, despite having specific concerns and criticisms. Still, whether Washington State's legal pot launch will go smoothly is anybody's guess.
"Who knows what kind of bullshit we'll have to go through initially," says DeNae. "I imagine it will be an experiment in trial and error."