With dispensary licenses about to be issued in Missouri following the state’s legalization of medical marijuana, CREW KC hosted a panel on the impact of the marijuana industry on commercial real estate at its first 2020 quarterly luncheon.
Moderated by Katie Bean, strategic composer at Circle Sideways, panelists Ryan Westhoff, partner at Dentons; Michael Wilson, director of research and development at United American Hemp; and Kellee Dunn-Walters, commercial underwriter and manager at Security 1st Title, discussed topics ranging from challenges in financing and insuring title, to predictions about legalization in Kansas.
The distribution and production of marijuana still is illegal under Federal law, and property and monies received from its production, sale or distribution is subject to confiscation by or forfeiture to the Federal government. Consequently, title insurers have been unwilling or reluctant to insure these transactions, noted Dunn-Walters.
However, that does not mean that a title company will not insure a transaction, and the requirements to do so are decided on a case by case basis.
Also, Dunn-Walters noted, banks generally will not issue conventional loans on property involving marijuana. She added that a bill introduced in Congress attempts to exempt banks from the confiscation or forfeiture penalty.
“If banks can get that exemption, we are hoping that the title insurance companies can piggy back on that and also get the exemption so that we will be able to insure traditionally funded loans,” Dunn-Walters said.
Westhoff remarked that large companies in the marijuana industry are not concerned about banking and title regulations because they have so much cash.
Westhoff said many of the contracts written with respect to the acquisition or leasing of real property in Missouri for marijuana related use are option contracts conditioned upon the buyer or tenant obtaining a license. However, many of these contracts also don’t have deadlines for the date by which the license must be obtained, thereby creating the potential for dispute.
Westhoff also said that in lease negotiations, he tries to eliminate any lease covenant that the tenant will not violate Federal law because “we have to make sure we are not breaching that lease on day one.”
Wilson predicted that the marijuana industry is going to be a half billion dollar industry in Missouri in the first couple of years.
“Everyone should be prosperous in the growth of the marijuana industry. There’s a whole lot of room for everyone to make money,” Wilson said.
Westhoff added that the window of opportunity for new entrants into the marijuana industry is slowly closing as more and more states legalize marijuana and the Federal government moves toward legalization.
Wilson predicted that there will be a “massive downturn” in the next three years in the number of leases for CBD stores as the now unregulated industry becomes subject to regulation by the FDA.
If Kansas legalizes medical marijuana in 2020, “you’re looking at no earlier than 2022 before your first cultivator is actually up and operational,” Wilson said.
Wilson believes there is an 80% chance that Kansas will enact legislation this year to legalize medical marijuana.
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Photo credit Collins/Webb Architecture. Third Street Dispensary in Lee's Summit, Mo., is an example of reuse and redesign for the neighborhood by converting an existing dilapidated building into a new and fresh retail space.
The building, designed by Collins/Webb Architecture, consists of approximately 1,600 SF of retail, waiting, admissions and secure product storage.
The design carefully considered the retail experience and its ability to shift cultural attitudes, expectations and viewpoints on plant-based medicine.