Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
I know I might be opening up a real can of something on this thread but I need to get some advice from some commercial RE investors if possible. I recently ran across a rather unique biz op. I have a client that's been looking for multiple commercial locations to rent/lease for a medical Marijuana retail operation/despencery where they will market a wide variety of Cannibis related products.
This particular geographic area is in the process of legitimizing Marijuana growing and cultivating operations, dispensaries, wholesale and retail operations, etc. albeit it is still against the Federal mandate.
My question is do you as a commercial property owner/investor think I would I be liable as the property owner and landlord and subjuct to property forfiture in the event of legal enforcement of said Federal mandate even if it's legal on a local Statewide level and my only involvement is as a landlord with no direct involvement in the biz other than a NNN lease?
I know many will answer by suggesting that I seek legal counsel which I've already done and thus have recieved a good cross section of sound legal advice and opinions. However, I'm particularly inerested in knowing if there are any commercial investors who have had any direct or hands on experience in this arena and what your thoughts, opinions and recommendations are.
being here in Colorado the question you have is regularly asked. If there was a change in federal administrations that wanted to crack down on a schedule I drug then yes you property could be seized regardless of your direct involvement. Banks are generally not knowingly allowing tenants in properties that they have loans on due to potential seized but also the fact the feds could take their bank license if the bank was knowingly involved with any aspect of a federally banned activity.
The current DOJ has stated they will not enforce certain laws regarding MJ but again that is subject to change. IMO I think several other states are going to see Colorado's lesson and want to tap into this new tax revenue base. As for the boogie man fear of increased violence, crimes etc, that is just not happening. I have seen no difference from prior to legalization to now.
My advice would be to go into any investment involving MJ with eyes wide open and if you decide to move forward be compensated accordingly.
@Parker Cox, Thanks for your comment and you and I are on the same page. Albeit I have, can and will continue to be somewhat of a risk taker (isn't that the definition of ENTREPRENEUR?) I'm no spring chicken to the biz World and certainly not willing to take a chance on legal and/or personal reproductions.
As far as space to grow I'm not the least bit interested in cultivating. In fact I've recently invested in a subsidiary to a publicly traded company in Colorado that's in the biz of building 100,000sf totally environmentally controlled greenhouses that rotate the crops that grow in them 4 times a year at half the cost which will result in a significant savings over all to the end user as long as the middle men aren't greedy and willing to pass it along.
In fact aside from the greenhouse investment I'm only intereted in commercial/retail type real estate that could be leased/rented to MJ retail/despensary operations with NNN potential.
@Justin Windham, I couldn't agree more with your take on what's going on in the MJ industry today. The train has definitely left the station and gaining Nationwide momentum. We both know what happens when you jump in front of a speeding locomotive and I'm sure the Fed does as well. Besides they have their hands full trying to keep terrorists from blowing us up and beheading us. LOL!
I wonder if the Indian reservations would be interested in 100,000sf environmentally controlled greenhouses instead of indoor growing facilities that use up $$$ on electricity and create other unpleasant issues i.e. moisture, premature deterioration, etc. Just curious.
I've been asked by some clients who are looking into this from other states. I don't really know the details, but my understanding is that these states currently import from CO and CA and would no longer need to after the licenses are given out in the state and those greenhouses are built. I feel like a lot of $$ is being thrown out to invest in theses "cool" companies, with very little history and promises of huge returns.
@Account Closed, not totally sure what your point is but if I'm gleaning what you're point is it has to do with the big investments into greenhouses. As it turns out this unique agrothec company can build these greenhouses anywhere anytime if the client wants to spend the money.
Additionally, an environmentally controlled greenhouse gets most of its energy from the sun naturally instead of having to depend on very expensive artificial lighting and enclosed buildings with ultimate mold and premature deterioration issues that will undoubtedly ensue at some point.
So I'm not seeing this agrotech going out of biz anytime soon. If anything I think the opportunities with this will only grow as the industry grows and expands. Now if you're thinking about all the Mom and Pop outfits out there trying to eek out a piece of the pie for themselves with antiquated, expensive and very limiting technologies then I couldn't agree more.
In the early onset, as with most major growth industries, you will see a growth curve of small start ups cottage industry businesses surfacing and perhaps even sustaining themselves or even evolving into one of the major players.
But at the end of the day this will ultimately become big biz and go the way of the alcohol and tobacco industry with proper packaging, marketing, advertising and positioning all vying for market share.
I am also following this industry rather closely. I know for a fact, some people are going to make a whole bunch of money but it is going to take big balls to be the ones who make it big.
Since the topic of growing on Native American lands has come up a few times I thought I would share this. Read it myself just this morning.
That's a great article Kimberly. I still find it very amusing that the fear for the impact the hemp industry would have on the timber/cotton/pretty much any fiber based product industry has deemed the cultivation of hemp illegal, but the taxation and capitalism behind cultivating a mind altering substance such as marijuana is ok because it doesn't compromise other big money industries.
@Mark Bensadon I expect hemp is lagging only because marijuana has more supporters pushing for legalization.
Marijuana does compromise quite a few other big money industries. Alcohol comes to mind first, the Prison Industry will loose tons of money, Pharmaceuticals will take a big hit as well (but they will at least have a place in the game).
The simple fact is people are starting to figure out that "Refer Madness" has always been a lie. By now I am pretty sure everybody knows somebody that smokes marijuana and it is obvious that those who do smoke are not quite the crazed junkie maniacs that we were led to believe they were. Slowly but surely, "hippies and pot heads" were able to come out of the closet. These days, I understand marijuana is quickly becoming as accepted as having a glass of wine.
On a medicinal level, if you follow the movement close enough, you will see that marijuana has blossomed into a miracle plant that literally cures just about anything that ails humans. People of all ages have been cured of cancer, epilepsy, and a host of other diseases. As one person within a family/social structure is cured, many within that group become supporters.
So, we have social and medical users pushing for marijuana in huge numbers. Not nearly as many are currently concerning themselves with the environmental impacts, but one cannot go without the other. In the end both marijuana and hemp will have their day again. The genie really has been let out of the bottle and it cannot be put back in, no matter how hard they try.
Some folks are going to hit the jackpot in this industry, guaranteed.
@kimberlyjones Very well put. While marijuana might appeal to some of the same consumers as alcohol, they are not mutually exclusive. Pharmaceutical companies are chomping at the bit to harness the true medical capacity that the plant has to offer. With cross breeding and the ease of experimentation with genetically identical clones from a common mother plant, the possibilities are truly endless. The difference between the drug vs the hemp is simple. Hemp alone could literally render the timber and cotton industries OBSOLETE. The fibres found in the hemp plant could be used in hundreds of applications that would benefit from its inexpensive substitution. Bio fuels, an organic fiberglass replacement, the list goes on. Lots of big money players have, and will continue to fight the use of this product to the end, no matter how much good it would do.
Interesting topic as I have a client who just fought his way out of foreclosure on a warehouse that, not to his knowledge at the time, that was identified by a California Municipality as one of some 40 or so warehouses selected as MJ warehouse facilities. I am not sure what the requirements of selection were but he sort of won the lotto on this one- as well as now understanding why the lender was to diligent and resourceful in trying to take back the property.
I need to read up on the legal stance of the various agencies so I can best help him in moving forward. I am used to helping out distressed properties but not ones that are so HIGH on the list of interest. LOL
Perhaps we can meet up and compare notes on the legal landscape here in San Diego.
@Bob Faulis, Would love to meet up sometime. Just got back from a tour of two 100,000sf environmentally controlled greenhouses expressly for the propagation and cultivation of MJ. Once Cali opens it will corner the World market no doubt as Cali is the #1 agro state in the Country.
@Fred Heller, I totally agree. It is a roll of the dice for those putting themselves out there at this stage of the game for the most part and a delicate balancing act for the ones that are. They are risking everything I know but then once again so did the Kennedy's and many other families, organized crime rings and business enterprises during prohibition. Once they repealed that, however, it was all about timing and positioning.
I don't normally chime in on real estate topics as controversial as marijuana and real estate, but I do a very interesting background on this topic, as my family was formerly the landlord of a medical marijuana dispensary. Now each landlord's experience with this differs (much like every landlord's real estate experiences differ) but ours was a fairly positive experience.
At the time, we were struggling with vacancy issues, as our property is an older industrial property in a rougher part of town. The dispensary was also having issues finding a good location too: not only is there a stigma involved in being the landlord of anything marijuana-related, but here in the City of Oakland, dispensaries are limited in how and where they can operate. I recently spoke to a lawyer with some insight on this and he told me that dispensaries and grow houses (anything marijuana-related, for that matter) are heavily regulated by city and county laws. He told me that it's probably best to check with your local jurisdiction, as something as unrelated-sounding as zoning designation can have a significant impact on the legality of dispensaries and grow operations in a specific location (but it sounds like you already knew that, lol)
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Anyways, the laws in Oakland proved to be very favorable for dispensary landlords in that:
1) All dispensary patients not only had to have a license for their medicine, but their prescription could not be used within a 100-foot radius of the dispensary itself. This was extremely beneficial as we did not have to deal with any potential increased fire hazards or smells that come from smoking marijuana.
2) Because the dispensaries were only allowed to operate within a very specific area, (I have been told that their permit only allows them to operate within a few city blocks here in Oakland.) the dispensaries do their best to run a very smooth operation. Our former tenant kept their business immaculately clean and employed both an advanced security system as well as a traditional security guard. I have been told that because the business is still illegal in the eyes of the Federal government, many dispensaries and growing operations operate on a cash basis, hence the need for all the security. Despite the additional risk, the dispensary was an overall good tenant. They knew the stigma as well as the limitations associated with their business, so we, as landlords, were well compensated for taking on this type of tenant. The tenant always paid their rent on time and, although their busiest hours were in the evening, the dispensary took care of any and all of their own issues, without having to involve us. I suppose that our property's location in a primarily industrial neighborhood helped, as none of the neighbors seemed to really care about the nightly comings and goings.
3) Even though our dispensary tenant eventually moved out, our property was very adaptable and we were able to rent it to a true industrial tenant not long after the previous tenant vacated. Although this is my own opinion, I would think that it's pretty important for investors and landlords to consider other possible uses for a property. After all, it's impossible to predict the future and it could very well be the case that marijuana, even medical marijuana, remains a federally-illegal business for a while, so it's always best to have a backup in case things turn ugly.
Maybe one day marijuana will receive federal recognition for its medicinal purposes... or maybe not. But either way, we as landlords and potential landlords can't take on the risk of having any medical marijuana-related tenants without knowing all of our facts. I hope that helps, and good luck with your new venture!
@Eva Poon, Thank you for your keen insight and very astute feedback. We have to consider all those things until the Fed acquiesces and realizes that the train has indeed left the station and they're not going to be able to stop it no matter who's running the Country be they Rep. or Dem.
In addition to investing in the greenhouses I'm also delving into the possibility of investing in some commercial/retail property in Cali at some point. I'm just positioning at this point, however, and have no intention in becoming directly involved in the biz other than possibly looking into some periphery segments of the industry like support products and commerce that don't actually have anything to do with the direct marketing of the MJ itself.
I can make a mortgage loan on marijuana properties where it is legal, medical and recreational. There is a premium to the rate. Let me know if you are interested.
Hi guys, new to BP but pretty well versed in the Cannabis industry. @John your're on the right track with the purchase/leaseback deals, the returns can be quite handsome typically 20-25% cap rates and potentially a small equity kicker depending on the deal structure. IMO the FED fears stated upthread are vastly overstated. In fact the legislature removed funding from the DEA as far as pursuing legal state regulated cannabis business'. This should also be a big election with several states poised to enact either medical & recreational cannabis laws.
I own both a recreational marijuana dispensary and cultivation center in CO, with hopes of expanding to MA this year. Feel free to PM me with any question!
@John Arendsen as stated above by others.....It's still against federal law. Take it from me you do not want to get on the fed's radar. Political winds maybe changing in mid January and the DEA may be told to start going after these places. My personal opinion would be stay away from these investments until Congress legalizes these activities. The feds can seize everything that is invested in and gained from the illegal activities to include: initial investments, land, buildings, vehicles, bank accounts etc....
Bottom line? Don't put all your eggs in one basket. Especially in a highly speculative venture. I never put more than 10% of my net worth in anything but RE; especially something as volatile and unpredictable as a theoretically illegal substance.
This has been a truly interesting and exhilarating conversation and I wish to thank everyone personally for their information, knowledge and participation. I would like to keep this thread open indefinitely for any/all folks that would like to contribute.
Forfeiture is always a risk. Keep in mind that any one particular FED prosecutors could decide to bring forfeiture actions. Read all the stories about innocent people having LOTS of money taken with NO criminal charge or conviction. Their only "crime" was having cash. We got stopped traveling from Tx to FL in the FL panhandle. One of the first questions asked was: "are you carrying any large amounts of cash". Being a lender, I considered asking him: "why, do you need a loan" but decided he might not be in a humorous mood LOL. I think I had a couple grand for emergency money and told him no. As governments get more desperate for money, they may decide to take YOUR property whether your actions are legal within your state. I not only hold a RE license, but also hold a federal license for other business activities and deal with one of the "alphabet agencies". They are cracking down on some licensees that knowingly deal with holders of medical marijuana cards in states where it is legal. They are citing federal laws as their justification. Until the federal law changes, I would consider it a gamble. Personal opinions have changed, and what is acceptable to many people has changed, but the federal law remains in effect.
I would be interested to hear more about your plans on this 100k Sq foot green house? I see it was about a year ago and would like to know if you moved forward with doing it.
@Kimberly Jones, as a word of friendly advice I caution you to refrain from using the word CURE as part of your lexicon re; MJ. Until a product has been thoroughly tested and researched and is deemed officially FDA approved and a cure for any/all specific ailment/s they've approved it for you are treading on some pretty thin ice when you make any claims about a drug, vitamin, herb, etc.
I've had some personal experience with this in the past with some vitamins and herbal remedies. I know you don't want to journey down that road.
@John Thedford, presently I merely have a position in a publicly traded entity that has a subsidiary who manufactures greenhouses period. They build them lease them to all types of agbiz and don't directly participate in the cultivation or trading activities in the industry.
Not sure what I could lose on this one other than a few thousand shares of stock which I can live with. What legal right would the FED have with me beyond being a stockholder? Just curious.