In June, Roland Conner sat down to compose a letter to the creditors who had financed the construction of his licensed cannabis dispensary in downtown Manhattan. A year and a half after opening, he was under immense strain as monthly loan payments, tax bills and obligations to his vendors mounted.
“Despite our diligent efforts, we are encountering severe financial difficulties that threaten the viability of our business. I am reaching out to seek your support and understanding as we navigate these turbulent times,” he wrote.
Conner’s past marijuana convictions had qualified him for a class of retail license awarded by New York State as a means of reparations to people who had been harmed by discriminatory policing of old drug laws. His store, Smacked Village on Bleecker Street in Greenwich Village, was the second to open in the state and the first supported by the New York Social Equity Cannabis Investment Fund, a $200 million initiative to finance 150 dispensaries with a mix of public and private funding.
Conner’s wife, Patricia, left her accounting job to run the store’s finances and his 26-year old son, Darius, moved from Florida to work at the shop as well. Together, their family seemed a perfect example of who the state wanted to help most through its 2021 cannabis legalization by helping to build generational wealth.
An affable man who owned a real estate company, Conner was chosen to be a face of the state’s bold initiative; he was one of the top scoring social equity applicants based both on his business experience and prior convictions. But since then, his store has struggled to live up its vision, ultimately hampered by a deal structure fashioned by the social equity fund that state officials vetted and agreed to.
Conner signed an agreement to reimburse the fund for about $1.9 million at a 13% interest rate over 10 years for the construction of his store. As part of that agreement, he is required to reimburse the fund for all operational expenses. From the start, costs ballooned as state and fund officials pressed Conner to open a trimmed down, temporary version of his store at a time when next to no dispensaries were opening despite an ambitious timeline set by Gov. Kathy Hochul.
The ribbon-cutting was a public relations success, with Conner and his family appearing in television segments and news reports, but in the rush to open, vendors for staffing, security and legal services racked up hundreds of thousands of dollars in charges, invoices reviewed by THE CITY show. On top of that, his store faced competition from a robust market of unlicensed stores that state officials initially failed to shut down.
Today, Smacked is in a precarious position, Conner’s business is challenged by tax bills, an increasing monthly loan bill from the fund and a lawsuit over an outstanding invoice for legal fees.
Meanwhile, the fund’s three managers and its private lender are prospering. Former City Comptroller William Thompson, sneaker entrepreneur Lavetta Willis and retired basketball star Chris Webber have raked in $1.7 million in management fees over a one-year period, THE CITY found, and stand to make millions more over the next 15 years whether they help open a single new store or not.
The company lending the private capital is in a no-lose position as well, after it stepped up with its own offer when the three managers failed to find investors willing to supply $150 million that Hochul had declared would comprise the bulk of the fund’s assets. Instead, the firm, Chicago Atlantic, signed a deal to loan the fund up to $50 million with a guaranteed 15% return. According to the terms, even if licensees like Conner default on their loans, the state will make the company whole.
Other than the licensees, should they default, the potential losers are the state’s taxpayers, who have invested $50 million in a fund that is currently draining money.
In a statement to THE CITY, the New York Social Equity Cannabis Investment Fund said that licensees were given a choice of whether to operate a pop-up store or wait until there was a full-scale launch and that “several ran successful pop-ups, which gave them the opportunity to gain experience and generate revenue more quickly.”
The fund’s statement continued: “While the vast majority of operators participating in the Fund’s program are enjoying success, we continue to support those who may be struggling to compete against thousands of unlicensed cannabis sellers or who are new to running a retail business.”
The governor’s office, the state Dormitory Authority and the Office of Cannabis Management, all of which work with the fund or oversee cannabis licensing, declined to respond to questions.
Chris Vianello, who operates two dispensaries in Massachusetts and first opened the fund-backed Dazed in Union Square as a pop-up last April, told THE CITY that the temporary operation had been helpful to launching the store.
“We definitely didn’t have a lot of time to prepare,” he said, while going on to call it a good opportunity “to do a test run of the market and see what works.”
Despite the challenges that he and other operators described in interviews, Conner maintains a strain of his optimism. With his business suffering runaway costs, the only pathway he saw was to ask for aid from the same people who had helped create his situation in the first place. In his letter to the fund, he requested a three-month grace period on his loan to give him time to catch up on his debts.
“Smacked Village was designed to be a template for the program, and we believe we can also serve as a template to address and rectify issues within the program,” he wrote.
Scramble at the Pop-up
Near the end of 2022, with the launch of the legal cannabis market far slower than anticipated, Hochul announced that 20 stores would open by the end of the year — even though at that point the fund had only signed nine leases and no retailers were close to operational.
That December, officials crafted a plan to open pop-ups within weeks instead of completed stores — bare-bones operations that could open quickly and be retrofitted later. Some officials inside Hochul’s administration and some licensees worried that any time saved or customers gained by opening quickly would be lost when the stores had to close to finish the construction.
“We strongly doubt the capabilities of even our best operators to pull something like this off in 3 weeks,” Ben Sheridan, a former policy director at the Office of Cannabis Management, wrote to his colleagues in a December 2022 email obtained by THE CITY.
The plan still moved forward. The head of the Dormitory Authority, the state agency that partnered with the fund to secure store leases and oversee construction, organized two days of training for retail licensees in early January at Smacked’s future location on Bleecker Street, emails show.
The state wanted Smacked to open in early January but was persuaded to push back to the end of the month. Even then, the timetable seemed implausible. Emails show that a week before opening, staff still had to be hired and trained; inventory had to be ordered and the bank accounts had to be set up to process transactions. The building’s heat needed to be fixed. And the fund had yet to turn over the keys to the store to Connor for what was supposed to be a run of only one month.
Both fund and state officials started looking for ways to speed things. They brought in a staffing company, Marcum Search, which hired 31 employees to work at Smacked right away. A representative from Dutchie, a company that offers a point-of-sale system for cannabis dispensaries, set up training for workers a few days before opening. Lawyers from the firm Prince Lobel Tye assisted with advising Conner. And within days, tens of thousands of dollars in products began pouring in, invoices show.
“It was just a mad dash,” Conner told THE CITY. “They wanted the store open because they were under pressure from the state to get these stores up and running.”
Conner signed an agreement to operate on a short term basis, but he hadn’t signed a loan agreement with the fund stipulating the costs that he would owe and at what interest rate. Early on, state officials estimated the final loans might offer $800,000 to $1.2 million at a 10% interest rate. At the time, Chicago Atlantic was still negotiating the terms of its own loan deal with the fund, which would in turn impact the terms of loans to storeowners, according to people knowledgeable about the terms.
“Tentative schedule for Monday! Details to follow! :-),” Willis, one of the fund managers, wrote in an email three days before the grand opening scheduled for that day.
The night before opening, Conner still didn’t have the keys to the cash registers, he recalled. He took a walk around the block to cool his frustrations.
“Okay, we just have to keep going forward,” he recalled telling himself. It became his mantra.
The next day, the opening went ahead as planned. State officials along with the cannabis investment fund managers lavished praise on Conner and his family at a packed press conference. “As part of the social equity program,” Reuben McDaniel, the CEO of the Dormitory Authority at the time, said, “Roland has a chance to make good money over the next four weeks.”
“It’s an amazing feeling. I’m overwhelmed, happy, and at the same time, being overwhelmed, but my family is here, that just makes me feel that this is something that was worth it,” Conner told THE CITY that day.
‘No, No, No to Everything’
While Conner was launching his pop-up dispensary in SoHo, just one other licensee had been matched to a fund location, emails show, on 125th Street across the street from the Apollo theater.
Co-founders Omar Tejeda and Greg Gray knew the neighborhood well, and the street had lots of traffic. The location was where they dreamed of landing before they learned that the fund had secured a lease there. By May, they had received their initial loan agreement from the fund.
But progress stalled in August 2023, when a group of veterans sued the state for being excluded from the cannabis licenses set aside for people like Conner and the Harlem entrepreneurs. A judge blocked the state from acting on more applications and Tejeda and Gray were frozen from opening.
Smacked closed down that summer, too. In May, the pop-up popped down after an extended run of four months so interior construction could be completed.
Facing hundreds of thousands of dollars in invoices, Conner proposed keeping part of the store open or that he operate as a delivery service out of the store, but none of his suggestions were approved. The construction company worried about the liability of doing work while customers were in the store and the cannabis agency debated if a separate license was needed for deliveries. “It was just no, no, no to everything that we were asking for,” said Conner.
Documents show that between January and May, the staffing agency, Marcum, billed about $425,000, a security company hired by the fund charged about $300,000 for security guards, and the law firm, Prince Lobel Tye, billed about $200,000.
“Everybody was just so eager to get him opened on this expedited schedule,” said David Holland, a lawyer with Prince Lobel Tye who advised Conner during the pop-up. “Even a sophisticated business guy like Roland was having trouble keeping track of the evolving responsibilities and costs associated with getting open.”
That summer, Conner finally received a copy of the proposed loan agreement with the fund. The underlying documents did not include a breakdown of construction costs to establish how the loan amount was determined. He was also concerned about the agreement not including caps on the expenses the fund could incur on Smacked’s behalf, and that strict default terms could make the loan even more expensive.
Conner’s team pushed back, delaying signing the document.
Weeks after the court injunction, a judge ruled that licensees nearly ready to operate could move forward. The cannabis fund sent Tejeda and Gray the loan agreement for their Harlem store a week before its scheduled opening, but it included a higher monthly loan payment than in the initial document offered a few months earlier, the pair told THE CITY.
“The numbers were not the same,” Tejeda said, adding that the fund informed him: “You have to sign this if you want to open on time.”
“We would have loved a little bit more time to go through the parameters of what we can and can’t negotiate,” said Gray. “They could have definitely offered more transparency.”
Gray and Tejeda signed, despite their misgivings. “At the end of the day, it was the price of entering the industry,” said Tejeda.
‘What Are We Going to Do?’
Conner was moving in the other direction — he found the conditions the fund wanted him to sign objectionable and negotiations grew more tense.
Despite the standoff, Conner reopened Smacked last September — even though he hadn’t signed his loan agreement. Peter Sack, the managing partner of Chicago Atlantic, called him directly, Conner said.
“Roland, what is it gonna take to get this agreement signed? Let’s negotiate,” Conner said Sack asked him. But without his lawyers present, Conner was affronted. “Are you kidding me? You think I’m going to sit here and negotiate with you?” he said.
When reached by phone, Sack declined to comment on his communications with Conner.
Eli Northrup, who had been helping advise Conner in his role running the Bronx Cannabis Hub, an organization that assists people apply for licensure, believed he could use a hearing called by state Sen. Jeremy Cooney (D-Rochester) to improve the hand of licensees considering fund financing.
“Borrowers have been threatened with being kicked out of their store if they do not agree to the fund’s loan terms. Numerous conversations have taken place with borrowers outside of the presence of their pro bono counsel, even after the fund had been advised that counsel should be included in all interactions,” Northrup said in his testimony.
The hearing did little to shift anything and as the negotiations stretched on, Conner got tired of fighting. “I didn’t have the luxury of ‘No,’” he said. “There was no way of going back. What were we going back to but wreckage?”
Patricia Conner, Roland’s wife, recalled that, “We were literally having breakdowns in our house, crying, wondering what are we going to do?”
Not seeing a way out, they signed.
Bike Helmet on the Shelf
From the vantage point of licensees waiting to open their businesses, Conner seemed like an example of the opportunities the state could provide. He had a store up and running, after all, and their prospects for opening were on the rise— State Supreme Court Justice Kevin Bryant had lifted the injunction on openings after approving a settlement agreement in the veterans’ lawsuit.
More licensees accepted fund deals, but the cost of some of the construction loans increased to more than $2 million at a 13% interest rate over ten years — far above officials’ estimates in early 2023.
Alex Ortecho signed a deal with the fund to open a dispensary on Hunts Point Avenue in the Bronx. He opened the Bronx Joint with his sister and his brother in March. Like Tejeda and Gray, some parts of their deal and the agreements with vendors kept shifting, even in the final days before the store’s opening, he said.
And as Conner and others asserted in their own cases, he said the fund never showed him an itemization of construction costs. “Do I really sit down and argue with these guys for something that they’re not providing anyone?” he asked.
Berkay Sabat, another licensee, got matched to a fund location in downtown Manhattan. He was wary about his proposed loan, but had been offered a storefront on Broadway in SoHo, a choice location.
After inking a deal, Sabat opened Elevate SoHo at the end of this April. Almost immediately, he felt the competitive pressure from an unlicensed store a couple of blocks away that was offering much lower prices than he could — free from the burdens of paying state taxes and repaying a hefty loan from the fund.
On top of that, the pricey SoHo rent and his monthly loan payment to the fund was proving unsustainable. He fell behind on all his payments almost immediately, he said.
Sabat sometimes works the door, checking customers’ identification to save on security costs. In his office, he stashes a bright green bike helmet on a shelf above his desk — it’s cheaper to do the deliveries himself.
The illegal store down the street was shut down by the sheriff for good in September, but the combination of his monthly rent and loan payments remain a burden. Sabat started looking for outside investors.
“Do you know how hard it’s been to get this far?” Sabat offers. “I can’t give up now.”
Waiting for an Answer
Back in June, Conner asked the fund for a 90-day grace period to catch up on his debts.
“This request is an attempt to find a resolution to a problem that can be fixed if we adhere to the original intent of the program, which is grounded in social equity,” he wrote. “Ensuring your success should not come at the expense of our business.”
Along with his debts and keeping up with his loan payments, the law firm that had provided Smacked with legal services during its pop-up era, Prince Lobel Tye, filed suit against him in May over outstanding invoices that totaled $143,316.62.
Sabat is also under strain. He accepted a financing deal with a Florida cannabis company, The Flowery. As part of the agreement, Sabat relabeled his store with his new partner’s brand name. But the deal gives Sabat a way to continue running his store itself, he said.
Ortecho and his family remain all in — they poured his father’s savings into the store as well. “My father’s our investor, he took out his retirement money,” he said.
Ortecho has a steady stream of local customers, but the monthly loan remains a burden. I’m gonna do my best, even if I have to work for free,” he said. “It’s hard but things are afloat for now.”
In July, the fund wrote back to Conner, notifying him that he was in default and that it reserved its right to take action against Smacked. Instead of waiving the interest for a 90-day period, the fund sent an amendment to the agreement extending the term of the loan for three months, which increased his monthly loan payment by about $2,000, according to people Conner consulted.
Conner signed it to avoid further penalties. In a response, he requested that the agreement be restructured in order for him to continue operating.The higher payments only exacerbated the financial strain on his business.
“I am the first justice-involved owner of a New York cannabis dispensary and it would be an unfortunate result to cease operations due to the financial strain placed on my business,” he wrote. “I hope we can reach an amicable resolution for all parties prior to arriving at this disappointing outcome.”
The fund has not acknowledged his request, he said.
