Local codes, real estate hurdles keep LI’s cannabis biz from blooming

Like any East End farmer, Marcos Ribeiro is obsessive about his crops.

But unlike most other Long Island farmers who have myriad outlets to market their produce, Ribeiro has a very limited number of options.

That’s because Ribeiro is a cannabis cultivator, and with the excruciatingly slow pace of retail dispensary openings throughout the state and competition from an overabundance of pot producers, he can count his customers on two hands.

In anticipation of future demand, the state’s Office of Cannabis Management (OCM) awarded more than 200 licenses to cultivators early on, but nearly two-and-a-half years after New York State legalized adult-use of cannabis, there are just 23 licensed retail dispensaries open for business in the entire state.

“I appreciate the state thinking ahead and giving out cultivators’ licenses and trying to get the ball rolling,” Ribeiro told LIBN. “But the problem was we grew this crop and there are thousands and thousands of pounds available, but there is almost no retail market for us to dispense this flower on a wholesale level. Even to this day it’s problematic because of the huge, enormous investments that we’ve made to get a product to the market and now it’s very limited in sales.”

The owner of Marcos Ribeiro Brick and Stone in Shirley for the last 21 years, Riberio launched his cannabis cultivating firm Harvest after getting his state license in April 2022. He operates the business out of a 20,000-square-foot greenhouse in Mattituck and a 13,000-square-foot greenhouse and 4,000-square-foot nursery in Blue Point.

Harvest sells pre-rolled joints, loose cannabis flower and a line of edibles called Funny Gummy, to a handful of dispensaries in Ithaca, Buffalo, Syracuse and Albany, and Long Island’s lone dispensary Strain Stars in Farmingdale. But so far, the business has produced more than it can sell.

“It’s very competitive. It’s almost like the reverse markets. What they did is set up 200-plus cultivators to compete with each other directly to get into a handful of stores,” Ribeiro says. “They’re really making it super difficult. I can understand that it’s the first time for everyone involved. I had never grown cannabis and the OCM had never licensed multiple retailers.”

While the OCM has issued more than 80 Conditional Adult Use Retail Dispensary (CAURD) licenses on Long Island, there is just one store open so far and only a handful poised to open soon. The biggest reason for the dearth of dispensaries is the nearly impossible task of finding locations here, as municipal opt-outs, local zoning restrictions and landlord price-gouging have short-circuited the hopes of prospective dispensary owners.

As it happens, Long Island has been one of the least welcoming areas in the state, when it comes to the cannabis industry. About half of New York’s 1,520 municipalities have opted out of adult-use retail, according to the Rockefeller Institute of Government, while about 95 of 111 municipalities on Long Island or 86 percent have opted out and about 10 of the 16 that opted in have no or very few commercial properties.

That limits retail dispensaries to four towns: Babylon, Brookhaven, Riverhead and Southampton. And though that may seem like a lot of areas, those towns have imposed restrictions that severely shrink the number of potential dispensary sites. Both Babylon and Brookhaven relegate dispensaries to industrial zones and require them to be at least 1,000 feet from schools; at least 500 feet from churches or houses of worship, libraries, playgrounds and community centers.

Riverhead and Southampton allow dispensaries and on-site consumption businesses in business districts and other retail zones, but dispensaries are not allowed in the opted-out Village of Southampton. And in Riverhead, dispensaries have to be at least 1,000 feet from any residential properties, which includes apartment buildings, virtually excluding them from locating in Riverhead’s downtown.

“There’s like one spot in all of Riverhead,” said Brian Stark, a dispensary license holder from Merrick, who has gone through several real estate brokers and explored dozens of properties in his quest to find a site that complies with all the regulations. “It’s a disaster.”

Stark, who owned a laundromat in Brooklyn and a couple of car wash businesses before getting into house flipping here and in Florida, has now set his sights on Queens, where a few Long Island license holders have found the going a little easier.

“It’s the only place that makes sense for delivery to service Long Island,” he said, adding that he’s hoping the state will step in to make Long Island municipalities ease some of their restrictions.

And though cannabis advocates point out that the thousands of businesses that sell or serve alcohol on Long Island have few or none of the same local restrictions, it’s often landlords demanding premiums that are just as onerous as municipal rules.

Robert Albi, who was awarded two CAURD licenses, has been looking for dispensary spaces here for the last several months.

“The owners or landlords tack on 50 to 100 percent price increases. They know you’re limited, and they hold the cards,” said Albi, chairman and president of Fulcrum Investment, a Manhattan-based business consulting firm that specializes in preparing companies for public markets. “That’s the biggest problem, because when you find something that doesn’t make economic sense, you’re behind the eight ball.”

Albi said he looked at a 3,000-square-foot industrial building for sale that was listed for $1.8 million. But when the owner found out it was for a cannabis dispensary, the price was increased to $2.8 million.

“When they’re advertising a space for $15 to $20 a square foot, typically they bump it up to between $40 and $50 a foot when it’s for cannabis. They don’t really give you a reason why, they just say it’s because of demand,” Albi said. “I’m not looking to settle on a low-traffic industrial spot, because this is retail driven. That’s the other economic factor that plays into this. If you’re on a main street, you might be willing to pay that premium, but not on these off streets.”

Commercial real estate brokers say there are other reasons why landlords have to reject leasing to dispensaries. Sometimes retail tenants have lease provisions that prohibit “obnoxious uses” within shopping centers and other commercial properties, and though cannabis is legal, it is still considered an “obnoxious use” in lease agreements.

And since cannabis remains illegal on the federal level, some banks and other lenders to commercial building owners won’t approve a cannabis use in any of their borrowers’ properties.

With the deck stacked against them, some dispensary license holders have banded together to advocate for a more level playing field and greater opportunities to open businesses here.

Gahrey Ovalle and Hugo Rivas, two veteran construction contractors from Central Islip, founded an advocacy group called the Long Island Cannabis Coalition, which has a membership that includes about 20 license holders, a couple of processors and cultivators, and a few ancillary businesses.

Both Ovalle, who is partnering with his CAURD-license-holder brother Warren, and Rivas, another dispensary licensee, have struggled to find locations for their prospective cannabis retail shops.

“We were getting a lot of objections from landlords who had space to lease. They didn’t want to entertain a cannabis business at all,” said Rivas, who has looked at nearly 20 potential locations, but was either denied by landlords or the sites didn’t fit the towns’ restrictions. “If I want to buy a property, the prices are jacked up a lot. As soon as they hear it’s for cannabis, they up the price.”

Ovalle, a social justice advocate, helped push for the recent passage of the Clean Slate Act, which automatically seals criminal records for those convicted of most misdemeanors and some felonies. He said that OCM officials have been in conversations with opted-in municipalities on how they can ease some of their restrictions once the OCM’s regulations are finalized.

“We want to work with the OCM to help soften communities and municipalities to open up for retail opportunities,” Ovalle said.

Toward that end, the coalition was a presenter at a “Why Opt In” discussion event with OCM representatives at Greenwood Hall in East Islip this week.

“We’re going to start in the opt-out towns like the Town of Islip and then move throughout the Island and hope to have a few of these conversations,” Ovalle said. “There’s a disconnect between the Long Island constituents who support the cannabis industry in polls at around 70 percent and the municipalities where almost 90 percent have opted out. Clearly there’s a disconnect and we want to help bridge that.”

Ovalle says his group wants to grow the industry responsibly.

“We want to clean up all the misinformation and disinformation around cannabis,” he said. “Most people are just thinking wrong and saying the wrong things because they don’t know any better.”

Besides the anticipated millions in tax revenue, one of the state’s main motivations for its legalization of cannabis is promoting social equity, as the OCM has issued its initial licenses to people who had prior cannabis convictions, many of whom were from disadvantaged neighborhoods.

“This has the opportunity to right a lot of wrongs that have impacted a lot of communities,” said State Assemblywoman Taylor Darling, who represents Assembly District 18.

But Darling also said she understands why so many Long Island municipalities opted out of retail sales and are reluctant to allow dispensaries in their communities.

“I understand Long Island’s hesitation, especially when there’s so much confusion around this new industry,” Darling told LIBN. “This is a living, breathing, moving situation. I hear about changes constantly so I can’t even tell you where we’ve landed at this point. I think New York State is still working out some kinks. So again, I understand where the municipalities are coming from. They don’t want to invest and have to shift things around as far as their resources go for a new industry where things are not concrete yet.”

Darling acknowledged that the large number of unlicensed businesses selling cannabis is impacting the legal industry’s rollout.

“We’re having this big issue with smoke shops across the state deciding that they just want to sell whatever they want to sell as far as product. That is dangerous when it comes to our community,” Darling says. “Regulations are not just to make sure we getting the taxes, they’re there to make sure that we keep our community safe and make sure that the products that are being sold are solid products and safe for consumption.”

Besides shops engaging in illegal cannabis sales, the state’s fledgling CAURD program has been challenged by a few lawsuits that have claimed the program discriminates against entrepreneurs who don’t fall into the previously convicted social equity bucket. The most recent lawsuit, which was filed by a group of disabled veterans, has resulted in a court-ordered pause of new licenses and a hold on current licensees opening new dispensaries.

Osbert Orduna, a Long Island CAURD license holder and co-owner of The Cannabis Place delivery business in Queens, who is also a service-disabled veteran, spoke at a rally outside the Ulster County Courthouse in Kingston last week defending the state’s program and arguing against the injunction just before it was extended.

“While the start-up of the regulated cannabis industry has had its challenges, the CAURD program and its licensees come from all walks of life, all races, all genders, and yes, it does also include service-disabled business owners,” Orduna said. “The plaintiffs do not speak for me as a service-disabled veteran, and they do not speak for all service-disabled veterans. They are not advocates for our community.”

Orduna said he and his partner have invested nearly $1 million in a new retail dispensary in Queens and the court-ordered pause that delays its opening will hurt the business and the more than a dozen employees that will be working there.

“If the TRO (temporary restraining order) continues, it will prevent our dispensary from opening. We would have to continue to pay our lease and other expenses without any revenue,” Orduna said. “This would snuff the life out of our business and also negatively impact our suppliers, who are licensed cultivators, farmers and processors. An injunction would also hurt their families and their communities.”

Meanwhile, cultivators like Ribeiro continue to struggle to find legal outlets for their cannabis products. To assist in that effort, the

OCM has launched a Cannabis Growers Showcase program, which allows cultivators to team up with CAURD licensees to sell their wares at pop-up markets around the state. One of those was held in Brooklyn last weekend, where Ribeiro offered 1-gram pre-rolled joints of some of Harvest’s popular strains, including Strawberry Cough, Peyote Cookies and Wedding Cake.

But the OCM showcases aren’t a permanent solution and ultimately Ribeiro will need more dispensaries to add to his client list in order to really grow his business.

“It’s frustrating for us. There are people who we want to hire,” Ribeiro said. “We want to hire 10 to 15 people and right now I can’t, because we can’t pay them and it doesn’t make sense. So it’s frustrating.”

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