New acquisitions put Green Thumb Industries at the forefront of Nevada's cannabis industry
Green Thumb Industries (CSE:GTII) (OTCQX:GTBIF) recently acquired Las Vegas-based Integral Associates for $290 million, the largest acquisition of its kind in Nevada’s cannabis industry to date. The deal will close sometime during the first half of 2019.
Integral Associates is best known for its Essence retail brand which operates three locations across the Las Vegas Valley. Business Insider ranked Essence as one of the best dispensaries in Nevada, and it’s been recognized by Leafly and High Times as well. In total now, Green Thumb Industries owns eight facilities and 60 retail licenses across eight states.
“We are thrilled to expand GTI’s production, distribution and retail footprint in one of the most popular tourist destinations in the world,” said Ben Kovler, GTI Founder and Chief Executive Officer in a statement. “Integral Associates are exceptional operators—they have a highly admired and respected business comprised of two world-class cultivation and processing facilities, multiple award-winning products, strong wholesale distribution, three impressive retail dispensary locations with significant retail market share and healthy EBITDA.”
Along with the dispensaries, GTI also acquired Desert Grown Farms and Cannabiotix NV, two cultivation facilities that add up to just shy of 100,000-square-feet. Desert Grown Farms also has a genetics library that includes over 100 strains of cannabis. Both facilities possess award-winning cannabis strains, including 25 strains that are unique to the brand.
As part of the acquisition, two of Integral Associates’ founders — Alex and Armen Yemenidjian — will join GTI’s leadership team. Armen will take on the role of President for the senior leadership team, and his brother Alex will be joining the Board of Directors as a member of the audit committee.
“We are excited to welcome Armen Yemenidjian to our senior leadership team, where he will serve as president,” continued Kovler in a statement. “Armen’s wealth of experience in building and growing an outstanding company will be a tremendous asset to our organization. We are also pleased to announce that Alex Yemenidjian will be joining our Board of Directors, and we look forward to leveraging his vast and varied experience and success.”
Alex comes with years of experience as Chairman of the Board for the Tropicana Casino and Metro-Goldwyn-Mayer, Inc. GTI CEO Ben Kovler welcomed the brothers in a statement.
The economics of cannabis in Nevada
Green Thumb Industries owns and operates both medical and recreational dispensaries in various markets, including the popular RISE recreational dispensaries — two of which are in Nevada. At the deal's closing, GTI will become the largest dispensary operator in Nevada.
However, they’re not the only company to recognize the potential of Nevada’s cannabis market, most of which is based in Las Vegas. With over 42 million tourists from around the world visiting last year, the state saw more than $500 million in medicinal and recreational cannabis sales in its first fiscal year which generated just under $70 million in tax revenue, according to a report put out by the Nevada Dispensary Association.
Even better was the fact that those numbers were 60 percent higher than Nevada’s original projection, with $20 million more in tax revenue. According to local Las Vegas News 3, the Nevada Department of Taxation put the extra $42.5 million into the state’s rainy day fund after giving $27.5 million to the public schools.
According to the Nevada Dispensary Association’s report, the state could easily see $1 billion in tax revenue over the next seven years. Numbers could jump exponentially if the federal law against marijuana were to be lifted. As it stands right now, the state is still combating the black market, with many dispensary owners telling local papers that black market dealers are their top competition.
“The industry is growing very, very rapidly,” NDA President Andrew Jolley told Local News 3 last month. “The black market is still very much alive in our state. We would like to see that demand for cannabis products channeled into the regulated, legal framework, where we have high quality tested products that pay taxes and generate revenue for the state.”
Grateful to be at @nvdispense’s economic forum today. I represent more marijuana dispensaries than any other legislator (20%!) and am committed to ensuring the industry’s continued success. Always learning from @tsegerblom! pic.twitter.com/qKTy6oiL7b
— Yvanna Cancela (@YvannaCancela) October 26, 2018
The largest cannabis market in the United States
Despite issues with illegal sales, the economic report surmises that Nevada could be the largest marijuana marketplace in the United States within five years, presenting a potentially unique opportunity for investors. Unlike other North American cannabis markets, such as Canada or Oregon, Nevada does not have a supply issue. Instead, their problems are with pricing.
Joe Brezny, the director of political operations with Nevada’s Carrara Nevada lobbying group, addressed the issue in June.
“If you look at the markets that are established, there’s going to be a little bit of a seesaw effect here because we’re only hitting about a third of the black market,” Brezny said in an interview with the Las Vegas Review-Journal. “With a bunch of people building now, that’s going to cause prices to drop, which will bring a bunch of new people in the market, which will cause prices to go back up.”
“And then more capacity will come online, and it will drop again,” he continued.
According to his interview with the Journal, Brezny sees prices falling pretty steeply over the next two or three years, from $340 per ounce at current prices to anywhere from $90 to $150.
Header Image: Essence Dispensary/ Source: Green Thumb Industries