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Highway 33 Capital Transacts the First Arizona Rural Adult Use Cannabis License

January 10, 2022
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In November last year the Arizona voters approved adding recreational use to the state’s already decade old medical use program.  Now, through October, medical marijuana and recreational cannabis sales reached a total of $1.1 billion.  And that, according to Marijuana Moment, with about $641 million in medical marijuana and $466 million in recreational, contributed $175 million in state taxes. October, in fact saw a sales record set of $58 million with the state benefiting from “transaction privilege taxes” (sales taxes applied to medical marijuana sales) of nearly $5 million and another $9.7 million from the excise tax added on to the sale of marijuana products for recreational use.

Within this abounding opportunity, a significant drawback has been the limited number of cannabis licenses authorized to be issued by the Arizona Department of Health Services. In April, though, the agency awarded 13 new Adult Use cannabis retail licenses across eight rural counties. Cannabis operator John Yasso of 101010 Management was one of over 400 applicants granted a license. Last week in a transaction facilitated by Highway 33 Capital Advisory the license was sold to Dr. Phil Wall a successful Arizona-based entrepreneur.

“The significance of this acquisition,” according to Highway 33 Partner Vincent Dipas, “is that being the first to be sold, this transaction establishes a benchmark for these rural cannabis retail licenses.”

Because there were no comparable transactions, the points of comparison used to establish a benchmark for the negotiations were legacy vertical licenses as well as lease rates for the offsite component of existing vertical licenses. With the consent of the parties and the assistance of the experienced legal counsel Highway recommended, the parties went directly to a purchase agreement.

Highway 33 Capital was chosen by John Yasso and Dr. Wall to help structure the negotiation based on the firm’s experience in Arizona’s cannabis market over the past four years and their ability to attract new qualified buyers. Timing from Highway 33 Capital’s introduction of buyer to seller to a signed purchase agreement was approximately two months. Timing from signed purchase agreement to deal close was a matter of just five weeks.

As follow-up the sale, Highway 33 is now working with both the buyer and the seller on new projects – working with Dr. Wall to source debt for his cultivation build out as well as working, and with Mr. Yasso to sell other assets his group owns in Michigan and Illinois.