Central Coast Cannabis Business Sells for $ 56 Million

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October 11, 2021

BY KAREN VELIE

After battling for a limited number of cannabis retail permits in the Santa Barbara and San Luis Obispo counties, which included background checks, interviews, and a variety of specific requirements, several winners sold their approved stores, most recently for $ 56 million.

Most recently, Coastal Holding Company has five pot stores under a purchase agreement, including Coastal Dispensary in downtown Santa Barbara, as well as two of its Coastal Delivery services, one in Santa Barbara and the other in San Luis Obispo. Coastal was founded in 2018 and has secured its retail permits over the past two years.

The Parent Company, a cannabis company backed by rapper Jay-Z, will purchase Coastal for $ 16 million in cash, $ 20 million in stock, and an additional $ 20 million in stock, pending the transfer of the various cannabis licenses. The deal is expected to close in 2022.

In selecting the Coastal Dispensary for one of three coveted pot shop permits in the city of Santa Barbara, the city awarded points as a Santa Barbara-based company. One of the other three pot shops approved in 2019, Golden State Greens, was sold to a Florida company in 2020.

Coastal Delivery SLO was the first cannabis company allowed to operate in San Luis Obispo, despite failing to meet several requirements. City officials said a department manager told them to keep the pot delivery service working even though their temporary occupancy certificate had expired.

As part of its selection criteria, San Luis Obispo gave cannabis company points for being minority owners in a low income bracket that the Coastal Holding Company had when approving their application, according to emails between city officials and the applicant. However, when the Coastal Holding Company applied for permanent occupancy certificates in 2020, the lower-income owners were no longer involved in the company.

Across the Central Coast, city councils have created several odd selection criteria to determine the winners of their lucrative cannabis retail permits. The process seemed to support certain candidates, including a permit holder who was selling before even securing a retail location.

Officials at Grover Beach, the first SLO County’s councilor to allow a retail pot shop, spoke out on the importance of a thorough screening process. Then, in late 2017, the council voted to give the coveted permits to a group of people, including felons, a man on the sex offender list, and people from the League of California Cities.

At the time, councilors argued against allowing the permit winners – The Monarch, 805 Beach Breaks, Natural Healing Center, and Milkman – to sell their permits. However, a clause in the ordinance allows the city administrator to permit the sale of marijuana pot shops and the transfer of permits.

The monarch was the first to sell, less than five months after the council gave its approval and before even securing a building.

The Monarch was a cannabis business that consisted of six chief executives, three of whom have ties to the League of California Cities. Patrick Shannon, The Monarch’s chief operating officer, is a former League employee; Antolin Cardenas, another school principal, works for the league on public affairs; and the Monarch’s CEO, Sunni Mullinax, is married to David Mullinax, the League’s local representative on the Central Coast and a close personal friend of former Grover Beach Mayor John Shoals.

In May 2018, 805 Beach Breaks opened as the first cannabis retail store in San Luis Obispo County. One of the original co-owners, Ed Esters, has a contentious past and is currently listed on the California Sex Offender Register. Esters was found guilty in 1997 of drugging, raping and sodomizing a female victim. In 2001 he was released from prison.

In April 2019, Harvest Health & Recreation announced it had purchased 805 Beach Breaks, another favorite of Grover Beach Mayor Shoals and then Alderman Jeff Lee.

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