RG 147 – The Green Rush: Investing in Cannabis Real Estate with Nate Whigham
Nuts and bolts
This interview with Nate Whigham took place at the Intelligent Investor Real Estate Conference in Marina Del Rey.
Nate is a commercial real estate mortgage broker who works on debt equity placement across all property types and capital stacks. Nate has financed several cannabis real estate deals which were loans for operators or for investors that are acquiring assets to lease to cannabis tenants. In the majority of US states there is some form of legalised cannabis whether it be medical or recreational although it’s still federally illegal. For a real estate investor, you don’t touch the plant so your primary risk will be federal asset forfeiture. There is a small amount of federal protection in the form of a budget memo that limits the government’s ability to spend money out of the budget prosecuting medically licensed cannabis operations in states that have a robust market.
As cannabis is federally illegal you can’t go to a federal lender to finance the real estate so the options are un-leveraged private money funds or family offices. Wealthy individuals are underwriting against the risk that the cannabis might be forfeited and so you can demand a premium on the rent at about 2/3 times the normal rate. Nate recommends that an investor looks at licensing requirements for the city they want to invest in as there are different requirements everywhere. In California you have to get a state and a local license which is different for each city. Each municipality will have different requirements. The tenant holds the license, not you, so you need to vet the tenant properly to check that can get and hold the license and afford rent.