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Drug Eviction: Pot Shop Suffers 'Hostile Takeover' 

Wednesday, May 27 2015
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These are good times in the marijuana business. With an adult recreational market still on the horizon, the California medical cannabis industry is enjoying its biggest boom time yet. Mobs of customers are fueling over a billion dollars a year in legal sales, but more important are the "investors." The cannabis game usually takes unkindly to outsiders, but not when they're carrying suitcases of cash, as the strange faces in expensive suits circling around the industry at all levels, looking for opportunities to buy into this multibillion-dollar game, are.

That said, the San Francisco marijuana industry's wildest success of late has nothing to do with selling cannabis. For several days earlier this month, a line of people camped outside in the Haight Street cold to be the first to stroll past a heavily armed security guard into a new clothing store and plunk down $100 for a hooded sweatshirt.

That insane demand is thanks to the brand — Cookies SF, a reference to what is easily the country's best-known strain of marijuana — and to its relentless pitchman, Berner, the San Francisco native who rapped and Instagrammed his way to hanging out with Snoop Dogg and became one of the most recognizable names in the industry. Not bad for a Sunset District kid who, just a couple of years ago, was working behind the counter at a humble cannabis dispensary in the Richmond District.

As for that dispensary, it was, as of last week, one of the oldest continuously operating marijuana businesses in San Francisco.

It's closed — shut down in what the owner is calling a "hostile takeover" and what appears to be a threatening trend for the first wave of cannabis businesses that laid the foundation for the country's fastest-growing industry.


Monday was the last day at The Hemp Center on Geary Boulevard near Park Presidio. The Hemp Center is decidedly old-school: no signage, with only a red, gold, and green-painted storefront signaling that this is a weed club. Inside, a relaxed doorman buzzes you into a cluttered, chaotic back room, where patrons lounge on couches and smoke, and handwritten signs advertise the prices and strains of weed in large plastic jars.

The feeling is of a disorderly social club, but this is true marijuana royalty. Wiz Khalifa hung out here not long ago; you can see the video on YouTube. The Hemp Center was the first dispensary to carry the now-legendary strain Girl Scout Cookies — and one of the last dispensaries in the city to offer an onsite smoking lounge for its customers.

That's all over now. After the club's 8 p.m. closing hour Monday, a furious disassembly of the premises began. Sheriff's deputies were expected to take possession of operator Kathleen Cappetti's keys first thing Wednesday morning.

Cappetti's legal situation is complex. According to court records, she owned the building outright with her former lover, Richard DeNola; after the relationship dissolved, so did the exact nature of her property rights. A dispute between the pair is in arbitration, but in the meantime, DeNola sold the building. The new owners — one of whom, Clara Michelson, is an Outer Richmond dentist — have supposedly already leased the location to a new dispensary, which will be able to open for business almost immediately — using Cappetti's old permit.

"It's a hostile takeover," Cappetti told SF Weekly, noting that the new "owners" plan to use a name with the same acronym (THC). "In other words, they're just stealing our business."

How can this be — and how can it be legal?


In San Francisco, the permit to sell medical marijuana — which, these days, is a highly sought-after license to print money — is tied to an address, not an operator. This means that while it's the operator who goes through a yearslong process to get approval from multiple city agencies to sell cannabis out of a particular location, the operator cannot take a permit with them anywhere else — and if they're evicted, the landlord can bring in new cannabis sellers of his or her choosing without going through the lengthy and expensive process again.

The Hemp Center is not the first San Francisco dispensary to go through such a change of ownership. Two SoMa dispensaries have undergone similar changes. One, the San Francisco Medical Cannabis Clinic on 10th Street, will reopen soon as Urban Pharm, with the local, SRO-residing operator replaced with a slicker Sacramento-area crew.

It makes business sense. Multiple dispensaries are currently trying to open second locations elsewhere in the city. It's easier and cheaper to secure an existing permit than it is to get a new one. And, under San Francisco tenant law, it's much easier and cheaper to evict a business than it is a residential tenant (there is no rent control and no "just-cause" eviction protection for commercial tenants).

Thus, there is little standing in the way of an enterprising weed seller convincing another seller's landlord to throw the business out and replace it.

"It's not always that simple ... but it is a trend," a prominent cannabis land-use attorney told me. "And we're going to see more of it."

This means trouble but also opportunity for less-polished marijuana sellers, who are reportedly entertaining offers in the mid-six figures for existing permits.

Cappetti plans to stay in the game — or at least try. She's leased a space farther up Geary Boulevard where she hopes to open a new smoking lounge and do deliveries. Whether she can win a new permit to sell cannabis at the new location isn't clear — her new neighbors are already taking unkindly to the smell of pot in the area, and she has unpaid taxes at the state level, according to records.

She's already watched Berner leave Hemp Center behind for money and fame. "That was tough," Cappetti says. Now, The Hemp Center is left by the wayside, right as the industry is taking off. "So I'm left at home again," she says, "scrubbing the toilet."

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About The Author

Chris Roberts

Bio:
Chris Roberts has spent most of his adult life working in San Francisco news media, which is to say he's still a teenager in Middle American years. He has covered marijuana, drug policy, and politics for SF Weekly since 2009.

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