Kerry Blasdel: 6 Steps to Finding Real Estate For Your MMC

By Kerry Blasdel

Note: This is the second in a two-part column on real estate issues for existing MMJ businesses.

The hunt for MMJ dispensary and recreational retail real estate can be difficult, complex, and time consuming. It is more burdensome to find and pre-qualify property in the MMJ industry than in almost any other commercial industry, due to many restrictions imposed by both local and state governments.

Often, MMJ business owners state that “it took forever to find a building.” Business owners start out their search being picky about a location, but soon find out there is no way to be picky and must accept the locations that are offered. Be prepared for this possibility.

1. Pre-Qualifying a Location

After you have chosen a geographic area, be aware that both the state and local jurisdiction have current laws in effect which allow your business. This all comes down to one word: Zoning!

Go to the local Planning Department and understand the local land use laws (aka zoning) . Usually you will find only a few zones in which your business would be allowed. See where they exist on the zoning map, and narrow your search to these areas only. No other areas are even worth looking at.

Next, if the jurisdiction requires this, you must identify nearby ‘sensitive use locations’ and be certain distances away from them. These may include schools, churches, recovery or addiction centers, other dispensaries, public parks, etc. These sensitive use parameters often knock out good locations, so be prepared.

2. Pre- Qualifying a Property

Within the designated zones, find available properties and property types. This means engage a good commercial realtor, an MMJ consultant, or you can do it yourself. (Suggestion: utilize professionals whenever you can. Commercial realtors fees are generally paid by the property owner, not the tenant, and realtors often have a wealth of useful contacts in and background knowledge on the area.)

Once you have a list of properties available for rent or sale in the appropriate zones, the first thing to do is find a landlord who is willing to rent or sell to you.

3. Property Types to Choose From

Now look at property types you desire. Be aware that often what you have in mind may not be available so you may have to compromise. Often the most sought after property type for a dispensary is a small-scale stand-alone building with no common walls, its own parking lot, on a busy commercial street, with high visibility.

These properties are often very difficult to find, and rent for premium prices.

Possibilities for a retail dispensary include retail store fronts, a converted old home, former gas stations or office space, an office/warehouse or an upper floor unit in a high rise.

4. Landlord Negotiations

Once you have found a few good prospective properties, it is time to negotiate with the owner or manager. Your first question – not the last – should be ‘Do you rent to licensed marijuana businesses?”

It is imperative that you be up front and honest with the property manager or owner, and obtain permission to conduct your MMJ business in the property. If you find a perfect property, it looks great, the location is sweet, the size is perfect, the parking is good, and the price is right, it will all be for nothing if the landlord refuses to rent to your cannabis business.

Typically commercial properties will charge a premium to rent to this industry. Expect to pay between 20%-40% more per square foot for rent. This is considered justifiable, as the landlord is taking a large risk with you. The landlord’s worst case scenario is that the property is confiscated under Federal Drug Laws. (For example, the landlord for Harborside Health Center in Oakland CA has been given legal notice by the regional U.S. Attorney to evict Harborside or face asset forfeiture.)

Expect ‘NNN’ leases. This means you pay rent, utilities, taxes, insurance and maintenance. Also, it is not uncommon for landlords to require cash up front, and a few months pre-payment as well.

5. Construction Modification and Tenant Finish

Once you have found your property and negotiated your lease agreement, it is time to begin modification of your space. Plan to modify the property somehow and expect to do it immediately. Often, local MMJ ordinances include modification requirements. You may have to hire an architect, obtain blueprints, hire a licensed building contractor, complete and inspect the improvements. You will also need a Certificate of Occupancy and a Change of Use Permit.

6. Move In and Open For Business!

This is the most exciting part of it all. After going through all of this, you can now open your business. Laws vary all over the country as to when you may occupy in relation to obtaining a local MMJ business license, so know your local and state laws.

Note: This is the second in a two-part column on real estate issues for existing MMJ businesses.Click here for Part I which detailed the eight reasons existing MMJ businesses might need a new location.

Kerry Blasdel is a real estate investor, dispensary landlord and MMJ consultant who runs the firm Plant Medicines of Colorado LLC.

13 comments on “Kerry Blasdel: 6 Steps to Finding Real Estate For Your MMC
  1. Craig Delsack on

    Great points to consider. Once you have a term sheet from the landlord, you should probably hire a lawyer to negotiate the lease. When Kerry says “NNN” he means triple-net lease — this generally means that the landlord expects the tenant to pay every expense in operating the property, as if he were the owner. So you should also have an architect and engineer inspect the premises so you aren’t hit with structural repairs. Also, the architect will ensure that your use of the property falls within zoning and certificate of occupancy requirements (and, among other things, that the utilities have enough capacity for your irrigation and electrical needs).

    Also, your lawyer should pre-negotiate your build-out requirements in the lease (and maybe get the landlord to throw in a few months rent to offset these costs). By getting pre-approval, it will minimize wasted time waiting for the landlord to approve your alterations before the rent and lease term starts.

    Just my 2 cents.

    Reply
  2. B & G on

    We have such a building. 5000sq.ft. on acre plus. On I70 service road w/no sight restrictions. 100% occupied by county approved & state licensed MMJ biz for 3+ yr. For sale with owner finance. Call Bill 406-883-2635.

    Reply
  3. David on

    The most important thing do is hire a good commercial real estate broker if you can find one that will work with the use. I have helped clients in Phoenix secure locations for grow and dispensary spots. This is no easy task and more like finding a needle in a haystack. Most LL’s even with a premium to rent will say no. But I have been persistent and have been able to help multiple clients. Just my two cents.

    Reply
  4. Tom Gordon on

    In my 20 transactions as a real estate broker in the Puget Sound Basin what I’ve found is a typical Landlord not being willing to pay a fee allowing a broker to make a living wage. Thanks to referrals and recommendations I’ve been able to represent tenants with the tenant paying my fee. It’s surprising how many obstacles are removed by tenants choosing to go to the top of my list. I know how difficult to find are entitled, compliant, vetted, permitable, arm’s length, win-win sites offering “legal” occupancy.

    Reply
  5. Mike Vendetti on

    Florence, Colorado hasn’t, and may not carry out the provisions of Amendment 64, and I don’t use marijuana, but I can certainly see the benefits of implementing amendment 64. The city Council is holding a workshop on October 14, at 6:00 PM in the council chambers. I would certainly appreciate some positive input to give them. We have properties for sale, that could probably be converted to a store. Also there are commercial properties that could also be put to use. the majority of the citizens in Florence voted in favor of prop 64, but there is so much hysteria and hearsay, I would really like to hear some facts, or better yet have someone present some pertinent facts at this meeting.

    Reply
  6. Lora Julian on

    Different states have different laws regarding properties and establishing businesses. You have to talk to the right people to get a general idea and so that your processing will be a lot easier and faster.

    Reply
  7. rhonda on

    Rita,
    If you’re still looking we have a great agent in Denver. He helped us find our MIPs warehouse condo…to BUY! Very inexpensive & in a fairly nice area of Denver. He’s well versed in zoning & cannabis regulations. Let me know if you need his info.

    Reply
  8. Linda on

    I Own 10 acres of ag zoned land south of Colorado Springs, CO with a very nice home on it. Could I lease out the property/home to a local MMJ grower? Any advice on that?

    Reply

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