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into any negotiations with potential cannabis tenants,” said Matthew Schiller, a partner
and commercial
leasing practice group leader with Murphy Schiller & Wilkes LLP,
in Newark. That
goes for both
industrial and
retail sites, where
such a tenant may violate “compliance with law” covenants and other leasing approval contingencies in the loan documents.
Property owners are now having those conversations with lenders, Schiller said, but cannabis operators are more likely to find space through acquisition or by renting from “a landlord that owns property without institutional financing in place.”
Some landlords have determined that “there’s not enough of a premium” to get involved with cannabis tenants, Fersko said, especially given industrial rents are already sky-high.
“On the one hand, it may be an easier deal to sign up because there is going to be less negotiation,” he said. “On the other hand, it’s certainly a more risky deal on the front side of it until licenses are issued, the tenant is up and running and you know that you have an operational business to meet the rent stream requirement.”
As experts also note, discussions of vacancy rates, loan agreements and other real estate matters are all but irrelevant in more than two-thirds of New Jersey’s 565 municipalities. State law required towns and cities last year to declare by ordinance whether they’d participate in the cannabis industry. Around 160 have opted in
at some level, with some choosing to allow only certain segments such as cultivation, warehousing or retail.
That makes it all the more difficult
for cannabis operators to find space, especially the growers and processers that were emphasized in the state’s first round of adult use approvals.
“This is part of the storm and part
of the difficulty on cultivation and manufacturing licenses,” said Michael
way that has not impacted the other 17 states with legal adult use. As such, fulfilling that demand could hinge on new construction and towns that take an especially proactive approach.
“Those who are interested in opting in at some point should start looking at areas in their municipality that perhaps they do want to zone exclusively for
cannabis use, because it will mitigate a host of other factors,” said Michèle
S. Delisfort,
principal and
managing
partner of the
Nishuane Group, a planning firm, and a Union Township committee member. “You won’t have the nuisance or the NIMBY issues, so if municipalities are a little bit more proactive about if, when and where they want to put the zones, that would probably mitigate some of these issues.” RE
REALESTATENJTM 11
Matthew Schiller
Michael McQueeny
McQueeny, a New York-based attorney with Foley Hoag LLP. “I think we’ll see that play out in the next six to nine months in particular.”
McQueeny, a counsel in the firm’s national cannabis practice, was among the panelists in a recent webinar hosted by the Urban Land Institute’s Northern New Jersey chapter. He lamented the reality that “we’re going to have a lot of orphan licenses, in the sense that I think a lot of them will get that initial conditional approval and then ... end up falling off a cliff after that 120 days.”
Other panelists suggested that one of New Jersey’s biggest assets — its access to the prized consumer bases of New York City, Philadelphia and its own state — could challenge the growth of the cannabis industry in a
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