“The grass ain’t greener, the wine ain’t sweeter, either side of the hill,” as Jerry Garcia sang.
If you would have told me when I started in the real estate capital markets industry that I would be financing a cannabis building, I would have asked you what you were smoking. But, here we are. There is a cloud over the industry because marijuana is still a Schedule I drug on the federal level—the same classification as heroin or cocaine—but it is approved for either recreational or medical use in 33 states. Due to the federal ban, federally chartered banks cannot even consider a loan in the industry. But, where there is a need, there is opportunity for lenders and investors alike. Last month, I financed a recently built 60,000-square-foot greenhouse and warehouse in Eastlake, Ohio, a state where cannabis is only licensed for medical use. The lender was able to achieve a 9.75 percent annual coupon (plus origination and exit fees) on a building that was well secured. It came with a corporate guarantee and the knowledge that the building would have only a 70 percent loan-to-value ratio as an alternate use (cold storage), even in the unlikely event that the cannabis laws got reversed and the drug became decisively illegal in every state. We also had several