MJBizMag February 2021 - 69

retailers. More than 30 California
cities and counties voted in favor of
pro-cannabis business initiatives in the
November 2020 election, paving the
way for new stores in some places.
" If I see an area that has 100,000
people, and they're going to allow two
stores, and then you have another
100,000 people in the town next door,
and there's no cannabis there, that's a
really good opportunity. "
Carving Out Your Own Niche
Elev8 Cannabis
founder and CEO
Seun Adedeji,
who opened a
single dispensary
location in
Oregon before
expanding into
Massachusetts,
believes smaller,
less-capitalized businesses can benefit
from opening in smaller towns.
Adedeji focused Elev8's
Seun Adedeji
Courtesy Photo
Massachusetts expansion on border
towns near New Hampshire, New York
and Vermont, where acquiring real
estate is cheaper than in bigger cities.
" The beauty is, because of the
limitations of licenses, each of those
small towns are only giving out two
recreational licenses, " Adedeji said.
" So your value still increases. "
Smaller towns might have their
charms, but a border strategy such as
Adedeji's can also work within cities.
Erbn Green Cannabis Co., a small
Canadian retailer that opened its first
location in the competitive Toronto
market in October, found a location in
the uptown area of that city.
It might not be a hot address
compared to the city's downtown core,
but Chief Compliance Officer Farrell
Miller said the location meets demand
in an underserved market near two
suburbs that opted out of allowing
cannabis stores.
" We've had a lot of customers
that live north of the 401 (highway
nearby), and there's not a lot of
activity north of the 401 at all. They
come in and they tell us that we're the
closest one to them, " Miller said.
Erbn Green's second location is in
Picton, Ontario, a small community
with less competition for cannabis
store licenses than in big cities such as
Toronto or Ottawa.
" This town is getting really known for
wineries and tourism, " Miller said. " We
eventually see cannabis aligning with
those things. "
To Buy or to Lease?
Elev8's Adedeji got burned when the
landlord for his first Oregon store
declined to renew the lease and he
had to find a new location. As a result,
Adedeji is a strong proponent of retail
operators buying real estate instead of
leasing, when possible.
" I would say, for anybody looking
to get into a leasing option, have a
10-year lease with an option of an
additional 10 years, " he said.
In Michigan, real estate broker
Goodman said marijuana's federal
illegality contributes to landlords'
hesitancy to lease to cannabis
businesses. Property owners fear
running afoul of their mortgage
lenders, she explained.
" We're seeing more private funding
on the purchasing side, and they'll lease
back to the operator, " Goodman said.
For well-capitalized players, buying
and then executing a leaseback deal
can bring some advantages. LivWell's
Lord said the company acquires some
properties, then sells them to partners
who will lease the locations back to the
dispensary operator.
" That allows us to go and execute
and use that capital for continued
expansion rather than having it tied up
in the real estate itself, " he said.
Dispensaries that plan on leasing
might be able to take advantage of
the commercial real estate climate
during COVID-19, advised Shryne
Group's Mitchell.
" We've shown that we're a growing
industry that's recession- or even
pandemic-proof, " he said. " It's given us
more leverage to negotiate better deals
with landlords, to get market rates. "
Get a Head Start
Smaller players might score an
advantage in the dispensary real
estate game by identifying potential
markets before regulators start offering
licenses, then engaging local officials
early, Goodman said.
" In that scenario, I'd recommend
that you start working with the city
before they've written any ordinances
and then work with them to get the
ordinance written for what you want to
do, " she said.
" We've seen quite a few of those
work out. They do like local businesses,
but it's a longer play. It might take six
to 12 months to get that done. "
Goodman also recommends
spending time engaging with the local
community.
" We've worked in a lot of cities
where the residents are completely
terrified of cannabis businesses, " she
said. " But once they start to get to
know you, and there's actually a face
associated with the business that
wants to come in, it's different. "
If you're looking to open a dispensary
in a particularly competitive market,
Goodman said, " you need to be ready
to put hard money down within a week
or two. "
Those willing to do business in
markets with lots of licenses available
might have more time to shop around,
Goodman added. " But generally, to get
a good location, you're going to have to
be ready to commit immediately and
move forward fast. "
Solomon Israel is a
reporter for Marijuana
Business Magazine. You
can reach him at solomon.
israel@mjbizdaily.com.
February 2021 | mjbizdaily.com 69
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MJBizMag February 2021

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