Central Coast cannabis business to sell for $56 million

October 11, 2021

By KAREN VELIE

Following the battle for a limited number of retail cannabis permits in Santa Barbara and San Luis Obispo counties that included background checks, interviews and a variety of specific requirements, multiple winners sold their permitted businesses, the latest for $56 million.

Recently under a sales contract, Coastal Holding Company operates five pot shops, including Coastal Dispensary in downtown Santa Barbara, along with two of their Coastal Delivery services, one in Santa Barbara and the other in San Luis Obispo. Founded in 2018, Coastal secured their retail permits during the past two years.

The Parent Company, a cannabis company backed by rapper Jay-Z, is set to purchase Coastal for $16 million in cash, $20 million in stock and another $20 million in stock contingent on transferring the varied cannabis licenses. The deal is expected to be finalized in 2022.

In selecting Coastal Dispensary for one of three coveted pot shop permits in the city of Santa Barbara, the city gave it points for being a Santa Barbara-based business. One of the other three pot shops permitted in 2019, Golden State Greens, sold in 2020 to a Florida company.

Coastal Delivery SLO was the first cannabis business permitted to operate in San Luis Obispo, even though it had not complied with several requirements. City staffers said a department head told them to allow the pot delivery service to continue operating even though their temporary certification of occupancy had expired.

As part of its selection criteria, San Luis Obispo gave cannabis businesses points for having minority owners in a low income bracket, which Coastal Holding Company had when its application was approved, according to emails between city staff and the applicant. However, when Coastal Holding Company applied for a permanent certificate of occupancy in 2020, the lower income owners were no longer involved with the company.

Throughout the Central Coast, city councils created several odd selection criteria to determine the winners of their lucrative cannabis retail permits. The process appeared to support specific candidates, including one permit holder who sold before even securing a retail site.

The first city council in SLO County to permit a retail pot shop, Grover Beach officials espoused the importance of a thorough vetting process. Then in late 2017, the council voted to award the coveted permits to a group of people who included felons, a man on the sex offender registry list and people affiliated with the League of California Cities.

At that time, council members argued against allowing the permit winners – The Monarch, 805 Beach Breaks, Natural Healing Center, and Milkman – to sell their permits. However, a clause in the ordinance permits the city manager to allow the sale of marijuana pot shops and the transfer of permits.

The Monarch was the first to sell, less than five months after the council voted to award the permit, and before they even secured a building.

The Monarch was a pot business consisting of six principals, three of whom have ties to the League of California Cities. Patrick Shannon, The Monarch’s chief operating officer, is a former employee of the league; Antolin Cardenas, another principal, works in public affairs for the league; and the CEO of the Monarch, Sunni Mullinax, is married to David Mullinax, the league’s local representative on the Central Coast and a close personal friend of former Grover Beach mayor John Shoals.

In May 2018, 805 Beach Breaks was the first cannabis retail shop to open in San Luis Obispo County. Ed Esters, one of the original co-owners, has a controversial past and is presently listed on California’s sex offender registry. Esters was convicted in 1997 of drugging, raping and sodomizing a female victim. He was released from prison in 2001.

In April 2019, Harvest Health & Recreation announced it had purchased 805 Beach Breaks, another favorite of Grover Beach Mayor Shoals and then-councilman Jeff Lee.

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