Commercial Investment Real Estate March/April 2019 | Page 16

FINANCING
FOCUS
Going Green
Cannabis industry investors remain optimistic despite regulatory,
compliance, and financing challenges.
W
ith sales approaching $10 billion in 2018, the
emerging cannabis industry looks to establish
itself despite obstacles related to nonstandard
property development. The modern cannabis
industry was established in 1996 when California became the
first state to legalize medical marijuana, but more states continue
to allow for its use.
A recent survey by Apto, a real estate software company, found
that 76 percent of commercial brokers believe cannabis deals tend
toward above-market pricing. But those heftier price tags come
at a cost, with eight in 10 respondents saying cannabis-industry
transactions are more complex than conventional deals.
Federal law prohibits the production, sale, and consumption
of marijuana, though enforcement has waned in the past decade.
Despite this outright ban, states have passed legislation allow-
ing its use, ranging from specific medical reasons or full recre-
ational consumption. These patchwork — and sometimes con-
tradictory — laws can be a headache for commercial real estate
brokers, says Dominic Sergi, CEO of Clear Height Properties
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March | April 2019
and a co-founder of Cresco Labs, a Chicago-based cannabis
cultivator, processor, and retailer.
“In commercial real estate, it’s all about location, location, loca-
tion, and while that’s true in the cannabis industry, it’s really
about compliance, compliance, compliance,” he says. “You need
to make sure that the site works with state and local ordinances,
that it meets zoning requirements, and it has the necessary
approvals for a successful venture.”
Still, momentum continues to grow toward legalization. In
November 2018, Michigan became the 10th state to allow rec-
reational use of marijuana along with Washington, D.C., while
medical use is allowed in 33 states.
“The slow but steady legalization of marijuana across more
states is beginning to have an impact on real estate markets as
local jurisdictions grapple with zoning and other issues that affect
the availability of sites, be they for cultivation and storage or for
retail sales of cannabis,” says Tanner McGraw, founder of Apto.
“[It’s suggested] that there is somewhat of a shortage of sites,
likely because allowable zoning has not caught up with demand.”
COMMERCIAL INVESTMENT REAL ESTATE
by Nicholas Leider