🎙️ Podcast: Ascend Wellness Holdings (AWH), CEO, Abner Kurtin
MedMen lawsuit, suing the Federal Government, New Jersey performance, preserving cash/managing CapEx, M&A when Cannabis stocks are trading near all-time lows
Biography. Abner Kurtin is the Founder and CEO of Ascend Wellness Holdings (AWH) and the Portfolio Manager for JM10 Partners Fund. Established in 2018, JM10 Partners operates two private equity funds that invest growth capital into the cannabis industry. Kurtin has been managing opportunity capital for over 20 years. Prior to AWH, he was the founder of K Capital Partners, a multibillion dollar hedge fund and Ca2 Group, a high end real estate development firm in Massachusetts. He started his career at The Baupost Group and served as a member of the Presidents Council of Massachusetts General Hospital and Chairman of the Hill House.
Ascend Wellness Holdings (AWH). The Company bills itself as MSO 2.0 — acquiring what it believes is the best dispensary locations since it did not go through the organic licensing process in the Seven States it either currently operates in or will enter via pending acquisitions. The company is currently vertically–integrated with assets in Illinois, Michigan, Ohio, Massachusetts, New Jersey, and Pennsylvania, with New York to come via the Medmen acquisition (a term sheet to settle the lawsuit was announced on May 11th).
Suing the Federal Government. Abner points out that this should be framed as a States rights issues in order to make a stronger case than previous attempts. The case is simple but hasn’t been clarified in this way. He has retained Boies Schiller Flexner and have gotten several other MSOs to join in suing the Federal Government over “unconstitutional policies.” They argue that while the controlled substance act makes Cannabis a Scheduled I Drug, Federal regulations should not be applied to State legal Cannabis businesses. He draws a parallel to how Casinos follow state statutes which authorize regulatory boards to oversee and control the conduct of gaming operations through a broad grant of rulemaking authority. They want State Attorney Generals to support this and have partnered with ATACH (American Trade Association of Cannabis and Hemp) to help with the challenge.
New Jersey. The Company’s Rochelle Park location did $900K in its first week and has actually trended up given the limited number of stores and short amount of time that retailers had time to prepare for adult-use. AWH opened it’s second NJ location in, Montclair in early June— which will also expand from 8 POS to at least 20 POS. The third location is being built at Fort Lee with 29 POS and expects to open in August.
Other Notable Dispensary Performance. Average Revenue per Dispensary for AWH is $12.7M/store, with 43% of products owned by AWH or partners. AWH made two additions in OH which are smaller box stores, and if excluded, the average would be closer to ~$15M/store. IL is ~$20M/store on average.
Balance Sheet/Debt and Cash Flow. As of 3/31/22, AWH has $143.8M in cash & equivalents and $233.7M of total debt — $89.9M. AWH closed on $36.5M of additional funding under the increase option of its existing Term Loan Credit Facility. In August 2021, the Company announced it had closed on a $210M Senior Secured Term Loan Credit Facility. He’s not concerned about the Company’s Gross Debt number as maturity is 4+ years out and the company is generating cash today. In order to preserve cash, AWH will build smaller grows and manage CapEx, which has the added benefit of limiting exposure to the wholesale business.
As the capital markets have become tougher, Abner thinks some of the additional licenses that have been issues won’t get built out as those builds will cost $20M+ and that’s just not available in the market today.
2022 Outlook / Expanding Footprint. The Company currently has 20 operating dispensaries with 213,000 sq ft of Canopy and expects to add an additional 10 dispensaries this year (4 New York dispensaries from MedMen and 1 cultivation, along with 6 planned medical dispensaries and 1 planned cultivation/process in Pennsylvania). In addition, AWH is expecting to open their third New Jersey location later this Summer. The company plans to increase production capacity in IL, MA, NJ, and PA while continuing expansion into IL (8 operational dispensaries, room for two more) and MA (2 operational dispensaries, license for another that’s not yet under construction). The company is looking to be acquisitive in Ohio, and wants to max out to 10 dispensaries in IL. AWH will also look at nearby limited license States to their current states (MO, CT).
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