A Budding Opportunity

Medical Marijuana’s impact on real estate development in Northeast Ohio

When Hank Rapport graduated from The Ohio State University in 1978 with a degree in landscape architecture, he dreamed about the big projects he’d design someday. But Rapport, the EVP of Operations at Stark Enterprises, never expected to be on stage in front of Northeast Ohio’s commercial development community talking about cannabis, of all things.

But there he was, at the Smart Business Commercial Development Awards Luncheon last month, as part of a panel discussion about medical marijuana’s impact on the local real estate market. The panel highlighted the unique challenges that Stark overcame, in partnership with Fabo Architecture and Paladin Security, to develop a groundbreaking project for Firelands Scientific — the second Level 1 cannabis cultivator in Ohio, and the first to sell medical marijuana in the state.

Firelands Scientific serves as an interesting case study in how the emerging cannabis industry is reshaping how entrepreneurs and developers collaboratively approach complex real estate projects. Here are some highlights from the panel discussion.

Smart Business Publisher & VP of Operations, Dustin Klein, presents Firelands Scientific CEO Jeff McCourt with a Smart Business Commercial Development Award at the luncheon in May 2019.

Building a team of experts

The Buckeye State legalized medical marijuana in September 2016, when Ohio House Bill 523 went into effect. Jeff McCourt stayed on the leading edge of this emerging industry as an attorney at Benesch Law, where he founded the firm’s cannabis practice area. He began working with the Firelands project as counsel, offering guidance through the state’s demanding license application process — a dauntingly nuanced process that I’ve written about previously for Cannabis Dispensary Magazine.

Ohio’s legislation sparked a mad dash for coveted cannabis licenses in a brand-new market. State law allows for 12 large growers, 40 processing plants and 60 retail dispensaries in Ohio. As a vertically integrated operator, Firelands pursued all three lines of business: cultivation, processing, and retail.

Navigating such a competitive, complicated application process required layers of expertise, so McCourt assembled a team of specialists to guide the project through completion — some of whom joined him on stage for this panel discussion, featuring:

Jeff McCourt, CEO of Firelands Scientific

Hank Rapport, EVP of Operations at Stark Enterprises

Eric Edwards, architect at Fabo Architecture Inc.

Bob Myers, VP of Paladin Security

“Having well-capitalized people, who know how to build complex buildings in a fast period, is absolutely critical to success in the application phase,” McCourt said. “Having quality design and security professionals on the team was instrumental, and having somebody like Hank who understands greenhouses is really important.”

In fact, he said, Rapport’s horticulture background was “one of the secret sauce elements” in Firelands’ success. Rapport helped shape the plans for the 30,000-square-foot Dutch Venlo greenhouse, attached to a CMU block building, featuring sophisticated automation and security systems throughout.

“Every single piece of that building was custom-designed and mapped to regulatory requirements,” McCourt said. For example, 150 security cameras throughout the facility are linked to local law enforcement as well as the Department of Commerce and the Board of Pharmacy.

“A unique part of the project was trying to deploy our technology in such tight timelines,” said Paladin Security VP, Bob Myers. “Anyone can install a camera to monitor something. Our specialty is creating a solution to wrap that technology into a workflow, and one of the unique challenges we had was that we didn’t know what the workflow was.”

The team’s ultimate challenge was integrating so many intricate pieces into the facility plan, on an extremely tight timeline. McCourt said the project “involved a year of development, intensively working with architects and security folks,” just to produce the plans required for the application. Then, as soon as Firelands won the license, the team had a short nine-month deadline to build the facility and open for business.

Basically, McCourt said, “You’re trying to build the plane as you’re flying it.”

Meeting strict regulations

Since each state sets its own regulations in the still-federally illegal cannabis industry, there were no local precedents for the Firelands team to follow as they developed this complex project.

“What was really challenging is that the Ohio Building Code hadn’t caught up to this industry,” said architect Eric Edwards. “Any other greenhouse, if you were growing tomatoes or any other plant, would be classified as agricultural use, but they’re telling us, ‘Well, the same rules don’t apply to you.’”

Most greenhouse facilities, for example, are ag exempt from some fire code requirements. But at the very last minute — after Fireland’s facility was built and awaiting inspection — the state fire marshal stepped in and required new fire suppression be added in the greenhouse. The building was rezoned from agricultural use to F1 (low-hazard factory use) — throwing a new hurdle in the team’s path.

Firelands is a unique case, because unlike traditional cannabis facilities that rely on grow lights for indoor production, Firelands taps into direct sunlight with its innovative greenhouse design — producing the only sun-grown cannabis in the state. Although the business ostensibly has more in common with other greenhouses than with typical indoor grow ops, the state decided otherwise.

“When this industry started in (states like) California and Colorado, the buildings they selected were old manufacturing warehouses due to their access to large amounts of power and water,” Edwards said. “From that point, (cannabis facilities) were always classified as F1 use, and that designation stuck as an industry standard.”

The team back-pedaled to adapt to the nascent state requirements in order to pass inspection and receive a certificate of operation in September 2018.

Boosting the real estate market

The Firelands development, one of the 2019 Smart Business Commercial Development Award Honorees, generated over $8 million of local construction contracts, putting 120 local contractors to work building the state-of-the-art facility in Huron, which now houses 55 employees.

The team survived a multitude of obstacles to become the second cultivator certified to operate in Ohio, and the first to legally sell medical marijuana in January 2019.

“For me, it was somewhat personal because our first sale was to my mother, who is a rheumatoid arthritis sufferer, and cannabis has been amazingly helpful for her,” McCourt said. “That reward at the end of the tunnel made it all worthwhile, because we view ourselves as ambassadors of this plant and what it can do for people in a medical context in the state of Ohio.”

Although Firelands’ cultivation facility is up and running, “a few folks were concerned about the location that we ended up winning our retail license in,” McCourt said, “so we’re working with the state to find an acceptable alternative location” for the dispensary.

As Firelands continues building strong community relations to educate potential neighbors about its product, McCourt emphasized the potential for commercial development opportunities as the industry continues to grow.

“When cities enact proactive zoning for dispensaries, that puts them on the radar and it becomes public knowledge that that city is in the game,” he said. “When property holders work with local communities to make it an attractive opportunity for others to invest in, you can create that opportunity on the retail side.”

But be prepared if you’re looking into the budding cannabis market, he advised.

“Working in the cannabis industry, every year is a dog year, in some ways — one calendar year is like seven in this industry. Everything moves fast; everything’s complicated,” he said. “You’ve got to be prepared to get punched in the face every morning when you wake up. Our success is going to be measured by our ability to get back up, smile, and just keep going, and eventually, we’ll get better at dodging punches.”