Monte Anderson, president of Oak Cliff-based development firm Options Real Estate, doesn’t drink or smoke. Yet, he personally sent a letter to Gov. Greg Abbott beseeching him to veto a bill sitting on his desk that would effectively outlaw the Texas hemp retail industry.
Senate Bill 3 bans the sale of tetrahydrocannabinol or THC-containing consumable hemp products, forcing one of his best tenants out of business, along with thousands of others.
“I would probably do just about anything for Eddie and Martha,” Anderson said of tenants Eddie and Martha Velez, who opened the retail portion of their business, Oak Cliff Cultivators, in Options Real Estate’s Tyler Station development in 2022. “Anything legal.”
Anderson is unlikely to be alone in his plea as shock turns to sadness and disbelief that a $5.5B annual industry could disappear overnight.
Bisnow/Maddy McCarty
THC products for sale in Houston.
Since the Texas House followed the Senate in overwhelmingly passing SB3 outlawing the sale of intoxicating hemp products last week, Eddie Velez, who is also president of the Texas Hemp Council, has contacted as many landlords as he can with a template letter to send the governor.
Abbott has 20 days from the end of the legislative session on June 2 to sign or veto the bill. If he takes neither action, the bill automatically becomes law and takes effect Sept. 1, either shutting down or seriously hamstringing more than 8,500 hemp-cannabinoid businesses that operate in Texas.
That includes Oak Cliff Cultivators, which is two years into a five-year retail lease.
“We have the commercial leases in place,” Velez said. “We have our utilities, we have our phone bills, we have our insurance. We have our maintenance. We have our internet. All of those things have an impact. Every shutdown, it’s a ripple effect.”
Velez said his story is just one of thousands that will reverberate across the state.
According to Whitney Economics, the industry employs over 50,000 Texans. In the Greater Houston area alone, there are upwards of 1,500 retail hemp shops — more than the total number of McDonald’s restaurants in the state.
While there are no published studies on how much retail space the industry occupies in Texas, it could be as much as 17M SF, assuming an average store size of 2,000 SF. Just one cannabis-focused REIT, Innovative Industrial Properties, has $30M of committed capital and 148K SF in Texas.
“All hemp retail locations, we’re asking our landlords to send a letter to the governor asking him to veto the bill … because it’s impacting his commercial real estate. It’s affecting his bottom line if I have to shut down,” Velez said.
Bisnow/Maddy McCarty
A “petition to veto SB3” sign on the door of Secret Library, a vape, smoke and wellness shop in Houston.
Marijuana is strictly illegal in Texas except for medical use, but hemp became big business there and elsewhere when the 2018 federal Farm Bill kicked open the door to hemp-derived products, including those with intoxicating effects. The bill removed hemp with 0.3% or less THC — the active ingredient that produces a high — from the Controlled Substances Act’s definition of marijuana.
The Texas Legislature, like other states, legalized the farming and retail sales of THC-containing hemp products in 2019, and a multibillion-dollar unregulated industry was spawned.
Agriculture Commissioner Sid Miller said he had received 546 industrial hemp farming applications by April 2020, adding that he hoped farmers would build a Texas “hempire.” The number of approved grower licenses shot up to 1,123 by 2021.
By March of this year, retail revenue from the Texas hemp industry reached $4.3B and total revenue hit $5.5B, according to a report the Texas Hemp Business Council commissioned from Whitney Economics.
But continued rapid proliferation led Lt. Gov. Dan Patrick to make banning intoxicating hemp sales a top priority this legislative session, arguing the products are dangerous and getting into the hands of children.
Those fears were echoed by other lawmakers in a video distributed by Patrick in which they pointed to proof of the products’ dangers, including a report from the Texas Poison Control Network of a 495% increase in marijuana-related calls involving children 5 and younger between 2017 and 2022.
Republican Texas Sen. Charles Perry, who authored the bill, said store operators targeted locations within walking distance from schools.
“These people are not good people,” Perry said of hemp sellers in the video. “They’re evil. They don’t care. It’s all about the bottom line.”
Anderson said he disagrees, adding that he doesn’t see the difference between selling hemp and selling alcohol or cigarettes.
“I don’t know why we are focusing on this issue,” Anderson said. “I don’t get why it’s not legal anyway.”
There is at least one difference between hemp and alcohol and tobacco sales in Texas: Technically, the hemp industry has no retail regulations, including an age limit.
The Texas Hemp Business Council is all for stricter regulations. Its members only sell to people 21 and older, said Cynthia Cabrera, founding board member of the council and chief strategy officer for cannabis product company Hometown Hero.
The council had hoped for a compromise, and the Texas Hemp Coalition was also pushing for alternative legislation to limit the industry without killing it off. The coalition found the House to be more receptive than the Senate, Velez said.
After the Senate passed SB3, the House approved an amendment regulating but not banning the products. But before voting on the bill, representatives approved another amendment introduced by Rep. Tom Oliverson of Cypress, a doctor who said he could not support Texans self-medicating with unregulated and highly potent intoxicants.
That reverted the bill to the full ban that the House passed by a vote of 95-44. The Senate gave it final approval and sent it to Abbott’s desk Sunday.
Bisnow/Maddy McCarty
THC-containing hemp products for sale at Green Goddess, a cannabis store in Houston.
A spokesperson for Abbott has repeatedly issued statements that the governor will “thoughtfully review any legislation sent to his desk” but has not offered any more insight into his thinking.
Republican Florida Gov. Ron DeSantis last year vetoed a bill that would have restricted hemp sales in the state. But Patrick continued his anti-hemp campaign with a press conference Wednesday, and many are skeptical the governor would defy both him and the legislature.
“There’s not much he can do. He’s probably going to sign the bill,” Rice University political science professor Bob Stein told ABC13.
Several other red states with thriving hemp industries have also banned its sale or tightly regulated it this month, including Alabama and Tennessee. Legislation that would ban most consumable hemp and other THC products is also pending in Nebraska.
“Hope springs eternal, but we have to be realistic, too,” said Cabrera.
Cabrera said Hometown Hero may still be legally allowed to operate its business from Texas under the new law since it also distributes to retailers outside the state.
But it will have to take a hard look at whether it wants to remain in a state with politicians who don’t support the industry, she said.
“It shows the residents in the state that the legislature doesn’t care what they want,” Cabrera said. “They really need to consider who they vote for in the future, because the legislative body is not reflecting the will of the people. The people did not ask for this.”
Anderson said he doesn’t feel like small to mid-scale property owners and developers like himself are at the forefront of legislators’ minds. This bill doesn’t fit with the typically business-friendly attitude of Texas, he said.
“I hope the governor doesn’t sign the bill,” Anderson said. “I don’t understand all the politics about it.”
Meanwhile, hemp retailers are on the hook for their leases. Some venues that double as vape shops might be able to remain in business or, like Hometown Hero, distribute products out of state. Nonintoxicating hemp consumables like cannabidiol, CBD, and cannabigerol, CBG, will be unaffected, though those products weren’t creating the vast majority of demand.
For others, the Texas bill creates a suite of new misdemeanor and felony charges for not following the law.
Anderson said his lease with the Velezes is legally binding except for acts of God.
“I don’t think this is an act of God,” Anderson said. “But Eddie and Martha are such great people. If there’s any grace that I would give, it would be to them.”
Landlords and retailers are pleading with Texas Gov. Greg Abbott to veto a bill that would ban the sale of intoxicating hemp products in the state. Read More
