Denver's First Cannabis Hotel Still Needs HVAC Approval

A Denver hotel is on the verge of creating an amenity that most travel agencies don't list in search filters: a cannabis lounge.

Located at 420 East 11th Avenue in the Capitol Hill neighborhood, the 132-year-old Patterson Inn was approved to add a cannabis parlor just over a year ago by the City of Denver; it's the first and so far only hotel in Colorado to receive such a permit. However, adding a licensed indoor pot lounge to a boutique hotel takes a lot of work, according to owner Chris Chiari.

While Chiari is making sure that the lounge's ventilation is up to snuff before the Patterson acts on being the first hotel in the United States to hold a cannabis use permit, he's already trying to open more pot-friendly hotels across the country. To learn more about the Patterson's journey and Chiari's plans to take cannabis hotels national with his other venture, The 420 Hotels, we caught up with one of Denver's most interesting innkeepers.

Westword: How is the Patterson's cannabis lounge conversion going? Still aiming for a steampunk vibe?

Chris Chiari: The hotel and the entity that will operate the lounge are working on the fourth draft of our HVAC design and will be submitting it to the city by the end of March. The City of Denver is enforcing strict rules around indoor air quality in a smoke-filled room. In the past several months, major agreements have been reached, recognizing the similarity between the lounge I’ve proposed and cigar lounges, allowing us to lean on proven system designs that have been built to meet international standards. Once we have the final design approved, we are in a position to start construction immediately. Since the largest expense is around the air-handling system, and since it will be located in the basement below the lounge, improvements to the room won’t start until the HVAC equipment is placed. With all the ducting and pipes to move the air, I think it will be hard to avoid the steampunk vibe.

Do you have a target opening date for the cannabis lounge yet?

There is no hard opening date at this time. Once we clear the final hurdle around HVAC design, we will be ready to start construction. The carriage house first floor was extensively renovated in the late 1990s. The space is now a modern steel-framed structure with a foot-thick concrete floor...the perfect blank canvas to add the lounge, and a major step toward wrapping up our construction quickly.

Is there any pressure to open by 4/20?

Our core business is overnight hospitality. The lounge is meant to add another attraction and amenity, in many cases, for guests already staying with us. Though being open for the high holiday would be nice, there is no pressure to be open by then. Doing this right and building a lounge and the mechanical systems to meet clean-air standards is worth the time and effort, since these systems will have an operating life that should be decades. I'm focused on getting this lounge to market and finding the patience to let the process work.

What have been the toughest obstacles to overcome as you work toward a hospitality permit? Has the age of the historic building played a part?

The 420 Hotels’ operating entities — the Patterson Inn, 12 Spirits Tavern and The 420 Denver — are all located in the historic Croke-Patterson. The building dates back to 1891. Major renovations were completed in the main structure, which houses the hotel and tavern, back in 2012. The carriage house, the future home of the cannabis lounge, is a different story. Its last renovations happened in the late ’90s, when a former owner looked to turn the space into a garage. He gutted the first floor and basement, leaving behind a steel-beamed modern structure with a foot-thick concrete floor. Something I noticed the first time I toured the house, and was reaffirmed by the general contractor who’s been pricing this job, is that there isn’t much work needed in the space to get this going — but for the HVAC, which has proven the biggest hurdle.

I have the HVAC design, but the requirements for a smoke-filled room are 100 times the standards for commercial space, with all air being pulled from outside. The system will change over the room once every three minutes. An HVAC system like this isn’t designed for an average day; it needs to have the capacity to operate at the extremes. On a call with the city, I told them, “I’m eccentric enough to build this thing, but not enough to turn it on.” I stressed that if the goal is a modern, sustainable city, flash heating in winter and cooling in summer of 27,000 cubic feet of air every three minutes would be a major energy cost and efficiency barrier. The conversation opened the door to an amended process that I have been navigating through since. We are now on a fourth draft of our presentation to the city showing that filtration, variable fan speeds, CO2 monitoring and heat exchange can meet standards, provide air cleaner than outside air, and through recirculation have the ability to more efficiently heat and cool the space. The air filtration team just finished a study in a California lounge to be able to prove up their portion of the final design.

None of these hurdles have been because of the structure or the age of the property. The house has seemingly been waiting for this as long as I have, and is proving from its suitability and location, as well as its structure and address, to be the perfect place to prove this idea and bring this product to market.
The Patterson is still the first hotel to apply for a cannabis hospitality permit in Denver. Why do you think there haven't been any to follow?

The 420 Hotels is the owner of the property, Patterson Inn and 12 Spirits Tavern, and partners with myself on The 420 Denver. This is all the result of how I restructured the company prior to our first equity crowdfund raise on Republic last year. The 420 Hotels is currently live with another equity crowdfunding round, this time on StartEngine. We are the first licensed cannabis business to launch a campaign on their platform. We are also the first hotel in the country to be in a city and state that has defined rules and licensing to create this type of business. Hotels are core assets, and lending for cannabis businesses is still affected by the reality of the legal status of cannabis at the federal level. Hotel lenders, even if their personal views might support cannabis, are conservative in the execution of capital. Cannabis investors want returns that are unrealistic and based on projections that are proving overly optimistic in many new legal states, as prices have collapsed. All of this uncertainty is foreign to the traditional model of hospitality. In the fog of great uncertainty, though, there is great opportunity. The Patterson Inn, at nine rooms, is right-sized to take the risk to bring this type of amenity to market. Finding property that meets the distance restrictions and has the available space, and finding owners that have the interest and passion to lead in an unknown market, and having this all happen in a location that has a hotel, is maybe too many variables that no one else has tried — or maybe I’m just the only one eccentric enough. I will not be the only one forever, but I am the only one today.

Can you explain what 420 Hotels is, and what you want to achieve with it inside and outside of Colorado?

The 420 Hotels is the parent company that is a hotel property ownership company, a hotel operations company and the owner of licenses for the on-site operation of a tavern and our pending cannabis social use lounge. At our core we are real estate, hotel operation and food and beverage, with the twist of the most exciting and unique amenity in hospitality with our pending cannabis social use lounge. The intention is to take our award-winning operations and expand the brand to gateway cities across the country and around the world, with the ambition of twelve to fifteen locations over the next five to eight years.

How much do you think adding cannabis use will change the energy, ambience and clientele of the Patterson? Besides what's inside of the lounge, do you see any more impact on the hotel?

The 420 Denver social use lounge is an added amenity for hotel guests. As a separate space with isolated HVAC, the intention is that the lounge will add value to the overnight experience while not affecting the hotel's current operations. Our guests today are already asking and interested about the future addition of the lounge. I believe that the Patterson Inn will still be appealing to the same guests as today while adding new demand. Our guests today are older couples on a romantic escape or visiting their children who live within blocks of the property. The property remains a historic and intimate boutique hotel. The history is established both from the age of the property and stories of its owners. I am not rewriting the history of the Croke-Patterson [Mansion]. I'm just adding another chapter.

What's one famous hotel where you'd love to see a cannabis parlor or cannabis use allowed?

The Patterson Inn in Denver, Colorado. That’s the one famous hotel, winner of Hotel of the Year for Colorado 2022 by Travel & Hospitality Awards, that I’d love to see a cannabis lounge in. One day, we may see amenities like this in major hotels the world around, and if I could pick just one other hotel, it would be the Hotel Pennsylvania in New York City. Maybe a lounge like this could have saved that property. Any others I might mention are targets for acquisition, and I wouldn’t want to give them any ideas until it’s time to close the deal.