Plans for hemp production in Evart hit a snag

Council declines purchase offer for industrial property

This lot in the Evart Industrial park was approved for sale by the city council last week to the current tenant in the facility, MacLellan Industries Services, Inc. An offer from United We Stand, LLC., a hemp production partnership, was declined by the council.

This lot in the Evart Industrial park was approved for sale by the city council last week to the current tenant in the facility, MacLellan Industries Services, Inc. An offer from United We Stand, LLC., a hemp production partnership, was declined by the council.

Photo courtesy of Evart

EVART — Plans for the establishment of a hemp production facility in the Evart industrial park have been stymied by a decision of the Evart city council to sell one of the desired lots to another purchaser.

Council approved an offer for the purchase of Lot 2 from Steven Eades, on behalf of the current tenant, MacLellan Integrated Services, Inc., for the cash price of $400,000, during its meeting last week.

In a letter submitted to council, Eades stated that MacLellan has occupied the facility on the property for around 20 years under a lease agreement with the city, and they desire to purchase the property in order to secure long-term occupancy and make further investments in the business.

The company has invested around $330,000 in equipment at the facility, the letter said, and has pledged to invest an additional $106,000 in repairs and replacements once the contract is finalized, including repairs to the parking lot, dock and sidewalk; replacement of outdoor lighting and outlets; roof repairs; and replacement of gutters, siding, doors, insulation, furnace and air conditioning units. 

The purchase will enable the company to retain six full time jobs, the company said.

“What council did, in my opinion, is a breech of contract because they had approved the sale of lots 2 and 3 to us,” United We Stand, LLC, partner Dr. Steven Kalesperis told the Herald Review. “They negated our contract by approving the sale to someone else while we still had a viable contract on the table and there was never a cancellation of our contractual terms."

United We Stand, LLC, began negotiations with the city in October 2021 for the purchase of Lots 2,3,4,6,7 and 8, which included a 90-day notice to the tenant of a facility on lot 2 for vacating the property.

The company planned to establish a campus for growing, processing, prescribing and selling medical and recreational cannabis and hemp. In addition, they plan to create an educational facility to teach about growing and processing hemp, as well as the many uses for the hemp products. 

They said the facility would bring as many as 100 jobs to the area.

Several issues were brought up by council that delayed approval of the purchase offer from United We Stand, LLC, including a request for information regarding the company’s financials and proof of availability of funds for the purchase.

“They went back and forth, and it seemed rather odd, to say the least,” Kalesperis said. “One minute they approved our acquiring the property and the next minute they are finding excuses not to sell it to us when we already had an approved contract. It seemed like it was one excuse after another, and the council seemed to be extremely uncooperative in terms of moving forward.”

In a meeting in November, Mayor Chris Emerick expressed concerns over the extent of the project and that it was an “unproven business model.”

“This business model is new and therefore unproven, and the proposal mentions loans and grants that are not typically available to cannabis projects,” she said at the time. “I would like to see proof of funding.”

The proof of funding was never provided, and Kalesperis told the council that "based on their experience in past acquisitions of real estate, until a contract is agreed upon by both parties, terms of financing are not required."

Additionally, council member Matt Hildebrand expressed concerns that the scale of the project was too large a risk for the city and suggested they purchase two lots outright and enter into a lease to purchase option agreement for the remaining properties, leaving open the possibility of those being sold to another buyer.

According to information provided by United We Stand, LLC, a compromise was reached between the city and the company to limit the purchase to lots 2 and 3 as the first phase, with the acquisition of lots 4, 6, 7 and 8 in two additional phases, with a first right of refusal if outside parties expressed an interest to purchase.

The contract was revised to a land contract, and after further investigation, it was determined the city could not enter into a land contract for the sale of city property, which caused further delay of the purchase.

“We were advised by Mr. Lewis (former interim city manager) that the purchase offer would have to be revised, since the city could not move forward with the land contract,” Kalesperis said in a letter to the council. “It would need to be revised to a purchase by cash or financing by a bank of investors.”

The company then sent a revised offer to purchase lot 2 for $415,000 and lots 3, 4, 6, 7 and 8 for an additional $305,000, stating they were seeking the council’s reconsideration of their initial intent to develop all the lots, since the financial investors involved were seeking to finance the entire project rather than just the initial phase of lots 2 and 3.

Individual financials and proof of funds remained an issue, along with a new issue that was brought forth regarding the city code requiring a 1,000 foot radius around any public school or church, Kalesperis said in the letter. 

Kalesperis said the property was zoned a "Green Zone" allowing for growing, processing and selling cannabis despite being within the 1,000 foot radius of a church.

The latest offer included a request for a variance of the code requiring the 1,000 foot radius, stating that the requirement had not been mentioned in previous negotiations.

The council denied the request for the variance.

“We appear to have reached an impasse,” Kalesperis said. “The council claims it cannot move forward without proof of funds for the prospective buyers to finance the purchase. While the buyers have multiple investors interested in financing the venture, they will not commit to a letter of credit or proof of funds unless they see a contract where there is an approved code exemption by the council.”

Our project would not only create jobs for Evart residents, but in addition to the tax revenues to the city, we plan to promote a community development assistance program whereby our corporate entity will donate 5% of the annual net corporate revenues, up to $1 million per year, to various city programs, the letter states.

With the latest action from the council, all of that remains in jeopardy.

Kalesperis said he believes council’s actions will impact the community in a negative way, considering what they had planned to bring to the city.

“They turned their nose up at an opportunity to put Evart on the map by allowing us to develop a training facility, as well as a medical treatment and research center that would have drawn people to this community and helped it thrive,” he said. 

He added he and his partners have decide to pursue property somewhere else.

“We are pursuing property in another community that is more receptive to our goals and our project, and more amiable to work with,” Kalesperis said.