MJBizMag February 2023 - 36

Role of Real Estate
Concerns about location vary by industry sector,
though landlords are warming up to plant-touching tenants
By Omar Sacirbey
F
ew factors are more important
to a cannabis company's success
than where it chooses to locate,
be it a cultivator, manufacturer or
retailer.
Cultivators and manufacturers
should consider proximity to the
markets they serve, while retailers
need to think about being accessible
to consumers. All plant-touching
companies must consider cost and
the strict zoning restrictions that
local governments impose on
cannabis businesses.
" The cannabis space is no different
than other business. It's all about
location, location, location, " said
Ryan George, CEO of 420 Property,
a Sacramento, California-based
marijuana and hemp real estate
marketplace.
TIMES ARE A-CHANGIN'
Today's real estate marketplace for
cannabis is dramatically different than
it was a few years ago.
Although cannabis business owners
should expect to pay a premium, or socalled
" green tax, " for real estate, those
premiums amount to far less than they
used to, observers said.
" Premiums were insane in 2018,
'19 and '20. They're still there, but
they're not what they once were.
The real estate premiums have come
down tremendously, " said Drew
Mathews, CEO of Green Life Business
Group, a marijuana and hemp real
estate marketplace based in San
Diego. " When a new state becomes
36 February 2023 | MJBizMagazine
that they can roll into their portfolios,
as opposed to buying one and two
shops at a time.
Rural locations often offer less expensive
cultivation options than urban areas.
Photo courtesy of 420 Property
recreational, there's absolutely a
premium, but it really doesn't go past
two times gross revenue right now. "
EYE ON THE FUTURE
At the same time, cannabis real estate
and business valuations are at an " alltime
low, " Mathews said.
He recommended that entrepreneurs
purchase four or five stores with
the plan to sell them to larger companies
when federal legalization happens-an
event he expects to occur in
four or five years.
" If you're a buyer, now is a time to buy
because valuations are down, " Mathews
said. " But it'd be silly to hold on to these
and try to make your ROI in the next
20 years. The guys that make out like
they robbed a bank will be all the smart
people that sell within the first six
months " after federal legalization.
Mathews added that his office
is already getting calls from large
cannabis businesses seeking real estate
transaction data, and most of them are
keen to buy chains of four or five stores
NAME ON THE DEED
Those circumstances will feed a
growing trend of cannabis businesses
opting to buy their real estate rather
than paying rent. The reason is that
many landlords have restrictions that
seriously impede cannabis businesses.
Matt Christopherson, senior
research analyst at the Chicago-based
National Association of Realtors (NAR),
said that buying " allows businesses to
control their property, so they can use
their property as they see fit. "
Meanwhile, stigmas that landlords
have about cannabis have been slow to
dissipate.
For example, in medical-only
marijuana markets, only one in three
landlords are willing to accept cash
payments for rent, an NAR study
showed in 2021, with respondents
saying they worry about taking cash
from a federally illegal activity.
In more mature markets with both
medical and recreational marijuana,
more than two-fifths of landlords are
willing to accept cash.
" The more it's legalized and the
longer it's legalized, the more landlords
are willing to take cash payments, "
Christopherson said.
To be sure, cannabis entrepreneurs
face numerous challenges in today's
real estate market, the most important
of which are addressed in the
following pages.
MJBizMag February 2023

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