These properties will doubtless be in high demand, but a few kinks need to be worked out first
The Cannabis industry is about to light up in Canada and preparations are being made to secure production facilities. But according to commercial mortgage broker Harry Tyson of DLC Commercial Core Financing, it isn’t without its set of problems.
“I have done a building that has that (cannabis production) in it,” he said. “There are lenders who are willing to take that, not only reputational, but security risk, because the security around the building has to be very tight because people will want to steal what’s inside. They’re worried about the security of the building—about it getting destroyed—not what’s inside.”
“You can’t do it in a multi-tenant building usually because of the other tenants. You have to have a facility that’s away from things.”
Tyson believes that, upon marijuana officially being legalized, most major lenders will be reticent about tarnishing their reputations, but not for long simply because of how much money could be made. Until then, the private channel is a safe bet for funding.
“It was a nice deal for everybody,” Tyson said of the cannabis facility’s mortgage he brokered. “He was happy that he got his funds, the lender was happy with his return, and I was happy.”
Cannabis facilities can indeed be lucrative. South of the border, Canna-Hub, a Sacramento-based real estate development and property management company that deals exclusively with the cannabis industry, is in high demand. Various companies involved in all parts of cannabis production are lining up, and Canna-Hub even filled its 16-acre “campus” in Mendota, California with tenants.
“Canna-Hub is building a first-of-its kind cannabis business hubs, which are large-scale sites—one of our sites is 1.2mln square feet total—that have indoor cultivation, mixed light—which is greenhouse cultivation—manufacturing, distribution, transportation, we have a third-party testing lab,” said Canna-Hub’s founder & CEO Tim McGraw. “You have this synergy of all those operators being in one community. They save on transport and it becomes an incubator because you have all these top-of-the-game operators in one park.”
McGraw added that Canna-Hub is receiving plenty of attention from Canada.
“We don’t have any firm plans to expand into Canada, but we’ve been inundated with investment banks saying private offices from Canada want to invest in us and want us to go public on the CSX exchange. So, we’re doing a small road show up in Canada next month with some bankers.”
Whether or not Tyson is correct about lenders’ lukewarm response to cannabis production facilities, real estate prices could ultimately determine the location of the sites.
“I’ve seen some activity in the Okanagan and in areas up in Northern B.C. because of the land being cheaper,” said Tyson. “Even out in Abbotsford and those areas. The land cost has to be less expensive than the high price of real estate in Vancouver.”