With Initiative 65 approved in Mississippi, it is time for business participants planning to enter the market in cultivating, processing, testing and retail to begin the process of evaluating and securing commercial real estate. Below we will summarize some of the factors and key points to consider during your search for property that will help position you to be successful.
What zoning classifications fit your intended use?
Initiative 65 outlines that zoning restrictions applicable to medical marijuana businesses involved in cultivating and processing cannot be more restrictive than other lawful commercial or industrial businesses. That being said, restrictions will vary depending on jurisdiction. It is our assumption that the safest zoning classifications for cultivation and processing would be I-2 (Heavy Industrial, I-1 (Light Industrial), TIP (Technical Industrial Park) and Agricultural (for cultivation only.)
Regulations on dispensaries cannot be any more restrictive than that of a licensed retail pharmacy.
It needs to be noted that no medical marijuana business can be located within five hundred (500) feet of an existing school, church or childcare center.
What impacts can Initiative 65 have on the local real estate market?
Cannabis is still an emerging niche in real estate. States where medical or recreational marijuana has been legalized for three (3) years or more have seen greater increases in demand for commercial properties. In states where prescription marijuana is legal, 19% of commercial members reported an increase in demand in warehouses, 18% in storefronts, and 15% in land. If all goes as planned, Mississippi should see an extreme uptick in positive absorption for industrial warehouse space over the next year increasing the occupancy rate eventually inflating rental rates.
Lease or own?
If you’re looking to borrow money to purchase a building for a cannabis related use, it could be problematic obtaining financing due to federal law. While Initiative 65 is state legislation, most title companies are unable to provide insurance and escrow services for cannabis related property transactions, due to the fact that they run afoul with several federal legislations. At this early stage of the process, it could be most beneficial for companies to consider a long-term lease for their operation. From a property owners perspective, a lease cannot completely cut off owners from liability, but there are clauses that may serve to limit it. Generally, commercial leases designed to service cannabis businesses includes language that list things like federal intervention, forfeiture threats, changes in federal enforcement policy, and enforcement actions as lease violation-constituting defaults. These clauses let an owner escape the lease if it is proving too risky
Regulatory Uncertainty
It is important to know that due to the infancy of this legislation, there is a large amount of uncertainty out there. We recommend that you use the services of a law firm that understands the complexities and differences between applicable state and federal law to help advise you on how to enter these markets.
Please contact B.B. Mitchell at 601.586.3220 for more information.