NEWSMAKERS

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Asked how he’s viewing the role interest rates will play for his company in the remainder of the year, Ishbia said he’s simply not.

“ e reality is, I don’t spend too much time on things I can’t control,” Ishbia said. “ e things I can control is the time I get up my attitude, my work ethic, my drive, my leadership. I can’t control whether rates are going to be at eight (percent) or three (percent). If they’re at three, it’s going to be easier. If they’re at eight, it’s going to be harder.”

As Ishbia navigates a contracting mortgage industry, he’s also navigating his new ownership of the Phoenix Suns and Mercury professional basketball franchises.

Ishbia completed his deal to acquire a majority interest in the Suns and Mercury in early February in a deal that valued the teams at $4 billion.

In his rst action as team owner, less than 24 hours after taking over, Ishbia made a big splash, orches- as weed prices kept falling, court lings show.

Tropics LP, a subsidiary of Calgary-based Sundial Growers Inc.’s investment rm SunStream Bancorp Inc., loaned Green Peak $70 million in September 2021 toward the acquisition of competitor 3Fifteen Cannabis and its 12 dispensaries in Detroit, Grand Rapids, Ann Arbor, Flint and elsewhere. Merida, a majority shareholder in 3Fifteen, also lent $8 million toward the 3Fifteen purchase. Both investors are suing Skymint in circuit court.

With an oversupply of product in the state and nite licenses and communities to sell the product, buying up dispensaries became paramount to Skymint’s growth strategy. It was either develop a higher-priced niche product or play on volume with more sales outlets to move product as margins diminish.

Prices had already fallen 50 percent between September 2020 and September 2021, causing lenders to demand sti er loan terms.

Under the Tropics’ promissory note, Green Peak agreed to repay the lender in full by September 2025 at a whopping 12.5 percent interest rate, compounding monthly, as well as sell some common shares of the company to Tropics, according to the lawsuit.

Under that agreement, Green Peak agreed to maintain a minimum cash balance of $7.5 million, which Trop- ics alleges in the suit that it failed to do in March last year. Tropics appears to have concluded it was either lose much of its investment or dump more money into Skymint in hopes its growth plan was successful. e two parties entered into another agreement in November, which included Tropics paying more than $5.8 million toward overdue sales and excise taxes for Green Peak.

Tropics loaned Green Peak another $5 million in March 2021, raising the loan total with fees to nearly $81.5 million. Green Peak once again did not meet its loan obligation in June 2022 after failing to raise an additional $15 million in new funding, according to the suit. e company also failed to pay additional fees to Tropics, pay back rent on its E. Jolly Road facility in Lansing and pay certain taxes, the lawsuit claims.

Tropics alleges in the court ling that Green Peak’s daily sales revenue has dropped from $356,953 in April 2022 to just $184,579 in January of this year, exacerbating an already bad nancial picture.

Green Peak owes nearly $4 million in sales and excise taxes by March 25, the suit alleges, and the landlord of its leased cultivation facility in Dimondale is attempting to evict the company for owing roughly $1.1 million in rent.

Tropics is asking the receiver to take possession of Green Peak’s assets.

“A lot of companies are on the edge, desperately trying to nd additional capital, but costs are so extraordinarily high,” said Lance Boldrey, partner at Detroit-based law rm Dykema Gossett PLLC and part of the legal team that designed the state’s legalization framework. “Everyone thought the money was so good, they’d do anything to keep the game going. But we’re going to see the market shake out. It’s following the same pattern we saw in Colorado, Washington and Oregon. Anywhere with unlimited licensure.” e other receivership cases are much smaller in scope, but represent the growing pain in the state’s industry.

“We’re getting lots of client calls about licensees not getting paid for product and monitoring more and more lawsuits over licenses and money owed,” Mains said. “ ese are the next receivership cases to come.”

Battling bureaucracy

e legal marijuana framework in the state, approved by voters in 2018, allows the state to license any entity that meets stringent criteria. But those same entities cannot operate without a local license from the municipality where they would like to operate. For instance, Skymint has local licenses in at least 29 municipalities.

Here lies the heavy lift for Sky- mint’s receiver, Gene Kohut, a partner at Detroit-based business advisory rm Trust Street Advisors, if he chooses to liquidate the company’s assets to pay back investors.

Under state law, each of those municipalities developed their own licensing framework that often includes di ering rules and red tape on transferring those licenses to a new owner.

“State licenses have little to no value, it’s all about the local approvals,” Mains said. “ ose ordinances are all over the place. Some only allow equity transfers or no license transfers at all or it’s a huge process. e receiver and any potential buyer or buyers is going to have to address each local license at a one-by-one level.”

And even if the receiver could navigate these local hiccups, is there a buyer with enough cash and lending power to gobble up Skymint’s assets in a declining market?

Michael Elias, founder and CEO of Skymint competitor Marshall-based Common Citizen, said he’s examined buying up its assets, but the debt obligations attached are too high.

“Debt is too signi cant and restructuring too di cult to extract any value,” Elias told Crain’s. “I’m sure someone could do it, but it’s too cumbersome today (under falling prices).”

Andrew Sereno, CEO of Manchester-based niche grower Glacial Farms, said the fall of Skymint would bene t businesses in the market by reducing supply. Glacial Farms sells weed wholesale under the Glacier Cannabis brand and doubled its grow operation by leasing additional space from a defunct grower last year.

Skymint holds ve adult-use Class C grow licenses, three adult-use excess grow licenses and eight medical marijuana grow licenses. at translates to the legal ability to grow as many as 28,000 marijuana plants, or about 2 percent of all of the state’s legal marijuana plants being grown as of Jan. 31, according to CRA data. ough it’s unlikely Skymint is growing anywhere near full capacity.

“For those of us who aren’t debtors to (Skymint), this is a great thing as it should mean less (excess cannabis) on the market that’s arti cially lowering prices,” Sereno said.

Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh trating a trade for future Hall of Famer Kevin Durant. e move to acquire the teams dovetails with Ishbia’s well-documented love of basketball. In college, he was a walk-on on Tom Izzo’s 2000 Michigan State University team that won a national championship.

“It’s a lot of money, but at the same time, I don’t think about the money,” Ishbia said of his foray into professional sports. “I focus on the enjoyment, success, opportunity and also the impact.”

Ishbia, during a reception prior to the Newsmakers event, acknowl - edged to Crain’s that UWM’s sponsorship deal with the Detroit Pistons NBA team — particularly the UWM patch that players wear on their jerseys — is a “little awkward” given his new ownership of the Suns.

He said it’s unlikely the UWM patch will remain on Pistons uniforms, but the company will continue to have a partnership with the Pistons and its home of Little Caesars Arena.

Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes