State awards 8 licenses to dispense marijuana

While the state has selected the contractors that will open Hawaii’s first medical marijuana dispensaries, patients hoping to buy cannabis as early as July 15 will likely be disappointed.

“July — no, that’s just not realistic at all,” said Big Island farmer Richard Ha, who won one of the dispensary licenses. “It’ll be more toward the end of the year. For one, this is a brand-new project, so we don’t have anything to copy. We don’t know exactly how many or when we can bring the seeds in. We can’t transport seeds across the ocean, so we need guidance there. There’s some questions that are unanswered.”

Ha is among a list of prominent local businessmen — including former Maui Land & Pineapple CEO David Cole, insurance executive Colbert Matsumoto and Richard Lim, former director of the state Department of Business, Economic Development and Tourism — who won medical marijuana dispensary licenses Friday, beating out dozens of others including actor Woody Harrelson and Hollywood producer Shep Gordon.

Eight licenses were awarded to businesses that can begin selling medical marijuana legally for the first time in Hawaii on July 15. Aloha Green Holdings Inc., Manoa Botanicals and TCG Retro Market 1 LLC were selected to open dispensaries on Oahu. Hawaiian Ethos and Lau Ola were chosen for the Big Island, and Maui Wellness Group and Pono Life Sciences Maui were selected for Maui. One company, Green Aloha, was selected to open dispensaries on Kauai.

“We’re very excited. It looks like a good group of awardees, and we are hoping to get our growing facilities going in the near future,” said retired Honolulu attorney Shelby Floyd, who is now living on the Big Island and leading Hawaiian Ethos LLC. “That will depend in part on the building department and their approval on our plans to build out dispensaries.”

Ha, CEO of Lau Ola LLC, said his group of investors expects to spend between $5 million and $10 million in startup costs, but hasn’t determined the return on investment just yet.

“I’m a farmer that has survived for 30 years. I’m very conservative,” he said. “If it’s lucrative we’re lucky but we’re not assuming that. What we’re getting into is a new industry that can probably help a lot of people as far as the medical aspect of cannabis is concerned, so it’s a great responsibility. Besides return on investment potential, (this is an opportunity) for the university to do a lot of research to show the different illnesses this can help. It’s largely undiscovered but the potential is huge. It is very exciting.”

Tan Yan Chen, executive director of TCG Retro Market 1, doing business as Cure Oahu, anticipates hiring at least 20 employees and opening a dispensary in late fall. Matsumoto, founder and chairman of Tradewind Capital Group Inc., the majority investor in Cure Oahu, is a board member of Oahu Publications Inc., parent company of the Honolulu Star-Advertiser.

Floyd has set an ambitious plan to get dispensaries up and running in Hilo and Kona by the end of summer. The group is still considering a range of pricing but did not disclose what that might be.

“Obviously, we want to be affordable for those people who need medicine, but the Department of Health has placed restrictions on our operations, which is true of all dispensaries, and that drives the price to some degree,” she said. “I don’t think there will be a significant return for at least a couple years because there’s heavy upfront investment required. In general, I think it will be a very nice rate of return for most of the licensees so long as the rules of the game don’t change.”

A four-member panel reviewed 66 applications for dispensary licenses. Their decision was based on criteria including companies’ proof of financial stability, ability to comply with security requirements and being able to meet patient needs, the DOH said. The applicants had to pay a nonrefundable $5,000 application fee.

The panel wouldn’t discuss why they selected and rejected particular dispensaries, but the Health Department said it expects to release the scores of each applicant in the next two weeks.

Video game entrepreneur Henk Rogers of Blue Planet Healing was among dozens of applicants who weren’t selected for a license. Rogers, 61, is famous for licensing the video game “Tetris” more than 20 years ago and lives in Hawaii in an entirely solar-powered home.

“We look forward to applying for a medical marijuana dispensary license in the future should the Department of Health decide that the granting of additional licenses to operate a medical marijuana dispensary is in the best interest of the people of the state of Hawaii,” Blue Planet Healing said in a statement.

Dispensary applicants are required to pay a $75,000 licensing fee to the Health Department within seven days of receiving written notice of their selection.

Applicants were required to have $1 million cash, plus $100,000 for each dispensary location. The department must inspect facilities before they can open.

Act 241, passed in 2015, allows medical marijuana businesses to have two production centers and two retail dispensaries, for a total of 16 dispensaries statewide.

Hawaii became the first state to legalize medical marijuana through the legislative process 16 years ago, but patients did not have a legal way to obtain the drug.

Industry experts say Hawaii’s medical marijuana businesses could be confronted with challenges unlike those in other states, such as navigating rules that ban interisland transport and limit the number of growers. They say the new industry could also face problems such as the nation’s highest electricity costs for indoor growing and a thriving underground market.

Meanwhile, state lawmakers gave preliminary approval Friday to a bill that would tweak the state’s marijuana dispensary law by authorizing advanced-practice registered nurses to certify patients as having medical conditions that qualify for medical marijuana, which allows those patients to obtain a medical marijuana card.

House Bill 2707 also decriminalizes the use of paraphernalia such as smoking pipes for patients who are authorized to use medical marijuana, and authorizes the University of Hawaii to conduct research into the use of cannabis.

The measure will also allow medical marijuana dispensaries to open on Sundays, which the original law did not. The measure now goes to the full House and Senate for floor votes.