Commercial Real Estate Investors Bullish On Cannabis

With the United States cannabis industry growing at an alarming rate and showing high returns, cannabis real estate investing is not a bandwagon idea anymore. Investors are increasingly recognizing the potential of cannabis-related properties as a lucrative opportunity, particularly as legalization spreads across various states. This burgeoning sector is poised to be part of the coming nuclear revolution in real estate, dramatically changing the landscape and attracting significant capital. With the right strategies, savvy investors can capitalize on this evolving market and reap the rewards of their foresight. This lucrative market has attracted a myriad of investors ranging from seasoned professionals to newcomers eager to capitalize on the trend. However, with this rapid expansion comes significant hurdles, leaving real estate agents facing industry challenges that require innovative strategies and a deep understanding of the legal landscape. Navigating the complexities of zoning laws and compliance regulations can be daunting, but for those willing to put in the effort, the potential rewards are substantial.

Quoting Patricia Kirk of Wealth Management:

The past few years have brought cannabis legalization to multiple states, giving real estate investors a new alternative asset class to put their money into. It looks like this trend is only going to intensify in the months ahead.

As we get further into 2022, all U.S. states without current medical cannabis legalization are now considering legislation or ballot initiatives to legalize it. In addition, some states where medical cannabis is already legal may take the next step this year to allow adult recreational use.

“As we come out of the pandemic, states are looking at the cannabis industry long and hard as a great way to raise tax revenue,” says Eric Altstadter, a partner at the New York-based accounting firm EisnerAmper.

Twenty-one additional states may legalize cannabis use in some form this year, according to Michael Schwamm, a partner in the New York office of the law firm Duane Morris. For example, in Oklahoma, which has the largest medical marijuana industry in the nation, State Representative Scott Fetgatter has introduced legislation to legalize recreational sales. Two potential 2022 referendums have already been filed that, if passed, would establish a taxed, regulated adult-use market, says Schwamm.

Hawaii and Rhode Island also have legislation underway to legalize cannabis for adult recreational use and several states, including Arkansas, Ohio, Nebraska, Idaho, Missouri and North and South Dakota, have ballot measures pending to approve recreational use, according to Matthew Karnes, founder of Greenwave Advisors, a New York-based cannabis research and advisory firm. There is also pending legislation in Delaware and Maryland that would legalize cannabis for recreational use.

With this “green wave” growing nationwide, Altstadter says real investors are becoming more comfortable with cannabis-related properties, despite the federal government’s failure to downgrade marijuana from Schedule I drug status.

The biggest risk for cannabis real estate investors is primarily the survival chances of the underlying business in a sector that has always been very cash-constrained and subject to a very high tax rate due to section 280E of the Internal Revenue tax code, continues Schwamm. Section 280E bars any business, or portion of a business, engaged in trafficking a Schedule I or II controlled substance, such as cannabis, from using certain deductions or credits for federal tax purposes.

For this full, very in-depth story, complete with detailed statistics, see links in the news notes.