Article by Glen Korstrom, Business in Vancouver
The number of entrepreneurs capitalizing on niches peripheral to cannabis agriculture may rise given new Health Canada regulations that require aspiring licensed cannabis producers to build expensive facilities before applying for a licence.
The fast-growing cannabis-agriculture space is akin to the Klondike gold rush, when many of those who profited were selling accessories.
Services needed include financing, production of genetically cloned seedlings, lighting and more.
Financing cannabis production remains a huge challenge on both sides of the border. Canadian banks are wary about lending to cannabis producers while U.S. banks are federally forbidden to do so.
Stickhandling through legal red tape to finance cannabis agriculture, however, is something that Vancouver’s CROP Infrastructure Corp. (CSE:CROP) has done many times over.
Its template for its loans is to set up a joint venture with a U.S. company whereby CROP, which is an acronym for Cannabis Real Estate Opportunity Portfolio, owns a 49% stake.
Despite that minority ownership, CROP raises and provides the capital for the project whereas the joint venture partner puts in no money.
Instead, the majority partner operates the cannabis-production business and provides CROP with 60% of the profit.
If the U.S. government ever legalizes cannabis at the federal level, CROP’s agreements with its joint venture partners stipulate that it can buy them out for a small fee. CROP’s partnerships are in Washington, California, Nevada and Oklahoma.
“We feel that this is very beneficial for us, as we have financial and business-development experience here in Canada to work with growers, and locals have networks built out and have that special type of knowledge,” CROP’s CEO, Michael Yorke, told Business in Vancouver.
“That’s how we find a synergy between the two groups.”
Although the Canadian Securities Exchange – unlike the Toronto Stock Exchange – allows its listed companies to majority own and operate cannabis farms in the U.S., Yorke said his company’s minority stakes in the American cannabis joint ventures reflect its caution about the continued illegal status of cannabis at the federal level south of the border.
Another B.C. company seeking to profit off cannabis agriculture without becoming a licensed producer is the Okanagan’s Klonetics Plant Science Inc.
It has an application in the queue at Health Canada to get a nursery licence, and its plan is to build out a laboratory, where it will clone cannabis species using cells and tissue culture in the laboratory, instead of using traditional cloning methods.