The U.S. cannabis sector continues gaining momentum, with numerous major milestones emerging in recent months, including the first television ad in history that was set to air in July from vape pen maker Neos, on Denver ABC affiliate KMGH in the state which has led the charge on marijuana reform, Colorado. Originally scheduled to appear just before the million plus (Nielsen) viewer “Jimmy Kimmel Live” program, this landmark event, which was aborted at the last second due to federal level concerns despite the spot adhering to all requisite protocols, characterizes just how fast and how far the industry has come. Even though the spot was pulled, it clearly demonstrates a “camel’s nose under the tent” moment for cannabis sector marketing and takes its place in the history books alongside other key milestones, such as the recent signing of a compassionate use law in traditionally conservative Texas by Governor Greg Abbott. The new Texas law allows the medical use of low-THC cannabis by patients such as children with crippling epileptic conditions like Dravet syndrome.
Colorado is the tip of the spear in many respects for this yet nascent industry, having generated a whopping $250 million plus in sales and bringing in $62 million in tax revenues during its first year of recreational legality, 72 percent higher tax receipts than initially projected, a feat due in large part to the state’s recreational use market boom. In Oregon, where Governor Kate Brown signed a law last month officially allowing existing medical marijuana dispensaries to begin selling recreational cannabis three months ahead of schedule, leading industry analysts at Arcview Market Research have projected first-year retail sales in the neighborhood of $200 million, with excise taxes in excess of $20 million. With tax receipts like these and public sentiment at a record high of 53 percent approval for decriminalization and rising, according to recent polls by both CBS News and Pew Research Center, it is little wonder that other states are racing to pass similar reforms.
The groundswell of popular support and juicy tax revenues have created massive opportunities for smaller companies looking to innovate within the sector and offer various operators access to technologies and services that can help their businesses prosper. With 74 percent sales growth nationwide between 2013 and 2014 alone, the roughly $2.7 billion 2014 U.S. market for cannabis, as well as cannabis based products like low-THC cannabidiol oil, and MIPs (marijuana-infused products) such as beverages and other edibles, is estimated by Arcview as potentially climbing to upwards of $40 billion by 2020, making it larger than the NFL or the entire organic food industry.
This is why a company like full-spectrum property management, construction and finance outfit Cherubim Interests (OTC: CHIT), which hitherto has been squarely focused on leveraging the company’s deep bench of experienced managers to do single and multifamily real estate development, management, and investment, has chosen to strike while the iron is hot, and throw its hat into the cannabis sector ring. Having obtained an exclusive worldwide license to a proprietary, portable, easily scalable and self-contained cultivation system developed by Victura Construction Group (OTC: VICT), a holding company focused on acquiring businesses in the disaster recovery and restoration construction markets, Cherubim has set about deploying this complete turnkey cultivation system to cannabis sector producers.
Able to provide an optimum grow environment for producing high-value cannabis strains, the BudCube Cultivation System (BCS), marketed via CHIT’s wholly-owned BudCube Cultivation Systems USA subsidiary, gives new market entrants and established growers alike an easily approachable and scalable leasing option that allows them to grow year round, while substantially bypassing the need for land, facility construction, or existing site renovation. Whether the grower is a small start-up operation, or a large and experienced entity, the BCS units provide a cost-effective basic component to model an entire grow op on. Directly addressing many of the bottom line-sapping issues that typically hamper large outdoor and indoor grow ops, like the costs and logistical complexities associated with pests (which include increasingly stringent end product pesticide content evaluations), controlled agricultural environment technology like the BCS represents a logical evolution for a production-centric industry that is focused on maximizing yields of high-purity, high-potency strains. Delimiting lost inputs due to crop failure elements and preserving the genetic purity of identified high-value strains is only the tip of the iceberg when it comes to the advantages such controlled agricultural environment solutions can provide.
According to Cherubim’s CEO, Patrick Johnson, the company has been patiently doing its due diligence and eyeing the sector for an opportune entry point. Now, as more and more states move to pass reform laws, and it seems inevitable that the North American market as a whole has nowhere to go but forward, the time has come for controlled environment agriculture solutions like the BCS. Leasing high-quality, yet cost-effective units to growers is a classic facilitator play that allows the company to sidestep extant legal constraints and challenges the cannabis industry continues to face. This strategy enables CHIT to profit off already-licensed operators in states and jurisdictions where medical and recreational cannabis is legal, without experiencing the associated overhead factors faced by growers, dispensaries and testing agencies.
The old adage about selling picks and shovels during the Gold Rush era comes to mind and CHIT is clearly looking to do the same thing with the “Green Rush,” acting as a cannabis sector facilitator and hardware provider. This aspect of the company’s operation will act as a strong revenue driver for its soup-to-nuts real estate development activities, providing the company with the kind of capital required to keep the real estate project and property acquisition/development end of things handily on track.
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