We combined resources with the Hartford Chapter of REFA for a very well-attended event on April 30th entitled, “Cannabis and the Effects on the Real Estate Industry in Connecticut and Massachusetts.” Melissa Ferrucci, a board member of both organizations, helped organize the panel of professionals who have been actively involved in the industry, which in Connecticut, is legal for the growing and distribution of medical marijuana. Derek Ezovski, President of Outsourced Risk Management Solutions, LLC and REFA moderated the panelists, Daniel S. Glissman, Esq. who provides legal services to the industry, Angelo DeFazio, RPh, a pharmacy owner who is a partner in both the growing and dispensary side of the business, and Kevin Michaelan, CPA, of CohnReznick, who provides tax and advisory services to the marketplace.
Cannabis + Real Estate
Land use and real estate are critical factors in the cannabis business due to a myriad of regulations and approval bodies found in every town, including planning and zoning, board of health, and town council. In Connecticut, location and real estate must be identified in the application process. As for space, retail facilities for dispensing cannabis products are similar in size to a jewelry store or pharmacy of 2,000-6,000 square feet while customized facilities for growing, harvesting, and warehousing cannabis products require a lot of real estate and many facilities are located in former industrial buildings. There are unique requirements for the space including high ceilings and proper ventilation. Some facilities around the country exceed 100,000 square feet in size.
Medical marijuana dispensaries in Connecticut were first approved by state lawmakers in 2012 and are overseen by the Department of Consumer Protection (DCP). Mr. DeFazio spoke from his perspective as a pharmacist and licensee of three dispensaries for Arrow Alternative Care. He indicated that Connecticut’s approach to licensing has been thoughtful and methodical and is a respected model around the country. The application process for licenses is rigorous and in high demand. For instance, there were 75 applications for the last 9 dispensary licenses awarded.
In Connecticut, physicians must certify that patients have a condition that would benefit by use of medical marijuana; pharmacists write the prescriptions. These conditions are highly regulated by the DCP and the list of conditions has continued to expand.
Attorney Glissman has been active in both Massachusetts and Connecticut and an advisor nationally. Real estate appropriate for the specific parameters to grow, harvest, and warehouse the products and navigating through the myriad of local zoning regulations has been a focus of his practice. In Massachusetts, some grow houses are up to 100,000 square feet; some in Connecticut are 70,000 square feet in size, many located in former industrial buildings.
On the retail side, locations similar to a jewelry store or pharmacy and space from 2,000-6,000 square feet is typical. Traffic, parking, ventilation and security are major factors in siting a retail location.
Financing is a part of tax accountant Michaelan’s practice and he has been working around the country. Growing cannabis is expensive, with cultivation a capital intensive part of the business with costs of $350,000-400,000 to build a facility. He indicates that only seven national banks will finance the cannabis business currently. He believes that this will change over time. There is a lot of private money now and REITS are starting to get into the action. Traditional banks can finance like any real estate development up until the time they start the business, then many people go out to state chartered banks or credit unions.
What’s next in Connecticut?
There is a growing discussion about approvals for recreational marijuana usage in Connecticut with large support from the public, Governor Ned Lamont and many elected representatives. Most agreed that approvals will come within a year, further expanding the demand for real estate in our state.