Mayor Wants Assurance Of Hemp Profitability

NEBRASKA CITY – A company proposing to convert the vacant VF Mall property at Nebraska City into an indoor hemp production facility told Nebraska City commissioners they can be confident in the business model.

 

The company is asking the city to use TIF in order to direct some of the property taxes paid by KORE Holdings back into the improvements of the building and infrastructure, including an $80,000 debt the city incurred while extending utilities  beyond Highway 2 for the construction of the Holiday Inn and Suites.

Mayor Bryan Bequette said there are concerns that the company will not be successful enough to pay the property taxes for the next 15 years.

 

"How specifically are you going to make the kind of money to pay off a $5 million investment?

Bequette

 

Bequette: “What I need to make sure is … we’re taking a property, trying to develop it. You’ve got to make sure you’re making money to pay those bills. Some pretty hefty bills at the price, for the money that you’re investing. … So, how does the facility make it’s money?  You’re doing a lot. You’re growing, processing, wholesale distribution – you say you’re not going to use it for retail –

Kats: “Correct, yeah. We’ll lease out to retail.”

Bequette: “… you have a material that you’re going to do a lot of things with, but help me understand how you’re specifically going to make the kind of money to pay off a $5 million investment.”

Developer Derek Kats said there are market opportunities in areas of processing and testing, as well as production. He said the original cultivation plan, where eight employees are anticipated, called for 45,000 square feet that could produce over 1,000 pounds per monthly rotation.

Kats: “If we are harvesting that approximately 1,000 pounds, that product ranges anywhere from  $500 to $750  … our profit margins are very large on that product.”

Kats: “The reason the market is so large for that is because there are very few groups in the United States that are able to do such large, indoor cultivation. The majority are doing small, boutique-style grows or greenhouses.”

He also said the price-point on the building is favorable at this point and it’s proximity to major highways is a plus.

"There are very few groups in the United States that are able to do such large, indoor cultivation."

Kats

 

Attorney Michael Sands said the First Nebraska Bank has underwritten the project.

Sands: “It is, you know, federally insured and backed in the investment and that’s based off of the pro-forma on the business model that obviously Derek has presented to them. And we’re talking about a local bank, as well.”

He said it’s not a bank that would nonchalantly take a risk, but would take a careful look at the business plan.

Sands said the city obviously envisioned using TIF to develop the former mall property because it established the lien to pay off its utility expenses based on future use of TIF.