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A year ago, Acreage Holdings, was a private equity firm run by Wall Street banker Kevin Murphy, taking minority stakes in cannabis companies throughout the United States. Today, it’s a public company worth nearly $2-billion, with assets (owned or being acquired) in 19 states and both former prime minister Brian Mulroney and former U.S. house speaker John Boehner on its board.

Such is the speed with which the U.S. multi-state operators (MSOs) have emerged as a force in the cannabis industry. Since MedMen Enterprises kick-started the trend last May, a handful of MSOs – including Acreage, Curaleaf Holdings, Inc., Green Thumb Industries Inc. and Harvest Health & Recreation Inc. – have gone public on the Canadian Securities Exchange, raised hundreds of millions of dollars, and begun deploying capital across the U.S.

On Wednesday, Acreage announced its fourth quarter financial results. The company saw US$10.5-million in sales, but posted a net loss of US$217.6-million (mostly due to non-cash expenses related to repricing its warrants and debentures after going public in November, Acreage’s CFO said). The results are expected to improve as more dispensaries and cultivation facilities come online, the company said. Acreage finished 2018 with 19 dispensaries, and plans to open another seven or eight by the end of the current quarter, many of them under the company’s new Botanist brand.

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The company did not release financial statements or an MD&A for the quarter, so its actual performance is hard to assess, beyond the highlights contained in a press release. However, Acreage’s management team did offer insights into how different state-level markets are developing, during a Wednesday morning investor call.

Here are some takeaways from the call, and a follow-up interview Cannabis Professional conducted with Acreage president George Allen:

New York’s med market underwhelms

“All across New York, the product selection is extremely weak, and prices remain the highest in the country. Pricing has been a huge turn-off for many patients within the state,” Mr. Allen said.

Acreage has had its own challenges in the state. The company has a 100,000 square-foot cultivation facility in Syracuse, which has been growing cannabis for a year. However, the facility’s processing capacity isn’t running, “due to both state approval, as well as some internal construction challenges," Mr. Allen said.

Because New York is a distillate only medical market, a considerable amount of Acreage flower product has been stranded. The company expects to get its processing capacity online within weeks, and hopes to flood the medical market with lower-priced products in the coming months.

As to whether New York will legalize recreational use?

“We believe the probability that legalization is contained with the governor’s budget due out later this month, is approximately 50/50,” Mr. Murphy said.

Michigan hits reset

Last fall, Michigan voters approved a ballot measure to legalize recreational use.

"As a medical state, Michigan had the highest level of consumer adoption of cannabis usage. The structural changes within the state, along with the adoption to adult use, renders Michigan to be one of the most exciting markets in the country," said Mr. Murphy.

These structural changes include a reset of the state’s licensing regime, Mr. Allen said.

“They basically took all the dispensary licenses back, and said, we’re reissuing them at a state level and making much stricter rules around the licensing regime. And that’s a dream come true: you hit the reset button and then you look for people who are well capitalized and pass the necessary background checks to enter the market,” he said.

Acreage has three medical dispensaries in the state, along with a cultivation facility.

New Jersey readies for Rec

On Tuesday, New Jersey’s governor and a group of state lawmakers said they’d finalized a plan to legalize recreational cannabis. The state assembly still needs to vote on the bill.

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"We believe it is highly likely this program begins sometime early Q3 this year,” Mr. Murphy said.

Acreage has one dispensary in Egg Harbor, and is planning two more, one in Atlantic City and one just across the river from Philadelphia.

Going to California

Until this week, Acreage had stayed away from the California dispensary market, while locking up cultivation and manufacturing assets in the state. On Wednesday, the company announced the opening of a dispensary in Oakland.

“California is a fascinating market, it’s by far the most mature market that we are in," said Mr. Allen. “Our entry into that market is going to be based not on the availability of dispensaries, but the availability of dispensaries in markets where we think there’s a material barrier to entry."

Because California does not require vertical integration, Acreage is focusing on widespread distribution for its brands and products in dispensaries throughout the state. "That said, we’ll use our dispensary to learn about products and the customers that are specific to that market,” Mr. Allen said.

Late to the Sunshine State

There are more than 100 dispensaries open in Florida, none of which are operated by Acreage. The company, however, is gearing up for a major push into the Sunshine State. It has secured 10 dispensary locations, Mr. Murphy said, and is negotiating the acquisition of a 200,000-square foot indoor cultivation facility.

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Florida recently passed a bill allowing medical marijuana to be smoked (it was previously a distillate-only market). Acreage is hoping the indoor facility will help it capture the new flower market.

“It’s vertically integrated in that state, so you have to produce every single product that you sell in your stores. Being not the first to market in that state, or view is we’re going to have to differentiate ourselves with product selection," Mr. Allen said.

Weed and lobster

Maine has been slowly creeping towards recreational cannabis sales over the past year. The big opportunity there, according to Mr. Murphy, is tourism.

“It’s a transition that takes us from a relatively small market serving 1.3 million inhabitants, to a high-volume, tourism-based market that attracts over 37-million visitors annually, comparable to the volume of traffic on the entire Las Vegas Strip, without the intense competition,” he said.

Connecticut chronic

In January, Connecticut lawmakers introduced another bill to legalize recreational cannabis. Lawmakers have had little success trying to pass legalization legislation in the past, but there’s an increasing sense of urgency, given the legal rec regimes rolling out in nearby Massachusetts and Vermont.

“Arcview [a market research firm] projected Connecticut cannabis sales to be $70-million in 2018. Our three dispensaries, equated to roughly 43 per cent of the state’s sales. If Connecticut only doubles in size by converting to rec, we’re very conservatively looking at three dispensaries doing more than 60 million in sales a year,” said Mr. Murphy.

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Massachusetts moving along

The roll-out of legal rec in Massachusetts’ has been a slow and often frustrating process, Mr. Allen said. The recreational dispensaries that have been licensed, however, appear to be doing brisk business.

“Adult use demand is higher than anticipated. We have been frustrated with the timing of our store getting approved for adult use. That’s a bureaucratic issue within the state, but we’re very optimistic that that’s going to happen sometime in the first half of the year. And that would be be for all three of our stores in the Worcester area,” Mr. Allen said.

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