Economic Development

Kesslers, 2 Other Local Groups Seek Marijuana Sites

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YOUNGSTOWN, Ohio – Three groups of Mahoning Valley investors want to be a part of Ohio’s latest budding industry.

Silver Rapids LLC, whose address is now listed as 200 Victoria Road, Austintown, plans to submit an application to the state of Ohio for a license to grow marijuana for medical purposes.

Two others with local backing, Riviera Creek LLC, and Fasttrack Group, also have plans to submit applications for grow sites within the city. Riviera Creek is the entity involving the Kessler family, whose business ties to the Mahoning Valley are deep. Fasttrack Group is the company that operates most of the area’s McDonald’s restaurants.

The three groups with local ties are scheduled to present information before City Council on Monday about their projects. Two other groups financed by out-of-town interests – Mahoning Valley Agriculture LLC and Ohio Grow Medicine LLC, — also plan to present proposals before council that date.

Decisions on who gets grow licenses will be made by the state; council can ban medical marijuana businesses operating in the city, which observers agree is not likely to happen.

“We’ve been working on this for about three months,” said Victor Masters, a managing partner in the Silver Rapids venture. “From a statistical standpoint, we have a 20% chance.”

Masters said Silver Rapids, formed in March, would apply for a Tier II license, which certifies a grower initially to plant up to 3,000 square feet of cannabis. Under recently adopted Ohio rules, that could increase to 6,000 square feet.

Masters said all of the partners in the Silver Rapids venture live in Mahoning County.

“Our business is a little different than the other guys,” he said, in that it’s a smaller indoor farm.

Masters said his expertise with design implementation and systems integration is transferable to the medical marijuana industry. “What I can offer is automation and ingenuity,” he said. “Design, software and hardware are all applicable to this industry.”

His venture, he noted, would create about 30 jobs, most of them part-time. The group plans to initially invest about $700,000 in the venture.

Tier II ventures are subject to a nonrefundable application fee of $2,000, a certificate of operation fee of $18,000, a $20,000 annual renewal fee, and must provide $75,000 in escrow or surety bonds, and $50,000 in liquidity.

Silver Rapids has filed applications with the city planning and zoning department that identifies a property at Performance Place along Poland Avenue where the business would be housed.

“We’re basically treating it as industrial use in current industrial or light industrial zoning,” said Bill D’Avignon, the city director of community development.

Local businessman Herb Washington and his son, Terrell, are the leading partners behind Boardman-based Fasttrack Group’s proposal.

Terrell Washington declined comment about his group’s plans until after the presentation Monday. “We don’t feel it’s advantageous because it’s very competitive,” he said.

The third group presenting before council that has a local presence is Riviera Creek LLC.

“We’re actively putting together a solid application and a solid business plan,” said Brian Kessler, who along with his nephew, Daniel Kessler of Liberty Township, is a partner in the venture.

Kessler, president of SBL Venture Capital LLC in Los Angeles, is a native of Boardman. The Kessler family’s company, Boardman Molded Products, has operated in the Mahoning Valley for 80 years, which he said exemplifies his group’s dedication to the community and was one of the investors in a group that sought to grow recreational and medicinal marijuana in Alliance in 2015, when they backed a constitutional amendment that went down to defeat.

“We’re completely Youngstown-oriented,” Kessler said. Riviera Creek wants to apply for a Tier I license, which allows an initial growth footprint of 25,000 square feet, with the potential to expand up to 75,000 square feet.

The state has limited the number of licenses to 24 across Ohio. Twelve of these would be Tier I certificates and 12 would be issued to Tier II applicants.

Under new rules adopted by the state, growers who seek Tier I classification must pay a nonrefundable $20,000 license application fee, a certificate of operation fee of $180,000, a $200,000 annual renewal fee, and must provide $750,000 in an escrow account or surety bond. Growers in this category must also establish $500,000 in liquid assets.

The Kessler family owns a building on Crescent Street and plans to invest $2 million initially to retrofit the complex.

Kessler said he’s worked with the legal cannabis industry for about five years and has developed a business model that he said could deliver a safe, contaminant-free product to market.

“I’ve worked with about 75 different businesses in this industry and understand how to bring a safe, healthy product to market,” he said, including information for patients on appropriate dosage amounts.

Technology has also evolved, and Kessler said his research has helped to develop growing methods that are both water- and energy-efficient and enables control over the cultivation process.

Kessler said Riviera is backed by substantial capital to fund the startup, but won’t seek outside investors until the license is secured, the business is operational and the project’s build-out is underway. “I’ve seen hundreds of startups that raise external capital and then that money goes to pay fees and upfront costs, and then they don’t get a license,” he said.

The chance of securing a Tier 1 license is about one in 10, Kessler said. “We hope we’re the building block of a solid, safe industry here,” he said. “We want to set the example of how to do this the right way, the safe way, with a company for many years to come.”

Two other groups, Mahoning Valley Agriculture and Ohio Grown Medicine LLC, are led by of out-of-town investors.

Ohio Grown Medicine LLC is backed by interests from the Chicago area.

Mahoning Valley Agriculture – backed by investors from Pittsburgh and Los Angeles — met with The Business Journal on Monday and said it has raised $10 million to fund a startup medical marijuana business in the city. READ STORY

Published by The Business Journal, Youngstown, Ohio.