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Big Marijuana: Florida firm rolls up 15 dispensary permits in Pennsylvania

The acquisition is part of an ongoing trend in Pennsylvania, where regulators appear to have been caught by surprise because they say such “roll ups” were not anticipated when the medical marijuana laws were written.

A marijuana plant. (Kent Nishimura / Los Angeles Times/TNS)
A marijuana plant. (Kent Nishimura / Los Angeles Times/TNS)Read moreKent Nishimura / MCT

Jushi Holdings Inc., the Florida-based cannabis company that bought out Beyond/Hello’s four Pennsylvania permits in July, announced today that it was acquiring the majority interest in Agape Total Health Care Inc.

Agape, of Lehigh County, won a permit from the Department of Health in December to operate three dispensaries in the Keystone State. Agape has plans to open medical marijuana outlets in Center City Philadelphia, Reading, and Pottsville. Jushi will continue with that plan.

Jushi will look to operate as many as 15 dispensaries in Pennsylvania, the maximum number allowed under state law. Founder and president Erich Mauff said Jushi will not attempt to add any additional retail outlets in Pennsylvania at this time.

“We have no desire to try to exceed the regulatory limit,” Mauff said. “We feel 15 stores is enough. That’s a lot. We should have nine of those open by the year’s end.”

Pennsylvania forbids the outright sale or transfer of a marijuana permit, but state regulators have allowed companies to instead have equity transfers and so-called management-service agreements.

Jushi’s acquisition of Agape is part of an ongoing trend in states such as Pennsylvania and Massachusetts, where regulators appear to have been caught by surprise because they say such “roll ups” were not anticipated when the medical marijuana laws were written.

Big multistate operators such as Jushi and, most notoriously, Arizona-based Harvest Inc., have sought to build market share by taking operating control of companies that underwent an extraordinarily competitive process to win the original permits. Harvest bragged to investors early this year that it controlled permits for 21 stores in Pennsylvania, six more than allowed, because it won permits using slightly different names. The Department of Health, which had previously congratulated the company, then threatened to strip Harvest of all its permits if it couldn’t prove they were awarded to independent companies. Harvest relented and returned two of the less desirable permits to the state.

Original winners of the Pennsylvania permits were scored on promises of diversity and community impact. However, when a multistate operator takes over a permit in Pennsylvania, the only thing regulators require of new owners is the passing of a simple FBI background check. It’s unclear whether the new owners are on the hook to fulfill any of the promises made by the original permit owners.

In July, Jushi announced that it bought “100% of the ownership interests in” Franklin Bioscience, which controls the Beyond/Hello brand. Beyond/Hello currently operates dispensaries at 12th and Sansom Streets, Fifth Street near Spring Garden Street, and in Bristol, Bucks County.

Until its sale, Franklin Bioscience was backed by a number of well-known regional powerbrokers, including SEPTA chairman Pat Deon, Brandywine Realty Trust’s Gerard Sweeney, former Tastykake CEO and current Independence Health Group chairman Charles Pizzi, and the late CEO and founder of the Rothman Orthopedic Institute, Richard Rothman, according to state records.

Jushi will pay an “undisclosed amount of stock, notes, and cash” to acquire 80% of Agape, according to a statement released from Jushi’s Boca Raton, Fla., headquarters.

“Upon closing of this transaction, we will operate five retail locations under the Beyond/Hello brand with a plan to open four more during the fourth quarter of 2019,” said Jim Cacioppo, CEO of Jushi. “All of these locations and the additional six to be opened are located in densely populated, high traffic communities.”

Jushi also operates or controls cannabis permits in California, Nevada, Ohio, New York, and Virginia. The company has applied for a permit to operate in New Jersey and is pursuing projects in Florida, Massachusetts, Oregon, and Colorado.