Oct. 22 2014 11:55 AM

For these entrepreneurs, helping sick people will likely be profitable

David Blair (left) and Zachary Lazarus are business partners in A Green Alternative, which is on track to be the city’s first licensed medical-marijuana dispensary.
Photo by Joshua Emerson Smith

    Outside of the third-floor entrance to the city of San Diego's Development Services Department, around 4:30 a.m. on Wednesday, April 23, David Blair joined a long line of would-be marijuana entrepreneurs. Other people had been queued up for days in anticipation of the city issuing its first-ever permits for operating medical-marijuana dispensaries.

    With a limited number of permits available, Blair hired a security guard for about $1,400 to also wait outside the building for several days prior to the city opening its doors to applicants. However, at the last minute, officials told everyone to walk downstairs to the first floor of the building and form a new line.

    "Imagine Black Friday at Target or Walmart," said Blair, who recalled a mad rush down a staircase, across a street and into a lobby filled with reporters. "We wanted to be first in line—first in, first out."

    To his satisfaction, Blair was among the initial six people allowed into an elevator up to the third floor, where he submitted a stack of professionally prepared documents outlining his plan to operate a dispensary.

    As it turns out, the race for permits had only just begun. Today, applicants continue to scramble to complete the city's approval process, which includes an environmental review, an appearance before a community planning group and an administrative hearing. 

    Finding a location that satisfies the city's requirements isn't easy, either. A limited number of commercial and industrial zones fit the bill. Dispensaries must be at least 100 feet away from residential property, as well as 1,000 feet away from each other and youth facilities such as schools and playgrounds.

    Nearly six months after the city began taking applications, Blair, last week, became the first person in the city's history approved to run a dispensary. He says the effort cost him and his investors about $140,000 in up-front costs and will likely top half a million before the store opens, which could be by the end of November.

    However, not everyone who fronted the dough for lawyers and zoning professionals will be as lucky. With only four dispensaries allowed in each of the nine City Council districts, 38 total applications are still pending, including 18 in District 2, eight in District 6 and five in District 8.

    Why have aspiring business owners spent so much money and time on something that's far from a sure thing? One factor that can't be ignored is that selling medical marijuana can be hugely profitable. Many dispensaries do millions of dollars in sales every year. Owners rake in sixfigure salaries. Oakland's pot behemoth, Harborside, has continually wrangled with the IRS over its yearly revenue of $22 million.

    Faced with this question, Blair doesn't deny that he expects his dispensary to make significant money. However, like many in the industry, he's quick to say his first priority is to help the sick.

    Back in February, when Blair first considered the idea of opening a dispensary, he and his romantic partner, Douglas Cristofo, had already been operating a medical-marijuana delivery service called Blossom San Diego.

    "It's about taking care of the patient," the soft-spoken Blair said. "In fact, with the delivery service, Doug will spend a half-hour to 40 minutes with each new patient, making sure that we're sending them the right strain based upon their illness."

    Diagnosed with AIDS in the mid 1990s, Blair, now 59, has used marijuana to treat his chronic pain and persistent flu-like symptoms for nearly 20 years. First recommended to him by an infectious-disease specialist, he said, the drug worked almost immediately.

    "Initially, I got stoned, but within a few days, within a week, the pain started to go away, using it once a day," he said.

    The couple's new dispensary—A Green Alternative—will be a 1,400 square-foot storefront at 2335 Roll Drive in Otay Mesa. They plan to employ roughly a dozen people, including eight fulltime workers making $15 an hour with benefits.

    Blair has taught business ethics at San Diego State University twice a week for the last six years and holds a doctorate degree in leadership studies from University of San Diego. But for most of his life, he worked as an interior designer and, for a brief period in the '80s, owned a juice company.

    Living in a nice house in Chula Vista, Blair and his partner have seemingly done well for themselves financially. Having bought multiple cars during the past few years, the couple got to know Zachary Lazarus, a former general sales manager at the Perry Ford car dealership.

    It was Lazarus who first suggested the idea of opening a brick-and-mortar marijuana business. Last year, Lazarus said, he made a nice bundle of cash by trading marijuana-related stocks, such as Terra Tech, which produces indoor-grow equipment.

    "It was crazy," the 37-year-old said. "It was stupid what these companies were worth. Some of them were heavily inflated."

    With his initial success in the marijuana industry, Lazarus pitched to Blair in January the idea of opening a dispensary together. With the city on the verge of approving its permitting program, the two decided to explore the idea further.

    "We just kind of had this great bond, as far as business," Lazarus said. "It got to a point to where I was showing up every day. I was calling every minute—literally—emailing, texting."

    From the beginning, Lazarus talked about franchising and going public, Blair said. While Blair was open to the idea, he had to win over his partner, whom he refers to as "very conservative."

    "Doug was against it in the beginning, and then he had an epiphany that it could be a means," he said.

    Having left his old job in October to go on disability, Lazarus winced in pain as he described being overworked. As a result, he said he also started medicating with marijuana, which he hadn't used since 1996. He'll be the COO and general manager of A Green Alternative.

    "We're not thinking about the permit being worth money," he said. "That's the farthest from our concerns. We're thinking about serving the community."

    However, he acknowledged the potential for profit. 

    "When I was fortunate enough to be selling [Blair and Cristofo] cars, I realized in my brain that they were in an emerging billion-dollar industry," he said. "When I saw what they were doing and how they were serving the community, it gave me kind of the drive to figure out how I could get involved."

    By most estimates, this is an emerging industry that could skyrocket with legalization likely headed to the state ballot in 2016.

    Blair's lawyer is medical-marijuana attorney Lance Rogers, who in June shifted away from criminal defense to join a practice focused solely on the business side of the industry. Rogers and pro-marijuana Washington, D.C., lobbyist Dan Riffle have more than 40 clients in multiple states.

    "For me, as an attorney, I'm following my clients who are following the legalization and institutionalization of marijuana," Rogers said. "My professional goal has been to put myself out of business as a criminal-defense attorney."

    Legalization wouldn't necessarily mean San Diego's permitting system would be irrelevant, said Eugene Davidovich, a founding member of Alliance for Responsible Medicinal Access, the city's largest marijuana trade association.

    It's likely a voter-approved initiative could include an opt-out provision for cities, Davidovich said. "This could be, for many years to come, the only legal way in the city to obtain marijuana for medical use."

    If that's true, the coming crop of new dispensary owners, such as Blair, have a specific responsibility to the city's medical-marijuana patients. With no permit applications in many areas of the city—including Districts 1, 4, 5 and 9—advocates are already planning future efforts to lobby the city to loosen its restrictions on where dispensaries can operate. And that'll likely be a much easier sell if the first city-approved businesses prove to be good neighbors.

    Write to joshuas@sdcitybeat.com or follow him on twitter at @jemersmith.


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