MJBizMag August 2020 - 72

The COVID-19 pandemic could
create opportunities for cannabis
operators to buy or lease real estate at
discounted prices compared to just a
year ago, experts say. But while some
businesses are looking for deals,
others are just hoping for a lifeline to
continue operating. Here are some
considerations for how the economic
downturn could impact the cannabis
real estate market:
* Some landlords are providing rental
payment deferment and, in some
cases, rent forgiveness for tenants
struggling amid the pandemic.
* Operators that are unable to make
rent and are forced to close might
be able to terminate their leases
through force majeure clauses or
other conditions detailed in their
rental agreements.
M
* Buyers might find that real estate
opportunities vary even within the
same geographical area because
of differences in zoning regulations,
taxes and economic incentives.
Experts recommend working with a
broker and shopping around.
any cannabis companies are
eager to take advantage of
any dip in commercial real
estate prices that accompany economic
downturns.
Amid the coronavirus-induced
recession, some marijuana businesses are
hoping to pick up assets and properties
from rivals and mainstream companies
that scale back or close shop altogether.
Others hope landlords will slash rents
to fill vacancies or avoid losing existing
cannabis tenants.
Marijuana companies that want to
acquire properties from distressed
businesses should be prepared to
identify and capitalize on opportunities,
experts say. Meanwhile, those cannabis
businesses that need relief in rent or that
hope to use their own properties to bring
in cash should consider the legal and
debt implications.
" You see many landlords
currently providing rental payment deferment-perhaps
even, in some cases,
forgiveness options, " said Garrett Graff,
managing attorney at Denver-based
Hoban Law Group.
" There's a lot of flexibility being
extended throughout the cannabis
industry in general, and that includes
within landlord-tenant relationships.
At some point down the road, as a
derivative impact of the pandemic, we
will see companies that are unable to
continue operating, and that will free up
additional real estate to be purchased, "
Graff said.
On the national level, industrial rent
prices were up nearly 9% year-over-year
to an average of $6.30 per
square foot at the close of
the first quarter of 2020,
according to the most
recently available data
from Chicago-based JLL.
The commercial real estate
firm shows a 4% increase
in office prices from the
first quarter of 2019 to the
70 Marijuana Business Magazine | August 2020
* Using a slower, phased approach
might make economic sense for
building cannabis businesses
going forward.
* Those looking to finance
real estate purchases through
sale-leaseback transactions
should consider their options
and review the terms carefully.
first quarter of 2020. JLL does not break
out the data for the cannabis industry,
but costs rose in established marijuana
metro areas such as Denver, Los Angeles
and Portland, Oregon.
BETTER SHOP AROUND
" A lot of the calls that I'm
Paula Turner
getting are from companies
that are looking for businesses
that have failed and want
to take advantage of those
opportunities, " said Paula
Turner, broker and co-owner
at Desert Pacific Properties.
Deals
Real
MJBizMag August 2020

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