MJBizMag April 2021 - 59

Christopher
Stefan
* Hire an experienced lawyer,
broker and even an investment
broker familiar with state and local
marijuana licensing regulations, said
Green, founder of CannaMLS.
* Do your own due diligence, starting
by carefully reviewing state and local
There can be real advantages to buying
a turnkey operation as opposed to
starting one from nothing.
" When you build from scratch, you
face many headwinds in the form of
entitlements, regulatory agencies and
construction timelines, " said Christopher
Stefan, a Denver-based cannabis broker
and principal of Desarollo Real Estate.
" In cannabis, all of these things
take twice as long as in a conventional
transaction, and things tend to drag out, "
Stefan said. " Buying a cannabis business
gives the buyer the benefit of time, which
accrues to the bottom line. "
HEAVY HITTERS ARRIVE
Although some individual investors
look to get into the marijuana
industry, Alovisetti predicted most of
the acquisitions this year will be by
multistate operators looking either
to enter new markets or expand their
footprints in states where they already
have operations.
In January, Chicago-based Cresco Labs
announced it was entering the Florida
market by buying Bluma Wellness in a
deal valued at $213 million.
" We identified Bluma as having
the right tools and key advantages for
growth, " Cresco CEO Charles Bachtell
said in a news release, citing the company's
" proven track record " and management
team as advantages of the purchase.
While not all deals will be the size of the
Bluma acquisition, experts provided these
tips for prospective marijuana investors:
rules governing the cannabis sector.
" I often see buyers take the word
of the sellers, " said attorney and
consultant Freedman. " The seller
obviously is motivated to make the
deal seem as easy to close as possible
and might not fully explain all of the
challenges involved in transferring
the license. "
* Stick to basics such as growth,
profitability and management,
Stefan said. And don't " throw
healthy skepticism out the window. "
* Don't assume you have the " secret
sauce " to drive sales higher than the
market allows. " I've seen buyers pay
twice the market rate for a dispensary
license based on their belief
they could quintuple the dispensary's
revenue only to later find such
growth wasn't possible based on the
competitive landscape in the city, "
Freedman said.
* Don't believe your own PR, Stefan
argued. " Too often, people who have
been successful in other industries
think their strategy will work in
cannabis and are proven wrong, " he
said. That trap can easily be avoided
by consulting with cannabis-industry
veterans.
Jade
Green
Beating Goliath
Most of the buyers of marijuana
businesses this year will be
multistate operators flush with
millions of dollars in capital,
cannabis attorney Charles Alovisetti
predicted.
" But even among MSOs, there is
a learning curve, " as the marijuana
industry is so complicated, said
Alovisetti, a partner in the Boston
office of law firm Vicente Sederberg.
" After a (company) does one deal in
a state, the next ones are easier. "
It is not as easy, however, for momand-pop
buyers hoping to enter the
market before marijuana is legalized
at the federal level.
Colorado-based cannabis broker
Christopher Stefan has worked with
groups such as grocers, oil and gas
executives as well as alfalfa and corn
farmers seeking to claim a stake
in what they hope will be a more
lucrative business: marijuana.
Here are some tips for smaller
investors looking to enter the
industry:
Understand that you won't be able
to take the tax write-offs you are
used to in other industries. " Work
with an accountant or a tax lawyer
who understands (IRS Section)
280E restrictions on deductions, "
Alovisetti said.
If a deal appears too good to be
true, there probably is a reason.
Stefan remembers one large grow
facility in Colorado that attracted a
lot of attention because of its size
and attractive terms. Drilling deeper,
" the ceilings were too high, the
building too porous, and the HVAC
would never dial in the climate quite
right, " said Denver-based Stefan,
principal of Desarollo Real Estate.
Take your time. There is a " potential
for a huge rush of deals " this year,
but go in with the knowledge
that everything in cannabis takes
longer than with other businesses,
Alovisetti said.
Don't expect that owning an MJ
business will result in getting
rich quickly. " There's a huge
misconception that the marijuana
business is a license to print money, "
Alovisetti said. " Marijuana is as
challenging a business as there is. "
- John Rebchook
April 2021 | mjbizdaily.com 59
http://www.mjbizdaily.com

MJBizMag April 2021

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