Moye White partner Garrett Graff and associate Bobby Dishell recently published an article with LexisNexis Practical Guidance that provides guidance for real property owners as cannabis continues to become legalized in more states. Graff and Dishell examine the areas of caution that real property owners will need to pay close attention to when working with cannabis businesses, including but not limited to insurance coverage, mortgage cross-defaults, and security issues.
In addition to outlining the expansive areas of risk cannabis offers to property owners, Graff and Dishell also provide a look into what opportunities the cannabis business has to offer, and how to mitigate the risk taken by real property owners.
An excerpt from the article is below.
To offset the risks, many real property owners are able to get a higher price per square foot in rent. For real property owners who are not risk averse, this rental premium could present a great opportunity for additional revenue. Separately, real property owners should pay close attention to how licenses work in their jurisdictions. For example, in Colorado, the license is tied to the land. While licenses can be transferred, such transfers are not always easy. Having a valid license and lease in place can substantially increase the value of a property. Moreover, some jurisdictions will only issue a certain number of licenses, meaning if the license is tied to your land and there are no more licenses to be awarded, the value proposition for having a cannabis tenant has substantially increased. Accordingly, some cannabis entrepreneurs and established companies are willing to pay well over market on a square foot basis in order to have the right to the property with a cannabis license. If you are in a multitenant space, a cannabis retail business can also substantially increase foot traffic.
Please visit LexisNexis Practical Guidance to read the full article.
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