Issues in the Marijuana Industry: Real Estate

real-estate-300x157As more states legalize some form of marijuana use, business owners are finding new barriers to entry in the
industry. One of the biggest involves the search and procurement of real estate. Acquiring an operation license is only the first step in what can be a long, tedious, uphill battle toward a successful cannabis operation.

Lack of Lending and Mortgages

Since the growth, sale and distribution of marijuana is still illegal at the Federal level in the U.S., financial institutions have steered clear of businesses with involvement in the cannabis industry. Banks face criminal prosecution, asset forfeiture and large amounts of liability if they are found to be involved with illegal businesses. It is because of this that marijuana-related businesses do not have access to traditional forms of lending and mortgages. Without access to the capital processes that other businesses have, many have to find other ways to raise funds.

Risk of Civil Forfeiture

As any association with a marijuana-related business is deemed illegal by the Federal government, many landlords and property managers are hesitant to lease space to them at the risk of civil forfeiture. Just like with banks, any property associated with the marijuana business can be subject to asset seizure, though the Federal government has several guidelines which state that they will not spend resources pursuing state-legal and compliant marijuana businesses. Despite these guidelines, some property owners don’t want to carry the risk of this even taking place. Those who do, however, are indulging in the increased rent and property values in areas like Denver, where warehouse prices have doubled (and in some cases even tripled) in the last five years.

Finding Conducive Property

leasingFinding real estate that works for the growth and sale marijuana can be very challenging. Zoning and restrictions regulating the distance from schools, day care centers, rehab facilities and other make it difficult in a mature market like Denver. Business owners who want to get into the industry now are buying existing locations, since they are already “grandfathered in” and have met proper distance and zoning requirements.  Most marijuana production facilities are large, open spaces that require ample ventilation and can sustain lighting and watering systems. Finding property that meets all of these criteria can certainly be a challenge, and has even led to the emergence of marijuana-focused real estate brokers and agencies.

An Industry Stigma

Even when business owners are able to overcome the challenges described above, they still face a stigma about marijuana and the cannabis industry. People still associate marijuana-related enterprises and their owners with a lazy, laid back, “stoner culture” mentality. These business owners find it difficult to be taken seriously, and being an illegal substance in the eyes of the Federal government doesn’t help. These barriers have driven marijuana businesses to band-together to not only change the perception of the industry, but to make the process easier and more conducive so that everyone can be more successful.

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