Trump Soho might sound like an interesting location for a series of seminars on commercial real estate in the cannabis industry, given the Trump administration’s ambivalence on the issue of legal cannabis. But then, the locale brandishing the name of the chief of the executive branch of the United States of America—along with the participation of numerous developers, law firms and financiers—might be the best indication yet of just how mainstream cannabis has become.
The hotel hosted around 50 to 75 people on May 4 to discuss the challenges and requirements of opening a cannabis-related business. Here were some of the considerations the panelists said are essential for those planning an entrée into this new frontier.
1. Location, location, location. Real estate’s main mantra holds equally true for cannabis-related businesses, if not more so. Those seeking to open a dispensary or grow facility have many factors to take into account beyond what they might for starting a more conventional business. The most basic—finding a location with the proper zoning—will be difficult. Different cities and counties will have different standards, and, as Kalyx Development’s Dawn Sandoval pointed out, cannabis-related businesses are often restricted not only by proximity to schools but also often to churches and day care centers. In states where medical or recreational cannabis is legal, that legality won’t translate to ease and might restrict you to sparse location choices even in the most tolerant of states.
2. Aroma control. Cannabis cultivation brings about powerful smells, which often spread to surrounding areas. This should be an important consideration for where and how you set up your business. If there are other businesses or residences nearby, AmeriCann’s Tim Keogh recommended investing in systems that mitigate the odor.
3. Community relations. Ensuring you find a space with legal protections and appropriate zoning is only part of the picture. Given the reticence many have toward legal cannabis, building a strong relationship with the community early on is essential. Kris Krane from 4Front Ventures suggested securing a “letter of non-opposition” from the local municipality to use in your applications for insurance and financing and to cement good relations with the locals. Having zoning on your side won’t matter all that much if residents and local officials don’t want you around.
4. Expertise and compliance. Lauren Rudick at Hiller, PC, reminded us that if you’re in the cannabis business, no matter what state and local laws dictate, you’re still “operating in open violation of federal law.” As such, you could have trouble obtaining certain conventional business services—your banking options, for example, could be fewer than for owners of more conventional businesses—or you could be susceptible to higher-than-average interest rates. Given all this, you need to make sure you operate as cleanly as possible, even more so than owners of other types of businesses. There’s a lot of paperwork, and even more if your business is cannabis. In addition to knowing every aspect of running a regular business, you also need to ensure that you understand all the particulars and peculiarities involved with cannabis businesses—including civil asset forfeiture laws. According to Rudick, you probably want to avoid a boilerplate lease. Instead, you need a special lease that spells out your responsibility and the property owner’s—plus, while many leases have provisions for landlord entry, this will probably be different where cannabis is involved. “You’re not just in cannabis: You’re in regulatory compliance,” she noted.
5. Questions of insurance. Several specialty companies are willing to insure cannabis businesses. Many are not. The Wellington Group’s Anthony Caiazzo spoke about the importance, given the challenge of securing insurance for cannabis businesses, of getting everything right and keeping your nose clean. This means everything from, if you partake, keeping pictures of yourself smoking off social media (which is good advice in any avenue of life, really) to ensuring your application is error-free, including spelling. “You’re not guaranteed insurance,” he notes. “If no one wants to cover you, you may be out of luck.”