Cannabis producers and out-of-state entrepreneurs are already looking well beyond Oregon’s robust medical marijuana market to the recreational one, where for the first time government regulators will scrutinize growers, their practices and their plants.
Nowhere is the trend more apparent than in the Portland area, where marijuana industry players are engaged in a modern-day land grab for warehouse and retail space.
Portland, home to more big medical marijuana growers than any other city or town in Oregon, is positioned to be a major producer of cannabis for the regulated recreational market.
(Oregon’s largest medical marijuana grow site serves only California patients)
The Oregonian’s analysis of 2014 state grow site data identified 64 large-scale medical marijuana grow sites in the Portland area – a whopping 178 percent increase since 2012. Data revealed 282 grow sites across Oregon serving 11 or more medical marijuana patients – a 129 percent increase since 2012.
Two factors have spurred the rapid expansion of marijuana growers: Oregon’s newly regulated medical marijuana dispensary industry, which includes nearly 213 retail outlets where cardholders can purchase medical cannabis, and anticipation of legalized marijuana, which Oregon voters approved last fall.
“The legal marketplace has been limited to 70,000 (medical marijuana) cardholders and now it’s about to be every adult and every 21-and-older tourist who passes through the state,” said Matt Walstatter, a medical cannabis grower and owner of Pure Green, a Northeast Portland medical marijuana dispensary. “It makes sense for production to ramp up.”
Marijuana, after all, is big business in Oregon.
Growers estimate that it costs between $ 400 and $ 1,000 to produce a pound of cannabis, which sells for between $ 2,100 and $ 3,000 per pound on the retail market.
Longtime medical marijuana growers who’ve quietly tended plants in their basements say they’re looking to upgrade to warehouses. Producers already in warehouses plan to expand.
They’re snapping up real estate, in some cases competing with each other for the same locations. Real estate agents say growers are paying well above market price to lease buildings, particularly in the Portland area, essentially reserving space until the Oregon Liquor Control Commission crafts rules for cannabis cultivation.
Six years ago, when Mike Anderly, 37, moved his plants out of his basement and into a commercial warehouse in St. Johns, the rent was $ 1,100 a month. Today the same space goes for $ 2,500. He spends about $ 6,000 a month renting two commercial spaces.
“There is such limited commercial space, especially in Multnomah County – and Multnomah County is the sweet spot – people are paying exorbitant rates,” said Anderly, whose marijuana production business is called Cloud City Gardens.
Growers like Anderly are placing big bets, sinking tens of thousands of dollars into large-scale operations. They hope they’ll pass muster with the liquor control commission, which hasn’t even begun to consider qualifications, rules and requirements for recreational marijuana producers.
“People are rolling the dice,” said Portland lawyer Amy Margolis, whose clients include marijuana growers. “We talk to people all the time who are trying to be prepared for what’s coming, but we have so little information to do so.”
Shane McKee, a longtime grower, figures he’ll spend at least $ 1 million getting his Clackamas County warehouse space ready for Oregon’s recreational market. McKee said he’s got another commercial grow space in Multnomah County and he’s in the process of closing on a second Clackamas County site.
Standing in the middle of his spacious Clackamas County location one recent morning, McKee pointed to a taped-off area where employees will extract hash oil from marijuana flowers and leaves in a spark-proof room. A bottling station for cannabis-infused drinks will go over here, he said, pointing to a spot a few feet away. Employees will load vaporizer pens with cartridges of liquid marijuana concentrates, a popular and potent form of the drug, in another corner.
There’s even space for an in-house lab to test marijuana for impurities and a kitchen to churn out McKee’s line of cannabis-infused treats.
Marijuana will be grown, harvested and dried in his warehouses before it’s wrapped and labeled — each package marked with a sideways S, the logo a Las Vegas branding company dreamed up for Shango, McKee’s chain of Portland medical marijuana shops. His products also are sold in two dozen Oregon medical marijuana dispensaries.
McKee, a builder who helped set up commercial marijuana grow sites in Colorado, hopes his facilities will serve as a model for state regulators.
He’s working on his own water filtration system to remove phosphates and nitrates — both typically used at high levels in marijuana cultivation.
Once his warehouses are up and running, he figures he’ll use 600 to 1,000 gallons of water daily. He’s also developing an efficient way to cool the air circulating through the warehouse.
He’s testing out four lighting systems — all of them bathing McKee’s crop in an intense glare for 12 hours a day — looking for the most efficient one.
For McKee, a 45-year-old who’s consumed marijuana since he was a teenager, the goal isn’t to grow better marijuana. It’s to make the process less of a resource drain.
“We’re not learning to grow cannabis here,” he said. “I learned to do that 20 years ago. I am learning to be more efficient, consistent and safe.”
Real estate agents and lawyers who work with cannabis growers said people see setting up a grow site or dispensary as a way to break into the industry.
“You have to be able to move quickly,” said Portland real estate agent Zack Stratford, who works with growers and dispensary owners to find space. “You have to have your bios ready, your finances ready. The landlords want to see that you are legit. If you don’t have all that ready and you are not able to compete with multiple offers, you will not get a location.”
When Mat Thompson’s plans for marijuana grow site in Ontario encountered resistance from local officials, the 34-year-old Nampa, Idaho, man looked around for the “friendliest county and city.”
He and his business partner, Mathew Seamans, also from Idaho, settled on Portland.
“It’s not easy to find warehouse space in Portland right now,” said Thompson, who holds an Oregon medical marijuana patient card, as well as caregiver and grower cards, allowing him to possess and grow marijuana.
The pair engaged in a fierce bidding war with another grower for space in St. Johns. They lost and ended up with a space in Southeast Portland.
“It was a nightmare,” said Thompson, whose business is called Hydrus Hydroponics Inc. “We did find a place. It was horrible. I had two deals fall through before I found this one. Everything out there is just being snagged up. The price of industrial space has doubled in places.”
Portland city officials said they don’t have a clear idea of where or how many commercial-scale medical marijuana growers operate within city limits.
By law, medical marijuana grow site locations are confidential and fall largely outside of state regulation. Police may check the Oregon medical marijuana cardholder database – which does not include patients’ health records – only to confirm whether a particular address is a registered grow site.
Josh Alpert, an aide to Mayor Charlie Hales, said city officials, police in particular, would like to know where commercial marijuana operations are located.
Alpert also suspects some medical marijuana growers aren’t going through the city’s building permit process when they convert spaces into grow sites.
“I think what we are nervous about at the moment is folks that are getting ready to operate and not going through the process of inspecting,” he said.
But dispensaries, he said, are more likely to bother neighbors than grow sites, which go largely unnoticed.
“These are legal businesses,” said Alpert. “They have a right to operate in the city. We want to do our best to make sure they are operating safely and the public is protected.”
Joel Jennings, 39, and Case Van Dorne, 23, applied for building permits with Portland’s Bureau of Development Services after leasing a grow facility in Southeast Portland last year. They told city officials they were planning a “hydroponic grow space.”
“We didn’t want to hide it,” said Jennings, “but we didn’t want to rub it in their face.”
Jennings and Van Dorne experienced firsthand the race for space. They competed with 120 other applicants for their dispensary space on Southeast Division Street. Their competition: other prospective dispensary owners.
The pair operates out of an unassuming commercial space on a bustling strip lined with small businesses and major retailers. Visitors won’t find a sign out front directing them to Jennings and Van Dorne’s grow operation. The door to their place is blank.
They sunk their life savings into the 5,200 square foot space, spending $ 12,000 on lights for one room alone. Their monthly power bill comes to $ 1,400.
Jennings and Van Dorne grow 40 marijuana strains — including their own Mt. Hood Magic — for their medical marijuana dispensary, Five Zero Trees. Business is brisk, but the pair is planning for the recreational market: Recently, they decided to lease more space in the building.
“Underneath us there’s a whole other level to this building that’s sitting and waiting for us,” said Jennings, standing next to three blue barrels, part of the automated feeding system that pipes a mix of nutrients and water into each pot of cannabis in the next room.
They’re not alone.
Jennings and Van Dorne recently got a new neighbor: Another marijuana grower set up shop down the hall.
— Noelle Crombie
Data interactives and analysis by Mark Friesen and Fedor Zarkhin.