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Halting the Cannabis Eviction Crisis - By sfweekly - March 16, 2016 - SF Weekly
SF Weekly

Halting the Cannabis Eviction Crisis

Eleven years is a lifetime in technology, real estate, and the California cannabis industry. But to find a taste of 2005 in 2016 San Francisco, all you have to do is head south on Mission Street past Cesar Chavez — do not be afraid, Valencia Street ends, yet the city continues — and pull up on the narrow block of 29th Street that connects Mission to San Jose Avenue.

Here, after you’re buzzed in past a mirror-glassed door, a handful of people — some old, some crippled, some indigent — can be found lounging on well-worn couches. There are black-light posters on the walls, and New Orleans jazz wafts softly through air heavy with the sweet smell of cannabis from the counter at one end of the room. It’s run-down, it’s homey, it’s comfortable. It’s very, very chill.

Bernal Heights Cooperative is what almost every “medical marijuana club” in San Francisco looked like in 2005, back before anyone had heard of a dab or a vape pen, back before tech and Wall Street investors took an active interest in California’s multibillion-dollar medical marijuana industry. It was well, well before new dispensaries fell all over each other to be compared to a Starbucks or an Apple store in the city’s lifestyle magazines.

There were a few dozen clubs just like this in the city in 2005. But as of 2016, Bernal Heights Cooperative is one of the only old-school weed clubs left. And it’s on life support.

Following a script employed by several other would-be marijuana entrepreneurs, the dispensary’s building has been sold, and the new landlords want Bernal Heights Cooperative gone, the current operators say. But that won’t mean the end of legal cannabis on the premises. No: It will mean a new, slicker, investor-backed dispensary replacing the cutty, neighborhood one.

Put another way: good old San Francisco-style gentrification and displacement for the cannabis industry. Evictions — but for weed.

This has happened several times before in San Francisco. The old 10th Street dispensary, a second home for many SRO dwellers, is now Urban Pharm. The Hemp Center on Geary Boulevard in the Richmond District, where marijuana millionaire Berner was slinging bud just a few years ago, is now Harvest. (Both are new, slick, and winning rave reviews.)

Both 10th Street and Hemp Center had significant issues — neither operator was good with paying taxes, for one — but the way in which they were shut down and replaced is its own separate conundrum. And with millions in investor capital flowing into the local weed scene, it threatens the city’s cannabis industry as we know it.

In San Francisco, you need two major permits to sell medical marijuana. Your “medical cannabis dispensary” (MCD) permit comes from the Department of Public Health. But it’s useless unless your MCD permit is tied to a specific location that receives zoning approval from the city’s Planning Commission. You can’t have one without the other — and the difficult one to get is from Planning, where waits of over a year just for a hearing are not unheard of, and where dispensary projects meeting all city rules have been denied a permit (almost always for political reasons).

Planning is your risk, your exposure. And as SF Weekly has reported before, enterprising would-be weed merchants have figured this out — and how to get around it. It’s simple: You buy a building that already has a dispensary, get rid of it, and then use the already-entitled land use to open up a new one.

One fellow, veteran Oakland real estate investor Marty Higgins, is turning this into his business model. Records show an LLC controlled by Higgins purchased The Hemp Center’s building days after The Hemp Center was evicted, and put in Harvest without the risk of a Planning hearing. (Days prior to the eviction and sale, Higgins was pitching investors on an upscale dispensary at the location.) When Bernal Heights’ building fell into foreclosure, he did the same thing, buying that building in September.

Higgins did not respond to a request for comment from SF Weekly. (Matthew Mills, an attendee at the recent “Marijuana Investors’ Summit,” says Higgins was there, seeking investors, claiming interest in “two or three” San Francisco weed stores.)

But his business model may be at risk.

“We’re working on legislation to close that loophole,” says Supervisor David Campos, who represents the area. “It allows someone to circumvent the whole approval process — it defeats the purpose of the existing approval process if you can forego it just by buying the property.”

Campos says he plans to ask the City Attorney before the end of the month to draft legislation to update the city’s medical cannabis permitting laws.

When he does, it will be the first significant update to the city’s rules on its cannabis businesses — which, at 28 licensed dispensaries and counting, could be a $150 million industry.

That is, if Campos’s legislation passes the Board of Supervisors, which has not passed a substantive update to the Medical Cannabis Act since its inception in 2005. A task force report issued in 2011 was ignored; a plea from the Planning Commission to update the rules in 2014 is still in draft form.

Bernal Heights has had its own issues. Its old owner-operator embezzled millions of dollars from the dispensary before skipping town, according to current operators Sean Killen and Sean DeVries — a tech guy and a legal clerk who stumbled into the operation — agreed to take over in the fall. The pair believe they have the business in a good position, but believe that Higgins could move to evict them at any time. They’re trying to reopen a “New” Bernal in the site of San Francisco’s last gun store, which closed last year, but — as investors have discovered — they could end up waiting six months to a year for a Planning hearing.

More than nostalgia is at risk. It’s hard to envision the hard-luck folks lounging on Bernal’s couches allowed a spot at a place like Harvest, where entry to the “VIP lounge” costs $150 a month.

Local weed clubs are literally being taken over by outsiders with lots of capital. Then again, in 2016 San Francisco, it wouldn’t be only hostile takeover.