NEW YORK (MainStreet) MJ Holdings (MJNE) is aggressively seeking to acquire real estate in Washington state for the purpose of leasing to regulated marijuana-related businesses. The Florida-based penny stock company plans to ante up $100 million towards warehouses for growing and small retail properties to serve as dispensaries.
"There is a demonstrated urgency in Washington for capital support for the real estate component of this industry and a call for mature seasoned financial investors to provide leadership experience and help marijuana businesses establish themselves," said Shawn Chemtov, co-chairman of MJ Holdings.
But since the state of Washington has limited to 2 million square feet the total amount of land allotted to grow cannabis, MJ Holdings is in a hurry.
"There is urgency to control the grow space," said Adam Laufer, co-CEO of MJ Holdings in Miami. "You need space available to grow and those with a first mover advantage will benefit in the long run."
Some 700,000 square feet is already taken and currently in operation and cannabis real estate investments in Washington are restricted to free standing buildings because bank mortgages in general do not allow marijuana tenants since marijuana is still illegal under federal law.
"It is likely that that the landlord's loan will be called by the bank if and when it is discovered that they have a marijuana tenant on the rent roll," said Laufer.
This limitation, however, is viewed as an opportunity by MJ Holdings.
"If MJ Holdings owns the building, tenants no longer need worry about a traditional landlord," Laufer told MainStreet. "As a landlord with its own financing, we allow the operator to focus on their business without worrying about a succession plan or contingencies should they get evicted."
MJ Holdings is no stranger to acquiring real estate for marijuana purposes. The firm recently acquired a 22,000 square foot industrial building on Joliet Avenue in Denver. It has solar panels and 18 foot ceilings on 1.4 acres but not enough electrical power.
"Currently we're upgrading the building's power," Laufer said. "Ideally, you want to buy a building that has enough power since growing marijuana is electricity intensive but in most buildings that just is not the case unless the previous owner or tenant was a grower or had a power intensive business."
Like in Colorado, certain counties have banned marijuana businesses in Washington despite state wide legalization of recreational use. They include Yakima and Clark. "Marijuana is illegal federally state so these counties say they are following federal law by imposing a ban," said Brian Smith, spokesperson for the state of Washington's Liquor Control Board.
Washington's county bans are based on State Attorney General Bob Ferguson's opinion posted on his website, which states the fact that the law doesn't prevent counties from banning.
"A group in Yakima approached us; however, we have turned them down," said Laufer. "We were informed that the city limit is the only area where cultivation is allowed."
MJ Holdings sees banning as an opportunity as well.
"If there are fewer counties and municipalities allowing marijuana, that means there are fewer buildings where growers can operate, which drives up the cost of available buildings and makes our financing products a necessity," said Laufer.
--Written by Juliette Fairley for MainStreet