A pharmaceutical company plans to open a medical cannabis oil production facility in Warren County in the spring.
The Front Royal-Warren County Economic Development Authority announced Tuesday that Parallel Virginia Limited Liability Company intends to buy and operate in the former Atlantic Skyline building at 426 Baugh Drive. The sale is contingent upon the conditional approval by the Virginia Board of Pharmacy of the company’s application for a pharmaceutical processor permit in Health Service Area 1. EDA Executive Director Douglas Parson said by phone Wednesday that the authority should find out the state board’s decision by mid-February.
The EDA Board of Directors met in a special meeting Tuesday morning and voted to approve a resolution that authorizes Chairman Jeff Browne and Secretary Greg Harold to sign a letter of intent to sell the authority’s property for the full asking price of $5,750,000 to Parallel Virginia. The company processes medical cannabis.
Browne, Harold and Directors Jorie Martin, Dr. Thomas Patteson, Jim Wolfe and Melissa Gordon met remotely via Zoom and took action after convening in closed session.
While the EDA awaits the state board’s decision, the authority plans to pursue the required conditional-use permit through the Warren County Planning Department, Parsons said.
“There’s no guarantees there, but we’re hoping for a favorable result, of course, and then there’s the due diligence items on the part of the client,” Parsons said. “You know they’re going to be looking over the building over the next couple of months and doing their due diligence to make sure the building will suit their needs.”
The EDA would recoup the $5.3 million it paid for the Baugh Drive property, Parsons said.
“There will be extra proceeds from the sale that will help the taxpayers recover a portion of the rest of the total cost of ownership,” Parsons said.
The sale and location of Parallel Virginia to the site should create a few hundred jobs with an average wage above the county’s, Parsons said. The EDA also estimates that the company would pay between $200,000 and $400,000 in revenue from personal property and real estate taxes once the facility begins operations.
“We think that within 24 months’ time, between the proceeds that we get from selling (the property) and the additional tax revenue that we get from their operations, the taxpayers will be made whole on the total cost of ownership of the building,” Parsons said. “So that’s really pleasing to us because we really want to do something positive, not only from an economic development standpoint, but we want to do something to eliminate this loan and to recover the investment that the taxpayers have made on this property in the last two and a half years.”
The EDA has a loan with United Bank with a principal balance of $5,041,507. The EDA spends approximately $25,000 per month to own the property, which includes loan payments of $22,450 and the remainder for utilities and insurance.
The existing building on the property helped the EDA attract Parallel Virginia to consider the site, Parsons said.
“So having an existing building certainly would help the client get up and running and get the market faster than obviously if they had to build a building on a pad site or a greenfield so we hope that it’s advantageous for the client and their quest for the license,” Parsons said.
The building layout also likely attracted the company, Parsons said.
“It has some office space, but yet it has a big enough production and distribution area to be attractive to a lot of different clients and then it sits on almost 14 acres of land and that’s also been very attractive,” Parsons said.
Utilities, including natural gas, already supply the property, Parsons added. The EDA also has a phase one environmental study performed for the property, he noted.
Virginia legislators recently opened the door to companies in the medicinal cannabis market seeking to locate operations in the state. Virginia law allows the Virginia Board of Pharmacy to award conditional approval for only pharmaceutical processor applications in the health service area. State legislation passed in 2018 approves the production and use of medical cannabis oil in Virginia. The legislation created five health-service areas and allows one processor in each area.
The Board of Pharmacy has awarded permits in areas 2-5. The Area 1 permit application process reopened recently. If awarded conditional approval, Parallel Virginia would move into the building in the spring.
The company operates in Georgia, Massachusetts, Colorado and Florida. It recently received the green light to locate a research-focused operation in Pennsylvania in partnership with the University of Pittsburgh.
The company already has letters of intent for strategic research and workforce partnerships with several public and private institutions of higher education in the state.
EDA representatives said in the announcement the Warren County-Front Royal area can expect to benefit from the company’s experience and success in other states. The company projects it would create hundreds of jobs and invest tens of millions of dollars.
Virginia law requires doctors who want to prescribe medical cannabis to register with the Board of Pharmacy. Patients must pay an annual fee in addition to the price of the prescription. State law allows no more than five dispensing facilities in the health service area.
If selected, the company also plans to identify other, standalone dispensing facilities in the health service area.
By selling the building, Warren County taxpayers can expect to save $25,000, or $300,000 per year, in loan payments, utilities and insurance costs
The EDA has been trying to recoup millions of dollars lost as a result of misappropriation and embezzlement of authority funds over several years. A civil lawsuit filed by the EDA claims the authority’s former Executive Director Jennifer R. McDonald stole money from the entity in part to fund real estate deals for her own benefit. The suit claims McDonald and other defendants participated in the alleged scheme. McDonald filed for bankruptcy in September, putting on hold any other civil claims against her. A circuit court judge dismissed criminal charges against McDonald and her co-defendants in the spring at the request of the special prosecutor assigned to the case. The matters have since been sent to the U.S. District Attorney’s Office for the region.
Parallel Virginia filed as a limited liability company with the State Corporation Commission in October.
Atlantic Exhibits moved out of the Baugh Drive facility about three years ago. The EDA bought the property in 2018.
The Baugh Drive property in the Stephens Industrial Park covers approximately 14 acres with an assessed value of $5,377,800, according to Warren County online real estate records. The existing building on the site was built in 2008 and is valued at $4,541,400.