A Real Estate Boom Powered By Pot
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A Real Estate Boom Powered By Pot
Posted by CN Staff on April 02, 2017 at 14:18:09 PT
By David Gelles
Source: New York Times
Quincy, Mass. -- At the edge of an industrial park in this suburb south of Boston, past a used-car auction lot and a defunct cheese factory, is an unmarked warehouse bristling with security cameras and bustling with activity. Until recently, the cinder-block structure was home to a wholesale florist, a granite cutter and a screen printer. Today, it is home to just one tenant: a medical marijuana operation called Ermont.Legalized marijuana has already upset societal norms, created a large legal gray area and generated a lucrative source of tax revenue. Now it is upending the real estate market, too.
In the more than two dozen states that have moved to legalize pot, factories, warehouses and self-storage facilities are being repurposed for the cultivation and processing of potent marijuana plants and products. Suburban strip malls and Beaux-Arts buildings have been reimagined as storefronts selling pre-rolled joints and edibles.And because the marijuana business comes with added baggage, landlords and property owners are charging a premium for new tenants working in the cannabis business. In Quincy, Ermont is paying above market rate for the previously dilapidated 36,000-square-foot building.“The landlord knew he was sitting on a gold mine,” said Zach Harvey, one of Ermont’s financial backers.Commercial real estate developers say they have never seen a change so swift in so many places at once. From Monterey, Calif., to Portland, Me., the new industry is reshaping once-blighted neighborhoods and sending property values soaring. In some Denver neighborhoods, the average asking lease price for warehouse space jumped by more than 50 percent from 2010 to 2015, according to an industry report. In the city over all, there are five times as many retail pot stores as stand-alone Starbucks shops.Wall Street is even cashing in. A few months ago, a real estate investment trust focused on leasing out warehouse space to growers started trading on the New York Stock Exchange.The sharp rise in property prices follows the booming market for legal marijuana. Sales of legal cannabis reached $6.7 billion in the United States last year, and are expected to top $20 billion by 2021, according to Acrview Market Research.“This is a new segment of the industrial real estate market that is being created in front of our eyes,” said George M. Stone, a longtime real estate executive now focused on the pot business. “It’s a huge industry and only getting bigger.”Yet there are simmering concerns that a new real estate bubble might be forming. Right now, millions of dollars are being spent to make old warehouses suitable for cannabis cultivation. Warehouses are in vogue for a variety of reasons: They are big enough to hold thousands of plants, can accommodate the needed climate controls, and are private and relatively easy to secure. What is more, because it is still illegal to transport marijuana across state lines, pot must be grown in the state where it is sold.But as the industry matures, many executives believe that tenants and investors spending big money on such projects could soon find themselves underwater. Ultimately, the theory goes, growers are likely to turn to less expensive greenhouses. And if federal regulations about the transportation of marijuana loosen, dispensaries in Boston could soon sell buds grown in California greenhouses.There is also a lingering threat that the federal government, which still classifies marijuana as an illegal substance, could crack down on the burgeoning industry. The attorney general, Jeff Sessions, has already expressed his disdain for the legalization movement.But for now, those concerns are being tossed aside for what looks like a can’t-lose opportunity for everyone involved: Building owners can charge above market rates, real estate groups can profit by subleasing to growers, and growers can make enough money to afford the steep rents.So far, the uptick in property prices from the marijuana business is concentrated in some of the states that have legalized medical and recreational use. And in some places, the industry is only getting started because voters made their decision just a few months ago.Maine’s law allowing recreational cannabis use took effect in January. Factories and warehouses near Portland that once produced and stored parts for model homes, steel beams and tires are already filled with budding marijuana plants. “These are factories that were sitting empty,” said Drew Sigfridson, a local broker with the Boulos Company.In California, a state that approved medical marijuana in 1996 and recreational use in November, greenhouses in Monterey County that once produced roses and tulips now grow marijuana plants with names like Grape Ape and Buddha’s Sister. Chuck Allen, a commercial broker with Keller Williams Realty who works in Monterey, said that in the last few years, more than 20 major transactions worth roughly $100 million have closed, and prices are on the rise.“Last year, you’d have paid about $2.5 million for a 10-acre parcel with greenhouses,” he said. “Today, you’d pay $5 million.”And in Quincy, Ermont is paying a premium for its unglamorous space. Ermont took over the building in 2014, though it began selling marijuana to the public only late last year. Before opening its doors, Ermont paid rent on the warehouse for two and a half years.During that time, Ermont gutted the building, spending about $4 million installing heating, ventilation and air-conditioning, as well as lighting, gas and insulation. Walls were torn down, and the floor plan was reconfigured to accommodate several large grow rooms, a retail space and a laboratory straight out of “Breaking Bad,” where in-house scientists distill potent cannabis oils.“It was a full renovation, including the roof and resurfacing the outside,” said Scottie Gordon, Ermont’s chief operating officer. “We knew it was going to be very expensive. This wasn’t just another greenhouse.”Denver’s Not the Only WinnerDenver has emerged as America’s de facto pot capital. Since Colorado legalized marijuana for recreational use in 2012, hundreds of stores selling pot have opened, and enormous growing operations have set up shop. Legal cannabis sales topped $1 billion in the state last year.The impact on the local real estate market has been equally big.From 2009 to 2014, 36 percent of new industrial tenants were marijuana businesses, according to the report on the city from CBRE Research, a commercial real estate company. Nearly four million square feet of industrial space was being used for cultivation in 2015, according to the report, about 3 percent of the city’s warehouse space. Warehouse vacancy rates in Denver fell to just 3.7 percent in 2015, down from 7.5 percent in 2010.The industry has taken especially deep root among the low-slung warehouses in north Denver. Buildings used for growing marijuana are easy to spot — many are distinguished by extra lights and security cameras. But “I wouldn’t have to point it out,” said Brian Vicente, a partner at Vicente Sederberg, a Denver law firm that specializes in marijuana issues. “You can smell it.”Retail spaces are just as hot. By 2015, there were upward of 200 marijuana stores in Denver, occupying high-end storefronts and former gas stations.The spike in demand has been good for landlords, who often charge two to three times market rates for spaces used for cultivation or sales.“It’s a tax these guys are used to paying because it’s still federally illegal,” Mr. Vicente said.Denver’s boom stands out, and marijuana has become such big business that an abundance of supply is starting to bring down retail prices, which could ultimately bring down real estate prices.But Denver is certainly not alone. The growth has become widespread enough, and with generous enough profits, to attract some of the country’s most prominent real estate investors.Alan Gold was chief executive of BioMed Realty Trust, which leased out space to life sciences companies, until it was sold to the private equity titan Blackstone for $8 billion in 2015. Now he is a co-founder of Innovative Industrial Properties, a real estate investment trust that buys buildings, renovates them and leases out space to medical marijuana growers.The company went public on the New York Stock Exchange last year and is valued at roughly $60 million, down about 10 percent since it began trading. “We’re really the first cannabis-related I.P.O.,” Mr. Gold said.The largest property in Mr. Gold’s portfolio is a 127,000-square-foot facility — a space more than twice as large as the White House — outside New York City. The building can handle both a large-scale growing operation and facilities to refine marijuana buds into edible products, and Mr. Gold is planning to open similar sites around the country.“It’s a way for us to invest in this industry on a national basis,” he said.Other entrepreneurs are following suit. Mr. Stone was an executive with the Witkoff Group, the real estate investment company that bought the Woolworth Building in 1988. Today he is chief executive of Kalyx Development, a private real estate investment trust focused on the pot business.Kalyx owns nine buildings in four states, including what was once a disk drive manufacturing facility in Eugene, Ore. Mr. Stone said he planned to expand into three or four more states this year, driven largely by demand from investors who want to put money to work.“There’s capital that is starting to stack up on the sidelines,” he said. “They’re looking for how to participate, and they’re looking for institutional-grade projects.”Assessing the RisksInnovative Industrial Properties, Kalyx and other similar groups are following the same strategy: buy buildings, retrofit them and lease them to commercial or medical marijuana growers. But it can often cost millions to turn a vacant warehouse into a facility suitable for cannabis cultivation.Rob Lally, who once owned strip malls and shopping centers but is now courting marijuana tenants with Commerce Real Estate, is converting a former tool factory in Leicester, Mass., into a cultivation center. He expects to spend $3 million to $4 million on the project, a sum that will take years to recoup.That big capital outlay is just one of the risks associated with the booming marijuana real estate business. Electricity costs alone can be budget-breaking, as plants need powerful lights to flourish. Some owners also face expensive battles with mold and other related wear and tear, as the warehouses were not conceived as places for a very humid environment.Add to that financial mix the fact that in mature markets like Denver, the retail price of marijuana is coming down as supply outstrips demand.“The price will come down so low that they’ll have a hard time justifying paying $10,000 a month just for lighting,” Mr. Vicente said. “That warehouse that you spent $10 million renovating is only going to be valuable for so long.”Finally, there is the elephant in the room: the question about pot’s legal status.While more than half the states have voted to legalize marijuana in some way, it is still illegal at the federal level. As a result, the entire business of legal marijuana — already worth billions of dollars a year — is predicated on the assumption that the federal government won’t enforce its own laws.The Obama administration largely left states alone, but there are signs that the Trump administration may not be so hands-off. “I reject the idea that America will be a better place if marijuana is sold in every corner store,” Mr. Sessions, the attorney general, said recently, adding that marijuana was “only slightly less awful” than heroin.The legal gray area has already left financing projects challenging. Because the federal government considers marijuana illegal, most banks won’t provide mortgages to buildings used by the industry. When Ermont took over its space in Quincy, it had to pay for the cost of the building owner to refinance with a local bank that would assume the risk.Any stricter enforcement of the laws by the federal government could put the real estate investments into immediate trouble. But even a move to legalize marijuana at the federal level would vastly change the economics. It could allow interstate commerce, meaning that marijuana grown relatively cheaply outdoors in California could be shipped to Massachusetts, where growing is far more expensive, potentially putting the East Coast producers out of business.Nevertheless, investors are pressing ahead with ambitious plans to grow ever more marijuana, wherever they can.The opportunity is just too big to ignore.‘Out of the Shadows’On a chilly Wednesday in Quincy, the line was out the door, stretching into the parking lot of the industrial park. After being open for just two hours, Ermont had already sold $10,000 worth of products. Patients were lining up to buy pungent buds, as well as cannabis-infused olive oil, peanut butter and honey. Soon the dispensary will offer a deodorant that can get you high.Today Ermont uses just about half of its retrofitted warehouse. But demand is so strong, the company expects it will soon take over the rest of the space to grow and process more plants.A short drive away in Brookline, the store in an old Beaux-Arts bank was also doing a brisk business. The products inside are made by another dispensary, New England Treatment Access, which grows its crops in a warehouse in southern Massachusetts. NETA wanted some pizazz for the customer experience, so it leased the bank.Inside, skylights and tall arched windows flood the former lobby with sunlight. Gilded Corinthian columns reach up to a domed turquoise ceiling. Where bank tellers once handed out cash, employees now hand over buds of Tangerine Haze and Master Kush.The decision to lease the former bank wasn’t cheap for NETA. The group entered into a lease years ago and paid rent while it sat empty.“The holding costs there were significant,” said Norton Arbelaez, director of government affairs for NETA. But, Mr. Arbelaez said, “we wanted to take this industry out of the shadows,” and a flashy retail space was one way to make that happen.So far, it seems to be working. On a busy day, NETA can sell marijuana buds, pre-rolled joints and cannabis-infused chocolates worth as much as $100,000.That is more than enough to keep the lights on.A version of this article appears in print on April 2, 2017, on Page BU1 of the New York edition with the headline: A Real Estate Boom, Powered by Pot. Source: New York Times (NY) Author: David GellesPublished: April 2, 2017Copyright: 2017 The New York Times CompanyContact: letters nytimes.comWebsite:  -- Cannabis Archives
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Comment #12 posted by Hope on April 04, 2017 at 09:07:29 PT
Quote from the Statesman article:
"But it remains to be seen if the legislative effort will result in increased availability of medical cannabis in Texas or decriminalization of all pot for low-volume possession – or if it helps establish a legal, potentially billion-dollar-plus cultivation and processing industry in the state."I hope they go the route to "Establish a legal, potentially billion-dollar-plus cultivation and processing industry in the state."My faith in the Legislature is pretty weak, though. I hope and pray that they can restore this God given human right to have and use the cannabis plant to the people of Texas. 
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Comment #11 posted by The GCW on April 03, 2017 at 17:44:46 PT
Everyone of Us, here at CNews, could post many news articles exposing how America is pretty much done with cannabis prohibition. Texas!Even a dense Sessions must know, unequivocally, attempting to persecute cannabis today, on a fed level, would be political suicide.  
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Comment #10 posted by Hope on April 03, 2017 at 14:38:21 PT
Texas, our Texas...
Texas lawmakers weighing flurry of marijuana-related bills Owner Jerry Jones Reportedly Wants NFL To Stop Banning Marijuana
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Comment #9 posted by Hope on April 03, 2017 at 12:15:21 PT
Comment 2 HempWorld
Amazing! And doubly amazing that it's all on a government website.Yet another branch of this same government insists there's no medical value in the cannabis plant and it's a danger to society and humanity and must be prohibited by force of law. One branch thinks it's so hideously dangerous that homes and businesses are subject to armed invasion and people are imprisoned, and some are killed.Does one hand of our government not have a clue, at all, what the other hand is doing?What's going on?What ludicrous evil keeps this plant prohibited... anywhere?I'm angry. Very angry. This government activity reminds me of the ATF selling guns to Mexican Cartels. Jefferson Sessions thinks he's so smart and wise... why doesn't he know about these studies? If he does, why is he ignoring them? Why isn't someone in our sprawling, overpaid government bureaucracy doing something about this? Couldn't someone from PubMed have these studies copied, bundled up, and walk them over to Sessions' office and put them right into his cruel, punishing, and ignorant hands?
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Comment #8 posted by Sam Adams on April 03, 2017 at 10:14:11 PT
Restaurant biz
>>>Colorado's legal marijuana industry is providing options for young workers.US culture - nothing to be proud of these days. It seems the American Way to always blame someone else for anything that affects you, or your money, the wrong way.If the Restaurant industry is losing workers to the cannabis industry it's because the restaurant industry has been treating hard-working young people as wage slaves for the last 30 years. Give them a living wage.  Give them a career path. Make their jobs fulfilling. This is what you do to solve your worker shortage, not blaming someone else. 
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Comment #7 posted by Garry Minor on April 03, 2017 at 05:10:15 PT:
This article was written by Steve Kubby back in '03.I really like how Richard Cowan words it!New Study Explains How Pot Kills Cancer Cells - Drug News Bot[It is hard to believe that the knowledge that cannabis can be used to fight cancer has been suppressed for almost thirty years, yet it seems likely that it will continue to be suppressed. Why?According to Cowan, the answer is because it is a threat to cannabis prohibition . "If this article and its predecessors from 2000 and 1974 were the only evidence of the suppression of medical cannabis, then one might perhaps be able to rationalize it in some herniated way. However, there really is massive proof that the suppression of medical cannabis represents the greatest failure of the institutions of a free society, medicine, journalism, science, and our fundamental values," Cowan notes.Millions of people have died horrible deaths and in many cases, familes exhausted their savings on dangerous, toxic and expensive drugs. Now we are just beginning to realize that while marijuana has never killed anyone, marijuana prohibition has killed millions.]'s True! Quite a failure!
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Comment #6 posted by The GCW on April 02, 2017 at 21:09:31 PT
Related. Very related.
Why Flip Burgers When You Can Sling Weed? Denver's Pot Boom Puts the Hurt on Local Restaurant HiringColorado's legal marijuana industry is providing options for young workers.
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Comment #5 posted by HempWorld on April 02, 2017 at 20:30:26 PT
Thank you FoM!
You (and Stick) are most welcome!Thank you for your website and you, it is awesome!
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Comment #4 posted by The GCW on April 02, 2017 at 20:02:41 PT
His & I vs. We The (MAJORITY of) People.
"Jeff Sessions, has already expressed his disdain for the legalization movement.""...HIS..." "...I..."-0-Look, every poll indicates the majority of citizens / voters favor ending cannabis prohibition.Sessions, practically stands alone in His misery.He is not going to be allowed to force Himself on America.FURTHER, There are so many bills in congress and courts, any of which will change and potentially end cannabis prohibition as Sessions knows it.Sessions' options have about run their course. The people are not waiting on the federal government in part because the federal government has let the American people down so badly on this issue ther're disgusted with contempt and no longer care what the feds think.The people are moving forward,  Sessions can only pretend to be a speed bump.Just look at Him!Who the F is going to even consider taking HIM seriously?When have We ever listened to people like that?The level of contempt here is incomparable to anything else in existence in America.-0-His only choice other than to keep out of the way IS TO STEP IN FRONT OF A MOVING BUS that will mow Him down!
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Comment #3 posted by FoM on April 02, 2017 at 19:58:03 PT
Amazing data! Thank you!
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Comment #2 posted by HempWorld on April 02, 2017 at 15:04:19 PT
Cannabis Cures Cancer! The Cat's out of the bag...
It is an injustice that individuals are refused access to the herb considering it is 100% natural and has been cultivated for thousands of years.Additionally, at least 100 studies prove that the plant can combat one of the most frightening modern afflictions: cancer. As 1 in 2 women and 1 in 3 men are predicted to develop cancer in their lifetimes, it is past time the herb lose its stigma and Schedule I status so that citizens worldwide might benefit from its many properties.Following are 100 studies proving cannabis to be an all-natural cancer killer:Cannabis kills tumor cells
Uterine, testicular, and pancreatic cancers
Brain cancer
Mouth and throat cancer
Breast cancer cancer
Prostate cancer
Blood cancer
Skin cancer
Liver cancer
Cannabis cancer cures (general)
Cancers of the head and neck
Cholangiocarcinoma cancer
Cannabis partially/fully induced cancer cell death
Translocation-positive rhabdomyosarcoma Green Flower Media
Cannabis kills cancer cells
Thyroid carcinoma
Colon cancer
Intestinal inflammation and cancer
Cannabinoids in health and disease
Cannabis inhibits cancer cell invasion More:
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Comment #1 posted by HempWorld on April 02, 2017 at 15:01:24 PT
Off Topic
"Despite the fact that countless individuals have used cannabis oil to heal their afflictions, the U.S. Cancer Institute lists cannabis as a ‘cure’ for cancer on its website, and a multitude of veterans credit the herb with helping them ditch opioids and alleviate symptoms of PTSD, the marijuana plant remains classified as a Schedule I drug in the United States.In fact, in most countries around the world, use of the herb and its components for medicinal and recreational purposes remains to be illegal. This continues, regardless of the fact that 0 people die from using the herb each year. In contrast, 30,722 die from alcohol poisoning and 38,329 from abusing pharmaceuticals annually (according to 2014 data).Some activists, such as Rick Simpson, have suggested that the plant is still illegal in the U.S. on a Federal level because of its multitude of uses. A part of the plant known as hemp can be used for clothing, food, and industrial purposes, and components of the ‘flower’ known as marijuana can inspire creativity, free-thinking and, of course, contribute to healing."Read More:
On and on...
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