Friday, June 13, 2014

California's new "GROWTH" industry for #CRE?...not what you think!

Image Attribution: www.longrange.sbcounty plan.com
So what is California's new "GROWTH" industry? You would believe that it is Cupcake shops, food trucks, and uber food delivery services...but these all are only off shoots of California's REAL new "GROWTH" industry...medicinal cannabis!

I receive no less than five calls a week from medicinal cannabis operators wanting to lease or buy one of my industrial listings for the purpose of GROWING medical marijuana...AKA weed, ganja, dope, hippy lettuce, medicinal cannabis...you fill in your favorite moniker. The operators are EXTREMELY well financed, organized, and have well researched arguments as to why their use is no problem. A great occupant, right?...not so fast!

I believed it was time to investigate the issue and learn just exactly why or not an owner should avoid this use in his building...other than the obvious...IT'S AGAINST THE FEDERAL LAW! Indulge me for a moment and let me try to explain...

As a disclaimer, I provide Location Advice to owners and occupants of industrial buildings in Southern California...AKA I lease and sell commercial real estate for a living and have since 1984. I have never made a lease or sale (that I know of) with a medicinal cannabis provider, grower, etc. BUT I may have (back in my youth) partaken in the herb recreationally...if I did, I didn't inhale, BTW. I guess this qualifies me as an expert if I can  just get my short term memory to cooperate and remember why.

So back to the burning question of medicinal cannabis.

According to Wikipedia, "In the United States, there are important legal differences between medical cannabis at the federal and state levels. At the federal level, cannabis per se has been made criminal by implementation of the Controlled Substances Act, but as of 2009, new federal guidelines have been enacted. According to U.S. Attorney General Eric Holder, "It will not be a priority to use federal resources to prosecute patients with serious illnesses or their caregivers who are complying with state laws on medical marijuana, but we will not tolerate drug traffickers who hide behind claims of compliance with state law to mask activities that are clearly illegal."[California passed an initiative to allow medical cannabis in 1996. In the intervening decades, multiple states have passed similar initiatives. A January 2010 ABC News poll showed that 81 percent of Americans believed that medical cannabis should be legal in the United States. Recently, in May 2014 Minnesota became the 22nd state to legalize medical marijuana not including DC."...and "Cannabis remains illegal throughout the United States and is not approved for prescription as medicine, although 20 states— Alaska, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and Washington—as well as the District of Columbia approve and regulate its medical use. (The Federal government continues to enforce its prohibition in these states.) However, the state of Maryland, which still explicitly bans the drug, enforces drug laws that are favorable towards the medicinal use of cannabis, making it a non-incarcerable offense with a maximum penalty of a $100 fine. In the 2010 election, Arizona passed a referendum permitting the use of cannabis for medical purposes, and on May 20, 2011, Delaware became the 16th state to legalize medical cannabis after Governor Jack Markell signed medical marijuana legislation into law."

According to California Norml, "Cities and counties across the state have moved to establish zoning regulations for medical cannabis cultivation. In many cases, these are driven by complaints from neighbors who don't like the sight or smell of marijuana, or by public officials with overly punitive attitudes. Public safety concerns have been raised, and there have been a few incidents of violence around marijuana gardens. While there may be a need in some cities to require greenhouses or other security measures for gardens, in rural areas and in whole counties, there is no justification for outlawing outdoor marijuana gardens. In any case, hardship exemptions for indigent patients must be included to assure safe access under state law."

I believe this blog post accurately describes the 5 horrible things nobody tells you about legally growing pot. The post is a bit racy...kinda like some of Duke Long's posts...so enter at you own risk.

So in my opinion, here is the bottom line...with industrial vacancies hovering around 4% in Southern California, why should an owner risk leasing or selling a building to a medicinal cannabis operator...either a dispensary or a grower? I cannot think of a good reason why...but I can think of many reasons why not:
  • It's illegal federally...even in states where it's legal
  • It's illegal in most southern California cities...although it's legal in the state
  • An occupant CANNOT get an occupancy permit...unless they lie. The city will "red tag" your building and you won't collect any rent
  • The use is potentially disruptive to adjacent tenants and property owners
  • Your property will be surrounded by a "different" crowd of folks
  • There are MAJOR upgrades to a building needed for the use...construction of rooms, power, lighting, ventilation. Even if the occupant were to pay for these upgrades, if the use gets red tagged (shut down) the owner is stuck with special purpose improvements that aren't re-usable...except for the power.
I will take a cupcake baker, a food truck commissary, or a uber food delivery service to occupy my listings any day!