By Benham R. Wrigley, Jr.,Wrigley Hoffman, P.C. a/k/a CannaLex Law
Eras in this country have been sometimes defined by commodities. There was King Cotton, then King Corn. Now we have King Weed. The demand for legalized marijuana in Michigan is enormous. Three-hour long waits at retail establishments to buy adult use product is reality. Societal change has arrived.
Approaching the new year, what is of importance to commercial Realtors and their clients? The easiest answer is the size of the market, which has gone from approximately 350,000 registered Michigan Medical Marijuana caregivers and patients to 9.9 million people for Adult Use (sometimes called “Recreational”). It’s the same plant as sold for medical marijuana. It doesn’t know the difference; it just has an expanded market.
With the expanded market now, there’s a tremendous demand for viable licensable properties. People interested in the marijuana industry are everywhere searching for locations. You need to learn which municipalities will allow which Medical Marijuana and Adult Use activities, how licenses are awarded, and how to creatively structure offers and leases, often pending licensing approvals.
Some other highlights and thoughts you need to understand for 2020:
- Municipalities still control their own fate. Are they in or are they out? They can be in, to a limited extent, by limiting the types of facilities and numbers of each (currently, there are only a handful of municipalities allowing adult use).
- We foresee a significant increase in the number of municipalities which will allow Adult Use facilities over the next year. Find them! Many of those municipalities indicated they wanted to wait to see what the Adult Use rules are. Emergency Rules have now been adopted. Municipalities are often slow to react and the leaders reluctant to leap into this arena until they see their neighbors taking advantage of the opportunities presented by these facilities. Unless things radically change, these facilities are not expecting tax breaks or money from the MEDC. They pay their full share for a fully taxable piece of property.
- Besides the usual Grower, Processor, and Retail Sale licenses, there are others under the Adult Use canopy which Realtors need to learn about as their clients may want to take advantage of them. These include:
- “Consumption Establishment.” In parlance
that’s a “smoking lounge.” Put those adjacent to restaurants, event facilities,
or at a golf course. Make it like a
video arcade?
- Marijuana Event Organizers. If your client has a large open space such as a field, a mall, or a parking lot, what about having a temporary marijuana event at that location? There are the obvious places like music festivals. People can come, buy merchandise, and smoke at the event. It’s doubtful we will see it on Calder Plaza this summer, but one never knows. What about at a football or baseball stadium?
- Delivery License. This license is not yet available. It’s in the proposed Rules and we expect it will pass. This will allow a delivery service to take product from the retail shop to an individual’s residence. It is not a secured transport and essentially replaces the requirement that home deliveries be by an employee of the retail entity.
- We also predict, which will be the impetus for further tremendous increased expansion in the industry, that the two-year lockout of non-MMFLA licensees is reduced to one year. Right now, the MMFLA licensees who are getting Adult Use licenses have that two-year protection from November 1, 2019. The change, if it occurs, would mean that any applicant could get the major Adult Use licenses beginning November 1, 2020. This is my prediction. I have no substantiation for it other than just my experience in this industry and reading the tea leaves.
What should Realtors do if they want to work with businesses in this new field?
- Help their clients understand the municipal ordinances which grant marijuana business opportunities, including restrictions on license numbers, locations, and buffer zones.
- In evaluating possible locations for their clients, understand the costs associated with such a development and the length of time required for construction/build-out and the license process.
- Recognize that property values are constantly changing in this new world of marijuana business as more municipalities jump into the business arena. Costs for electricity, water and transportation through a Secured Transporter play significant roles in determining value.
- Since this is a cash business, understand the requirements of Currency Transaction Reporting (Form 8300) for those receiving cash payments. This includes landlords. Recording requirements relate to “a series of transactions,” not just to each individual payment. If you are a landlord or property manager, it will be best if you understand its requirements.
- Learn the future of the industry so that you can help your clients best evaluate options and opportunities for initial operations, optional licenses, and expansion opportunities.
The “Wacky Weed” dominates the real estate market as a new year and a new decade dawn. Realtors take heart; the expansion of this new growth business has just begun. Opportunities abound for those willing to learn and work.
Cannabis keeps on growing.
