Lexpert Magazine

14 LEXPERT MAGAZINE | OCTOBER 2017 | RECENT DEVELOPMENTS IN BUSINESS LAW | LEXPERT: I understand speed to market was a big focus here with the market sched- uled to open in July 2018. Was it demand- ing working under such a tight time frame? Zackheim: Yes, I would say the biggest chal- lenge in executing this deal was the tight timing. e cannabis market is quickly evolving and many cannabis industry par- ticipants are moving very quickly to best position themselves for success. In order to capitalize on the opening of the Canadian recreational market, it was critical to both Emerald and Village Farms to quickly locate the right partner and to reach a mutually beneficial business deal as soon as possible. Beeby: Because of the looming deadline for recreational marijuana and the timeframe to get licensing through Health Canada, there was a small window for getting this deal done in time for the JV to be produ- cing before next summer, and as a result, the pace of the deal was tremendous. Our team flew into Toronto late on a ursday night and we spent all the next day ham- mering out the key points of the deal. Nei- ther side was leaving until we had all the key points settled, and we signed the deal shortly aer we got back home. LEXPERT: Can you give me a sense of the size of these greenhouses? How is the con- version process going? Beeby: ese greenhouses are absolutely huge: 1.1 million square feet equates to about 25 acres, and since tomatoes don't give rise to quite the same security concerns you get with marijuana there's considerable work needed to get the greenhouse up to code, so to speak. e parties have decided that the best way to proceed is to convert the greenhouse a portion at a time rather than trying to tackle the entire facility all at once. Once they have a portion of the building converted and licensed they'll move on to the next area as needed to satis- fy demand. Stephen Ruffini, CFO, Village Farms: e conversion of the greenhouse is a large but manageable undertaking. Convert- ing an existing greenhouse operation is certainly much quicker and less costly than greenfield construction, which is the path that many existing licensed producers are pursuing to achieve scale. Budgeting and detailed plans for the conversion are in process. LEXPERT: Concerns about the safety of medical cannabis have been in the news of late. How do these companies stack up in terms of health and safety? Ruffini: Emerald Health has been operating under Health Canada's stringent Access to Cannabis for Medical Purposes Regulations (ACMPR) regime since is original licence with, to our knowledge, no issues. Village Farms has been a leader in crop applica- tions, in both Canada and the US, for the last 30 years and has been producing fresh produce for decades without a single food safety issue. Unfortunately, a number of the new cannabis ventures in the mar- ket lack meaningful experience in crop management. Agricultural experience and expertise matters, especially when people are ingesting the product. Beeby: Emerald's track record is complete- ly clean. ey don't use any pesticides and they test regularly in-house. e JV is ex- pected to follow similar procedures to en- sure that its products remain clean. LEXPERT: What was the biggest take-away from this whole experience? Gherbaz: From a transactional lawyer's perspective, in order to properly structure a cannabis-related joint venture, it is espe- cially important to understand both your client's and its joint venture partner's ob- jectives, their respective views on how the cannabis market will evolve and to be cre- ative in attempting to resolve differences between the parties. Until there is greater understanding and certainty in the canna- bis market, no two transactions are likely to be similar. ON THE TREND Marijuana Money Statistics from Viridian Capital Advisors show a dramatic uptick in capital raised by marijuana-based start-ups in North America. By August 25, 2017, these companies had raised US$1.7 billion in capital (equity and debt), compared to US$590 million by this time last year. Big Canadian players in the sector include Aurora Cannabis, Canopy Growth and CanniMed Therapeutics. GRAPHIC BY DAVID DIAS; SOURCE: VIRIDIAN CAPITAL ADVISORS

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