Bellingham, Ferndale entrepreneurs ready to enter recreational pot business

THE BELLINGHAM HERALDApril 13, 2014 

Nick Cihlar stands in a nearly 13,000-square-foot space in Ferndale, pointing to blueprints and then out into the part of the building that's being changed into four large grow rooms for marijuana.

In Bellingham, Danielle Rosellison stands in a warehouse that will be the 17,000-square-foot home of Trail Blazin' Productions.

Both are poised to enter Washington's newest industry since voters approved Initiative 502 - the 2012 ballot measure that legalized recreational marijuana in the state.

"It feels like we're part of history here," said Cihlar, one of three main partners in Subdued Excitement, or SubX. "The whole thing is exciting."

The Washington Liquor Control Board, which is overseeing the implementation of I-502, has received 301 applications from Whatcom County businesses for licenses to grow, process and sell marijuana. They are split into:

-- 124 for growing/producing.

-- 103 for processing.

-- 74 for retail.

The state board has yet to issue a marijuana license to any business in Whatcom County.

Not all retail applicants will get a license, given that the board has allotted only 15 pot stores for all of Whatcom County. There will be a lottery April 21-25 in places here and other parts of the state where the number of proposed stores outstrip the total allowed.

SubX and Trail Blazin' have applied for licenses to grow and process pot.

The entrepreneurs said they wanted to get in on the ground floor of history and be part of a "green rush" that represented one of the best business opportunities they'll have in their lifetime.

"This industry is going to create a lot of jobs and a lot of wealth," Cihlar said, "and it's going to be good for communities."

But there are risks.

For one, marijuana is still illegal under federal law. Then there are regulatory and other hurdles that come with being part of a new venture.

"Nobody wants to be the first to do something - except us," Rosellison said.

Here's a look at two businesses that hope to be among the pot pioneers in Washington.

TRAIL BLAZIN'

Rosellison and husband Juddy have grown pot for the legal medical market in Washington state. At 15 plants, that was a small venture compared to the more than 1,500 plants they'll use to grow for the recreational market through Trail Blazin' Productions.

"It's a massive undertaking," Rosellison said.

Challenges included not being able to borrow from banks, which are reluctant to loan money because marijuana is illegal under federal law - requiring the family to take out a second mortgage on their home.

They couldn't get a loan through the federal Small Business Administration, or get assistance with their business plan from the Small Business Development Center at Western Washington University because the center receives federal funding.

Bellingham SCORE, whose volunteers provide business counseling, also won't offer assistance because of the disconnect between state and federal law.

"You don't have the same resources because there are so many things that are federally funded," she said.

But Rosellison, who described herself as part of a normal, middle-class family with kids, is forging ahead with private funding from an additional partner - who will be the grower along with Juddy - and two investors in Trail Blazin'.

To Rosellison, a loan officer with Security First Mortgage, recreational marijuana is about economic opportunity for her family, for other businesses and for the community.

"Finding a good job in Bellingham is not easy to do," she said. "To be able to do this, we're really set on having a living wage and not a minimum wage for our employees."

Trail Blazin' received its building permit from the city of Bellingham on April 3. Rosellison hopes to be able to start operations at its Division Street location in Irongate Industrial Park in about two months.

She said it will take several hundred thousand dollars to get their business going. And that's even before they get a license from the state.

Pot applicants are required to meet state regulations and rules of their local jurisdictions.

At the state level, the Rosellisons and others must undergo background checks, be residents of Washington for at least three months prior to the application filing date, and have their business areas inspected by the state.

The liquor board also investigates funding sources for the prospective businesses - investors must be from Washington - and who is connected to the licenses, as well as make sure that proposed locations meet the 1,000-foot buffer required between schools, libraries, transit centers and other places where children gather.

The state also requires applicants to put in security measures, including cameras.

After business owners have met all of those requirements and pass a final site inspection by the state, then they get the OK to operate.

"After you invest all our money, you get the license," Rosellison said.

To Rosellison, recreational marijuana is a calculated risk. Banking laws eventually will catch up, and the momentum is swinging as more states move to legalize marijuana.

Colorado has shown the extent of the demand. (The state's voters also legalized marijuana for recreational use and opened its stores in January.)

"You cannot grow enough," Rosellison said.

As she and others in Trail Blazin' work to open their business, she talked about joining the Chamber of Commerce to "put a positive face on our industry."

This April, the business received a most valuable player award from the chamber. For Rosellison, it was a sign of something else.

"We're being embraced by the community as a legitimate business," she said.

SUBX

At SubX on Whitehorn Street, Cihlar talked about installing 1,000-watt grow lights - 36 of them in each of the four grow rooms - and two smaller rooms to experiment with plant breeding or new types of equipment.

He and business partner Nathan Jorgensen recalled being turned down a number of times when, starting a little more than a year ago, they looked for space to buy or rent. They originally hoped to open their business in Bellingham, hence the Subdued Excitement name.

Their options improved after the U.S. Justice Department promised to not interfere as long as the state strictly regulated the emerging marijuana market, including tracking plants from seed to sale.

"That was the moment where attitudes sort of changed," said Cihlar, general manager for snowboard and stand-up paddleboard company Nidecker USA.

Cihlar, Jorgensen and Seth Weissman are the main partners in SubX. Friends and family also are investing in the business. So far, they have spent about $150,000 on their venture, which has a budget of more than $500,000.

Jorgensen will be the grower for the business. He's from a farming family in Eastern Washington and has been growing medical marijuana for a number of years.

Jorgensen became involved with SubX because he wanted to be part of a new industry.

"I figured if you don't try, go for something, you'll never know," he said.

For Weissman, who studied economics at Western Washington University, it was the idea of "taking an existing market and moving it from an illegal market to an actual legitimate taxable business."

"I'm curious to see what the market forces are going to be and how all that's going to play out with supply and demand," he said during a pause in the SubX construction project.

Cihlar hopes to have the business operating by mid-June, if all goes well during final inspection with the liquor board and the city of Ferndale.

(In March, the City Council voted to block new applications for recreational marijuana businesses in Ferndale for six months. but SubX was far enough along that it wasn't affected by the ban.)

At full production, Cihlar estimated that more than 1,000 plants will be on the property.

It will take about 10 weeks to get the first plants to harvest, and an additional two to four weeks for drying and curing.

SubX marijuana could be in stores starting in October, Cihlar said.

Reach Kie Relyea at 360-715-2234 or kie.relyea@bellinghamherald.com .

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