GRAND RAPIDS — Fluresh LLC plans to open the first licensed medical marijuana provisioning center in Grand Rapids on Feb. 7 in the former Benteler Automotive plant on the city’s southwest side.
Founded by Thornapple River Capital LLC principals Brandon Kanitz and Genesis Guanga, Fluresh expects to invest nearly $27 million to transform the 200,000-square-foot building at 1213 Phillips Ave. SW into a provisioning center, as well as a processing operation and Class C marijuana grow facility.
The plans are coming together after the company in November completed a $9.9 million property transaction with TC 320 Hall LLC, a subsidiary of Grand Rapids-based Third Coast Development LLC.
“When Michigan passed the new (Medical Marijuana Facilities Licensing Act) and opened up medical marijuana, we decided to do what we had done in other states, but rather than investing in somebody else’s business, we decided to create our own company,” Kanitz told MiBiz. “We recruited a management team that had significant experience in both operating companies and consumer product experience.”
Steele OZ LLC purchased the property and will lease it to Fluresh. Fluresh and Steele OZ share many of the same investors, Kanitz told MiBiz. Most of the capital for Fluresh was raised through Steele Partners LLC, an entity that invested in Steele OZ and is managed by Thornapple River Capital.
Steele Partners raised nearly $12.4 million in a recent fundraising round that closed at year-end and included 38 investors who put a minimum of $50,000 into the company, according to filings with federal securities regulators.
Kanitz said investment came from a “hodgepodge” of private investors, with a large contingent through Ann Arbor-based investors in Thornapple River Capital, as well as other individuals in Grand Rapids and around the country.
As traditional banking is currently unavailable to marijuana companies, private individuals needed to issue secured mortgage notes for Fluresh.
“We will probably end up raising something like $20 million of equity capital, and potentially borrow about $17 million from private investors to complete the project,” Kanitz said. “It’s a lot of work because you have to finance the equity side and the debt side yourself.”
Only a select few community banks and credit unions in Michigan will serve marijuana businesses, although that small number presents an obstacle for operators starting up in the industry, as MiBiz previously reported.
“It’s a barrier to entry,” Robin Schneider, executive director of the Michigan Cannabis Industry Association in Lansing, previously told MiBiz. “It makes it very difficult to get into this space.”
Officials at Fluresh hope the U.S. Senate passes the proposed SAFE Banking Act, which was introduced in March 2019 and provides clarity on the disposition of funds gained through marijuana businesses.
The U.S. House passed the SAFE Banking Act in September, but the legislation has stalled in the Senate. Sen. Mike Crapo, R-Idaho, the chairman of the Senate Banking, Housing and Urban Affairs Committee, said in December that he opposed the bill as written and asked for feedback on how to address public health and money laundering concerns.
In late January, the bipartisan group of four House co-sponsors of the SAFE Banking Act wrote a letter to Crapo urging swift action on the legislation from a public safety perspective.
“Our bill is about public safety. It does not change the legal status of marijuana and is focused solely on taking cash off the streets and aligning federal banking laws with the decisions states are already making regarding cannabis. This is a constructive step forward for our legislative effort and an important step toward making our communities safer and providing regulatory certainty to banks, credit unions and other firms — many of which are not directly involved in the marijuana industry — which are trying to operate their businesses in a safe and legal way,” the congressmen wrote in the letter.
Kanitz said federal action could help reduce the cost structure for companies like Fluresh as they’re able to participate in traditional banking services.
“The hope is that there becomes clarity from a federal level, and that we’ll be able to refinance these investors out and materially lower our costs when that happens,” Kanitz said. “We are seeing more non-traditional financing vehicles like private equity firms and family offices invest in the (marijuana) space.”
The opening of Fluresh
Executives at Fluresh hope the marijuana facility will provide a needed economic development boost to the southwest Roosevelt Park neighborhood of Grand Rapids.
The company expects to employ more than 80 people.
“We are hoping to be a boon to the community from an employment standpoint,” said Fluresh CEO Leah Bailey.
The Grand Rapids location will serve as the company’s headquarters. Fluresh also has invested about $37 million in a similar facility in Adrian, Mich., about 30 miles southwest of Ann Arbor.
“Grand Rapids has seen a lot of investment between the Medical Mile, the west side, and for the most part the south side has lacked significant investment,” said Jacob Fein, controller for Fluresh. “As we were looking for places to put this facility and our flagship store, we tried to focus on those areas.”
Bailey said Fluresh will begin with medical marijuana sales, but hopes to “be part of the adult-use community” as Grand Rapids decides how to regulate recreational marijuana businesses in the city beginning this month.
Construction Simplified is serving as construction manager for the Grand Rapids facility, while Toledo-based JDI Group Inc. served as the architect.
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