The main worry for the potential cannabis real estate investor is the danger of civil forfeiture.
If a landlord knowingly rents to a marijuana business, it may be difficult for them to establish an “innocent owner” defense if they are functionally indifferent to whether the business is complying with state law.
Some credit unions offer checking accounts for cannabis businesses, but there is typically a waitlist to get one, and they are not available everywhere.
Similarly, most title companies will not hold money in escrow, close transactions, or issue title insurance on properties which have a cannabis business operating on them.
If an agreement is made to sell the business, the buyer may be impatient to begin operating the business, or to begin changing things at the business, or even to begin putting money into the business.
Also, if a cannabis business has pending violations, which can take a long time to either settle out or have a hearing, or if it is under investigation, ownership and location changes will typically be held up until the issues are resolved.
At the same time, there is often a legally-mandated, minimum distance between retail stores, so if a retail store moves in close to your property, you may not have the option of opening a retail store at your property even if it is otherwise suitable.
On the flip side, all of these difficulties surrounding the locations of marijuana businesses mean that once a marijuana business establishes itself in a particular location, it is much less likely than a non-marijuana business to change locations, because of the accompanying regulatory difficulties.
With this information in mind, we can take a shot at answering the first question I posed: is my money safe in a cannabis property? The reality is that thousands of landlords have been renting to thousands of licensed marijuana businesses for many years now.
Oregon first allowed people to apply for these licenses beginning on March 4, 2014, and so everyone and their mother tried to stake out whatever they could, some even using computer macros to fill in the application form faster so they could be at the head of the queue.
Starting late 2016-2017, Oregon issued a ton of recreational marijuana licenses.
When the 2018 Farm Bill passed, a lot of people who lost their money in cannabis shifted to hemp, so there was another land grab and tons of new businesses cultivating hemp in summer 2019.
Also, around last summer, the OLCC started speeding up pending license applications and ownership change applications, which made a huge difference to people and unlocked a lot of dormant assets – stores and operations that were ready to go but had been waiting, in some cases, more than a year to get their license.
Producer licenses have value, but that value is usually limited because a company will usually want to set up its own grow and often won’t be interested in existing grow infrastructure – many companies just buy the license only, and they are currently going for around $200,000, plus or minus.
Oregon is trying to set itself up as a producer and destination state, but New York has leapfrogged us, having passed laws allowing social consumption.
The Fresh Toast is an award-winning lifestyle & health platform with a side of cannabis.