If Cannabis License is OK'd, Company Sees Room to Grow in McKeesport

By Jason Togyer
The Tube City Almanac
March 20, 2017
Posted in: McKeesport and Region News

Above: Pittsburgh-based PurePenn LLC has received conditional use approval from McKeesport City Council to erect a facility to grow and process medicinal cannabis on this five-acre site in the industrial park along the Monongahela River. The company is hoping to be awarded a license by state regulators. (Tube City Almanac photo)

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A group of investors applying for a license to cultivate cannabis --- medicinal marijuana --- in McKeesport sees room to grow on the Monongahela River waterfront.

PurePenn LLC is applying today for one of only two licenses that Pennsylvania expects to award in southwestern Pennsylvania. A different group with ties to former Steelers great Franco Harris is applying for a license in nearby Braddock.

The competition is serious, said Gabe Perlow, chief executive officer of PurePenn, and many groups who are applying in the Pittsburgh area are doing so quietly to fly "under the radar."

PurePenn had hoped to do the same, he said, but needed to go public after their application for a conditional use permit required approval from McKeesport City Council. Council approved it unanimously at its March 1 meeting.

McKeesport officials have a good feeling about Perlow and the other PurePenn partners, Mayor Mike Cherepko said.

"The company has put together a very diverse team and very professional," Cherepko said. "When they reached out to us with this opportunity several months ago, we sat and talked, and after we were able to sell the city to them, they felt very comfortable with us."

Perlow, who also serves as associate general counsel at Pittsburgh-based McKnight Realty Partners, credited state Sen. Jim Brewster of McKeesport with helping to make the connection with city officials.

"The support from them was pretty amazing," Perlow said.

McKeesport is a natural location for PurePenn, he said. "I live near Frick Park, so it made perfect sense for me to look along the Mon Valley," Perlow said. "Our chief financial officer, Raymond Boyer, was raised in McKeesport, so he has a deep connection to the community."

PurePenn is committed to McKeesport and is not hedging its bets by putting in applications elsewhere, Perlow said. "We want to bring these jobs to the city of McKeesport," he said. "If we do get the license, we will commit a percentage of our gross receipts to funding a community foundation at a minimum of $50,000 a year."

Cannabis advocates have argued for decades that the chemicals in the plant --- better known for their psychotropic properties --- have important medical applications. Research has demonstrated that medical marijuana can help reduce the side effects of chemotherapy drugs, stimulate appetite for cancer patients, and relieve chronic pain.

Some researchers believe it could have applications for Alzheimer's disease patients and for people who suffer from auto-immune disorders, such as multiple sclerosis, according to Scientific American.

Pennsylvania has not legalized recreational marijuana use, but in 2016, it became one of 18 states that legalized medical-only use. Eight other states have legalized both medical and recreational use.

One of the first states to legalize medical use of cannabis was Nevada, where voters first approved a constitutional amendment in 1998 and ratified it in 2000, both times by wide margins. PurePenn has partnered with a Nevada company, Moxie Seeds and Extracts, to operate the proposed McKeesport facility.

"My background is as a real estate developer and attorney," Perlow said. "When we were first approached about (investing) in this, my first goal was to find an operating partner."

Perlow and investors met with six other groups before entering the partnership with Moxie to use their proprietary technology. "They were the first ones who were eager to show us their results," Perlow said.

(Above: A Moxie Seeds and Extracts employee works inside the company's Nevada facility. Photo courtesy Moxie Seeds and Extracts.)

PurePenn is proposing to build a new, modular growing and manufacturing facility on a five-acre site at the RIDC industrial park at the former U.S. Steel National Plant. The facility would be located next to the former McKeesport Connecting Railroad roundhouse, currently abandoned.

"We also have the right of first offer on another five acre parcel, so it could be a full 10 acres," Perlow said.

PurePenn wants to start with a 15,000-square-foot facility and up to 25 employees, and then make the operation larger when necessary, he said.

Security at the facility would be tight. All plants would be tagged and inventoried and their whereabouts entered into a state-run database, Perlow said. The facility would be protected 24 hours by security guards as well as cameras, and surrounded by fences on three sides.

"We actually think the site itself, in an industrial site, located next to the river, is one of the safest areas we could be in," Perlow said.

No marijuana plants will leave the facility, he said. To comply with Pennsylvania law, the factory would produce and ship only the extracted chemicals.

Like any organic material, cannabis plants lose their potency after they're harvested. Perlow said that Moxie's technology extracts the necessary chemicals right away. "It's an amazing process," he said.

The facility will not dispense medicinal marijuana and will not be open to the public, Perlow said.

"I think people are perceiving this as something it's not," Cherepko said. "They think there are going to be bales of marijuana (plants) being produced. It's a pharmaceutical facility."

He said both his administration and McKeesport police are satisfied with the proposed security at the PurePenn facility. "Obviously, we will work hand-in-hand with them as well," Cherepko said.

If PurePenn is awarded one of the licenses --- Perlow said they hope to know within 90 days --- the company will quickly ramp up development on the RIDC site, with construction following the completion of a concrete pad and utilities.

Still unknown is how PurePenn will deliver medicinal cannabis to patients. Pennsylvania is preparing to award dispensary licenses as well. Southwestern Pennsylvania will be awarded five licenses to dispense medicinal cannabis, and each of those licensees may open up to five brick and mortar storefronts.

A bigger unknown is whether the federal government will take a bigger role in regulating medicinal cannabis --- or stopping its sale altogether.

Under former President Obama, the U.S. Department of Justice in 2013 issued the so-called Cole memorandum that stated the federal government would not stop states from legalizing cannabis on a limited basis.

But President Trump's new attorney general, Jeff Sessions, has stated publicly that he doesn't endorse the Cole memorandum, and has expressed skepticism about the benefits of marijuana legalization, especially for recreational use.

Last month, Trump's press secretary, Sean Spicer, said the president expects to see "greater enforcement" of federal marijuana and cannabis laws. According to a recent story in The Economist newspaper, Spicer's remarks caused many industry investors to panic, and stocks in companies that grow and process medical marijuana lost about 10 percent of their value.

Perlow said his investors are remaining patient and optimistic. He noted that Sessions has promised to keep an open mind when evaluating the medicinal properties of cannabis.

"It's a ray of light to the industry," Perlow said.

Originally published March 20, 2017.

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