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 small plants, 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.
“Right now, in the cannabis industry, the majority of people who you hear are cloning are using what we call mothers and clippings,” Klonetics CEO David Brough told BIV, describing a cultivation method of putting plant parts into soil.
“We have a much better scientific approach,” he added. “We create the actual [plant] – we take the mother [plant] and we create a tissue culture of it. For example, you could hold upwards of 100,000 cells in a petri dish. Imagine trying to hold 100,000 clippings. We create a perfect genetic replication of a plant.”
Brough aims to be in full production and have sales by next spring. To make that happen, he is building a 13,000-square-foot lab, a quarantine facility and a 75,000-square-foot greenhouse, where he will grow plants from the tissue culture.
He sees good news in Health Canada’s new regulations in that he believes that his own timelines will be moved ahead and that approvals will happen faster.
Lighting is another necessity for growers.
Light installers, who have previously eschewed greenhouse work, are starting to give the niche some thought.
Metcalfe Lighting owner Marty Metcalfe told BIV that his Port Moody-based company’s bread and butter since he founded it in 1985 has been commercial work for clients such as car dealerships and shopping malls.
His team has for decades, for example, installed lights at the mall now known as the City of Lougheed.
“We’ve had some interest in [providing and installing lights to cannabis producers] and had some discussions,” he said.
So far he has not done that work, but the legalization of cannabis is providing opportunities. •