Marijuana Licenses in Michigan
CategoriesCannabis

Transitioning from Medical to Recreational Marijuana Licenses in Michigan

In the past two years, Michigan’s Marijuana Regulatory Agency and its predecessor has licensed numerous marijuana facilities under the Medical Marihuana Facilities Licensing Act, or MMFLA. Under the MMFLA, a licensed dispensary—often referred to as a “provisioning center”—can only sell to Michigan medical marijuana card holders.  Similarly, a licensed grower or processor can only sell to an MMFLA licensed entity. However, with Michigan voters passing the Michigan Regulation and Taxation of Marihuana Act, or MRTMA, in November 2018, Michigan now allows the sale of marijuana to any adult aged 21 and up and is currently licensing marijuana facilities under the MRTMA.

The passage and rollout of the MRTMA has many Michigan MMFLA licensees wondering how they can transition to the recreational marijuana market. First off, it should be noted that for most MRTMA licenses, the owners first have to have a MMFLA license. There are exceptions to this requirement, however, the most important ones being the MRTMA microbusiness license, which allows for small scale vertical integration, and the Class A Grower license, which allows for the growing of 100 plants under the MRTMA. This rule also doesn’t apply to Designated Consumption Area licenses and event licenses

Making the Transition

Putting these exceptions aside, let’s assume that you have an operating MMFLA Class A, B or C growers license, processor license, provisioning center license, safety testing license or secure transport license. How and when does your MMFLA licensee transition to an equivalent MRTMA license?

Until December 6th, 2021, only those who first obtain an MMFLA license are eligible for an MRTMA license, except as noted above. In this way, the MMFLA acts as a sort of “gatekeeper” to most of Michigan’s recreational cannabis licenses.

Now, assuming you are an operating MMFLA licensee, and your municipality has opted in under the MRTMA, or in some cases failed to opt out (more on this later), your company would be eligible to apply for an MRTMA license. The MRTMA application process is somewhat similar to the MMFLA, and MRTMA license applications for MMFLA licensees are expeditated and can pass the prequalification step in as little as a week. However, only step one of the application process is expediated, and step 2 remains the same whether the entity already has a medical license or not. Thus, an applicant with an operational medical facility would still need to complete the recreational attestations A through F and submit a social equity plan, though this is a lot easier than some would lead you to believe. 

Updated information regarding any change in the entity’s ownership interests, contact information or tax liability must be updated with the MMFLA licensing section prior to applying for a recreational application. This includes bank accounts being opened in the name of the entity and property owned or leased by the entity, even though the MRTMA does not require an entity or its supplemental applicants provide 12 months of financial statements as required under the MMFLA.

Contrary to many of the rumors I’ve heard in the industry, there is no requirement for how long the entity must hold a medical license. For whatever reason, many licensees, and even a few cannabis business attorneys, seem to be under the mistaken belief that you must have held your MMFLA license for at least two years. This is likely an incorrect reading of the MRTMA statutory provision that after two years of the MRTMA program’s implementation, you are no longer required to first obtain a medical marijuana license before obtaining an MRTMA license. 

MRTMA Opt-Ins: “If a municipality hasn’t opted out, they still haven’t opted in”

There is one more misconception that may be helpful to address. You may have heard this one before, possibly even from MRA Director Andrew Brisbo himself, and that is the misconception that if a municipality hasn’t “opted out under the MRTMA, they have in effect opted in.” This was a source of confusion among many attorneys, including myself, who read the statute differently than the MRA’s previous interpretation.

However, my firm along with a couple other firms decided to put this statement to the test, and the outcome was what I had long suspected, and even told many guest at my previous speaking engagements. That is, if a municipality hasn’t opted out, that doesn’t necessarily mean you would be able to receive an MRTMA license.

As an example, let’s take the City of Detroit, which failed to opt out by the November 1st, 2019 deadline. The City did eventually opt out about two weeks past this deadline, though in the interim, our firm along with a few others submitted MRTMA licenses to MRA since we were told by MRA on several occasions that would mean our clients were eligible for a state MRTMA license. 

In turns out, this was not the case, and there are a couple of reasons why the “if they didn’t opt out, they’ve opted in” argument failed. First, the MRTMA license application requires a municipal certificate of occupancy in order to issue a MRTMA license, and you would be unlikely to get a certificate of occupancy if a municipality hasn’t passed an MRTMA opt in ordinance.

However, let’s assume you are a medical marijuana facility that already has a certificate of occupancy. In fact, our clients in Detroit all had certificates of occupancy and were operating as MMFLA licensed provisioning centers. This leads to the second hurdle, which is that the state will ask the municipality to confirm that the marijuana facility complies with its zoning ordinance. 

Here, if a city or township hasn’t passed zoning for recreational marijuana, and has only enacted zoning for medical marijuana or has no marijuana zoning at all, then the municipality will almost certainly tell the MRA that the property does not conform with municipal zoning, and the MRTMA application would be denied. While this certainly begs the question of how a facility could not confirm with zoning if there is no applicable zoning, MRA’s current position is to simply take whatever the municipality says at face value.

While this second reason may be challenged in court or through administrative hearings, it is MRA’s current interpretation of the MRTMA (at the time of this article), and it effectively shuts down the “if you haven’t opted out, you’ve opted in” theory of state licensing. That leaves MMFLA licensees waiting for their municipality to opt in to the MRTMA three options:

(1) lobby municipal officials to opt in,

(2) petition the municipality to bypass the city council or township board (but these petitions cannot enact zoning provisions), or

(3) simply wait and see.

If you have questions on how to transition your MMFLA licensed facility to the MRTMA, contact us today to discuss your options.

State Legalized Marijuana Facilities
CategoriesCannabis

State Legalized Marijuana Facilities

Michigan recently legalized recreational marijuana in the State, and prior to that, passed the Medical Marihuana Facility Licensing Act, or MMFLA, which allowed for licensed, state-approved medical marijuana facilities. While the law is administered by the State’s Department of Licensing and Regulatory Affairs, or LARA, local municipalities are given the authority to determine where licensed cannabis facilities are allowed to locate. 

Properties that are located in approved “marijuana real-estate” or “green zoned” areas have seen their value shoot up seemingly overnight. The vacant buildings left empty from the decrease in American manufacturing are now some of the highest valued properties in the area due to the growing popularity of the marijuana business and the ability to repurpose these building for such enterprises, often times doubling or tripling the market value of the property.  For dispensary properties in particular, we have seen prices increase as much as ten-fold from the pre-marijuana market value to the marijuana market value. 

Part of the reason for this is that in order to apply for a marijuana facility license in many municipalities, you must already have a building purchased, leased or under contract and being that not every building will be licensed, many have seen it favorable to make offers on several building hoping one will be licensed and taking the hit of loosing deposits on the others.  These high, up-front cost have created a high cost of entry, but why so much?

One of the reasons the cost of commercial real-estate for the use of marijuana is so high is due to the strict zoning laws set forth by each municipality.  Beyond the setbacks and necessary distances from schools, churches, and other marijuana facilities, many of these city’s only allow marijuana facilities in small, predetermined locations in very limited numbers.  This creates only a small handful of properties that are eligible for an operation, compared to numerous buyers desperate to get their hands on dispensaries in order to vertically integrate their operations and have the “best locations”. This is further exacerbated by large local operators and deep pocketed multi-state operators who are willing to pay a steep premium for high-quality provisioning center locations. These market forces drive up the prices for everyone, including smaller local operators who are only looking for one or two facilities for the cannabis operations.   

On top of the high cost to purchase these cannabis properties, “loans for such ventures” are few and far between.  With a scarcity of lenders due to marijuana still being federally illegal, people are forced to pay cash upfront or pay high interest rate in order to get funding from private lenders and investors. This creates a significant barrier for entry to smaller local groups looking to establish marijuana facilities in the state.

What to Do as a Potential Purchaser

There are still options for those wanting to enter this industry without having millions of dollars in liquid cash to spend on a dispensary or cultivation property.  One such option that we are seeing are businesses collaborating, with multiple business groups coming together to buy a building and dividing it into individual units for each separate entity.  Other operators that are politically well connected are driving the opt-in process themselves, thereby ensuring that the property they already own is “green zoned” or by having an inside track on where the “green zoned” property is going to be, allowing them to purchase at the pre-marijuana market value.  This does have risk, however, due to the possibility that their selected properties do not end up making into “green zone”, or the municipality ultimately decides not to opt in after holding several hearings.  

Still others are continually watching municipalities decision making in regards to the marijuana faculties ordinances and hoping to find hidden gems and diamonds in the rough.  By doing this and acting on building and lands before it is officially allowed by the municipality, aspiring cannabis facility owners will be able to acquire the properties before the premium is priced into the property value.  

How Much is the Mark Up?

If you own a property that happens to be in a green zone, this article probably has you salivating. With the right buyer, your half a million dollar property could be worth as much as five million depending on the municipality you are located in and the license types your location is approved for. However, not all license types and municipalities produce such a big windfall. Usually, dispensary properties see the largest mark up, followed by grow properties, and then by processing facilities. We have not seen much of a mark-up for properties zoned by secure transport or safety testing facilities only, though generally properties zoned for these two license types are also zoned for other license types. 

Another main factor when determining the marijuana value of a property is its location, which is in turn based on two main factors. The first factor is how many people are in the area. This factor primarily effects dispensary / provisioning center properties but can also affect other license types as there needs to be a large enough labor pool to staff your facility. For dispensaries, like any other retail business, the more people in the area, the more potential customers and potential business. This is why dispensary licenses in a city like Warren with over 100,000 people are more competitive compared to cities like Pinconning, with only about 1,200 people.  Also relevant is how much green zoned property exists in a municipality, with the greater supply causing a greater price, and whether the area sees an influx of seasonal tourists.

The final main factor is the number of licenses that a municipality allows, if the municipality limits them at all. Turning to Warren and Pinconning as examples, Warren has more than 100,000 people but only allowed 10 provisioning center licenses, meaning one licensee presumably would serve a base of more than 10,000 people. Pinconning, on the other hand, allowed unlimited provisioning centers to be located in its boundaries, which would lead to several locations competing for a very limited customer base. The practical effect of this is that provisioning center property in Pinconning warrants almost no “marijuana mark up”, where as an approved and licensed location in Warren would probably warrant a 10x multiple or more.

Conclusion

The high price of cannabis approved property may be a blessing or a curse, depending on your perspective. If you own property that becomes green zoned, the value of your property will likely increase, though such an increase could be short lived. If you are looking to buy property, then this premium is likely the bane of your existence. However, you can employ strategies to locate property for less than the full marijuana value, though each strategy has its own set of drawbacks.

REAL ESTATE PURCHASE AGREEMENTS
CategoriesCannabis

Contingencies in Cannabis Real Estate Purchase Agreements

When evaluating a Michigan marijuana real estate opportunity, one of the first questions we ask is “is it contingent?” What this question really means is whether the seller will let the buyer back out if they are not able to ensure the necessary approvals or other important items needed to operate on the property. These contingencies can be drafted many ways, with some requiring the buyer to sacrifice part of his or her good faith deposit if they are unable to meet the contingency, and some simply entitling the buyer to a full return of the buyer’s earnest money deposit. How these are drafted depends on how the deal is negotiated and how sophisticated the parties to the transaction are.

Oftentimes, real estate purchase agreements are simply photocopied form contracts that allow you to “check” one or more contingency boxes. These forms are often used to avoid having to involve a Cannabis real estate lawyer in the transaction. While they can sometimes be useful when a buyer wants to put in numerous offers on several parcels of real estate, a tailored and well crafted purchase agreement can save both the buyer the seller a lot of headaches and ensure that each is protected with respect to the proposed transaction. Whether you are the party protected or not may depend on whether you have a real estate attorney on your side that understands the ins and outs of purchase agreements, or if you simply have a broker or agent who only has a cursory understanding of which provisions are important in cannabis real estate transactions.

Contingency provisions are especially important for buyers when you consider the current price of Cannabis properties in Michigan. A property that is in the “green zone” for a provisioning center, for example, might be worth $200,000.00 prior to being zoned in, but listed for a million dollars once the zoning ordinance is passed. With the high multiples being paid by the purchasers of cannabis properties, it is that much more important that the purchaser is protected so that he or she doesn’t get stuck vastly overpaying for a property they cannot operate a marijuana facility on.

Whether you are a real estate broker, buyer, seller or attorney, “contingency” may be one of the most commonly used words in Michigan cannabis real estate transactions today. In this article, we will explore some of the common contingencies used in cannabis real estate transactions, when they should be used as a buyer, and what to look out for as a seller.

The Municipal Approval Contingency

Out of all of the contingencies we utilize when negotiating and drafting real estate purchase agreements in the Cannabis industry, this is the most common. This contingency is also what is being referred to when a cannabis property broker or purchaser asks “is it contingent?” A municipal contingency is a provision whereby the buyer is not obligated to close until they receive municipal approval to operate a marijuana facility, which is sometimes explicitly stated in the purchase agreement or sometimes simply referenced as the purchaser’s “intended use.”

In its most basic form, municipal contingencies are used to ensure that the buyer doesn’t get stuck with the property without being able to operate a licensed marijuana facility on it. As an example, let’s imagine that you wanted to purchase a “green zoned” provisioning center property in Warren, Michigan. Warren had a very competitive provisioning center application process, with only about 20% of the dispensary properties that applied set to receive a provisioning center license. If you were to close on the property prior to approval or denial, instead of having a contingency, then you may have been stuck paying several millions of dollars and still not being able to operate a provisioning center. With a municipal contingency, you would only need to close on the provisioning center property if your municipal license application was approved. If it was not, you could have walked away from the deal, maybe only losing part of your earnest money deposit and some due diligence costs

As the above example illustrates, if the property does not already come licensed, this type of contingency is a must for buyers of cannabis real estate. Even if licensed, buyers may want to nonetheless have the purchase contingent upon the transfer of the license since transferring municipal cannabis licenses is not always a straightforward process.

Due Diligence Contingency

This contingency is also very common to cannabis real estate transactions, and is perhaps the most used contingency in real estate transactions generally. There are several specific contingencies that are often grouped together with the due diligence contingency—e.g. environmental contingencies (i.e. Phase I, Phase II and BEAs), structural or other construction related contingencies (i.e. subject to inspection by a professional building inspector), and so forth.

Basically, a due diligence contingency allows you a certain amount of days—e.g. 30, 60 or 90 days—to investigate the property. Sometimes these provisions are crafted to individual items to be investigated and sometimes these are crafted to be open ended. Either way, these provisions provide the potential purchaser will the ability to back out of the transaction if they discover items during the due diligence process that are not to their liking. When representing the seller, we often try to make the due diligence provision as specific as possible and allow the seller to “cure” any problem the buyer may have with the property. When representing the buyer of a cannabis property, we do the opposite.

Similar to the municipal contingency, what happens to the deposit depends on how the purchase agreement is drafted. It could be drafted to provide the buyer a “free look” at the property, meaning he or she has a certain amount of days to decide whether to move forward, after which the buyer’s earnest money deposit becomes partially or wholly non-refundable. It could also be drafted to become “hard” immediately or after a shorter period of time—e.g. the deposit becomes hard after the first 30 days of a 90 days due diligence period.

Financing Contingency

While common in other areas of real estate, this type of contingency is not too common in cannabis real estate transactions for the simple reason that it is very difficult to obtain financing for cannabis transactions (but not impossible!). In my experience, this contingency is often simply added by the potential purchaser of the transaction to give the purchaser an “out” if they later decide not to close on the transaction. It is also sometimes included simply by mistake—the template the broker, agent or owner used for a prior transaction contains the financing contingency language, and no one knew enough to take it out.

Put simply, a financing contingency in cannabis real estate transactions should be seen as a potential red flag worth looking into. If you are a seller and the buyer includes this language, chances are they just wanted to give themselves an extra “out” if they decide they don’t want to go through with the transaction. While it is possible that the buyer actually has a commitment for debt financing—we work with a handful of lending brokers that specialize in the Cannabis space —this is very uncommon in Michigan marijuana property transactions. As a seller, the presence of this contingency should at the very least trigger further investigation into who the purchaser is working with to finance the transaction and how credible the offer to finance actually is.

Title Work Contingency

If purchasing using a warranty deed, the buyer and seller will almost always engage a title insurance company to “insure” the title of the property. Typically, the seller will obtain a commitment for title after signing the initial purchase agreement, and the buyer will then be given a chance to inspect the title work before agreeing to enter the transaction. Regardless of whether you are the buyer or seller, you will likely want to make sure that the title company you are working with is Cannabis friendly

In most title contingencies, if a buyer sees a title exception they don’t like—e.g. a use restriction, undisclosed easement, a second potential chain of title, etc.—they give written notice to the seller of the specific exception they don’t like. The seller can either “cure” the exception, and if the seller is unable to cure, the buyer is given the choice to either walk away, renegotiate the deal, or move forward with the title defect.

This type of contingency is extremely common in real estate transactions, and virtually a must-have for purchase agreements that transfer the property by warranty deed. Title insurance is generally not too expensive and well worth the protection it provides. However, you do need to be careful that you are not invalidating the terms of the title insurance when you enter into a cannabis transaction. Most title companies will not ensure marijuana property, and if they find out a property they insured is operating as a marijuana facility, they may refuse coverage if a title issue later arises . It is therefore important to work with a cannabis-friendly title company that will stand by its title insurance policy.

Conclusion  

Contingencies are an important part of nearly all Michigan cannabis real estate transactions, yet some buyers, sellers and agents will overlook the importance of these provisions in protecting the parties’ interests. For this reason, Michigan cannabis real estate purchasers should ensure that the person handling their transaction is well versed in purchase agreement contingencies. Michigan Cannabis Properties has legal staff at the ready to protect its clients interests and to make sure they are not “caught holding the bag” at the end of a real estate transaction. Mr. Roberts is a Cannabis business and real estate attorney and the managing partner of Scott Roberts Law, a boutique cannabis business law firm.

Title Insurance for Michigan Marijuana Real Estate
CategoriesCannabis

Title Insurance for Michigan Marijuana Real Estate

Title insurance is an important part of most real estate transactions. The purpose of title insurance is to insure against any financial losses resulting from defects in a property’s title work. Most sophisticated purchasers of property will not close on a commercial real estate deal without title insurance since they do not want to assume the risk that there are problems with a property’s title work.

At this point, some of you may be wondering what exactly I am referring to when I talk about a property’s “title” or what “title work” is. What this refers to is all of the past deeds, easements, mortgages, and similar documents that concern the property, whether or not they were recorded at the county register of deeds. A “title defect” could take the form of a second chain of title (i.e. the owner sold to two separate people), an unreleased lien affecting the property, a restrictive easement, or a public easement through the property, to name a few.

Depending on the specific title defect, your ability to use the property may be affected. For example, if a public easement runs through your property, you may not be able to construct a building where you want to. As another example, if there are two chains of title, you may not be purchasing the right one. The seller may have been given a quit claim deed from the previous occupant, who may have never owned the property that he or she deeded over to the current occupant or who deeded it over to multiple people.

Title Insurance for Cannabis Properties

Now that you hopefully understand the importance of title insurance in real estate transactions, let’s talk about title insurance in the context of Michigan Cannabis Real Estate . Similar to banks, most title insurance companies won’t work with cannabis companies, or insure real estate where the intended use is as a medical or recreational marijuana facility. If there is a cannabis use mentioned in the purchase agreement, most title insurance companies will refuse to issue a policy.

Sometimes brokers or attorneys try to get around this restriction by simply keeping marijuana references out of the policy, essentially hiding the fact that the property will be used as a marijuana facility from the title insurance company.  For example, if a purchase agreement has a municipal approval contingency, the purchase agreement may simply state that buyer will need to receive all necessary municipal approvals for its “intended use” rather than spelling out what that intended use is.

This sort of “hide the ball” game is best avoided as it can defeat the whole point of obtaining title insurance. A title insurance company, like any insurance company, will often look to avoid paying under the policy if the purchaser of the policy breached the terms of the title insurance agreement. If you hid the fact that the property will be used as a marijuana facility from the title company, you may have just given them the reason they were looking for to avoid payment under the policy.

Rather than trying to hide the properties intended use, we recommend working with a qualified brokerage company with access to cannabis-friendly title insurance companies, like Michigan Cannabis Properties. While most title insurance companies will not insure your property and will void your policy if they discover the property was purchased for a cannabis business, there are some that will insure you, they are just few and far between. Fortunately for our clients, we work with closely with cannabis-friendly title insurance company that will cover your losses resulting from title defects at your marijuana properties.

Conclusion

Title insurance is an important part of most real estate transactions, especially the purchase of expensive commercial properties. If you are trying to hide a property’s intended use from the title company, there is a good chance you will not be able to collect against the policy if you incur a financial loss as a result of a title defect. At Michigan Cannabis Properties, we help our clients obtain title insurance for their cannabis properties from reputable title insurance companies that will not void the policies once they find out the property’s intended use.

Mr. Roberts is a cannabis business and real estate attorney and the managing partner of Scott Roberts Law, a boutique cannabis business law firm.

Marijuana Real Estate
CategoriesBUY/LEASE Cannabis

Marijuana Real Estate: Interest, Acquisition, and Competition

Acquire, Develop and Lease Cannabis Properties

The legalization of cannabis has changed the social attitude towards the industry. The industry has been gaining support, and there is increased demand in the market for real estate. Business owners are probing the market for real estate suitable for use in the cannabis market. There are various opportunities in the cannabis market and property that is eligible for use has seen a dramatic increase in price.

Legal Marijuana Industry

Since legalization the legal marijuana industry has experienced exponential growth each year. Current reports, assume that this trend is bound to continue.  Recreational marijuana will only make these estimates and reports even larger. The marijuana industry will continue to require suitable real estate in order to grow. State and municipal regulations such as setbacks and drug-free zones affect the amount real estate actually available to those looking to get into the business.

Marijuana Industry in Michigan

Michigan residents voted to legalize recreational marijuana in November of 2018. As per sources, the business will begin in early 2020. Investors and entrepreneurs are trying to get an advantage by getting into the medical market before the transition begins. The recreational law in Michigan restricts most recreational licenses to applicants who already hold a medical marijuana license.

Prior to grant a license from the state, it is essential to select the right location in Michigan. As with any business, success depends on not only quality of service, but location. Specifically, your business should have a good amount of the market share in the region it is located and be discernable from its competition.

Detroit Dispensary

Many property owners are leasing space for dispensary owners in Detroit. Beyond a state and city license for a dispensary, you need a building that is properly zoned. An experienced agent will help facilitate the buying experience as well as ensure property purchased fits its intended use.  

Detroit Michigan Map

There are numerous factors involved in potential real estate for Cannabis.

•        Features

•        Zoning issues

•        Legal and Financial considerations

•        Owning or Leasing

Real estate is an essential part included in the application process. It involves leasing, letter of intent, owning real estate, providing the deed, property tax clearance, etc. A marijuana real estate attorney can assist you with the entirety of the application process including any questions regarding the real estate. They can guide you with the advantages and disadvantages associated with owning v. leasing.

Work with Marijuana Real Estate Expert

The core strength of a firm is having fundamental knowledge in the industry. There are many obstacles and regulations changing and shaping the marijuana industry. In Detroit and the Metro Detroit area, our team can help connect you with service providers and business professionals who could assist you in your venture into the cannabis industry. These experts know to build business and teach you the tactics necessary to succeed in the cannabis industry.  

Final Verdict

Opportunities to enter and thrive in the marijuana industry are currently available. They may not always be though. Interest in the cannabis industry is constantly growing, this means competition for you and your business. It is essential for you as a property owner or lessee to have the knowledge about this industry and what it takes to be successful. Our team is prepared to assist you with the most up to date information as possible,  solutions for zoning issues, and tried and true business practices. Equipped with our team of legal and real estate experts will help you identify viable properties before your competition.

Get in Touch with licensed Marijuana Consultants.

We are eager to assist you in the acquisition of property. Our team of legal and real estate professionals are well equipped to assist you with any legal or real property issue you may have when looking for suitable real estate in Michigan. If you or anyone you know is considering a foray into the cannabis market, our expert team specializes in indoor facilities, acquisition of eligible properties, and sale or lease of a property. Please call us today for a consultation.

STEPS TO START A CANNABIS BUSINESS
CategoriesBUY/LEASE Cannabis INVEST/FINANCE

5 Steps to start a cannabis business in Michigan

Marijuana was recently legalized in Michigan, and we are still about 12 months from having any recreational marijuana facilities in the state. By legalizing marijuana for recreational use, Michigan joins 10 other states and the District of Columbia as the only recreational states within the U.S.

The cannabis industry has been growing at a rapid pace since legalization began. First with medicinal legalization and now with recreational, the cannabis market seems poised for even more growth in the coming years. Michigan is expected to be one of the largest marijuana business markets in the country. Some experts even believe it will be second only to California. The potential in the marijuana industry has attracted a lot of new faces to the industry, you may be one of them. The purpose of this article is to give newcomers a brief introduction into the industry by letting them know what steps they need to take to get a cannabis business started in Michigan.  Before we jump into the steps please review these facts about the cannabis industry in Michigan.

  • Marijuana business opportunities have plenty of options from producers, processors, provisioning centers, testers, and secure transporters.
  • Michigan regulations contain stipulations that require potential applicants for a recreational license to first hold medical cannabis licenses..
  • Michigan will have new licenses like the microbusiness licenses available for application when the recreational law is written.
  • Michigan also will allow for home grows for personal use.
  • Michigan has allowed cities to opt-out or in to legalization on a city by city basis.  

Here is 5 step guide about initiating cannabis business.

Infographic

Step 1: Register business in Michigan

In order to initiate your cannabis business in Michigan, you must register an entity with the Department of Licensing And Regulatory Affairs (LARA). As with many other licensed businesses you should complete any application for a marijuana license in the entities name. After you have established your business with LARA you can begin the application process for any of the below licenses with the state:

  • Cannabis retailers
  • Cannabis wholesalers
  • Cannabis processors
  • Cannabis producers
  • Medical cannabis dispensaries
  • Medical processors.

You will also need the following licenses and permits to run your marijuana business :

Make sure you renew your registration every year before the present registration expires..

Step 2: Get your local cannabis permits and licenses.

Filling the sufficient documents with the state is not enough. In order to operate your business in a municipality, which will require municipal approval. Municipal approval also entails a seperate application process. Different licenses have different different requirements and it is important that you contact a professional to assist you with your application.

Step 3: Obtain Required Cannabis State License

Steps two and three are interchangeable and you can pursue state licensing before city or vice versa. The state license in Michigan will be required, and some cities require proof of a state application before they will even review your city application. A state license is required for any type of cannabis business to operate in Michigan.

Step 4: Determine your Tax Obligation

There are various taxes involved for Cannabis business. When organizing a business invest time by researching upcoming tax responsibilities. Michigan like other states requires that cannabis businesses pay an excise tax. This tax is something you have to disclose when applying for your IRS Employer Identification Number. Additionally, taxes will be levied differently depending on what type of business you operate. An example of this is provisioning centers are taxed differently than cannabis growers are, as such you should consult a qualified accountant to assist you in determining your tax liability.

Step 5: Anticipate Ongoing Business Registration Requirements.

The list of licensing, registration and compliance does not end here. On top of entity registration and renewals, every state and city issued cannabis license will require a yearly renewal for a set fee. You need to make sure you are prepared for these fees and understand when you need to file your paperwork. Reminders by the state and city will be sent, however we still recommend that you enlist the services of a professional when dealing with such matters.

In Sum

It is important to understand that these five steps are not all the considerations you need to take into account when starting your cannabis business, and is intended as a brief introduction into the bare minimum required when starting a new cannabis business. We highly recommend that you consult with a professional who can let you know if it is worth your time, energy, and money to get into the cannabis industry. You should understand that the journey from the beginning of the process to an up and running marijuana facility will be long and intrusive. You should be ready to lay your history out like an open book and have it examined thoroughly before you can proceed to licensure which will be the first step to starting a cannabis business in Michigan.

CANNABIS BUSINESS
CategoriesBUY/LEASE Cannabis INVEST/FINANCE

TO FIND THE BEST LOCATION FOR YOUR CANNABIS BUSINESS

Finding the right location for your cannabis business can be very tricky especially if you are new to this business. It requires a good amount of research and some knowledge about city layouts. Today we are going to look at how we can find the best location for your prospective marijuana business.

Now before we dig deep into this matter lets look at some important facts about the Cannabis business and what are the start-up requirements.

•    The Research

Cannabis businesses are dictated by not only state law, but also municipal codes, ordinances, and laws. As a prospective business owner the easiest way for you to navigate these laws and get this research done is to hire a professional. There are many attorneys and real estate agents and brokers that deal specifically with marijuana that stand ready to assist you. For choosing a destination for your business you want to make sure that you research the city code to ensure that they allow medical marijuana facilities within their city limits. After you have confirmed that they allow marijuana facilities, you want to see where specifically those facilities are allowed. Usually, cities allow different types of facilities in different areas of the city. For example, marijuana grow facilities are almost always relegated to industrial zones, whereas provisioning centers are allowed in more traditional business settings.

Now that you have found a property in the specific zoning area where your business is allowed to be do you need to do any more research? the short answer is of course! In addition to zoning restrictions every city that allows a marijuana facility also requires mandatory setbacks from other establishments like churches, schools, parks,…etc. You will need to confirm the building you have selected complies with these setback requirements or your business will not be allowed to operate. You also need to consider parking, most cities require you to have parking sufficient to cater to your expected business. This means that in addition to all the above requirements you have to make sure the property you select has either a private parking lot, ample street parking, or land on the property that can be converted into a parking lot.

•    The Application

It is always better to speak to the local real estate professionals and attorneys before trying your hand at a marijuana application. For the sake of sticking with the topic of this article we will discuss only the municipal application process. In Michigan the application process is different from city to city. Some cities allow multiple applications on the same property, while others only allow one at a time. This is a very important distinction for you to know since you are a prospective cannabis business owner. For those cities that allow multiple applications on the same property, your application will usually be compared “apples to apples” with the other applicant, with the victor being the one that offers the most contribution by having their business approved. Additionally, all city applications charge a fee, which is non-refundable even if you are denied.

City applications also have different requirements for what you need to qualify for a cannabis business license. For example, in the city of Detroit you are required to show financing in the same amount and kind as you would with your state application. Whereas with other cities all that is required is showing that you are currently in process of acquiring a state license. These requirements are integral to knowing where you will locate your cannabis business because you could save valuable time and money and focus your efforts on the finding a suitable property as opposed to getting lost in the weeds.

•    What is Next

After you think you have found a suitable property you want to find out what kind of market for cannabis use or sale you are dealing with. All successful businesses take into account what percent of the market they will make up. In your case whatever cannabis business you choose to open, you should know not only how many others like you are in the area, but also how many are currently applying for locations in the area. Depending on whether you are one of the first in the area or really late to entering the area can make a huge difference as to whether this is actually the best location for your business. Additionally, some new cannabis business owners will have a unique approach to their specific business, like an Apple store themed dispensary that has become a state-wide chain in California, or vertically integrated facilities that are an all in one shop.

Finding the right location for your cannabis business is about a lot more than just the actual physical location. You need to consider  If this is your first time trying your hand at a cannabis business it is highly advisable that you hire a professional to assist you in completing this process. You will save yourself time, money, headache, and much more by working with someone who knows what to do in the aforementioned situations.  Speaking of marketing you want to ensure that your location is easy to find and you are able to get advertisements set online with dedicated cannabis sites like WeedMaps and Leafly which can, in turn, also help customers discover your facility.

CANNABIS LOANS
CategoriesBUY/LEASE Cannabis INVEST/FINANCE

The Complete Beginners Guide to Cannabis Loans.

The cannabis Industry generated a good amount of revenue in 2017 and 2018. Some estimated that the market was between about $9-$18 billion and they expect that it will double by 2020. The marijuana business is booming and this sector is expected to grow exponentially, while this sounds like an attractive opportunity, many of the most qualified people are locked out of the market, because they cannot afford to stake out their own claim. As most of you know one of the most important factors when starting a new business is finances. Without adequate financing your business could hit the ground before you have had a chance to really implement a business plan.  

The most difficult part about procuring adequate finances for a marijuana business is the fact that traditional lenders will not finance your business. Other businesses even ones with a rate of return much lower than marijuana will secure financing before your marijuana business. The main problem with lending in the marijuana industry is the fact that it is still federally illegal. Michigan has legalized marijuana medically and recreationally, however, traditional banks and lenders in the state still will not lend a hand to your marijuana business. If you are looking for a way to secure a capital contribution/investment to start your marijuana business you are reading the right article. This article will explore the financing options available to the still infantile marijuana market and how you can secure funding in a national banking system that does not support marijuana.

Obtaining funds for any business, most of all marijuana businesses can be an incredibly difficult task. You need to find a lender that offers you a rate that you are able to pay and a loan of the right amount. This is difficult since lenders, even those in the marijuana industry consider, marijuana businesses high risk. However, as the marijuana industry becomes more prevalent and regulated loans and investment opportunities should become more viable and easier to secure.

Options for funding cannabis businesses are limited but there are options. Whether you are a marijuana grower, provisioning center, processor, tester, or transporter you need funds to start your business. This article will explore the following funding options available to you currently in the cannabis industry.

  • Cannabis Commercial Real Estate Loans
  • Cannabis Leasing Equipment Loans
  • Hard Money Loans
  • Cannabis Business and Startup Loans

Cannabis Business and Startup Loans.

A cannabis business and startup loan is exactly what it sounds like, a loan that helps you start up your business. However, since the marijuana industry is still federally illegal, you cannot go to your local bank and take out a cannabis loan. This means you will have to work with companies that already work in the cannabis industry. These companies that are already lending in the cannabis industry set the market for what a start up loan can look like. In order to secure the most amount of financing from these lenders and private investors you need to have a very well put together pitch, by this we mean a legitimate business plan, and real figures based on estimated sales and costs. You will also need to demonstrate that not only are you capable of holding the marijuana business license you are applying for, but also you are in the process of completing the applications necessary for those licenses. If you pitch your business correctly you could secure the financing necessary to open your business.   

Hard Money Loans

Hard Money is a short-term bridge loan. Usually, hard money loans are secured by real property. Hard money loans typically have higher interest rates than traditional business loans, because they usually involve higher risk and a shorter repayment period. Additionally, hard money loans are issued by private lenders or investors they are able to be used by marijuana business owners. The benefits of a hard money loan when compared to traditional loans is the speed with which they can be issued, where traditional loans would take weeks or months to get set up, a hard money loan can be approved in a matter of days. A short turnaround time is important in the marijuana industry because with a marijuana business securing financing especially during the application process is necessary to get your business licensed. This option is good if you cannot secure any other means of financing.

Cannabis Real Estate Loans

For those marijuana business owners who can afford to self finance the operation but need help with purchasing, leasing, or building out an existing property cannabis real estate loans offer a viable avenue for funding. Private real estate money lenders will support you by offering the capital investment you need to get your business a physical location or the construction funds necessary to get your business started. Cannabis business owners could also use real estate loans to acquire start up capital if the lender agrees to such an agreement.

There are many cannabis real estate lenders that offer a diverse and creative investment strategies for your marijuana business. It is up to the business owners to choose right investor for their business. There are even real estate lenders in the cannabis industry that have tried to replicate the traditional real estate loan, and offer you a loan, secured by assets and title to the property in exchange for their lending you the capital you need. However, the cannabis industry is still new in Michigan and while such real estate loans carry a high interest rate now, as the risk goes down so should the rates, making this option much more realistic for many more prospective marijuana business owners.

Cannabis Equipment Leasing

Cannabis equipment leasing loans are loans that give marijuana business owner the option to purchase any type of equipment essential for their business. Especially in marijuana grow and processor facilities, your business will need equipment in order to generate income. While the red tape around lending to marijuana businesses is still in play, equipment financing loans allow you to utilize lender capital to secure the machinery, equipment, and supplies necessary to get your business up and running. As with other loans discussed, the risk involved typically means that this type of financing will involve a high interest rate. Funds made available through private lenders or investors and are available to cannabis growers, extracting companies, medical dispensaries, and seed producers so they can obtain high-quality equipment for their business.

Summing Up

Marijuana is still considered illegal on the federal level, as such traditional financing methods are not available to prospective and current marijuana business owners. Alternative lenders are a solution to the problem of finance in the cannabis industry. The above discussed methods are some of the best options available in the current marijuana market. They allow you as a marijuana business owner to secure financing for whatever your goal is and more importantly whatever stage of your business plan you are in. As with securing investments and loans with any other business make sure to do your due diligence and shop around, so that you ensure you are receiving the best possible deal for your marijuana business.

Insurance for Cannabis Companies
CategoriesCannabis INVEST/FINANCE

Types of Insurance for Cannabis Companies

Marijuana is getting legal status in many states in the USA. As with any legal and regulated business, marijuana business owners need insurance. However, just because you need insurance does not mean you can get insurance. Currently, many traditional insurance companies will not issue insurance policies to marijuana businesses.  

New marijuana-specific insurance companies have risen to meet the demand for insurance in the industry. The marijuana industry like other industries needs protection against any risks like financial help in case of loss, theft, damage to property, or equipment. This article will discuss what we believe are the 7 types of cannabis insurance you should consider for your marijuana business.

Factors to consider before taking insurance

Risks in the business

There are different risks associated with different marijuana businesses. If you are a marijuana grower, you will not need the same insurance as a provisioning center. Therefore, it is important to understand the risks associated with your business, in order to adequately insure your business. The right type of insurance will protect your business from the losses associated with your specific marijuana business.

Take recommendations

While you may know a lot about the risks involved in your marijuana grow, provisioning center, processing, transportation, or testing facility, you probably do not know as much as licensed insurance professionals. Specifically, insurance professionals offering marijuana-specific insurance. Make sure to do your research before considering insurance, as well as shop around, but make sure you do take into account the opinion of a licensed insurance professional.

8 types of Cannabis insurance suitable for cannabis companies

  1. Commercial General Liability Insurance

Commercial general liability insurance is what most people think of when you say commercial insurance. It protects against exactly what it sounds like it protects against, the general hazards associated with conducting business. This type of insurance will be appropriate for any and all marijuana businesses. It gives protection to marijuana business owners against all general risks including potential damage to the property.

Commercial general liability insurance provides blanket coverage for potential claims for injuries to workers, your property, patrons, and much more. This insurance will protect your business from losses associated with conducting your business and is recommended for all businesses.

  1. Worker’s Compensation

Workers compensation insurance protects the employer in the case of an employee injury while in the workplace. This type of insurance is recommended for most businesses as an employee injury on company grounds could end up costing the employer a lot of money. However, some businesses like a provisioning center have little risk of on the job injury since there is not much physical labor or danger involved in the job description.

While it is always advisable to carry insurance to avoid the risk of a hefty payment later, there are ways around worker’s compensation insurance. In most other industries ways of getting around worker’s compensation insurance involves hiring your employees as independent contractors. However, this is not a catch-all solution and your relationship with your employees will be investigated to determine whether or not they actually meet the definition of an independent contractor. The best advice we can provide with procuring worker’s compensation insurance is that if you dictate your employee’s schedule and they are not sufficiently “independent” protect yourself with a worker’s compensation policy.

  1. Crop Insurance

This is the type of cannabis insurance is one we emphasize for marijuana growers. If there are any damages to the crops, the marijuana growers get the financial help. It also covers the risks facing crops from natural disasters such as heavy rain, drought or famine. While Michigan marijuana grows are primarily conducted indoors, you are still considered a “farmer” for lack of a better word. Not insuring your crop is just foolish. That would mean you as a grower would have absolutely no protection in the case of a loss. If the crop is your first crop, you could be risking the entirety of your business. Crop insurance is also applicable in the case of seeds and harvested crops.

  1. Vehicle Insurance

This insurance applies to many vehicles such as trucks, cars, and motorcycles. It provides the financial help in case of physical injuries caused by road accidents. This will be especially helpful to testing facilities and secure transporters. Driving in the United States is very dangerous and accidents happen very often. If your employees are operating company vehicles it is very important that your vehicles be insured against potential losses. Specifically, Michigan requires insurance and with our no-fault insurance laws, even one accident could cost you more money than you would care to spend.

Automobile insurance also protects your vehicles in the case of theft or damage. This insurance is highly recommended for an marijuana business that would have any vehicles. However, this insurance could be a bit harder to procure as traditional insurers are not going to insure vehicles associated with marijuana. Specifically, many traditional insurers consider marijuana too high risk, especially when in addition to vehicle and driver safety, the insurance company has to think about potential loss to high value cargo. Insurers in the marijuana industry have developed techniques to address, marijuana specific concerns and most of those techniques are focused on the minimization of exposure for the insurance company, which means capped policies.  

  1. Property Insurance

The 5th recommendation for marijuana business owners is  of property insurance. This type of property insurance would cover additional risks not covered by the commercial liablity insurance mentioned first. Property insurance can cover your property from a multitude of risks including natural disasters, internal failures, AC/heat, theft…etc.

Property insurance can act as a catch-all for those already carrying general liability insurance. While it may seem like overkill on top of general liability, property insurance can protect your business from very costly risks that are part of owning a property, but have nothing to do with your commercial practices.

  1. Cargo Coverage

The next on the list is Cargo Coverage insurance. This insurance really is relegated to those shipping their product around. Shipping in Michigan using trains or trucks can get dangerous, and as discussed earlier, auto insurance in the marijuana industry is generally capped. Therefore, as a business owner the capped policy may not protect the total value of the crop you are shipping. Cargo insurance offers the added protection to cover your entire shipment, and could even require less coverage from your auto insurance.

This insurance is recommended to large facilities that are constantly transporting large quantities of marijuana. The added cost in addition to your auto coverage is immensely valuable when considering the potential loss associated with even a single shipment loss. Total loss of a shipment could amount to hundreds of thousands of dollars lost. As such cargo insurance is recommended to those that can secure it.

  1. Equipment Insurance

This insurance is needed by marijuana growers and processors. Under this insurance, the marijuana owners get protection in case their equipment is damaged. Processors and growers use a lot of equipment in their facilities, especially larger operations. Some facilities depending on approach to growing and processing can have very expensive and intricate systems at work, as such insurance protecting the owners from loss of equipment is necessary to ensure the success of the company.

It is not uncommon for growers to be targeted for theft, this type of insurance also covers the equipment that is lost to theft. Under this insurance, the owners will get the repair expenses in the case of damage or replacement costs in the case of damage.

Equipment insurance and property insurance provides additional coverage and acts as a fail safe for anything that would not be covered by property insurance. Some insurers will offer equipment coverage as part of their property insurance policy.

Conclusion

Every marijuana business owners needs will be different according to what type of business they own. The above recommendations provide as complete a picture of what type of insurance is appropriate for each business as well as what each insurance offers protection against. These insurances will help the marijuana business owners conduct business in a safe and protected manner. Marijuana insurance is still a relatively new development, as recreational marijuana becomes more prevalent in the USA, we expect more insurers to enter the marijuana industry.

Cannabis Real Estate, and Funding Tips
CategoriesCannabis

Cannabis Growth, Real Estate, and Funding Tips

Acquiring suitable real estate to house a medical marijuana facility can be a burdensome task for people who want to break into the burgeoning marijuana industry. Funding is another big problem for individuals that want to get into the cannabis industry. The lack of support from financial institutions means that cannabis entrepreneurs have to be self funded or look for investments before they can enter the industry. As with any business it can be very difficult to secure investments in your company or idea.

If you are wondering how to become a cannabis grower in Michigan there are a lot of things that you need to know. First, the field is growing rapidly and is attracting more and more attention with each passing day. Second, the market is expected to grow exponentially, some economists estimate the cannabis industry to generate over 100 billion USD by the year 2029. This article will be a brief walk through of what you should know when growing cannabis and what you can do to secure funding and real estate to start a cannabis facility.

Starting a Cannabis Business – things you should know

As stated above the marijuana industry is one that is exploding in popularity today. However, new entrepreneurs often find it difficult to get the capital necessary to start their business. The capitalization requirements for the license alone range from $150,000-$500,000. That is just what you need to show on paper in order to qualify. Additional hurdles are presented when new entrepreneurs attempt to enter the marijuana industry without already owning suitable real estate. Suitable real estate can be difficult to acquire since not only can it be extremely expensive, but zoning restrictions make certain real estate ineligible for use as a marijuana facility. So even finding a property that you think would be perfect for your new cannabis business may not be a viable piece of real estate. So on top of securing funding for your new business you also need to do your due diligence…or hire a good real estate agent.

Different ways to medical marijuana

Medical marijuana growing as with most every other business involves a lot of moving parts. Other than real estate and capital funding, there are also other areas that cannabis business owners need to focus on, like what type of marijuana they would like to grow, how they would like to grow it, what method they will use for curing and storing prior to sale…etc. People new to the marijuana industry will have to not only balance securing funding and finding suitable real estate but also determining what growing method and process are right for them. Different growing methods are dictated by factors such as commitment, money, time, and circumstances. New cannabis entrepreneurs need to understand that growing cannabis using different methods comes with different benefits as well as disadvantages.

When it comes to medical marijuana growing, any method can work out for those who put a dedicated routine and process into their cannabis grows. However, the outcome is not solely determined by how dedicated you are to your crops, there are multiple factors at play here. Specifically, we are in Michigan which means indoor grows are what will dominate the economic landscape. With indoor grows you have to maintain temperatures, make sure the environment is clean, beware of spider mites, and always make sure the crops are properly watered. Those are just some of the basics. Entrepreneurs who want high-quality cannabis will be required to put a great amount of effort into their operations regardless of which method they are using to grow marijuana.

An insight cannabis growing methods

Now, you may be wondering where or how to begin. The first step is getting clones or seeds to get grow operation started. Clones are salvaged pieces of other plants that can then be raised into their own plant. Once, the first step is taken, you should choose a growing method. Let us have a look at a few different ways you can grow medical marijuana..

1.Plain Dirt

Plain Dirt soil

Using plain dirt for cannabis growing is one of the traditional methods. You can grow cannabis like you would grow any other plant. However, you need to make sure that the soil is good and properly fertilized and watered.

  1. Plain Dirt

Using plain dirt for cannabis growing is one of the traditional methods. You can grow cannabis like you would grow any other plant. However, you need to make sure that the soil is good and properly fertilized and watered.

Pros:

  • This method is usually cheaper and easier than most other methods for growing marijuana in Michigan or any other state where marijuana is legalized.
  • Normal quality fertilizers can be used for this metho

Cons:

  • There are chances for losing a cannabis crop or getting varying results plant to plant based on the imbalance of nutrients and minerals in the soil.
  • Yields may not be equal to the other cannabis growing methods.

2. Rock Wool/Coco Fiber

Coco Fiber soil

Making use of inert mediums rather then soil for holding the roots eliminates the problems concerning quality of the soil.

Pros:

  • This method is as easy as the plain soil method.
  • The yields are better when compared to growing cannabis in plain soil.
  • It is simple and cheap just like plain soil method.
  • The procedure is usually cleaner with little mess and fewer bugs.

Cons:

  • Needs special fertilizers that are pretty expensive.
  • Needs Coco fiber which is not too expensive but can be difficult to find locally

3. Hydroponics

Hydroponics weed growing

Hydroponics by definition is about having the roots of the plant come in direct contact with the nutrients as well as have access to the oxygen in the water. This method does not use soil at all and involves growing the plant in a water base. Mediums like gravel, perlite, rockwool…etc are usually used to support the roots. Special fertilizers will be added lightly to water that has poured through the growth medium. An immediate difference between the roots grown in soil and those that are grown in hydroponics, can be identified.

Pro:

1. This method will increase the rate of growth up to 25%.

2. Yields generated from the individual plants will be up to 30% more.

3. Cleaner yields .

4. Increased accuracy in Ph levels.

Cons:

1. The hydroponics method can be very expensive.

2. Reservoirs to hold and mix the water and nutrients are required

3. Professionals are needed to service and install the equipment

Where to get help for starting cannabis business

Now that you have a brief introduction to the beginning of a marijuana grow operation, you may be interested in pursuing a state and municipal license. In order to make those applications as successful as possible you will need not only assistance from an attorney but also a suitable piece of real estate for your operation to be run out of. We at Michigan Cannabis Properties can assist you with any of your potential real estate needs. We stand ready to advise you on what properties we know of that will fit your plan. Additionally, we work closely with attorneys to ensure that you are protected each step of the way. Please reach out to us if you are interested in acquiring real estate for your future or current medical marijuana business. We can be reached at (248)234-4060.

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