Real Estate Marijuana Financing - Equity
I am working with an established and profitable MJ retailer and cultivator (licenses in same state), net profit aprx. $0.5mm last year. They desire to open two new retail locations in their primary market this year - one BTS ($2.5mm), the other a renovation of an existing building ($1.2mm). These deals will likely need to be financed 100% cash/equity. Do you guy know of any capital lenders out there that finance MJ deals? I have been going the friends and family route up to this point. The firms I have seen offering MJ financing lend at aprx. 12.0% - this basically wipes out the deal returns. All that could change if debt financing becomes available for the MJ properties but who knows if/when that might be. 
[{"id": "efj7mho", "text": "Most US-based institutions are hesitant to lend on cannabis-related ventures, especially after the [rescission of the Cole memo](https://www.banklawmonitor.com/2018/02/update-doj-rescinds-the-cole-memo-fincen-guidance-still-in-effect-for-now/). \n\nMany property owners I work with are concerned that if they lease to a cannabis-related venture the DOJ may take their property through civil asset forfeiture even if the venture operates within the laws of local jurisdictions.\n\nThis risk is why you're seeing higher rates (you mentioned 12%). \n\nThat said, some non-US institutions or smaller local institutions will consider lending on cannabis-related transactions. Furthermore, if the cannabis tenant is one of many tenants, it may be easier for a larger institution to overlook the tenant.\n\nI recommend finding a commercial mortgage broker that operates in your area and has experience finding financing for cannabis related ventures.\n\nI hope that helps. Good luck.", "replies": [{"id": "efji8u0", "text": "We have a couple of loans on properties with MJ Tenants - so far no issues with the bank (3 years in). I did reach out to a mort. broker in Las Vegas. After two weeks he got back to me - 12.0% interest.. so back to the drawing board. Thanks for the feedback.", "replies": [{"id": "efvklcp", "text": "I have seen lenders in the high single digits, so you should be able to beat 12%.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "efjat3l", "text": "*Danger Will Robinson*\n\nInstitutional investors won't touch anything related to marijuana; it's still illegal on a national level, and those lenders don't want to risk actual jail time. \n\n12% is criminal, but shows you how they see the MJ market.\n\nAlso, keep in mind that with BTS, you're going to be holding the asset for a while. MJ shops aren't super resilient, competition can wipe them out quickly. And if MJ goes legal nationwide, you can expect much bigger players to immediately enter the market, which could leave you with a half-depreciated retail building which many potential tenants may be hesitant to rent due to the past use.\n\n", "replies": [{"id": "efjhxv8", "text": "Thanks for the feedback and agree that a wave of consolidation will hit the market if MJ goes legal on the federal level. We like these guys because they are business people first, the Co is the market leader (4 locations in the state), are vertically integrated (so fatter margins on retail vs. competitors), and the lease is secured by the parent Co (which is now expanding into Canada through JV's). Also, I agree that federally legal will mean more competition. We are looking at this as an opportunity as the Co would likely be an acquisition target and at that point we could (hopefully) assume a bank loan on the properties if it all goes federally legal.\n\nSounds like private wealthy individuals / trusts are still the best bet for fund raising. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "efjyet6", "text": "What state are you in?  12% hard money is steep, even for here.  I work with a gentleman that does hard money deals and they range from 8-10%.  There is another lender out of PNW called [Canna Financial](https://www.cannafinancialgroup.com/) that may have what you are looking for.", "replies": [{"id": "efjzhx9", "text": "Thanks. I'll check them out - these deals are located in the PNW region so might be a good fit for Canna. ", "replies": [], "depth": 2}], "depth": 1}, {"id": "efvjmpp", "text": "I just closed at 8.50% 30 year fixed, fully amortized and no prepay on a property with a dispensary as a tenant. Marijuana financing exists but 100% financing isn\u2019t realistic to expect unless they have other properties to collateralize ", "replies": [{"id": "efwce4c", "text": "Interesting. Would you be willing to pass along the name of the lender?", "replies": [{"id": "efwcyvt", "text": "Not unless we had a fee agreement signed", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eg1hphs", "text": "I know of loan products available for working capital and for property purchase financing for cannabis business operators.", "replies": [], "depth": 1}]