Big cannabis investor document leak

Happy Valley Ventures backs off on subverting Mass CCC dispensary ownership law

By Grant Smith & Mike Crawford

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For our Midnight Mass readers, a special primary source leak from Happy Valley Ventures, LLC (the holding company applying to run recreational dispensaries in Brighton (1927 Beacon St.), Gloucester (38 Great Republic Drive), and the city of Boston (220 William McClellan Hwy)). 

This document, a “Confidential Investor Update” circulated in September of 2018, gives detailed insight into the company and its strategic plans in Massachusetts. 

Of note, the company highlights its proposed location in Brighton by way of its distance from the Boston College campus. Some officials on the Massachusetts Cannabis Control Commission (Jennifer Flanngan in particular) have expressed reservations about the proximity of recreational cannabis dispensaries to college campuses. 

Dan Adams of the Boston Globe wrote of this investor document with their latest “This Week in Weed” email. Here’s what he reported.

UNHAPPY VALLEY
Speaking of sneaky control schemes...

A little stoned bird dropped a link in my inbox this week to a confidential investor document that marijuana company Happy Valley appears to have accidentally made public.

If the name sounds familiar, that's because the firm is moving aggressively into Massachusetts. It has plans for a cultivation, processing, and retail facility in Gloucester plus two stores in Boston, including one in the space that currently hosts the (in)famous Mary Ann's bar near Boston College.

But the document indicated Happy Valley also had plans for a fourth store in Boston's South End at 60 E Springfield St., a building it bought last summer for $5.4 million. Just one problem: Massachusetts only allows each company to own three stores.

Indeed, Happy Valley's October, 2018 letter to investors acknowledged, "we are not allowed to have more than three brick and mortar retail locations."

That proposed arrangement might not involve Happy Valley directly owning the South End license, but it nonetheless appears to run afoul of Massachusetts Cannabis Control Commission's regulations that ban even indirect control of more than three licenses. An outside company acting as a landlord and mandatory supplier could easily be construed as having the right to "veto significant business decisions," one way the commission defines control. (New, even tighter rules currently under consideration would assign control to any entity taking more than 10 percent of a marijuana company's profits.)

However, Happy Valley owner Michael Reardon insisted to me this week that the company is no longer pursuing a location in the South End. The property is now for sale, he said. 

"We are not pursuing this strategy," Reardon wrote in a brief statement. "We actually made a decision to sell the property to reinvest our cash before doing any due diligence on the [lease and wholesale] strategy. It’s certainly clear to us now that this strategy is not viable."

Happy Valley's retreat is the latest example of companies rethinking earlier plans to expand beyond three licenses, following public scrutiny of the issue and signals from the commission that it takes a dim view of such deals. As noted above, the calculus is changing.

Pictures of the document are included below.

The full HVV PDF investor document here.