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Interviews

Blank Rome State of the Cannabis Industry Panelist Interview Series: James Daley, Needham Bank Senior Vice President and Director Structured Finance

Max M. Borg —

We are looking forward to welcoming experts and industry leaders from across the country to the Eighth Annual State of the Cannabis Industry Conference. Our panelists and speakers will offer their unique strategic insights, experiences, and expertise on the cannabis industry.

To continue our interview series, we are featuring a new interview with banking industry veteran James Daley, Senior Vice President and Director Structured Finance at Needham Bank. The new Structured Finance team provides customized financing solutions of $10 million or more to support the growth plans of businesses headquartered primarily in Massachusetts.

  • Can you describe Needham Bank’s role in the cannabis industry and your role at Needham?

Needham Bank is providing senior secured debt facilities, ranging in size from $3,000,000 to $75,000,000. This capital is used by both direct and indirect cannabis companies for a variety of applications.

At Needham Bank, I manage all of Commercial and Industrial Banking (lending and treasury) and all of Cash Management for the Bank. Cannabis lending rolls up through one of my teams, Structured Finance. 

  • Does Needham Bank target particular cannabis businesses to lend to? What are some common features of the businesses that Needham invests in? 

For lending inquires we are focusing on Multi State Operators (“MSOs”) and large regional direct and indirect cannabis companies. We are staying away from Single State Operators. For treasury opportunities, the Needham Bank team is looking to support operators that have an up-and-running business, slightly past the infancy stage, with a primary focus similar to the lending strategy for large scale, regional, and MSO operators.

  • What are some subtle “red flags” that might deter you or your team from investing in a potential opportunity?

When we see business plans that set unrealistic expectations. Many operators new to the industry think they will be profitable overnight. That is hardly the case. 

  • What would our readers find surprising about lending to cannabis businesses? 

The debt instrument is really basic and straight forward. It is not complicated at all.

  • What are some important lessons you’ve learned as a lender in the cannabis industry, and how have those lessons impacted your team’s current strategy?

Don’t overspend! Operators are spending way too much money to get their business off the ground. Keep plans simple. Focus on operations, focus on margins. These facilities are NOT real estate loans. They are operating businesses that require constant production, oversight, and management. We look at construction budgets very closely, and we upgraded our construction engineer program to take a finer look at budget and building processes to ensure clients are not overspending, are staying on budget, and to ensure they are staying on time.

Register now for Blank Rome’s 8th Annual State of the Cannabis Industry Conference!

Join us in person or via live stream on October 21, 2024. RSVP here: bit.ly/3AJprRA

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Interviews

Blank Rome State of the Cannabis Industry Panelist Interview Series: Patrick Kim, Altmore Capital Co-Founder and Managing Director

Max M. Borg —

The Blank Rome team is thrilled as we gear up for the Eighth Annual State of the Cannabis Industry Conference!

We are looking forward to welcoming experts and industry leaders from across the country who will offer their unique strategic insights, experiences, and expertise on the cannabis industry.

In anticipation of the conference, we will be featuring interviews with several of our panelists. These conversations will provide a glimpse into their diverse backgrounds and perspectives, and give our readers and conference attendees a preview of the compelling topics we will be showcasing at the conference.

For our first interview, we sat down with Patrick Kim, co-founder and managing director of a leading provider of capital to the cannabis industry, Altmore Capital. Prior to founding Altmore Capital, Patrick was a partner at the Williams & Connolly law firm in Washington, D.C. At Williams & Connolly, Patrick represented a variety of major financial institutions and investment funds, including several top-tier private equity firms, in a range of commercial litigation matters and government investigations. Patrick offers a unique perspective on financing within the cannabis industry due to his legal background.

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Legislation Regulatory Compliance

Massachusetts Superior Court Holds That New HCA Law Does Not Apply Retroactively

Max M. Borg —

On June 10, 2024, Associate Justice Jeffrey Karp, of the Massachusetts Superior Court, Essex (the “Court”), issued an important—and, to many licensed cannabis businesses in Massachusetts, surprising—ruling in the case of Haverhill Stem LLC vs. James J. Fiorentini, that the new Host Community Agreement regulations (See Chapter 180 of the Acts of 2022, “An Act Relative to Equity in the Cannabis Industry” (the “New HCA Law”)) promulgated by the Massachusetts Cannabis Control Commission (the “CCC”) do not apply retroactively to the Host Community Agreement (the “Stem HCA”) entered into in 2018 between the City of Haverhill, Massachusetts, (the “City”) and Haverhill Stem LLC (“Stem”), a licensed cannabis dispensary.

Therefore, the Court held that the Stem HCA is governed by the language of G.L. c. 94G and 935 CMR 500 et seq. as in effect at the time of entry into the Stem HCA (the “Old HCA Law”), such that the Stem HCA is not governed by the New HCA Law.

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Regulatory Compliance

CCC’s Model HCA & Approval Process

Lauren Medeiros Forster —

In May, the Massachusetts Cannabis Control Commission (“CCC” or the “Commission”) released a bulletin (the “Bulletin”) regarding some administrative license extensions in response to the Commission’s new framework and processes governing host community agreements (“HCAs”) in Massachusetts.

Under the CCC’s new regulations governing HCAs, licensees, and their host communities, licensees are required to submit to the CCC a compliant HCA that is approved by the Commission before the licensee can be granted approval for their final license or an annual license renewal.

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Legislation

CCC in Turmoil? Massachusetts Legislature Urged to Place Cannabis Control Commission in Receivership

Gustav Stickley V —

On June 18, 2024, the Massachusetts Office of the Inspector General (“OIG”) addressed a letter to the Massachusetts state legislature (“Legislature”) urging it to take action to correct the poor governance structure of the Cannabis Control Commission (“CCC”) (click here to see the full letter).

The letter states that the CCC’s enabling statute lacks clarity in establishing the leadership hierarchy and defining the duties and responsibilities of its staff and leadership. Despite apparent efforts over the past two years by the CCC, including its commissioners, to establish a clear governing structure, the OIG posits that it is no closer to solving the issue than it was two years ago.

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Controlled Substance Act Employment Issues Legislation Meet Blank Rome Mergers and Acquisitions Regulatory Compliance

Welcome to Cannabis Industry Insights

Frank A. Segall, Scott H. Moskol, and Max M. Borg —

Whether you are a plant-touching operator or an ancillary business, lender, or investor, Blank Rome’s Cannabis Industry Insights blog is your go-to resource for the cannabis industry.

Authored by our trailblazing Cannabis practice attorneys, the Cannabis Industry Insights blog explores the rapidly evolving legal, regulatory, and business landscape, helping those in the sector stay ahead of the curve and seize industry opportunities. Our cannabis team was one of the first in the United States to utilize its extensive corporate and finance experience to support the cannabis industry, and has received numerous accolades, including Law360’s prestigious 2023 Cannabis Practice Group of the Year.

Through our blog, we will continue to explore issues that directly impact the cannabis industry. With the announcement of the rescheduling of cannabis from Schedule 1 to Schedule 3 under the Controlled Substance Act, we are optimistic about new and expanding opportunities for industry players. In addition to interviews with industry leaders, the blog will cover such topics as the impact of rescheduling on 280E taxation; legal and regulatory compliance concerns; the landscape for mergers and acquisitions; legislative efforts; banking, insurance, and other business issues; capital markets; workouts and restructurings impacting the industry; the growing importance of e-commerce, fintech, and regtech; debt and equity financings; labor and employment issues in light of unionization efforts; data privacy and security; and employee stock ownership plans (“ESOPs”); among other areas that are relevant to the underpinnings of the industry.

Our goal is to help cannabis businesses survive and thrive in this highly regulated environment, as well as to assist new participants in entering this exciting industry. Subscribe below to receive our timely content:

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Legislation Regulatory Compliance

The Future of Hemp-Derived THC

Marc A. Polito —

Recent state and federal rumblings lead us to believe we may finally have some resolution to the uncertainty surrounding the legality of hemp-derived synthetic THC products, including without limitation, delta-8 THC, as an amendment to the 2018 Farm Bill has been proposed to clarify the loophole allowing for the sale of such hemp-derived products.

When the 2018 Farm Bill was enacted in 2018, it removed hemp, defined as cannabis (Cannabis sativa L.) and derivatives of cannabis with low concentrations (no more than 0.3 percent tetrahydrocannibinol (“THC”) on a dry weight basis) of the psychoactive compound delta-9-THC, from the definition of marijuana in the Controlled Substances Act (“CSA”). Hemp comes from a cannabis plant, just like the delta-9 THC producing marijuana plant, but a hemp-cannabis plant refers to cannabis plant that contains 0.3 percent or less of delta-9 THC. Delta-9-THC is the compound generally responsible for the psychoactive effects of cannabis that is subject to the CSA. A typical marijuana-cannabis plant on the other hand, can have anywhere from 15 to 30 percent of delta-9 THC.

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Controlled Substance Act Regulatory Compliance

Rescheduling Timeline and Exclusions

Gustav Stickley V —

Advocates of the cannabis industry are understandably excited over the Drug Enforcement Administration’s (“DEA”) recent publication of its proposed rule to reschedule marijuana as a Schedule III controlled substance under the Controlled Substances Act (“CSA”). However, the proposed rule is subject to the due process required by the federal rulemaking regime and will not be officially implemented (if at all) for at least a couple of months, possibly longer. Below we set forth the current timeline of the rulemaking process.

Further, it is helpful to understand what exactly is being rescheduled. We know there are hundreds of cannabinoids, derived from both hemp and from cannabis, and there are manufacturing processes allowing for the creation of synthetic tetrahydrocannabinol (“THC”) and other synthetic cannabinoids. So what’s being rescheduled as Schedule III? We will discuss this below.

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