Business & Economy

Why this LA city could be the next ‘Mecca’ for pot businesses

David Wagner/KPCC

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On a recent Saturday morning, about 200 people walked among rows of folding tables on an indoor basketball court in the South L.A. city of Lynwood. They shook hands with business owners wearing company-branded shirts. They asked about open positions, took brochures and wrote down contact information.

It all looked like a pretty normal job fair, but this one was hosted by the Lynwood Cannabis Association. 

"The purpose of the event was to introduce ourselves as the licensed cannabis operators in the city," Cannabis Association Chairman Tony Torres said.

On Jan. 1, it will be legal to buy recreational marijuana in California. While many local governments are nowhere near ready for retail sales to begin and some are resisting the legal pot industry, a handful of Southern California cities decided early on to embrace it. Lynwood has been one of the most aggressive in courting cannabis.

Eleven cannabis companies are currently setting up shop in Lynwood. The city has licensed them to grow marijuana, turn it into oils for vaping or ingredients for edibles and distribute it all to dispensaries.

Torres said with legal sales just around the corner, now is the right time for Lynwood residents to meet the people behind the businesses moving into their community.

"We are committed to owning who we are, to being public about who we are, and promoting the benefits of the industry we represent," he said. 

A representative of the cannabis company Moxie ready to meet Lynwood residents at the job fair.
A representative of the cannabis company Moxie ready to meet Lynwood residents at the job fair.
David Wagner/KPCC

Hector Rivera is the co-owner of Calimed, a company licensed to cultivate, manufacture and distribute cannabis in Lynwood. He sees a lot of his competitors still waiting for other cities to pass their pot regulations.

"At this point we're way ahead of everybody," Rivera said.  "If you want to get in early, this is the time."

Calimed's owners initially considered basing their operations in Needles, one of the small desert towns trying to attract the cannabis industry. But Rivera said they chose Lynwood because it puts Calimed right in the middle of one of Southern California's biggest markets.

"We're right in the center of the 105, the 710, the 110, the 5. So it's easy access throughout the whole city," he said.

As part of their development agreements with Lynwood, Calimed and other marijuana businesses have committed to hiring locals and starting them at 150 percent of the minimum wage. 

Lynwood resident Marvin Criner works as an armed security guard at medical dispensaries in the L.A. area. He came to the job fair hoping to drum up more contract work for his company. 

"It's actually a good opportunity for a lot of young people that didn't go to college, where they can make a decent amount of money and take care of their families," Criner said.  

Two Lynwood city council members showed up to the job fair. One of them, Aide Castro, led the push to pass the city's pro-cannabis ordinance in late 2016.

"I want to make sure that you guys are successful," Castro told the crowd. "I want to make sure that Lynwood is looked at as the Mecca of how to do it right."

Back in her office at City Hall, Castro said the working class city has been financially struggling for most of her 10 years on the council.

She wanted to attract businesses that could create a range of jobs — from delivery drivers to plant scientists — and significantly boost local tax revenue. The city estimates that once all the local business are up and running, cannabis taxes will add at least $3 million to the city's $33 million dollar annual budget each year.

By announcing early on that Lynwood was open for business, Castro said the city got to pick companies with a track record of success in other states.  

"For me it was an opportunity to bring economic development into the community, and take a business that unfortunately has already been thriving in the black market in our communities and bring it out into the light," Castro said. 

Lynwood’s move to welcome legal pot has also spurred a rush on old, neglected industrial real estate. Auto shops and tile stores in the city's manufacturing zone will soon have a cluster of marijuana-growing neighbors.

Attorney Aaron Herzberg, who has been involved in a number of property deals in Lynwood, said, "It's really one of the first cities in which real marijuana businesses are being built." 

Herzberg's firm, the Puzzle Group, works with entrepreneurs trying to make it in L.A.'s competitive legal cannabis industry. He says those who passed on Lynwood now wish they hadn't.

"I told them all that they should've gotten into Lynwood," Herzberg said. "They kind of thought I was crazy. I acquired real estate for a $103 per square foot, and now you can't acquire it for $300 a [square] foot." 


Lynwood Urban Gardens owner Arthur Shvartsman stands in the warehouse where he plans to grow 240 pounds of marijuana per month.
Lynwood Urban Gardens owner Arthur Shvartsman stands in the warehouse where he plans to grow 240 pounds of marijuana per month.
David Wagner/KPCC

One of the entrepreneurs who did manage to buy space is Arthur Shvartsman, owner of Lynwood Urban Gardens.

Opening the creaky door of his 12,300 square-foot warehouse on Martin Luther King Jr Blvd., he said the property had been empty for some time. "Over a year, I think," said Shvartsman.

"Where we're standing right now, what you're looking at is going to be all grow facility, all blooming rooms," he said. 

While the first floor will be dedicated to climate-controlled indoor farming, Shvartsman plans to add two more stories to make space for offices and extraction rooms.

While he's excited about his venture, he's disappointed that — at least so far — Lynwood is not licensing dispensaries.

"That would be awesome," said Shvartsman. "If we were fully integrated in one building, we [would] have cultivation ... manufacturing and dispensing. Ideally, that's what you want."

Councilwoman Castro said it was a strategic decision to welcome most types of cannabis businesses, but not dispensaries. She wanted to emphasize blue-collar job creation while easing concerns about a proliferation of dispensaries.

Castro said the goal with cannabis was to "have the brewery and the distillery, just not the liquor store on every corner."

Shvartsman thinks the city may come around on allowing dispensaries. He's leaving space at the front of his building for retail sales, should Lynwood ever give him the green light.