Verano Holdings Corp. (VRNOF) is buying into Virginia’s tight medical market, while also expanding its existing footprint in Arizona, as The Cannabist Company Holdings (CBSTF) continues to divest.
Verano is cornering the market in one of just four active medical cannabis regions in Virginia by purchasing a production facility and six dispensaries from Cannabist for $90 million, according to a July 29 press release. Verano is also paying Cannabist $15 million for a cultivation site, a production facility and two retail stores in Arizona where Verano already owns two grow sites and six dispensaries.
“This opportunity greatly increases Verano’s growth trajectory as we gain access to the coveted market of Virginia ahead of an adult use program and deepens our footprint in Arizona,” said Verano Chair and CEO George Archos, in the press release. “With Virginia, we will be in a prime position to once again take advantage of the extraordinary growth that is expected to come with an adult use program launch.”
As Verano grows, Cannabist, which was formerly known as Columbia Care until shortly after a proposed merger with Cresco Labs (CRLBF) failed, continues to reduce its footprints across the country, which CEO David Hart explained when the Verano deal was announced.
“We are pleased to have reached an agreement and look forward to welcoming Verano to the robust Virginia market,” said Hart in a statement. “As mentioned in previous announcements, we are continuing to optimize our footprint as we target building a better business, which includes deleveraging our balance sheet.”
The Cannabist announced in June that it was divesting its retail operations in Florida, just months ahead of when voters will determine whether legal adult-use sales come to the Sunshine State.
Virginia then became the state in which Cannabist had the second largest footprint, behind Colorado, with 11 retail shops, which will now drop to five. However, Cannabist is not completely giving up on Virginia. It still controls a region and recently announced the opening of a sixth dispensary.
The MSO is now left with facilities in 12 states and the District of Columbia.
Virginia’s tight medical market has enticed MSOs
Virginia’s medical market officially opened with its first dispensary in August 2020. The Virginia legislature legalized adult-use possession in 2021 and set Jan. 1, 2024, for the start of commercial sales. The only hitch was that legal sales would have to be re-authorized, with subsequent regulations, by the legislature. Shortly after the original law passed, Republicans took over the state legislature and the governor’s office and declined to take action on legal cannabis sales.
Democrats regained control of the state legislature in 2024 and attempted to legalize an adult-use market, which would have allowed the existing medical operators to switch over, as long as they also helped finance six cannabis microbusinesses. That bill ultimately fell victim to GOP Gov. Glenn Youngkin’s veto in March.
Legal possession remains, but consumers still have to wait for enacting legislation before an adult-use market can launch.
Unique compared to other state cannabis markets, Virginia is split into five regions in which a single cannabis cultivator is allowed to operate. That cultivator can own or co-own up to six dispensaries in their region.
With this deal, Verano now controls region 5 serving eastern Virginia, while Cannabist maintains region 4 in south-central Virginia. The Cannabist announced the opening of a new dispensary in Richmond as recently as June 11.
“We are thrilled to expand our presence in Virginia with the opening of Cannabist Richmond. This new location will allow us to support the Richmond community and the growing needs of our patients by offering even greater access to our high-quality and diverse cannabis products and exceptional customer service,” said Cannabist President Jesse Channon, in a released statement.
The original list of authorized cannabis producers included PharmaCann Inc., Dalitso LLC, Dharma Pharmaceuticals, Green Leaf Medicals and Columbia Care (Cannabist). That inaugural round of provisional licensees included three MSOs and two companies local to the state.
PharmaCann would eventually lose its license for failure to adhere to permitting requirements, and Columbia Care absorbed Green Leaf Medical in late 2020. Green Thumb Industries Inc. (GTBIF) bought into the market with a 2021 acquisition of Dharma Pharmaceuticals, while fellow MSO Jushi Holdings Inc. (JUSHF) scooped up Dalitso in the same year.
PharmaCann bought roughly seven acres of land with the intention of building a cultivation facility. Although the company was aware that a gas line ran through the property, they did not realize that it would keep them from building anything on the land, according to an April 4, 2023, Virginia appellate court ruling in PharmaCann Virginia LLC v. Virginia Board of Pharmacy.
The lack of construction prevented the company from securing their provisional license. While the case was still ongoing, the Virginia subsidiary was sold to MedMen Enterprises Inc. (MMNFQ).
Verano previously attempted to enter the market in 2022 when it considered an option to purchase PharmaCann Virginia from MedMen. State courts stymied that deal when MedMen, which is now in receivership, failed to appeal the loss of its license after the company missed the deadline to start facility construction.
The state re-opened region 1 in northern Virginia to applicants in February. But it has yet to announce a selection, and the region remains unserved.
