Cannabis Makes Financing a Challenge for Property Owners

Investment Property Capital recently arranged a loan for a mixed use property in San Francisco 100% occupied by a cannabis dispensary. The property consists of two ground floor commercial units, both occupied by the dispensary, and a residential flat above where the business owner lives.

Despite the $2,000,000 value of the property and the relatively small loan amount of only $400,000, both the optics and legality of lending on a property with a cannabis-related business are insurmountable for 99.9% of all banks, and most private lenders too.

Although an MRB (Marijuana Related Business) such as a dispensary, grow operation, warehouse, or volatile compound manufacture may be a legal permitted use according local laws, it is still prohibited by federal law and therefore only a handful of lenders are actively lending in the space. Additionally, if a borrower’s personal income is only partly derived from a MRB, most lenders will Just Say No.

At IPC, we have a wide network of trusted resources who are willing to study an issue deeply, and take informed action and develop lending products when others will not. For example, Mark Skolnick, Broker at IPC, was instrumental in developing fractional TIC products when TICs for home ownership was relatively new.

Today the leading edge for the real estate finance industry is in lending on properties with an MRB (also ‘CRB’ for a Cannabis-Related Business). We are currently working with two particular banks and several private several investments funds, both looking for MRB lending opportunities. One of the banks will provide a 10 year loan amortized over 25 years priced at Prime + 1.50 – 2.00%. One of the private funds will lend at rates from 9% – 11% with loan amounts up to $40,000,000.

Please call us at 415-893-9321 if we can be of service to you with our creative, out-of-the box approach to real estate finance.