Retail Cannabis Zoned Mixed Use - What are the financing options?

[Michael Bramante]

Hello Biggerpockets,

I write this post in hopes that there is someone out there that can help point me in the right direction. While this topic is still pretty new in the whole financing and real estate world since it’s still a brand new budding industry 😆; I would love if someone has any suggestions.

Recently I have been very interested in properties that have the ability for use in the new cannabis industry since the potential upside is immense. After examining current retail options, cannabis seems to be the one industry that can combat online sales and Covid business downfalls. Cannabis can only be purchased in a brick and mortar location, therefore it is protected from online businesses. The cannabis industry is still in such an early phase and therefore none of the big nation wide brands have entered the space. I strongly believe that in 4-8 years when Cannabis is finally federally legal, the large brands like Marlboro, Anheuser-Busch, or Heineken will enter the space and then cannabis real estate, licensing, and businesses will be bought out for big money.

 As my obsessions with finding real estate that fits this business model ripened, I came across a mixed use property with the ability to obtain a special permit for retail cannabis sales. The property consists of 2 residential units and one commercial unit; the residential units are being rented for $1750 and $1225; the commercial unit is vacant. I have talked to a lawyer who specializes in cannabis licensing and can acquire licensing and special permit for the property for $32,000 + $10,000 licensing fee. 

I have two options for the property:

1. Take out a business loan and operate the property

2. Sell off license (which is transferable) for $500,000+ and rent property to new tenants

I am stuck on finding a suitable financing option for the initial acquisition of the property. To my understanding, bank financing is out of the question because of the standard clause about agreeing to no practices that are federally illegal. Therefore my thinking is to go to a cannabis friendly lender or hard money. Will hard money lenders lend on a property of this nature or will most of them be out of the question as well? 

Lender options:

1. Are there any cannabis friendly lending banks?

2. Will hard money lenders lend on a “green” business?

3. Will hard money lenders lend to a property for the extent of acquiring licensing, even if its in the cannabis industry?

4. Can this property be purchased with a standard 80% LTV commercial loan at hard money 5-9% rates; or is this strictly a cannabis only lender?

Please, any help in this matter is greatly appreciated!!!