How Much Does It Cost To Start A Dispensary & Craft Grow
Cannabis Legalization News – Thomas Howard Podcast Featuring Andy Poticha
Tom Howard: It’s clearly 2:00 p.m. on a Wednesday, and so it’s cannabis legalization news time. We’ve had a huge week in cannabis legalization news. Illinois became … hey Miggy … what number is it?
Tom Howard: 11. The big number 11, and we also have a guest joining us. It’s Andy Poticha. Say hi, Andy.
Andy Poticha: Hello.
Tom Howard: Awesome. Well, we’re going to round up the news, and then Andy is going to discuss with us his unique knowledge about something that’s so hot right now. The cost of getting into a cannabis cultivation facility in Illinois. They’re called, The Craft Grows or a dispensary, but first, I think the biggest news of the week was of course that JB Pritzker signed it into law. Now, it’s number 11, but there’s been a lot of other really cool federal news, and Miggy have you heard anything on the west coast? Is there anything that you’re working on for weednews.co.
Miggy: No. Not me, per se. I mean state-by-state has been great also with New York and Texas and Ohio, but those are all more medical and one is decriminalization. The Banking Act.
Tom Howard: The Banking Act. I’m actually going to present to everybody, that’s another thing. So FinCEN did just release, and says that FinCEN publishes these on a quarterly basis, but of course it takes them a little bit of time to get the actual date. This came out this past week, and it’s current as of April 1. When the quarter ends here in about a week for June, these numbers will be updated and then FinCEN will publish that in another couple of months.
Tom Howard: But you can see the sharp uptick right there. Q3 2018. Basically JB Pritzker won, and then maybe this was also some New York thing. They don’t really publish those, but this is the number of banking institutions that are lending to marijuana. Interestingly enough, the thing that you see when you are lending to marijuana a lot, and hopefully my screen was on there, is –
Miggy: Hey, Tom.
Tom Howard: They file nondisclosure agreements and all that other stuff to kind of keep it secret, but this uptick, and a fairly large uptick according to the number of banks that are actually banking cannabis, somewhat corresponds to the stuff that’s been coming out of Congress. This is a really fresh news. This is from the Marijuana Moment, just from like a half hour ago.
Miggy: Oh nice.
Tom Howard: Right. And if you’re not familiar with what’s going on in the federal level, especially when it comes to banking and cannabis, it has to do with two things. One is the defunding of the war against marijuana for everything, not just medical, but state law marijuana. Second is the continuing pushing of the Safe Banking Act, placing it into the funding bills itself. As we get up the fiscal cliff, the fiscal cliff happens every year September 30 because that’s when the federal budget actually ends. The budget that will be passed that will continue to fund, that’s how hemp was legalized. That’s how the first war on marijuana was defunded back in 2014, through Rohrabacher-Farr Amendment just for the medical. It looks like the budget for 2020, plus Illinois going open for business, will really signal it’s time to go. It’s time to lend to cannabis businesses, and I would not be surprised if New York next year legalizes it. I think 2020’s going to be the biggest year for cannabis legalization ever. What about you, Miggy?
Miggy: No, I totally agree, especially since the House agrees to protect the legal states. That’s a huge step towards legalization, like you said. Just like jury nullification but in a financial way of how to attack prohibition.
Tom Howard: There’s jury nullification. That’s great, but you’re already being prosecuted. You’re on trial. Imagine if you could just stand up during a trial and be like, “Excuse me, Your Honor. There’s no money for this trial.”
Miggy: Yeah, yeah. That’s for sure. Defunding the war on drugs. I think that’s the best way to put it. FYI, when you had the chart on the screen, on YouTube, I was a predominant screen.
Tom Howard: That gets back to, I really need, and if anybody’s out there that is majoring in YouTube, and also social media SEO and has a paralegal degree, I will hire you because I am doing this all myself. And it’s sad. Somebody could be managing this, and then I could get back to work for the clients, which are just blowing up my phones. It’s going great, but that’s one of the reasons why we brought our guest on. He has actually designed and built cannabis facilities in Illinois. Andy.
Andy Poticha: Yes?
Tom Howard: How many of these facilities have you built?
Andy Poticha: In Illinois, we have completed four dispensaries and one cultivation, and are working on one cultivation and another dispensary at this point. That’s just in Illinois. We’ve been doing work in other states outside of Illinois as well. We’re working on our 8th state, actually.
Tom Howard: MSO
Andy Poticha: I’m sorry?
Tom Howard: A multi-state operator.
Andy Poticha: Multi-state operator, exactly. We didn’t intend to be. Our whole entry point into this has been interesting. The fact that as a result of getting into this vertical we’ve been able to be a national company pretty much overnight, actually.
Tom Howard: When did you get into the industry?
Andy Poticha: We got into the industry about five years ago now. One of our commercial clients called me up one day and said, “Hey, I need your frequent flier number.” And I said, “Really?” I said, “Why is that?” And he said, “Because we’re going on a field trip.” And I said, “Okay, you want to clue me in as to what it’s for?” He said, “Yeah, we just won three medicinal cannabis licenses in Illinois, and I know that we don’t have any idea what we’re doing, and I know you don’t have any idea what you’re doing in this realm, so we’re going to figure it out together.” And we have. We successfully designed and built three dispensaries in Illinois, one in Mokena, one in Morris, and one in Deerfield.
Tom Howard: I want to share these, because I saw your website and with a lot of design builds that you’ve talked about, and I want to discuss those more, it looks like you’ve refurbished very ancient buildings. Not ancient. Like hundred year old buildings, I guess.
Andy Poticha: So one of them, yes. One of them was a restaurant that had – the picture that you’ve got up on the screen right there.
Tom Howard: Is that this –
Andy Poticha: Yeah, that’s this one right there. That bar was the only thing that was salvaged out of this restaurant. We created our experience around that. The difference between what this particular client was looking to accomplish versus what was out there, which was really the point of the field trip, was what can we do that would be different than everybody else. Clearly when we started this, and up until January 1 it will still be for medicinal reasons, we looked at it from the perspective of what if your 90 year old grandmother came into a situation where it was recommended to her that this medicine would be helpful. You’re talking about somebody, Illinois, even though we’re a blue state, we’re typically conservative in our thinking and we don’t really change rapidly.
Tom Howard: Even though with Chicago, I guess you’re right. You’re even still more conservative considering the strictures and constraints they put on their adult use bill.
Andy Poticha: Correct. Correct. So we looked at it from what kind of experience would your 90 year old grandmother be able to deal with and have a successful outcome if she needed this medication and she came to a facility to get it. We knew after seeing what was out in Arizona and Colorado, which was the destination of our field trip five years ago, that most of what was out there at the time was either a doctor’s office or it was an Apple store. Neither one of which would be very appealing to a 90 year old person who only knows of cannabis as seeing people get arrested for and on the nightly news. So we decided that given the premise that our particular client was patient-centric and not just product-centric, that we would try to create an experience for them that would allow them to make sure that clients coming in would feel comfortable. That they’d be able to walk in and not feel like they had to pass such a security, even though security is very important and very much required in Illinois.
Tom Howard: In that vein, I want to share this picture. You said the 90 year old grandmother, and this reminds me – she was Swedish. This reminds of me a very old, beautiful building right here, and what is this that we’re looking at? Is this one of the dispensaries that you’ve created?
Andy Poticha: Yes, so that’s the outside of the photo that you showed with the bar on the inside. That’s a different one. All of the dispensaries that we’ve done in Illinois have been in existing structures. Two of them were inside commercial strip centers, and two of them were free standing buildings. The one in Litchfield, Illinois, which is about 45 minutes south of Springfield, that’s a free standing building that we gutted and did some cosmetic work on the outside.
Andy Poticha: Then the one that you just showed that was green, that was the one that was the old restaurant with the bar. It was actually a red building that looked more like a barn, and we literally just filled in some blanks and changed some openings that didn’t really belong with our design, painted it up, and really preserved the inside, which did a couple of different things. A, it gave the experience still for comfort for the client, and B, outwardly, which was very important to the client and to us, it didn’t really change the image of the community. The community was used to seeing that restaurant there for years, and basically all they see now is the fact that it changed colors, and the sign’s got a different name on it.
Miggy: Hey Andy, besides the dispensary, how many grow operations have you guys helped build?
Andy Poticha: In Illinois, we completed one. We’re in process of working on a second one, and we are in phase two of the one we completed. We’re drawing that so we can build that hopefully before the first of the year. That’s just in Illinois. We’ve done grow facilities and are working on phase twos in Maryland, in Ohio, in Pennsylvania. We’ve got a few under our belt.
Miggy: For me, I think a dispensary is just like a store front, so pretty architecture and building is always beautiful. You can appreciate it whether it’s a spa setting or your home. For me, I think the grow facilities are going to be the hardest. One of the most challenging parts of this whole industry, which is a great niche for somebody like you who has previous HVAC experience and all this other stuff. Do you guys provide like a year long support, because depending on climate, depending on region, you’re dealing with different humidity issues and different other types of environmental issues that you really try to contain your plant the best you can.
Andy Poticha: Sure. Let me comment on two things. First of all, at this point with the requirements of medicinal dispensaries and what I am believe is likely going to be on the recreational side, it’s a little bit more than someone who knows how to do a good tenant finish out because there are security factors that go into this.
Tom Howard: A lot of security factors.
Andy Poticha: Correct.
Tom Howard: The law itself.
Andy Poticha: Yes, especially in Illinois. Then of course there’s operational function. Every operator works a little bit differently from how a patient’s greeted to how they get the medicine to how they leave, and that’s just from the patient’s side. Then you’ve got the entire situation of how medicine gets brought into the facility, where it gets stored, how it gets inventoried, when it gets inventoried, how it gets kept track of, and that’s just from the medicine standpoint.
Tom Howard: You’re very familiar and skilled with this, because all of these are built into the hundreds of pages long law that Illinois has passed, and these are all detailed requirements that you need to put with the application that you submit to the state. If you’re approved for these licenses, they become a part of the license, you have to follow them. So you have a lot of familiarity with building each aspect of the facility so that it is compliant with the law?
Andy Poticha: That’s correct. Every law in every state is different. There are states that require that what got submitted in the application gets built to the letter of those drawings, every detail. You can’t even move a door six inches without letting them know the reason why you’re doing it. Then you’ve got some other states that give you some leeway based on existing conditions, based on nuances and changes in the law, based on nuances and changes in their procedures in how they enforce the law. The thing about all of this, which is interesting and yet it’s also challenging, is that everybody’s figuring this out as we go because the industry is so new.
Tom Howard: It becomes a problem, though. I want to talk about the cost as well, because I’ll have clients, they’re always like, the easiest thing to price in the cannabis industry is at the retail level where you’re going to be selling your grams. But then they talk about, “Well, how much is it going to cost to get into business?” And that’s something I hope we can discuss here in the future, but it’s so difficult to say, “Like, look. I don’t know how much it’s necessarily going to be, because you need this and this and this and this and this.” And most businesses, they open, they start doing business, and then if they need an employee handbook or these types of security policies, but they’re all important.
Andy Poticha: Right, right. Let me put the cost discussion on the side for a second because I want to comment about the one question with regards to how we handle our clients and service them. Yes, we have lots of experience doing these types of projects based on the requirements and the size of the projects that they are. We are very different in our approach to how we look at our clients. We have always been client-centric, and what that means is that we want our clients to look at us as their design-build partners. The way we have been set up from the inception of our business has lent itself to that type of relationship. In that, we look at every project not as a one time project, how much money can we make, finish it, go on to the next project. We look at every project, that we’re offering our client this partnership so that they can go on and do what they do best, while we do what we do best, and the way we have figured out that we can sit on the same side of the table as them is based on the way we operate.
Andy Poticha: So we don’t charge, as most architects and most contractors do, a percentage of construction for these reasons. You have no incentive to finish a job on time and you have every incentive to make it cost more money. So we said if we’re truly going to be partners with our clients, we need to have some skin in the game, so we’re going to be offering them our process and our intellectual property and we’re going to say that the project’s going to take this long and our fee is going to be a stipulated sum based on how long that’s going to take. So it doesn’t much matter to us if the project is sixty thousand, six hundred thousand, sixty million, or six hundred million, if it takes six months to do, our fees are going to be the same. Our clients then understand that we now have an incentive to finish it in a timely manner in the time that we’ve agreed to, but just as importantly, we have the incentive to make sure that our client is getting the most bang for their buck without us having the incentive of trying to sell them something more.
Andy Poticha: This is one important paint, and then I’ll get to sort of the reason why I brought that up. In our project in down state Illinois, our cultivation, we found out that it was in an enterprise zone. Client had no idea.
Tom Howard: Zoning is huge. That’s something that I’m going to be doing videos on because it’s big, so it looks like you came up smack dab right into the middle of it.
Andy Poticha: When we found out it was an enterprise zone and realized that our clients could obtain all of the materials tax free, we immediately went back to our client and said, “We’re going to rebate all of this money to you.” We saved our client over a quarter of a million dollars in monies that they would never have known if we didn’t bring it to their attention, and they would never have been the beneficiary of it if we weren’t as open and transparent as we operate. So, the point of my whole little schpeel here is that we want our clients for life. We develop long standing relationships, so these clients that started out with these three dispensaries here in Illinois acquired a dispensary and cultivation in down state Illinois. We did those. Acquired a cultivation in Maryland. We did that. Acquired dispensaries in Maryland. We did those. Then Ohio, then Pennsylvania, then North Dakota.
Tom Howard: You have a blueprint for them to have growth, then you have more of a partnership aspect to them, because cannabis being such a team sport that it is, it’s fascinating and amazing that you’re able to partner with them to bring them greater success through that transparency and honestly in a gold rush industry. Is it easier to trust somebody in a gold rush industry or in a highly regulated industry where everything is already basically a commodity and priced?
Miggy: It’s definitely a gold rush. I just got a phone call from a friend of mine yesterday about hemp. He’s actually going to invest $20,000 in a hemp farm, and they’re going to do hemp-crete. He knew that I did the activist thing on the side and had some questions about the industry. It’s just kind of funny because this is like common knowledge to you and I. Hey Tom, so I don’t know if you remember this guy?
Tom Howard: I actually remember the book above it, the safer book. That was by Mason Burke, the guys that eventually started MPP, or the Marijuana is Safer than Alcohol, and they really spearheaded the Colorado legalization ten years ago.
Miggy: Yeah, I mean right now it’s a prime time. We have a knowledge base which is kind of the same as saying, “The sky is falling,” for the past 20 years, and now they legalize hemp and everybody wants to get involved somehow. Or cannabis, the stigma has been slowly going away for the average consumer. I’m talking to you in my six figure lab, and you’re talking to me from your office, and the stigma’s gone. So much more potential for this gold rush industry, and definitely you want to get with somebody who’s been there and has trust. That’s why I think with the working in construction, that vertical transition, there’s so much more vertical things that can be applied in cannabis that people just don’t understand.
Tom Howard: Andy, have you seen any of the gold rush kind of like with hemp coming into your business as providing these services for adult use companies?
Andy Poticha: Interestingly enough we’ve had no inquiries from anybody yet specifically about hemp. Most of the inquiries outside of this particular client, because again we never really envisioned that we were going to do more than three dispensaries. As this client started to grow, and as we went along with them and realized that this was a great opportunity for us. There are other companies on a national level that have contacted us and we’re doing work for. We do get inquiries periodically because people will see our website, people will hear a podcast, people will read an article that we’ve been in. We’re relationship guys. We’re not going to be right for every client, and every client’s not going to be right for us.
Miggy: Andy, do you get any push back when someone on the board said, “Hey, let’s get involved in the cannabis industry. Let’s do grows and dispensaries.” Was there any pushback within your company on that?
Andy Poticha: That’s a great question, actually. There was absolutely none. The funny part about all of it is if there was going to be any push back at all, anybody that knows our entire group, they would actually have thought it might have been me because as big of a proponent, and I am a huge proponent from the medicinal side, I’ve actually never tried the product. That’s for a reason. What’s that?
Tom Howard: It’s this thing. It’s called cannabis deficiency, and we’re not really sure if it’s a real thing, but it’s a thing.
Andy Poticha: Yeah. Back when I was in college, the only way to get cannabis, which was never called cannabis back then. It was either pot or marijuana or weed, was to smoke it.
Tom Howard: We’ll go to a bar. We can discuss.
Andy Poticha: Exactly. I wouldn’t smoke anything, so I’ve never tried it. People who know me and knew me in college, for them to know that I’m involved in this industry, certainly at this level, I know that they’re chuckling. Because I think that everybody that I know in my office and everybody I know that I’m associated with, friends and family, has done enough research on the medicinal benefits to cannabis that it’s the biggest no-brainer. Then, of course, you can throw in the recreational part of it, which yes, and it’s a yes and. The medicinal part of is just – I’ve got a son that’s got ADHD, and he’s been on every synthetic you can possibly be on, and I can’t wait for it to get recreational here so that he can get off these chemicals, get on something natural, because I know what the benefits are. They’re incredible.
Tom Howard: Facilities, so you kind of know what’s going in the flower itself, which is real interesting. One of the things about the regulations that appears that the closer that you get to the plant and the flower itself, and how it works and what people say about it, the quicker your prejudice is of considering it marijuana, which basically just under the law now means cannabis with THC present, just goes.
Andy Poticha: Right. I think when I first started reading up about it, Time Magazine did a whole expose on the history of cannabis, which if you haven’t read it, I’m sure you probably have, you should read it because it’s fascinating. From the time it came to the United States, and the campaign against it, and it’s amazing how successful for so many years it had been, when you look at that in relation to prohibition and alcohol, which didn’t nearly have the same success as restraint and the legality of it that cannabis has. I think that it’s asbolutely, use the word gold rush, it’s a snowball effect. At this point, the horse is so far out of the barn. It’s going to happen.
Andy Poticha: It’s exciting for a lot of reasons. For me, having been involved in the design and construction industry for 29 years and have done everything from, and still do, from high end residential to boutique commercial, to other types of commercial value add type work, it’s really been exciting because you’re getting to work with people that are incredibly smart. They really have knowledge about what their product does. They have knowledge about what kind of environment their product needs to live and grow in. Really, our function is to be facilitators and help them articulate that on paper, and ultimately, in reality, that which they can’t do themselves. We stay in our lane, and we try to be good listeners. It’s just fascinating, because all these new products and all these new ways to use the product has just been re-invigorating and exciting.
Miggy: I think it’s great. We’ve got a lot of comments right now. People are impressed that you’ve talked about getting medical for your son. Just the fact that you’ve come to that realization where you’re like, “You know, I’m tired of pumping all of this crap into my kid. Why not try something normal or organic?” We’ve been living in such a mindset of something has to come in a bottle. Why does it have to come in a bottle to try?
Tom Howard: Some of the products themselves, the packaging is now getting a lot more artsy and novel, but I remember the first few times. It would look like it was coming in a bottle. Of course it had to be childproof, but you know.
Andy Poticha: Right.
Miggy: Why not have a holistic approach to anything? Like you were talking about with the lack of THC, it’s just like lack of vitamin C, you get scurvy. The lack of THC, we get a little edgy.
Tom Howard: We do have a case that shows that maybe this whole cannabinoid deficiency is a real thing, but who knows.
Andy Poticha: I think that’s really an important comment as far as the organic nature of this, because I think we’ve seen the whole shift in the food we buy. We see so much about all of the chemicals that go into food, and people are buying food in restaurants that are farm to table. They’re buying food in grocery stores that are organic. Then, of course, thrown in the whole what chemicals do to you, like the whole opioid crisis, and it makes it a real easy shift for people’s mindset to say, “Hey, you know what? Let’s see what this is all about.” The stigma is gone or going away.
Miggy: Yeah, man. Let’s do it.
Andy Poticha: Yeah, let’s do it.
Tom Howard: Now one issue that I thought might be problematical for the people that want to get into the industry would be not knowing, not having the depth of knowledge that you have from your experience building all of these things. So if we could build like a spec craft grow and a spec dispensary, and then we could grow hemp flower in it. And we would grow the most beautiful hemp flower, just like they grow the most beautiful cannabis with THC flower in these things, but we would use this facility so that we could provide tours and then talk to would be entrants to the industry and we’ll call it Dank Supply, let’s say. You’d come down and you’d explain to them, “Well, this is how much it will probably cost. This is how we do it for refurbishing purposes.” If you were going to help me, and it’s Design Construction Concepts, that’s right?
Andy Poticha: So Design Construction Concepts is our high end residential and boutique commercial vertical. Our cannabis vertical is Cannabis Facility Construction. We’ve got, as I think we mentioned, that wasn’t a vertical, we had two verticals – the Design Construction Concepts and Mosaic Construction.
Tom Howard: Vertical, you guys just spoke of, and I’m like, “All right, I need a cannabis facility. I’m going to use you for my plans for the license. How much should I have set aside to open a dispensary, let’s say?”
Andy Poticha: The thing about both dispensaries and cultivations is it really depends on how big or how small they are because there are things that you can leverage and amortize over footage that really affect the per square foot cost. For instance, you need a certain kind of vault for the product that has certain kind of security. Now if you are taking that vault and putting it in a 1500 square foot dispensary, the cost per square foot is tremendous, well, the cost per square foot is tremendous in relation to say a 5,000 square foot dispensary. I can tell you that we’ve done dispensaries that are as small as 1,500 square feet for a couple of three hundred thousand dollars, and we’ve done them as large as 5,000 square feet and they’ve been nearly a million dollars with the same program. You can do the math per square foot. I don’t like really quoting square foot prices in general because for two reasons. A, they’re really not ground up structures, so you’re talking about existing conditions you have to deal with, which is no different than any remodeling you’d do, whether it was residential or any commercial. And B, you’ve got these challenges of if a vault costs 50 grand, it’s costing 50 grand whether its in 1,500 square feet or whether it’s in 5,000 square feet.
Tom Howard: The actual regulations themselves really do dictate a lot of the cost for that purpose. That’s refurbs. The vast majority of them out there are probably refurbs. I’ve never seen any cannabis dispensary that is anything really besides someplace in an existing commercial real estate building. I have seen more along the lines of construction when it comes to the cultivation space. Have you built any cultivation, or has it all been refurbs. If so, what have you been refurbishing?
Andy Poticha: That’s another good question. They’ve all been refurbs. Basically our clients identified property that was in the right area that was distressed, not necessarily from the physical perspective, but from the financial perspective. So they were able to get manufacturing facilities. So the one down in down state Illinois was actually a roller skate wheel manufacturing company and so that was interesting. The one in Maryland and the one that we did in Pennsylvania, those were machinery manufacturing companies. They have ranged everywhere from brick and block warehouse type structures to basically what I would call a butler building, which is a steel erected building that you’d see, well, they call it a butler building because of Butler Aviation many, many years ago. That’s what they would build airplane hangars out of.
Tom Howard: Oh! Airplane hangar. Now I’ve learned something. Thank you very much, Andy. Butler Building means where they build airplanes, which makes no sense! I was thinking it’s like a butler’s pantry and they’re making toast.
Miggy: With the facilities, though, is your biggest issue with ventilation and what not? Because that’s a huge thing with grows. You’ve got to have constant ventilation. I know some places have reverse vacuuming where the facility where the grow is at will be where when you open a door it all comes out, the air pressure. Is that one of your biggest issues with the grows in a new spot?
Andy Poticha: Yeah, so we’re basically building buildings within buildings, and that’s been the interesting thing. We’ve learned a lot. We’ve learned a lot along the way, and that is that we understand, especially on the processing side because all of the cultivations that we’ve done have been a combination of cultivation and processing. The humidity control is just as important as the air quality control, certainly on the processing side as I’m sure you both know. It’s been a challenge for us to be able to get the right equipment into place with the existing structures that we have in order to be able to create that environment. A lot of that, too, is that, and I think that this is the most fascinating part about the business, is that processors and growers, I equate them really to chefs in a restaurant. They know what they want to get out at the end of the day, and they’re going to tell us what conditions that we have to account for in order for them to be able to produce the products that they actually know that they can. It’s for us to figure out how to do that with equipment that’s out there, with engineers that are out there.
Andy Poticha: As I’m sure you’ve both seen and heard, just as everything is changing so rapidly on the licensing end, it’s changing just as rapidly on the technology end. There are new products coming out all the time.
Tom Howard: When you’re creating these, I’ve seen machines that are operating the entire facility, like all of it. Like a very, very sophisticated computer, kind of like Hal from Space Odyssey that’s controlling the entire space ship. What types of stuff are they installing in these things that are taking care of the automation? I remember that as actually one of the parts that was asked in the Illinois Craft Grows, and it’s supposed to be in your application. So how do we address that?
Andy Poticha: It’s interesting because when we first got into this, and we first met the initial grower that started with our client, he basically said that he had gone into a bunch of facilities that looked at it from not the grow side, but from the high tech efficiency manufacturing side. They basically tore out a lot of that type of stuff because there’s something to be said, especially in a craft grow, about the human interaction with the plants. The plants are like people, right? Not every plant can take the same amount of nutrients. Not every plant will take the same amount of water or react the same way to lighting. So you have to be in a position where you are able to monitor it and deal with changes as you see them. Now, obviously when you’re talking about 50 or 100 thousand square foot grow, you either have to have an awful lot of people, or you have to have some help. So there’s a combination between what is being used for control, and that is setting temperature controls and readings so that you don’t have to be on site all day and all night to monitor. Of course those are alarmed when things get out of sync, so that somebody can react to it right away.
Andy Poticha: Same thing on the fertigation side. Same thing on the lighting side. It’s been really interesting and there are companies that are literally developing as we have this conversation.
Miggy: Here in Seattle, and I’m not so sure in Chicago it’s already happened, but we have a Canna Con. It’s an annual convention of people with different trades who want to be involved in cannabis. I’ve seen products, like apps like you’re talking about that monitor the temperature and will give you alerts. Are you using these guys? Are you contracting them out, or are you just installing their equipment into part of your process? Or are you involved that deep into it?
Andy Poticha: We are, and actually our outlook about this is exactly the way we got into it. We weren’t the initial people that got into cannabis, so we had the good fortune of seeing all of the mistakes and challenges and failures that people before us had made. We are trying to do the same thing when it comes to equipment, that we don’t want to be the first to be trying something out without having some kind of a track record, even if it’s just very, very, in a very short span.
Tom Howard: You’re Apple, not Samsung. You let Samsung make the new novel stuff, great. Your cell phone folds. You wait and you see how it works, and then you employ those techs.
Andy Poticha: Yes, because you know, like I say, there’s new equipment coming out all the time, and that’s not necessarily standalone equipment. There are companies out there that are saying, “Okay, there’s the particular piece of HVAC equipment that’s been on the market for years, and these are the challenges with it. What can we do to make it helpful for our industry by putting an add-on on it?” It’s almost like an app that helps an app, per se. We’ve been very interested in that. We work on this concurrently. Our client does research. Our engineers do research. We do research, and we talk about these things and really, really drill down into, okay, if we’re going to try this, what really is our risk? Economically? Physically? How does it affect our labor force? How does it affect – getting back to the conversation we had earlier, you’ve got a brand new product, and it’s significant part of what you’re using for processing or for grow and it breaks down. Where do you get parts? Who’s got experience to service anything like that? We try to really look at this thing holistically and take very calculated, conservative risks as to what we would be willing to advise our clients.
Andy Poticha: So we might just take a room. We might take a series of rooms and try something out so the whole facility isn’t subject to oh my god, if it fails, not only do we have the expense of replacing it, but we can’t do anything.
Miggy: Speaking of your small facilities, like the little experiment. Is there any tech out there that you’ve worked with? So I saw something a while back, probably about a year ago, and I thought it was a great idea where the lights. They incorporated lights and it had to do with the heat and the airflow coming through that. They used that heat to help maintain the air. Is there something new and weird that you’ve worked with that you’re like, “Wow, I didn’t see that, you know, coming.”
Andy Poticha: Not yet, but we’re in process. The facility that we’re working on in Maryland has got a system to be able to help the major- So we’ve been using AON systems, pre-packaged units, for our heating and cooling, specifically our cooling of these rooms. They’ve been challenged and AON made by Carrier. They’ve been challenged, they’ve been around forever, obviously Carrier has, and AON units are used in big buildings, especially schools. They’ve been challenged with being able to create an environment where you can get the humidity down as far as you can with say, for instance, a chiller system, which is much more building-centric versus local, which is one of the reasons why our growers insisted on having pre-packaged, forced air HVAC systems. Because if a unit goes down, the whole building’s not going down. You’re able to isolate that. One of the systems that we’re just looking into now is a system that uses salt. It’s a desiccant system, actually, that is able to work with- I’m sorry?
Miggy: Desiccant. It’s a fancy word for –
Andy Poticha: It’s a fancy word for being able to run air actually over salt coils, and being able to pull the air out of, pull water out of the air. We’re using that in conjunction with the AON system, and so I’m really excited to see how that works because it’s something new. It sounded sort of so overly simplistic that it was too good to be true, but it’s building a track record. It’s actually not made here in this country. It’s made actually in Turkey, and we are, I’m very interested to see how it’s going to work.
Miggy: That water that’s being extracted out, is that being reused or is it just being dumped out?
Andy Poticha: It’s actually being reused.
Miggy: That’s pretty awesome. What ratio?
Tom Howard: That’s in the law for, it’s your water recycling program. This makes perfect sense that this system would be explored for its efficiencies that it brings, but that’s really cool.
Miggy: Yeah. We’re about to hit our hour mark, dude. Buddy.
Tom Howard: Oh no, let’s wrap it up then. We’ve got about five minutes before you’ve got to get back to the office. So if I were just going to try to get a craft grow, and I’m going to be doing a refurb for a craft grow, and I’m not going to be fancy. I’m going to let my grower do his thing or her thing. How much do you think it would cost to put together a craft grow? Craft grows in Illinois have to be less than 15,000 square feet and only 5,000 square feet of I want to say flowering space.
Andy Poticha: Right. So if it was only a craft grow and it had no processing and it was of that size, I think you’re probably looking at somewhere in the, depending on existing conditions, so this is a real shot in the dark range I’m going to give you. It’s probably somewhere between two and a half and three and a half million bucks is probably what I’m guessing at that size.
Miggy: And you’re including the security systems, HVAC systems. That’s a lot of bang for your buck, right?
Andy Poticha: Yeah, I’m including everything that it would take from the beginning of it to the end. From security to HVAC to your flower storage to your dry rooms, your trim rooms, your packaging rooms, everything else, security area, everything else that would be involved in that, yeah.
Miggy: That’s pretty awesome.
Tom Howard: Those are all really, really necessary. All those types of security and all those thing, those are implicit in the actual application itself, so you can’t get the license unless you make those types of disclosures to the state that that’s actually what you’re building and that you intend to buy all that stuff. Then you have to prove to the state that you have the financial wherewithal, so it’s what you can do.
Miggy: Andy, I’ve got one thing for you though. In Washington when we went recreational, there wasn’t a lot of stipulations into the structures until after people already got their permits and whatnot. Have you found yourself doing a lot of damage control because you started working on this, and now the state requires a new thing? Is there a lot of that going on with you?
Andy Poticha: There’s actually not. All the states that we have worked in for the most part have been very clear with what’s required. What hasn’t been so clear is depending on what state you’re in, how much leeway they give the inspectors on interpretation. We actually just ran into this in two different states. We ran into it in Michigan where there was a dispensary that we did and there was a real discrepancy between what a commercial space is required to have, which is access from anybody walking in off the street to a public bathroom, verus what the laws are. There was a huge discussion and the state inspector, who inspects buildings, actually relented because the cannabis law had stated that you can’t even be allowed into the facility unless you already had a card. From the recreational standpoint, obviously that’s a challenge, but from a medicinal standpoint, they actually won out.
Andy Poticha: Now in Ohio, I can tell you, most of the inspectors out there have been given a lot of leeway for interpretation of the law. So that’s been challenging. The law is gray, and they’re saying it’s charcoal gray and you’re saying it’s blue gray. We have been forced, and my client has been forced, to adapt certain things. Although, we were really lucky. It was really mostly only in regards to two things with our client. One, holding them to the letter of the law as to what they put on their application, and two, security, a security issue.
Miggy: That’s always a big issue no matter what state you’re in .
Andy Poticha: Right.
Tom Howard: And it will continue to be, until more people have experience with this. Well, I don’t know. Do you think we’re ever going to get in an Oregon situation with these types of regs where we are being so restrictive as to how they can grow this plant? Or we ever going to be trying to, have you heard what Oregon’s doing, guys?
Miggy: As far as the interstate stuff?
Tom Howard: They’re trying to export, interstate commerce, a federally prohibited substance. Oregon signed the law this week. They’re going to start interstate transportation and export of their oversupply of cannabis from Oregon.
Miggy: Now what happens when the goverment creates their own law like that when they can do interstate acceptance?
Andy Poticha: I tell you, I don’t want to be a truck driver trying to deliver across the state line. I can tell you that.
Tom Howard: Oregon sits in there and then the states to the north, the south and Nevada, so they don’t have to break the plane of anything that’s a prohibitionist state. I think that’s how they’re going to try to make the case. Because it’s those states, and those are the state laws, if that federal prohibition goes through at the end of this year to expand the defunding of the Department of Justice not just for medical marijuana for state laws, but for all state law marijuana, it could work. But anyway, I really want to thank you Andy Poticha from the Cannabis Facility Construction Company for coming and just educating us.
Miggy: Yeah, it was good.
Andy Poticha: I appreciate it. I really enjoyed it, and glad to be on anytime that you’d like. Glad to come back.
Tom Howard: We have a lot of questions. Now that I know the ballparks on there, I can hear the clients right not going like, “I have to raise how much money?” Like, well look guys, I realize it’s new entrance. Social equity. But any business that you start has an upfront cost, an overhead. Then you talk about real estate, and then you talk about the regulations involved with the letters of the law, and boy. It can get expensive.
Andy Poticha: Yeah, and I’ll tell you the one parting shot I would give you is that anybody wanting to get into it needs to make sure that they’re funded properly, because we’ve seen people, even in Illinois when they first got into it, they didn’t fund themselves enough. They didn’t raise enough capital, and they were forced to either sell to somebody else or just close their doors. New business or not, every business today requires a lot of capital and specifically when you’re manufacturing something or you’re selling something retail, you’ve got to make sure that you’ve got enough capital or it’s going to be a very short life.
Tom Howard: Very true. Anything to add for the good of the order, Miggy?
Miggy: Nah, just come back next Wednesday as we shoot the shit on Weed News.
Andy Poticha: Absolutely.
Tom Howard: Weednews.co is your website and I can’t wait to hear about the next article. Mine, you know, you just got to Google Cannabis Lawyer and then go to my website Cannabis Industry Lawyer and you’ll find me. I’m sure if you Google Cannabis Facility Construction you will find this beautiful website and all their work. Thank you very much for joining us, and we’ll see you next time.