The Sinreich Group

Attorneys at Law

(212) 317-1131

The Sinreich Group is a New York City based real estate law firm that represents public and private sector clients in connection with the acquisition, development, leasing, financing, repositioning and disposition of real estate throughout the country.

In the Weed(s) Part 3

In September 2015, when we published our first In the Weed(s) post about cannabis-related real estate, medical marijuana had been legalized in ten states (plus D.C.), five of which had also legalized cannabis for recreational use. Fast forward to today, and 30 states (plus D.C.) have enacted laws legalizing marijuana. Equally important, as of October 17th, Canada became the first industrialized country to legalize recreational and medical marijuana use.

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Throughout Canada and in each U.S. jurisdiction where cannabis has been legalized, real estate is a necessary common denominator for cannabis cultivation, transformation and retail distribution. In 2017, cannabis sales topped $9B in North America and according to a recent report by Grand View Research, Inc., annual global cannabis sales are expected to reach $146B by the end of 2025.

Beware of the Feds

If you're thinking this would be a great value creation opportunity for your property, keep in mind other post-2015 changes. Earlier this year, the Department of Justice rescinded Obama administration policies creating a safe harbor against enforcement of federal marijuana laws in states that have legalized marijuana. Thus there is no longer an official federal policy that protects against criminal federal prosecution for the use, possession, cultivation and transportation of marijuana notwithstanding compliance with state law. This potential for federal prosecution extends to a wide range of cannabis-related activities, including knowingly leasing, renting, maintaining, managing or controlling a place where marijuana is grown, transformed or sold.

State Laws Provide De-Facto Shield

Notwithstanding the increased risk of federal criminal prosecution, the de-facto shield of favorable state laws has enabled cannabis-related facilities to continue to emerge from the shadows. Industrial premises used for indoor cultivation and transformation are seemingly as state-of-the art as those found in the more traditional, similarly highly regulated pharma industry. Retail dispensaries are no longer relegated to dilapidated buildings in fringe locations.

Minimize Risk

To strike the right balance between the enormous opportunities this industry represents for landlords and tenants and the risks of owning, leasing and occupying cannabis-related real estate, a collaborative landlord/tenant approach to strict regulatory compliance and conflicting real estate needs is key. That way, neither party gets stuck with the whole bill but none of the benefits.

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