This story was reprinted with permission from Crain’s Detroit and written by Dustin Walsh.
Skymint, the embattled marijuana operator being acquired out of receivership, is shuttering its growing and processing plant near Lansing, Michigan.
The company plans to close the 56,000-square-foot Harvest Park facility at 10070 Harvest Park in Dimondale and lay off roughly 180 employees by March 1, the company said last week in an internal memo to employees that was obtained by Crain’s.
“Unfortunately, the changes that occurred in the cannabis industry over the past few years no longer allow us to compete cost effectively while maintaining our growing processing operations at the Harvest Park facility,” Jeff Donahue, Skymint’s executive vice president and general counsel, wrote in the memo. “The decision was necessary to remain competitive in the market and ensure long-term viability of Skymint.”
Skymint continues to operate 22 retail locations across the state, according to its website.
Only a few years ago, Skymint was among Michigan’s largest producers and sellers of marijuana in the state before a collapse in marijuana prices and alleged bad management sank its financial outlook.
Representatives from Skymint nor its new owners Canadian leaders Tropics LP responded to Crain’s inquiries on the matter.
The deal to acquire the company out of bankruptcy was expected to close early next year. It’s unclear whether the closure is a directive from Tropics.
The company is expected to begin layoffs at the Harvest Park plant on Feb. 12, according to the memo.
Tropics LP, under a new entity called Skymint Acquisition Co., acquired the assets of Green Peak Industries, doing business as Skymint, out of receivership for $109.4 million in a stalking horse bid in October. Tropics is a subsidiary of Sunstream Bancorp., which is a joint venture with the publicly-traded SNDL Inc. (NASDAQ: SNDL).
Under the deal, Tropics acquires Skymint’s cultivation assets as well as 22 retail leases with dispensaries that produced annualized sales of approximately $68 million in September, the company said in a news release.
Skymint entered receivership in March after Tropics filed a lawsuit over $127 million owed to the company.
Tropics 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. Under the Tropics promissory note, Skymint agreed to repay the lender in full by September 2025 at an interest rate of 12.5%, compounding monthly, as well as sell some common shares of the company to Tropics, according to court records.
Under the agreement, Skymint agreed to maintain a minimum cash balance of $7.5 million, which Tropics alleges in the lawsuit that it failed to do in March last year. In response, Tropics loaned Skymint another $5 million, raising the loan total with fees to nearly $81.5 million. Skymint did not meet its new loan obligation in June 2022 after failing to raise an additional $15 million in new funding. The company also failed to pay additional fees to Tropics, pay back rent on its East Jolly Road facility in Lansing and pay certain taxes.
The two parties entered into another agreement in November 2022, which included Tropics paying more than $5.8 million toward overdue sales and excise taxes for Skymint.
Tropics alleged in the court filing that Skymint’s daily sales revenue dropped from $356,953 in April 2022 to $184,579 in January of this year, exacerbating an already bad financial picture. Skymint was allegedly burning through $3 million in cash per month and generated only $110 million in revenue in 2022 — $153 million below its forecast of $263 million in sales for the year.
Skymint owed nearly $4 million in sales and excise taxes by March 25, the lawsuit alleged.
in April, Skymint ceded its lease on the former Summit Sports and Ice Complex near Lansing. The company planned to double its marijuana production capabilities with the facility but never completed the build-out. Skymint surrendered the 176,000-square-foot facility and 21 acres back to developers, the country’s largest cannabis property developer Innovative Industrial Properties Inc.
San Diego-based Innovative Industrial Properties invested roughly $30 million to acquire and renovate the facility on Skymint’s behalf but sought to retake the property after Skymint failed to pay on its lease.
IIP also owns the Harvest Park property.
Representatives from IIP did not immediately respond to Crain’s inquiries on the future of the Harvest Park plant.
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