Ron Strider
Well-Known Member
There's a quiet fight raging for property right now among businesspeople aspiring for a piece of Ohio's nascent medical marijuana industry.
And that battle for real estate is acutely felt in the Northeast Ohio market, a region that will be called home by up to 18 of the state's initial 60 dispensaries, or 30% of that business.
The window to submit applications for a dispensary license opened Nov. 3, but closes on Nov. 17. The most proactive entrepreneurs – who are also the most likely to get a permit – have been searching for locations to operate a potential business for many months or more.
And while it's unclear how many will ultimately apply for a dispensary license, that business has lower barriers to entry and the most permits up for grabs versus the cultivating or processing operations, which all together comprise the three state-regulated marijuana businesses.
"It's a sprint," said Kevin Yates, a principal with Cleveland's Allegro Realty Advisors. "The (draft) applications came out not that long ago. And in the intermediary period, people are trying to lock up as many locations as they want to apply for."
Like Yates, many brokers are hearing from businesspeople in this market and across the country searching for a place to do business as showing that a site is secured – and that you have support from the local government – is a small yet critical part of the system the state uses to determine which applicants gets licensed.
"The best groups right now are continuing to work. They didn't just submit and let it sit," said Kevin Patrick Murphy, a Cleveland lawyer with Walter | Haverfield who works with aspiring and existing marijuana businesses. "They're continuing to finalize construction plans and form relationships with real estate folks who can facilitate that."
Startup costs aside, finding a location for a dispensary presents some challenges unique from doing the same for a facility to grow or process marijuana. Businesses are statutorily required to be 500 feet away from facilities like schools, churches, libraries, daycares and parks. However, that's less of an issue for cultivators and processors, who aren't consumer-facing and can locate in more rural areas.
Up to five of the state's 11 initial Level II cultivators – the significantly smaller of the two grow operations, with Level I cultivators working in spaces with up to 25,000 square feet versus the 3,000-square-foot cap for Level II – of medical marijuana will operate in Northeast Ohio, according to the Ohio Department of Commerce. There can be up to 24 cultivators licensed in Ohio ahead of the medical program that launches next September, 12 in each level.
Level I cultivation licenses will be announced in the coming weeks, but it's worth noting that none are getting close to Cleveland proper.
Akron, Canton, Oberlin and Ravenna each will have at least one of the Level II cultivation facilities. A second could go in Akron or Canton, depending on which site applicant Fire Rock Ltd. moves forward with (they were provisionally licensed at three sites but can only operate one).
The cultivation facility slated for Ravenna is in a somewhat wooded area just south of the Portage County Airport that wouldn't typically see much through traffic. Dispensaries, though, want to be near highways, hospitals and public transportation and in highly visible retail areas.
"It's definitely more challenging for dispensaries," said Eric Senders, co-founder of Beachwood-based Cannabis Design Services, a consulting business spun out of iGrow Induction Lighting, which focuses on lighting for indoor cannabis grow houses. "Cultivators and processors are more like manufacturers, they lend themselves to development and industrial zones. These aren't walk-in businesses."
On the dispensary front, aspiring businesspeople are flocking toward Northeast Ohio because it has some of the most permits to go around. Numbers are based largely on population density – Cuyahoga County, for example, is tied with Columbus' Franklin County with the most possible dispensary licenses up for grabs at five.
Cities vary widely on their own local rules dealing with marijuana businesses, though, complicating the search for real estate.
Location, location
While the local rules may feel like more red tape, they're actually somewhat helpful in streamlining the process of finding property, Murphy said. But every city is different.
Cleveland recently lifted a moratorium on marijuana but added other restrictions on where businesses can locate on top of the state's 500-feet requirements. Marijuana businesses can only operate in Cleveland proper in areas zoned for general retail or some industrial uses, and the consensus is that leaves just 5% of the city as suitable for a dispensary, consultants say.
Then there's Akron, which replaced a moratorium with a local licensing program. Local license fees are $250 for a provisional license, then $2,500 for the annual operating license. That's on top of the nonrefundable $5,000 fee just to apply for a dispensary license from the state, $70,000 for a biennial certificate of operation and $250,000 an applicant needs to show in liquid assets.
In Euclid – a city many see as a more "friendly" city to the marijuana industry – there was never a moratorium in place. In the spring, Euclid City Council created a veritable "marijuana district" by adopting zoning rules making marijuana cultivation and processing a permitted use in the city's industrial corridor, which runs just south of Interstate 90 between Euclid Avenue and the highway. Dispensaries will be approved on a case-by-case basis, said Euclid planning director Jonathan Holody.
Effectively opening up the city for marijuana businesses was motivated by interest in having some kind of operation there. City officials didn't add any other local rules or licensing costs beyond what the state imposes.
"We saw how heavily regulated the industry would be, which gave our leaders a level of comfort," Holody said.
Lakewood, meanwhile, is less interested in landing a cultivator or processor because the densely populated city has almost nowhere they could go that meets the perimeter requirements. However, the city passed rules for dispensaries that require paying $25,000 a year for an annual license plus 1.5% of sales over $1.25 million.
Those are easily the highest local costs in Northeast Ohio – and maybe even the country.
Lakewood Mayor Michael Summers acknowledged this, but said aspiring dispensaries "didn't even blink" at those costs.
"I was listening carefully to the financial expectations from companies investing in these business ... there is anticipation of a lot of money coming their way," Summers said.
He added that it's unclear what might be required of the city in terms of local resources that may be needed for something like security.
"We will have to put up some municipal resources to make sure everything works well," he said.
In a city that will already be tough to find real estate, and despite adding those extra costs, Summers said Lakewood has three applications from Ohio-based companies to operate retail shops: one on Detroit Avenue on the western border; one in the middle of the city near the intersection of Madison Avenue and Lewis Drive; and one near the intersection of Madison Avenue and Newman Avenue on the east side.
Besides a chance to add revenue for local governments, the marijuana movement also benefits landowners.
In areas where many applicants are fighting over one space, not only are costs going up for the property itself – something Murphy has dubbed the "marijuana tax" – but applicants are paying big to have those locations taken off the market, signing contracts with options to take over the property if they're awarded a license. Many are paying as much as full rent to hold on to a property for months at a time until they know if they were awarded a permit.
Asking to have those properties off the market for so long is unusual, Yates said, and is benefiting landlords who are charging a premium.
"They can charge well in excess of market rent or even in some cases percentage rent to be able to rent or lease," Murphy said, "and you're paying for the privilege for that option on the property for up to seven months."
And then there are the challenges of financing. Banks are leery of working with any marijuana-related business because of federal laws. That means applicants typically need private financing or investors.
While running a retail shop for medical marijuana may seem like the easier business to get in to compared with growing or processing the plant, the real estate factor is creating some unique hurdles.
"When it comes to finding a space," Senders said, "it's definitely been a challenge for people."
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Budding marijuana biz faces realty hurdles | Crain's Cleveland Business
Author: JEREMY NOBILE
Contact: Contact Us - Crain's Cleveland Business
Photo Credit: Ron Strider
Website: Crain's Cleveland Business
And that battle for real estate is acutely felt in the Northeast Ohio market, a region that will be called home by up to 18 of the state's initial 60 dispensaries, or 30% of that business.
The window to submit applications for a dispensary license opened Nov. 3, but closes on Nov. 17. The most proactive entrepreneurs – who are also the most likely to get a permit – have been searching for locations to operate a potential business for many months or more.
And while it's unclear how many will ultimately apply for a dispensary license, that business has lower barriers to entry and the most permits up for grabs versus the cultivating or processing operations, which all together comprise the three state-regulated marijuana businesses.
"It's a sprint," said Kevin Yates, a principal with Cleveland's Allegro Realty Advisors. "The (draft) applications came out not that long ago. And in the intermediary period, people are trying to lock up as many locations as they want to apply for."
Like Yates, many brokers are hearing from businesspeople in this market and across the country searching for a place to do business as showing that a site is secured – and that you have support from the local government – is a small yet critical part of the system the state uses to determine which applicants gets licensed.
"The best groups right now are continuing to work. They didn't just submit and let it sit," said Kevin Patrick Murphy, a Cleveland lawyer with Walter | Haverfield who works with aspiring and existing marijuana businesses. "They're continuing to finalize construction plans and form relationships with real estate folks who can facilitate that."
Startup costs aside, finding a location for a dispensary presents some challenges unique from doing the same for a facility to grow or process marijuana. Businesses are statutorily required to be 500 feet away from facilities like schools, churches, libraries, daycares and parks. However, that's less of an issue for cultivators and processors, who aren't consumer-facing and can locate in more rural areas.
Up to five of the state's 11 initial Level II cultivators – the significantly smaller of the two grow operations, with Level I cultivators working in spaces with up to 25,000 square feet versus the 3,000-square-foot cap for Level II – of medical marijuana will operate in Northeast Ohio, according to the Ohio Department of Commerce. There can be up to 24 cultivators licensed in Ohio ahead of the medical program that launches next September, 12 in each level.
Level I cultivation licenses will be announced in the coming weeks, but it's worth noting that none are getting close to Cleveland proper.
Akron, Canton, Oberlin and Ravenna each will have at least one of the Level II cultivation facilities. A second could go in Akron or Canton, depending on which site applicant Fire Rock Ltd. moves forward with (they were provisionally licensed at three sites but can only operate one).
The cultivation facility slated for Ravenna is in a somewhat wooded area just south of the Portage County Airport that wouldn't typically see much through traffic. Dispensaries, though, want to be near highways, hospitals and public transportation and in highly visible retail areas.
"It's definitely more challenging for dispensaries," said Eric Senders, co-founder of Beachwood-based Cannabis Design Services, a consulting business spun out of iGrow Induction Lighting, which focuses on lighting for indoor cannabis grow houses. "Cultivators and processors are more like manufacturers, they lend themselves to development and industrial zones. These aren't walk-in businesses."
On the dispensary front, aspiring businesspeople are flocking toward Northeast Ohio because it has some of the most permits to go around. Numbers are based largely on population density – Cuyahoga County, for example, is tied with Columbus' Franklin County with the most possible dispensary licenses up for grabs at five.
Cities vary widely on their own local rules dealing with marijuana businesses, though, complicating the search for real estate.
Location, location
While the local rules may feel like more red tape, they're actually somewhat helpful in streamlining the process of finding property, Murphy said. But every city is different.
Cleveland recently lifted a moratorium on marijuana but added other restrictions on where businesses can locate on top of the state's 500-feet requirements. Marijuana businesses can only operate in Cleveland proper in areas zoned for general retail or some industrial uses, and the consensus is that leaves just 5% of the city as suitable for a dispensary, consultants say.
Then there's Akron, which replaced a moratorium with a local licensing program. Local license fees are $250 for a provisional license, then $2,500 for the annual operating license. That's on top of the nonrefundable $5,000 fee just to apply for a dispensary license from the state, $70,000 for a biennial certificate of operation and $250,000 an applicant needs to show in liquid assets.
In Euclid – a city many see as a more "friendly" city to the marijuana industry – there was never a moratorium in place. In the spring, Euclid City Council created a veritable "marijuana district" by adopting zoning rules making marijuana cultivation and processing a permitted use in the city's industrial corridor, which runs just south of Interstate 90 between Euclid Avenue and the highway. Dispensaries will be approved on a case-by-case basis, said Euclid planning director Jonathan Holody.
Effectively opening up the city for marijuana businesses was motivated by interest in having some kind of operation there. City officials didn't add any other local rules or licensing costs beyond what the state imposes.
"We saw how heavily regulated the industry would be, which gave our leaders a level of comfort," Holody said.
Lakewood, meanwhile, is less interested in landing a cultivator or processor because the densely populated city has almost nowhere they could go that meets the perimeter requirements. However, the city passed rules for dispensaries that require paying $25,000 a year for an annual license plus 1.5% of sales over $1.25 million.
Those are easily the highest local costs in Northeast Ohio – and maybe even the country.
Lakewood Mayor Michael Summers acknowledged this, but said aspiring dispensaries "didn't even blink" at those costs.
"I was listening carefully to the financial expectations from companies investing in these business ... there is anticipation of a lot of money coming their way," Summers said.
He added that it's unclear what might be required of the city in terms of local resources that may be needed for something like security.
"We will have to put up some municipal resources to make sure everything works well," he said.
In a city that will already be tough to find real estate, and despite adding those extra costs, Summers said Lakewood has three applications from Ohio-based companies to operate retail shops: one on Detroit Avenue on the western border; one in the middle of the city near the intersection of Madison Avenue and Lewis Drive; and one near the intersection of Madison Avenue and Newman Avenue on the east side.
Besides a chance to add revenue for local governments, the marijuana movement also benefits landowners.
In areas where many applicants are fighting over one space, not only are costs going up for the property itself – something Murphy has dubbed the "marijuana tax" – but applicants are paying big to have those locations taken off the market, signing contracts with options to take over the property if they're awarded a license. Many are paying as much as full rent to hold on to a property for months at a time until they know if they were awarded a permit.
Asking to have those properties off the market for so long is unusual, Yates said, and is benefiting landlords who are charging a premium.
"They can charge well in excess of market rent or even in some cases percentage rent to be able to rent or lease," Murphy said, "and you're paying for the privilege for that option on the property for up to seven months."
And then there are the challenges of financing. Banks are leery of working with any marijuana-related business because of federal laws. That means applicants typically need private financing or investors.
While running a retail shop for medical marijuana may seem like the easier business to get in to compared with growing or processing the plant, the real estate factor is creating some unique hurdles.
"When it comes to finding a space," Senders said, "it's definitely been a challenge for people."
News Moderator: Ron Strider 420 MAGAZINE ®
Full Article: Budding marijuana biz faces realty hurdles | Crain's Cleveland Business
Author: JEREMY NOBILE
Contact: Contact Us - Crain's Cleveland Business
Photo Credit: Ron Strider
Website: Crain's Cleveland Business
