So You Were Awarded a Maryland Social Equity Cannabis Cultivation License. Now What?

On Sept. 8, 2023, the Maryland Cannabis Administration (MCA) announced that they would be awarding additional cannabis cultivation licenses to Social Equity applicants. The window for submitting applications closed on Dec. 12, 2023, and the MCA plans to announce the winners just after the new year. 

These applicants will be selected through a lottery, and the following cultivation license types and quantities will be issued:

  • 16 Standard Growers: A standard license authorizes the holder of the license to operate more than 10,000 square feet, but not more than 300,000 square feet, of indoor canopy.
  • 24 Micro Growers: A micro license authorizes the holder of the license to operate not more than 10,000 square feet of indoor canopy.

In addition to the cultivation licenses, the MCA will also issue dispensary and processor licenses:

  • 75 standard dispensary licenses
  • 8 micro dispensaries
  • 32 standard processors 
  • 24 micro processors

How to Calculate Your Cannabis Canopy

It’s important to remember that the term canopy refers to the total square footage of space used by a cannabis licensee for the production of flowering cannabis plants. Your canopy includes each layer of cannabis plants grown on racks or shelving, from vegetative growth to flowering. 

Your cannabis cultivation canopy does not include square footage used for:

  • Mother stock
  • Propagation
  • Immature plants
  • Processing
  • Drying
  • Curing
  • Trimming
  • Storage
  • Offices
  • Hallways
  • Pathways
  • Work areas
  • Other administrative and nonproduction uses

Next Steps for Maryland Social Equity Cannabis Cultivation Licensees

Fast forward: Here we are—January 2024. Congratulations! You were just awarded your “conditional license.” Now what? Well, the clock is ticking. You now have 18 months to finish the following tasks:

  1. Complete a supplemental license application that includes criminal history and financial background investigation on all owners and investors
  2. Identify a physical location and establish legal control of the premises
  3. Gain zoning or planning approval from a political subdivision, if applicable
  4. Pass all health, safety, and security inspections
  5. Update registration information with the State Department of Assessment and Taxation
  6. Obtain additional funding through grants, loans, or additional investors, if applicable

These are all to-dos that you can work on with the attorney or legal team that assisted you through the social equity cannabis cultivation license process. 

Securing a Cultivation Location as a Maryland Social Equity Cannabis License Holder

Maryland is leaving zoning approval and locational requirements for cultivators and processors up to the local municipality. So, you’ll want to make sure the city or town officials in which you seek to operate are on board with your plans before you spend too much time thinking about a specific site. 

Reaching out to local authorities can oftentimes be a good place to start. They will give you a crucial sense of the local opinion and they may even know of viable properties that are available. In many cases, a public hearing may be required to gain approval (be aware that denial is also possible). It’s also best practice to rule out properties that are in close vicinity to any business that could render the site noncompliant such as a daycare, school or church. 

Site Selection for Cannabis Cultivation or Processing

Identifying how much square footage you need is the first step to an efficient cannabis facility design. Every facility is different, and new builds tend to be more efficient than retrofits, but 50% tends to be an ideal ratio of flowering canopy to ancillary space. That means that Maryland social equity cannabis license holders should be looking for a facility of around 20,000 square feet. 

Standard cultivators might set a goal of up to 300,000 square feet of canopy—so unless you are limited to a certain square footage by your license category, as with cannabis microbusiness facilities, you can dream big. 

One thing to note, however, is that once facilities top 100,000 square feet, your canopy might take up as much as 60% of the overall facility or higher, depending on the efficiency of the design and support operations required. It’s also important to remember that in larger facilities, shipping, distribution and receiving start to require greater space considerations than those of smaller facilities.

Should I Purchase or Lease a Cannabis Cultivation Facility as a Maryland Social Equity Cannabis License Holder?

Everyone thinks that owning the building/property will save money, and while there are certainly advantages to owning and improving your owned asset, we’ve seen very successful operators negotiate favorable leases and save millions of upfront dollars. That frees up that cash for tenant improvements, equipment and/or operational expenses. 

There’s something to be said for needing to raise less cash—this keeps more equity (and control) in the hands of the operator. It’s also worth noting that there has been a trend over the years for successful operators who initially owned their properties, to raise cash through the sale of their facilities to Real Estate Investment Trusts (REITs) or other buyers. 

To clarify, there is nothing wrong with wanting to own the site/property. In fact, real estate ownership can be a great way to control your own destiny. If you’re raising cash for your business, however, adding a big-ticket real estate purchase on top of all your other operational expenditures can be a challenge. Leasing a property, whether it’s built-to-suit or retrofitted, can be a good way to free up cash at the expenditure-heavy outset of building your Maryland cannabis cultivation business.

Should I Build a New Facility or Retrofit an Existing Property?

The unfortunate answer to this super common question is: “It depends.” 

What does it depend on? Probably the most important factor is the existing condition of the potential retrofit building. The second-most important factor is the current price of cannabis against price projections for a year or two from now—which is most likely the length of time it will take to plan, design, permit and construct a new facility. 

Many new markets experience very high demand and pricing when a new adult-use market opens, so it’s important to get your operation online and harvesting quickly to enjoy those prices while they last. While there can be serious speed-to-market advantages in the retrofit strategy, sometimes—as any contractor will tell you—retrofit jobs can go way over budget and timeline due to unforeseen circumstances.

That makes the retrofit approach to your cannabis facility design a bit of a gamble. That said, if you have the connections, resources and budget for extensive due diligence and inspections that must be performed prior to committing to any site, a retrofit can be very workable. Be mindful of the bones of the space, however. Popping the top of a low-ceilinged building to make room for vertical grow facilities when you need to up your production is rarely the best value proposition.

It’s common for new operators to enter into Letters of Intent with landlords, to secure the property while inspections and design strategy planning and budgeting can be done. Try to lock in 30-60 days on that intent agreement to give you plenty of time to evaluate and plan. 

Conceptual Design and Production Planning for Maryland Social Equity Cannabis License Holders

Once you have a site and/or a building in mind or under contract, it’s important to get an accurate understanding of:

  • What it’s going to cost to get the facility operational
  • The overhead expenses once it’s running
  • The production (and revenue) potential for the business

Until this point, many operators/business owners will go off loose, budgetary numbers, such as: Flowering canopy will be 50% of facility; yield will be 50 grams per square foot of canopy times 5 harvests per year; ½ gallon of irrigation water per square foot per day, etc. 

Planning this way is fine when you’re applying for a license, but once you have a conditional license in hand, things get real, and your budget will need to be as real as possible. 

Now it’s time to develop a conceptual site plan, workflow, and production plan. Any potential investor will require this level of detail to seriously consider investing in any project. Working with an experienced cannabis cultivation design and operational advisory team will help ensure your numbers are realistic and that you are avoiding costly mistakes. 

Cannabis Facility Design for Maryland Social Equity Cannabis License Holders

It all starts with cannabis facility design. When Next Big Crop begins planning a site or facility, we work closely with the person who will be managing the day-to-day cultivation operations. We liken this to designing a kitchen with the direct input of the chef. However, if an operator doesn’t have a cultivation manager hired yet, that’s no problem. 

Our years of planning commercial cannabis grow facilities and actually working in them has given us a deep understanding of how equipment selections and workflow impact production and scalability. We can develop a methodology for the site based on industry best practices with accurate estimations for plant size, cycle time and yield in order to adequately size all support areas. 

Once you have a floorplan, cultivation equipment and systems can be specified and integrated into the design. Now accurate quotes and lead times for equipment can finally be secured. Even if you have a brand of LED grow lights or a particular irrigation automation system that you want to go with, it’s always a good idea to shop a few sources and to ensure you are getting the best price. 

Preparing Your Production Model and Budget as a Maryland Social Equity Cannabis License Holder

Once you have a good understanding of your facility’s upfront costs, your cultivation methodology figured out and pricing for all your equipment, you have everything you need for an accurate production model and budget. This model should serve as the roadmap for your business as time goes on. 

Here’s an inside look at how Next Big Crop prepares a production model for a cultivation business: We need to make sure that ongoing expenses like labor and consumables are in line with the cultivation process and equipment, and that yield forecasts are conservative, but high enough to interest investors and owners. 

All cannabis cultivators grow the same three product categories: 

  • A-bud
  • Smalls (popcorn)
  • Trim 

There should be a different price/revenue potential tied to each product. If you plan to sell your trim to a processor, be prepared for a low pound price.

What Next Big Crop Has To Offer Maryland Social Equity Cannabis License Holders

Next Big Crop has helped cannabis operators across the country. Specifically, we have designed and set up the operations for some of Maryland’s most successful Grower, Dispensary and Processor facilities. 

In 2016, the Next Big Crop team led the Maryland cannabis business application process for our client Green Leaf Medical Cannabis (gLeaf), and we received the highest-scored Medical Cannabis Grower license application out of over 100 applicants. 

Next Big Crop went on to manage the design, construction and operations for gLeaf’s Maryland operations. Along with gLeaf’s talented management and staff, Next Big Crop helped to create one of the most successful cannabis businesses in Maryland, and throughout the northeastern United States. 

Are you seeking to join Maryland’s new adult-use cannabis market? Reach out to Next Big Crop today for experienced support.