Browse Tag: legal marijuana

Legal Marijuana: What Will The DOJ Do To A Growing Business?

Seal of the United States Department of Justice

US Attorney General Jeff Sessions has gotten to work on clarifying the US Department of Justice’s posture on legal marijuana. The move couldn’t come sooner for the commercial real estate industry supporting this growing sector of the economy.

The enforcement of federal marijuana laws in the face of legalization by 29 states is of considerable concern to commercial real estate markets; based on the latest wave of state legislation passed, nearly 1 in 5 Americans now have access to state-legal marijuana, a figure that encompasses a whopping 68 million people.

In legalized states — and in the states expected to vote in favor of legalizing — the commercial real estate industry is on the march with sourcing and developing the industrial, land and retail property types that support and house the growing, distribution and dispensary needs of the legal marijuana business. But the road has gotten bumpy since the 2016 election.

A perpetual challenge to smooth real estate investment and to property sourcing is market uncertainty, and the Trump administration has been doing the legal marijuana industry no favors on that score. Since his confirmation as AG, Sessions, who as recently as April 2016 made the statement that marijuana users aren’t “good people”, has introduced quite a bit of national uncertainty into the legal marijuana business.  First pointing to Congress as the responsible party for a final decision, Sessions this week got a memo out to 94 US Attorney’s offices and DOJ heads that appears to take greater ownership of the impasse in legal marijuana enforcement.

The memo (read the full memo here)  addresses a newly created Task Force of Crime Reduction and Public Safety and tasks them with the following:

Task Force subcommittees will also undertake a review of existing policies in the areas of charging, sentencing, and marijuana to ensure consistency with the Department’s overall strategy on reducing violent crime and with Administration goals and priorities. Another subcommittee will explore our use of asset forfeiture and make recommendations on any improvements needed to legal authorities, policies, and training to most effectively attack the financial infrastructure of criminal organizations. 

Gone is any mention of Congress, and the singling out of marijuana in a sentence concerning itself with consistency reads (to these eyes, anyway) as a signal that the AG is looking for ideas from his bureaucracy. If I had to guess, at least some of the feedback Sessions receives will mention in no uncertain terms that violent crime and the legal marijuana business are distinctly different phenomena in at least 29 states of the union.

The deadline for response from the memo recipients is July 27th of this year.

Sessions Points To Congress On Legal Marijuana

During his confirmation hearing yesterday on Capitol Hill, prospective US Attorney General Jeff Sessions sent an ambiguous message to the real estate developers, property owners and lenders working to expand legal marijuana business in states that allow it. Pressed by Sen. Patrick Leahy (D-VT) on the topic of enforcement of federal law prohibiting marijuana in those states, Sessions responded with a bit of safe boilerplate before pointing to Congress:

“Using good judgment on how to handle these cases will be a responsibility of mine. I know it won’t be an easy decision but I will try to do my duty in a fair and just way.” 

He added: “One obvious concern is the United States Congress has made the possession in every state and distribution an illegal act. If that’s something that’s not desired any longer Congress should pass a law to change the rule. It is not the Attorney General’s job to decide what laws to enforce.”

Banks, developers, investors looking for guidance on legal marijuana

The commercial real estate implications of Sessions’ dodge are significant. A growing legal marijuana industry and the real estate professionals that serve it await clear leadership on the issue as sales figures are jumping by double digits in year-over-year measures. The hunt has been on for property and legal stability for dispensary developers in a growing number of states that have adopted legalization measures, from the 28 states that have legalized medical marijuana to the eleven now legalizing recreational use. Traditional capital sources such as banks have been shy to lend and serve the industry under conditions that leave open the possibility of federal action closing the enterprises due to cannabis remaining illegal at the federal level.

As the business of legal marijuana waits for clarity from Washington, it appears the wait will go on.

States that have legalized weed

As of November 2016’s election, these seven states plus the District of Columbia have legalized marijuana for recreational use:

Alaska, California, Colorado, Massachusetts, Nevada, Oregon, Washington, Washington D.C.

And these states have some form of legalized medical marijuana:

Arizona, Alabama, Arkansas, Connecticut, Deleware, Florida, Hawaii, Illinois, Iowa, Kentucky, Louisiana, Maine, Missisippi, Missouri, Maryland, Michigan, Minnesota, Montana, New Hampshire, North Carolina, New Jersey, New Mexico, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Wisconsin, Wyoming.

A Look At Legal Marijuana Commercial Property Brokerage

Despite the fact that it remains a federally illegal Schedule 1 drug, 2015 is the year that legal marijuana sales hit $1 billion. While still a far cry from its elder, comparable national markets — wine and spirits ($123 billion wholesale + retail), tobacco ($43 billion), brand-name pharmaceutical manufacturing ($149 billion) — the legal market in weed grew at a rate of 184% year over year in 2015.

Centered in the states of Colorado, Washington, Oregon, Alaska, and Washington, DC, where recreational cannabis has been legalized, the market is even wider than the above thanks to the legalization of medical use of pot in 23 states and Washington DC.

That adds up to a lot of commerce, which needs a lot of space for custom and secure retail, warehousing and growing operations. As always, meeting those space needs are commercial property professionals who make it their business to serve business.

How are today’s legal-marijuana property brokers and other professionals branding themselves and conducting that commerce? Without any implication of endorsement or preference, let’s take a quick look at a search sampling of the industry:

Avalon Realty Advisors 

avalon-realty-advisors – Winning the SEO sweepstakes today by coming in on top for the natural Google search results for “marijuana commercial real estate” is Colorado-based Avison Realty Advisors. With a website reminiscent of a traditional RE / professional services firm, they make a pitch for competency in a new commercial marketplace, including MMJ/RMJ consulting, which concerns itself with Colorado medical (M) marijuana operators transitioning to retail (R) operations.


Commercial Marijuana Realty (CMR)

cmr – Cast in contemporary web layout, this web pitch promises a mix of property and professional skills including turnkey properties, assistance with licenses, and investment opportunities. Seems also to be a network play, expanding presence in the emerging business niche by running or possibly franchising multiple websites, as at least one other high-ranking site carries the CMR imprint.

420 MLS

420mls  – Using a sharp presentation one might call “the NORAD command center of the legal marijuana property market,” listings concerning all aspects of the business from growing to logistics to retailing are included. Also on show: properties in states where legalization is limited to medical prescription.

More Undoubtedly To Come

While these three basic presentation styles form a decent, if rough snapshot of today’s web pitches, expect the rush to profit from this emerging market to grow in intensity, eventually encompassing evergreen concepts in real estate from REITs to franchising and everything in between.

Legal Cannabis And Commercial Real Estate: A Budding Industry

The US is in the middle of a major evolution in policy concerning cannabis. In an era of legal supply and demand for pot, where are the commercial property opportunities?

In twenty-one of the fifty states, marijuana legalization laws have passed. While federal law bans all sale and possession of cannabis, enforcement in states varies quite a bit. Washington and Colorado have repealed state laws prohibiting the recreational use of cannabis, choosing a regulatory regime that is contrary to federal statutes. The gap between the federal “war on drugs” and state’s rights has never been greater and only shows signs of widening.

A map showing the marijuana legalization picture at the state level

A Dealmaker Steps Into The Breach

Addressing gaps in markets is what entrepreneurs do, and the legal cannabis business promises to attract many business visionaries, lured by what is surely a multi-billion dollar market.  Serving that market means finding the space and doing the necessary property deals.

Catching a lot of attention for doing just that is one commercial real estate pro named Llorn Kylo, CEO of CannabisRx, a Scottsdale, AZ based real estate company who is snapping up millions worth of industrial properties in Illinois, California and Florida. Angela Gonzalez of the Phoenix Business Journal reports:

Cannabis-Rx Inc., a Scottsdale-based real estate company that is buying real estate for the medical marijuana industry, has paid $3.26 million for properties in California, Illinois and Florida.

The new publicly traded company just secured $30 million in financing to find real estate and financing for pot businesses.

Llorn Kylo, CEO of Cannabis-Rx (OTCQB:CANA), said he has been looking for properties in Arizona, but hasn’t found anything compelling yet.

“I certainly am looking and hope to get back to you with something in Arizona, but nothing just as of yet,” he said.

The real estate firm paid $1.26 million for a 209,000-square-foot building in Florida that will need another $1.8 million in upgrades.

Yes, he realizes he’s spending more on upgrades than on the building, he said.

He has contemplated buying vacant land and building from scratch, but the zoning permit process takes longer. For now, he’s looking at buildings he can rehabilitate.

Cannabis-Rx also just paid $2 million for four properties in San Francisco and Chicago.

The company already owns 37 properties in Florida, Illinois, California and Washington. Nine are ready for sale, four are under contract to be sold and 24 are being renovated.

Kylo said he’s interested in additional properties in California, Michigan, Washington and Colorado.

“I’m looking for distressed-type assets that need some sort of rehabilitation to improve the building,” he said. “We crystallize gains to improve our returns by finding diamonds in the rough.”

He said the company has achieved an average internal rate of return of about 32 percent per property.

Where Mr. Kylo leads, I’m sure many will follow. For all appearances, licensed marijuana distribution represents a property market sector with only growing demand for space devoted to its supply chain.  While the federal vs. state enforcement picture remains murky, in the states that have determined their own marijuana rules, the farm, industrial, warehouse and retail sectors all stand to benefit greatly from the arrival of a legal cannabis industry.