Dec. 6, 2021

Behind the scenes and before the lottery that determined who was first in line to open a medical cannabis dispensary in Sioux Falls, there was a massive site search.

Commercial real estate brokers spent untold numbers of hours responding to inquiries about properties, realizing that most deals would never materialize as the city limited dispensary locations to five qualifying applicants.

“For two straight months at least, there were multiple buyers and tenants in the market looking for space and different out-of-state brokers calling,” said Raquel Blount of Lloyd Cos., who fielded dozens, if not hundreds, of those inquiries.

“Anyone who wanted to be in the business had several people trying to track down locations, so it really was unprecedented.”

Locations can’t be 1,000 feet from schools or other dispensaries. If there’s another sensitive use between 500 and 1,000 feet such as residential development, schools, child care centers, public use facilities or parks, the city can require a conditional use permit.

In some cases, other circumstances prohibited locations from being submitted.

Of Ryan Tysdal’s listings, the ones that would have qualified under city and state guidelines were ruled out by “covenants that restrict it within the development,” said the commercial broker with Van Buskirk Cos. “A lot of the eligible properties had further restrictions by many times national retailers. Any building that has an Edward Jones in it or tenants like that, for instance, restrict any kind of cannabis, so it was exceedingly difficult to find something.”

Another hurdle for some involved existing loans on their buildings, Tysdal said.

“If it’s an FDIC loan, there’s generally language that you can’t lease to unlawful uses, and in the eyes of the federal government, it’s not lawful, so there could be financing implications,” he said. “I don’t know of a lot of people who want to pay off their mortgage early just to do a weed deal.”

In the end, 79 potential locations were submitted to the city, and five were chosen by lottery to begin the process.

Two are expected to appear on the City Planning Commission’s January agenda, seeking a conditional use permit.

One is a retail center at 3613 W. Avera Drive, which includes Starbucks, Capriotti’s Sandwich Shop and Sweet Cheeks ice cream shop.

The other is at 3215 S. Carolyn Ave. and is in a retail center known as the 41st Street and I-29 plaza. It’s a former office space.

The Planning Commission can be the only step for a conditional use permit, though the decision can be appealed to the City Council either by the applicant or neighbors.

A third location at 2211 W. 49th St. is a retail center known as Golden West Plaza that’s being renovated.

“It was one of few existing retail centers that qualified, so (the owner) decided he maybe should just apply himself,” said Tysdal, who previously did the deal on the building. “He saw an opportunity and had the real estate to do it.”

The property also would have required a conditional use permit, except the City Council voted to exempt churches as a sensitive use and the ordinance change takes effect this month.

“That would exclude churches in commercial areas, so if you have a church that moved into a warehouse district or strip mall, the thought there is it’s tough to block out a whole commercial area,” Kooistra said.

The final two locations chosen initially in the lottery do not need city approval beyond a certificate of occupancy, which is granted following permitting and inspection.

Those include the only site in north Sioux Falls, a building at 1421 B Ave. that currently includes I.S. Restaurant Design Equipment & Supply.

The other site is bare land for now at 309 W. Anchor Lane, which is east of Minnesota Avenue and south of 85th Street.

“A lot of people went the route of getting land under contract so they can build a building,” Blount said.

If any of the five locations doesn’t move forward for one reason or another, the next two on the list are a retail center at Lake Lorraine and an office building at 2904 W. Russell St.

In addition to required city approvals, all dispensary locations also need to apply for certification from the state.