Illinois medical marijuana's big players are risk-taking real estate, mortgage businessmen
Late one Saturday night, Rob Sampson had a confrontation with his 15-year-old daughter about marijuana. But it was his daughter doing the confronting and it was Sampson defending the drug.
Sampson and his wife, after a long night of polishing his new company's applications to grow medical cannabis, returned to their suburban Chicago home to find their daughter waiting up. They hadn't yet told her their business plans.
"She said, 'What is going on?'" Sampson recalled. "'I know something's going on and you guys aren't telling me.'"
That's when they had The Talk: a conversation Sampson and his three partners in Chicago-based Cresco Labs have repeated with parents, in-laws and co-workers to explain why they are switching livelihoods and risking millions of dollars to follow the promise of medical marijuana.
Cresco Labs is poised to become the state's largest marijuana grower. It won three cultivation permits, more than any other company. But the risks are daunting. Illinois' marijuana pilot program expires at the end of 2017 unless state lawmakers extend it. Far fewer patients have signed up than projected; only 2,000 have been approved at last count. Some Illinois doctors are skeptical.
What's more, Cresco is a defendant in two lawsuits filed by unsuccessful applicants. Cresco plans to build 40,000-square-foot growing facilities in Joliet, Kankakee and Lincoln, but the litigation could delay construction.
The cannabis industry isn't an opportunity for easy money, as some might believe, said Michael Elliott of the Marijuana Industry Group, a Colorado trade group.
"A lot of businesses have failed in Colorado," Elliott said. "Everyone who got into it found it to be 10 times more complicated than they initially thought. And I imagine that's going to be true in Illinois as well."
Cresco Labs' four founding partners are accustomed to high stakes.
Dominic Sergi, the youngest at age 31, started his own real estate company, Clear Height Properties, in his 20s. Joe Caltabiano, Charles Bachtell and Sampson weathered the mortgage crisis in prominent positions at Chicago-based Guaranteed Rate, the largest independent retail mortgage company in the nation.
Caltabiano, a star in his field, will continue making mortgage loans. But Bachtell, a 36-year-old attorney who has been Guaranteed Rate's general counsel, and Sampson, its 40-year-old chief operating officer, are leaving the mortgage giant to work on medical marijuana full time.
"Our departure is surprising a lot of people," Bachtell said.
Walking through their high-ceilinged headquarters in a River North brick-and-timber loft and settling around a conference room table, they readily agree their new venture presents their biggest career gamble yet.
Caltabiano, 37, is a survivor of childhood leukemia to which he credits his "carpe diem attitude." He directly benefited from collaborative oncology research that, over several decades, has hugely improved survival for children with cancer. Remaining involved in follow-up research, he's quizzed oncologists about medical cannabis. They've told him they recommend it to ease nausea and other cancer treatment side effects.
"You have some of the smartest people in the world recommending a product that's a Schedule I narcotic the federal government has deemed has no medical benefit," Caltabiano said. "It got me thinking."
Cresco Labs' applications scored highest in the state's selection process, not only in the three districts where Cresco competed, but compared to scores across the state. The partners credit their edge to consulting with a reputable Denver cannabis company, wooing local support and winning bonus points by promising to contribute 10 percent of net profits to charities.
Michael Mayes, CEO of Quantum 9, a Chicago-based marijuana industry consultant, predicted Cresco Labs will survive the bumps and the litigation.
"They're definitely one of the largest players in Illinois," Mayes said. "With three licenses, there's plenty to focus on. They'll be just fine."
Carla K. Johnson can be reached at https://twitter.com/CarlaKJohnson