ABSTRACT
Together with financing, access to real estate – either by lease or acquisition – is the threshold issue facing cannabis operators and a significant hurdle in establishing a successful venture in the space. It can be exceptionally difficult to find a suitable location for a cannabis (and sometimes hemp) business given the plethora of zoning restrictions, building code classifications, and restrictive covenants impacting cannabis businesses. Once an operator finds an area or a building that meets regulatory requirements, negotiating favorable terms with landlords is the next test, as expectations frequently fail to align. Landlords, particularly those new to cannabis, are often skittish of cannabis tenants and attempt to mitigate perceived risk with above-market rents and guarantees. Of potential impact to both parties, tenants and buyers frequently overextend on lease or acquisition price or fail to build in an adequate cushion to obtain full licensing, leading to risk of default on a lease or seller leaseback instrument. Finally, it can be difficult to move a cannabis business’s location. Typically, regulatory approval is required to change the location of a licensed premise, and new locations are often in short supply.
