New York’s Cannabis Social Equity Investment Fund has so far failed to achieve its intended goal of raising $200m from a combination of public and private investment and helping 150 businesses open up across the state.
Criticism of the once-lauded scheme, however, goes well beyond this. Recipients have called out predatory lending and high interest rates, alongside a general lack of transparency and mismanagement.
Now, reporting from investigative journalist Rosalind Adams in The City, shows that the fund’s three managers have earned $1.7m through the scheme over the last year and stand to make millions more over the coming years, despite these significant failures.
It states that the fund’s high fees, coupled with the complex borrowing requirements and delays in opening dispensaries, have undermined the fund’s mission to foster social equity within New York’s cannabis industry.
According to a freedom of information request obtained by The City, former New York City Comptroller Bill Thompson, ex-NBA player Chris Webber, and former sneaker entrepreneur Lavetta Willis received $1.7m in ‘management fees’ over the most recently reported 12-month period.
The managers’ compensation structure includes a 2% fee on all contributions to the fund, totaling about $78 million so far.
Additionally, the managers receive a $25,000 bonus for each dispensary they help open, adding another $525,000 last year. However, just 21 businesses have been financed through the scheme since its inception.
These fees have been criticised as ‘excessive’, and many argue that it reduces the capital available to those supposed to be benefiting from the fund.
Dispensary owners supported by the fund also report high borrowing costs that deviate from initial promises. Initially, fund representatives mentioned loans between $800,000 and $1.2 million with a 10% interest rate.
However, after securing a $50m loan from Chicago Atlantic with a 15% interest rate, loan terms for operators rose to 13%, impacting the businesses’ financial viability.
Additionally, dispensary owners noted limited control over costs linked to designing and constructing their storefronts, with some loans exceeding $2 million.
Documents obtained by The City indicate that the owners lack transparency regarding how these costs are structured, which raises questions about the fund’s management practices and adds strain on social equity borrowers, many of whom have asked for temporary loan relief.
Furthermore, The Social Equity Investment Fund, classified as a private entity, is largely shielded from public disclosure laws, even though the state holds a 49% stake and has invested substantial taxpayer funds.
This topic and more will be discussed in detail at Business of Cannabis: New York on November 12 at the New York Academy of Medicine. Grab your tickets now.
Are you a fully-operational retailer, license holder or license applicant in New York? Apply for your FREE Retailer Ticket for Business of Cannabis: New York on November 12. Submit your application here.
The post Managers of New York’s Troubled Cannabis Social Equity Loan Scheme to Pocket Millions Despite Failures appeared first on Business of Cannabis.
Continue reading...
Criticism of the once-lauded scheme, however, goes well beyond this. Recipients have called out predatory lending and high interest rates, alongside a general lack of transparency and mismanagement.
Now, reporting from investigative journalist Rosalind Adams in The City, shows that the fund’s three managers have earned $1.7m through the scheme over the last year and stand to make millions more over the coming years, despite these significant failures.
It states that the fund’s high fees, coupled with the complex borrowing requirements and delays in opening dispensaries, have undermined the fund’s mission to foster social equity within New York’s cannabis industry.
According to a freedom of information request obtained by The City, former New York City Comptroller Bill Thompson, ex-NBA player Chris Webber, and former sneaker entrepreneur Lavetta Willis received $1.7m in ‘management fees’ over the most recently reported 12-month period.
The managers’ compensation structure includes a 2% fee on all contributions to the fund, totaling about $78 million so far.
Additionally, the managers receive a $25,000 bonus for each dispensary they help open, adding another $525,000 last year. However, just 21 businesses have been financed through the scheme since its inception.
These fees have been criticised as ‘excessive’, and many argue that it reduces the capital available to those supposed to be benefiting from the fund.
Dispensary owners supported by the fund also report high borrowing costs that deviate from initial promises. Initially, fund representatives mentioned loans between $800,000 and $1.2 million with a 10% interest rate.
However, after securing a $50m loan from Chicago Atlantic with a 15% interest rate, loan terms for operators rose to 13%, impacting the businesses’ financial viability.
Additionally, dispensary owners noted limited control over costs linked to designing and constructing their storefronts, with some loans exceeding $2 million.
Documents obtained by The City indicate that the owners lack transparency regarding how these costs are structured, which raises questions about the fund’s management practices and adds strain on social equity borrowers, many of whom have asked for temporary loan relief.
Furthermore, The Social Equity Investment Fund, classified as a private entity, is largely shielded from public disclosure laws, even though the state holds a 49% stake and has invested substantial taxpayer funds.
This topic and more will be discussed in detail at Business of Cannabis: New York on November 12 at the New York Academy of Medicine. Grab your tickets now.
Are you a fully-operational retailer, license holder or license applicant in New York? Apply for your FREE Retailer Ticket for Business of Cannabis: New York on November 12. Submit your application here.
The post Managers of New York’s Troubled Cannabis Social Equity Loan Scheme to Pocket Millions Despite Failures appeared first on Business of Cannabis.
Continue reading...
