Marijuana Dispensary Rentals - Marijuana Friendly Landlords

[Neil Da Silva]

Hey BP,

This is a Toronto specific question!

In Toronto, Marijuana dispensaries are opening and closing monthly, the businesses are operating in a "grey area" of the law until marijuana is federally leagalize in July of 2018. I have a few business associates who own some dispensaries and they tell me that the biggest struggle they face when opening and operating a Dispensary in Toronto, Canada is finding a "Marijuana Dispendary" friendly landlord to lease from.

Often terms are as follows, in addition to first and last months rent the lessees pay a deposit of anywhere between 3-5 months of rent. Here in downtown Toronto a good location will have an average monthly rent of $9-12k . Lets say the deposit is $30-50k. Should the lessees leave on their own accord, i.e. if the police shut them down, or business isn't good, the landlord keeps the deposit. Should the landlord decide to terminate then the deposit is returned.

As there is a "Green Rush" with marijuana here in Toronto, I am very intrigued by the real estate aspect of this.

My questions are as follows:

1. What is the downside to the landlord in the event the dispensary closes up shop? They get to keep the deposit and then rent to someone else, seems good to me.

2. In the event the police shut down the dispensary what are worst case scenarios for the landlord? I.e. mortgage holder could terminate loan?

3. What other ways could you persuade landlords to rent to dispensaries as many are scared of the stigma that comes with as well as the legal ramifications?

4. What kind of specifics should landlords put in their leases to dispenaries to protect both them and the lessee?

Thanks for you input guys!

- Neil

[Oren K.]

Neil,

My family owns some commercial in a prime location and we have been approached many many times in the past 2+ years regarding a dispensary. Leaving the current vs future legalities aside, the point that @Claude Boiron  made regarding 'unsavory' use is near / at the top of our list for not considering allowing one at the property.

As a landlord you should consider the tenant mix. For example, and being extreme, imagine if you had a day care center or after school tutoring school in a unit. Gaining a dispensary tenant may mean loosing another tenant. Also if you have class 'A' tenant (e.g. Starbucks), they may not want the association and take the first opportunity to move.

Oren