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Report on Business Cannabis Professional High Tide joins Canopy, Fire and Flower in race for Ontario retail stores

HIGHLIGHTS
  1. High Tide confirms deal with one Ontario retail lottery winner
  2. Canopy’s Tweed banner appears in one Toronto storefront
  3. More established retailers expected to enter Ontario retail scene through alternative means

Canada’s largest pot sellers are already setting up storefronts in Ontario, despite no guarantee those locations will actually be allowed to sell cannabis anytime soon.

April 1 will see the first 25 stores authorized for recreational cannabis sales open for business across the province, with no additional permits expected before the end of 2019. The right to open those stores was granted via lottery last month, mostly to sole proprietors with no background in the cannabis or retail industries, though established cannabis retailers have since been attempting to enter the country’s largest consumer market through alternative means.

The Edmonton-based Fire and Flower chain and Smiths Falls, Ont.-based Canopy Growth (under its Tweed brand), for example, are renting some of the country’s most expensive retail spaces and using them temporarily for educational and administrative purposes while they await licenses. Others, however, are acting faster, offering millions of dollars to Ontario’s 25 cannabis retail lottery winners for the right to operate stores on their behalf.

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Calgary-based Canna Cabana parent High Tide Inc. announced such a deal on Monday. No financial terms were disclosed, though company CEO Raj Grover has previously told Cannabis Professional he had made multimillion-dollar offers to various retail lottery winners. Reached by phone Monday, Mr. Grover declined to comment on the deal value, what region of Ontario the lottery winner was from, or whether the store in question would have his company’s Canna Cabana or Smokers’ Corner branding when it opens in less than eight weeks (fines for failing to open on April 1 start at $12,500).

The Alcohol and Gaming Commission of Ontario is responsible for issuing cannabis retail store permits. As CanPro reported previously, the regulator has asked all 25 lottery winners to disclose any relationships such as the one announced by High Tide on Monday that will see the retailer purchase a minority stake in the lottery winner’s business. AGCO rules and provincial law requires all pot store applicants to “demonstrate that they will exercise sufficient control, either directly or indirectly, over [their] cannabis retail business.”

Accepting the offer from High Tide, therefore, could result in the AGCO rejecting that lottery winner’s application, warns Caryma Sa’d.

“There are no minority stakes in a sole proprietorship,” said Ms. Sa’d, a cannabis-focused lawyer based in Toronto. “You are locked into how you presented yourself in the original lottery application [but] if this was happening in a less public fashion, where behind closed doors deals were made, hands were shaken and the public was none the wiser, that might be more difficult for the AGCO to track or follow up on.”

Fire and Flower made a move into Ontario last month by starting construction on a flagship store in Toronto’s trendy Yorkville neighbourhood, where, as CanPro’s Marcy Nicholson reported at the time, rent is roughly $300 per square foot. The roughly 2,100-square-foot location will cost the company nearly $700,000 per year to maintain, Nicholson reported, but will not open to the public until it is licensed to sell recreational marijuana.

Canopy Growth has leased an even larger space in Toronto’s equally-trendy Queen Street West neighbourhood. Arlin Markowitz, senior vice president of CBRE, said the smallest storefronts in the area would be roughly 1,000 square feet and would cost about $11,000 in total monthly rent.

Tweed signage is visible in a second-floor window of the Canopy building. While Mr. Markowitz noted space above ground level costs considerably less, the company confirmed it has leased the entire property including the ground level, which is currently vacant and appears to be undergoing renovations.

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“This building is actually our Toronto administrative offices,” said Canopy spokesperson Caitlin O’Hara, noting various functions related to marketing, government relations and events are performed from that location.

“I’m not sure if renovations have started on the main floor, but I do know it is currently vacant”, Ms. O’Hara said. “In the meantime, this location is strictly for office use.”

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