The legal cannabis business, expected to be a $7 billion industry this year, is having ripple effects across the U.S. economy, and Minnesota’s commercial real estate industry may have had its first significant cannabis-related transaction.
The deal: a nearly $1 million building purchase by packaging firm Boveda Inc. in the Opus Business Park in Minnetonka last week.
Boveda makes a patented type of two-way moisture pack designed to keep the contents of sealed containers at precisely determined humidity levels. Until recent years, the most common applications for the playing card-sized packs have been in the tobacco industry: Manufacturers have dropped them into cigar boxes to, in effect, turn the containers into mini-humidors, thus ensuring freshness and optimum taste for connoisseurs of expensive stogies.
It turns out those same qualities translate exceedingly well for storing the valuable buds of the cannabis plant.
Booming new market
Charles Rutherford, Boveda’s director of business development, says the small firm has found a booming new market for its humidity packs with legal marijuana, and is benefiting from that industry’s rapid growth. A report issued this year by ArcView Market Research predicts it will soar from $7.1 billion this year to $22 billion by 2020 as more states move to legalize some form of cannabis consumption.
While declining to reveal revenue figures, Rutherford confirmed that the cannabis market has transformed Boveda and made its space needs much more pressing.
“We’ve been in the cigar business for nearly 20 years, but now cannabis overwhelms everything that we’ve ever done with tobacco,” he said.
Started as Humidipak in 1997
Boveda was founded as Humidipak Inc. in 1997 by a pair of General Mills veterans, formulations chemist Albert Saari and packaging expert Robert Esse. The next year they were granted a patent for a two-way humidity control idea for packaging. Their packs were able to naturally regulate humidity at a set level within containers via the use of certain kinds of salts mixed with water, absorbing and emitting purified water vapor through a semipermeable membrane that prevents direct contact with the package contents.
The company, under President and Chief Executive Sean Knutsen, has since introduced packs of varying sizes that work at a humidity level of 62 percent; when a pack is placed into a sealed jar along with the cannabis, it results in an atmosphere judged optimal for the preservation of the cannabis’ efficacy and quality. Boveda says these packs have been established as a global industry standard, and are playing a major role in standardizing the levels of product quality within the emerging industry.
Bulk of business is from four states
The majority of its business is coming, not surprisingly, from the states of Oregon, Washington and Colorado, where recreational marijuana for all adults is legal, and from California, which allows medically prescribed marijuana. California, Massachusetts and Nevada are expected to legalize “adult use” this year, and Florida is likely to pass a medical marijuana law, further expanding the market, according to the ArcView report.
This growth has resulted in Boveda “busting at the seams” at its current offices and R & D lab situated beneath a strip mall at Minnetonka Boulevard and Hwy. 101.
“We needed a new, fresh space,” Rutherford said. “We originally were thinking about buying a building that we could slowly grow into, but then it turned into more of a necessity. We’ve got people now working at makeshift desks.”
Rather than relocating closer to its core West Coast markets, however, the company opted to stay in Minnesota with the purchase of an 8,200-square-foot, 37-year-old office building on Yellow Circle Drive in the Opus Business Park. A filing with the Minnesota Department of Revenue indicates the company bought it June 15 for $940,000 from an entity related to the American Church Mortgage Co.
The move is expected to completed by this fall.
Don Jacobson is a freelance writer based in St. Paul. He is the former editor of the Minneapolis-St. Paul Real Estate Journal.