Marijuana Business Magazine July 2018

requirements, such as not being too close to a park, school or day-care facil- ity, he said. Cannabis entrepreneur Fox said: “I don’t like to throw away money, and you are throwing away money if you are paying rent before you are even 100% certain you are going to open.” Find Vacant or Distressed Properties Location will play a large role in finding a suitable property that won’t require upfront rent. “The key for us is that we would find property that is not in high demand,” Fox said. Those properties can be in a city where many buildings suffer from a high vacancy rate because of low tenant demand. Fox said that was the case in all the properties he took over.The lack of demand meant the properties either were vacant or the tenants were on a month-to-month lease. However, free rent isn’t without risk. For the Illinois property, Fox had a “first right of refusal” clause in his letter of intent to lease the building.That meant if another business was willing to rent the space for the same amount of money during the waiting period, Fox would have to decide whether to match the offer or walk away. “Luckily, no one else came along, so I didn’t have to make the decision,” Fox said. He wasn’t surprised that no competing offer for the space surfaced, because there wasn’t much leasing activ- ity in the area. Get Professional Help Fox interviewed 25 commercial real estate brokers in 2016, when he was entering the Ohio medical marijuana market, before he found the right fit. The broker he chose was eager to carve FACE TIME AND OTHER SWEETENERS S ayyou’ve identified the perfect building for your marijuana dispensary or other business, but you don’t want to pay rent until your license is approved, a process that can take months. One way to improve the odds of getting a landlord to agree to your terms is to have a face-to-face meeting. Apersonal meeting can convince a landlord that youwill be a trustworthy, long-term ten- ant at the helm of a business that will gener- ate enough revenue to pay what typically is an above-market rent, according to Daniel Shortt, an attorney with the Seattle office of Harris Bricken. Presenting a business plan that includes the backgrounds and financial strength of your partners, sales projections and brand recognition of your product can help convince a landlord to work with you on a free-rent period, Shortt said. “The landlord wants to make money and knows that he can charge youmore than a typical tenant,” Shortt said. “But he also knows that he is taking more risk.” Property owners take a bigger risk with a marijuana ten- ant because the drug remains illegal at the federal level. That can make a property with a marijuana business more vulnerable to seizure by authorities. Meeting a landlord in person can provide dividends that transcend dollars and cents, he added. “The benefits of meeting a landlord in person can go beyond just themoney,” Shortt said. “You can’t really put your finger on it, but anything you can do to make the landlord comfortable is helpful in convincing him to want you as a tenant.” But, he noted, renters probably will not be able to meet the landlord in person if the property is owned by an out-of-state real estate company or investor group. Anotherway tomake the landlordwant to lease to you and consider a concession such as a period of free rent is to look at the deal through the eyes of the landlord, according to Shortt. “Realize that the lease is not a ‘one and done’ deal,” said Shortt, who has represented MJ clients leasing space, as well as landlords leasing buildings to cannabis businesses. “Really, it is part of a long-term relationship. Youmight have a list of concessions youwant (such as free rent until you get your license) and consider what you can offer the landlord in return.” For example, you might agree to foot the bill for tenant improvements in exchange for a period of free rent. But be aware that a landlordmight not see improvements to the building as a reason to cut you a deal with free rent. “Some tenant improvements are only great for a specific tenant, and if that tenant leaves, it can be a cost to the landlord who has to remove them,” Shortt said. However, upgrades to the electrical and heating and cooling systems typically will be important to all types of businesses, possibly making a landlord more amenable to concessions. – John Rebchook Daniel Shortt, an attorney with Harris Bricken’s Seattle office, says marijuana business owners have a number of options to defray rental costs while waiting for license approval. Photo courtesy of Harris Bricken