Oakland pot dispensaries delay opening OAKLAND

Nearly a year after Oakland permitted the establishment of four new medical marijuana dispensaries, three have yet to open, in large part because landlords have been unwilling to rent to them.

City leaders and cannabis advocates say a federal crackdown on cannabis businesses has sent a chill through the real estate market, particularly after the U.S. attorney last year sought property forfeiture from the landlord of the Harborside Health Center dispensary - a case that is still pending.

"Ever since the U.S. attorney took their hard-line stance on property owners, property owners have been hesitant to lease space," said Arturo Sanchez, Oakland's deputy city administrator, who oversees the city's permitting process for marijuana dispensaries. "That was complicated further after the forfeiture action by the U.S. attorney against Harborside."

The one dispensary that did open over the past year - Blum Oakland on West Grand Avenue in Uptown - also faced reluctance from a landlord. Sanchez said the landlord of one proposed site for Blum had wanted a $4 million bond even though the property was worth only $2 million.

The difficulty in finding dispensary sites marks a shift in a city that stood only a year ago as the vanguard of California's cannabis culture. The four approved dispensaries would have doubled the number of outlets selling medical marijuana in Oakland - even as the federal crackdown shut down hundreds of other dispensaries around the state.

But then in April, federal agents raided Oakland properties connected to Richard Lee, a dispensary owner, prominent legalization advocate and co-founder of the famed cannabis school Oaksterdam University. In July, federal agents taped their forfeiture notice on Harborside's front door. "We really need to set some ground rules here where the federal government is going to respect property rights and Californians' legal access to medical facilities," said Dale Gieringer, director of California NORML, a marijuana advocacy group.

Gieringer criticized federal authorities for going after dispensaries permitted by local governments while allowing unsanctioned ones to flourish.

Oakland has a variety of restrictions on where dispensaries can be located. They have to be at least 600 feet from various places children frequent, including parks, libraries, schools, and other dispensaries. They are entirely banned from areas zoned residential, Sanchez said.

That in itself can make it hard to find a location, said an operator of one of the four new dispensaries, who asked that his name not be used.

"You have all these other things that prevent dispensaries in certain places," the operator said. "You couple that with the fact that some people do have a moral issue with it, you really do limit your options."

Repeated attempts to reach other operators were unsuccessful. Some experts in the cannabis industry said dispensary operators fear speaking out because the two dispensaries targeted by the federal government, Harborside and Lee's former Coffeeshop Blue Sky, were led by people often in the media limelight. The camera-shy posture of the new dispensaries is most striking with Abatin Wellness, a dispensary planned for Oakland.

Geoff Spellberg, an attorney representing Harborside's landlord, said property owners have good reason to be worried.

His client never received a warning, he said. The only explanation given by the U.S. attorney's office for why Harborside was targeted was that it was a marijuana "superstore."

"In my view, it's a very arbitrary conclusion that they're a superstore," Spellberg said. "When is a medical cannabis dispensary not a superstore?"

Without clear guidelines about what's legal, Spellberg said he would tell any client that leasing to a dispensary "is a major risk because the consequences are so severe."

Spellberg's client's property is worth $2 million.

"The big concern I would express to a potential landlord is that there's not enough guidance about what the federal government is going to permit and what they're not going to permit."