By Holly Dutton
Medical marijuana is poised to become a player in New York City real estate, though an obstacle course of restrictions stands in its way.
Twenty-three states in the U.S. and the District of Columbia have passed medical marijuana laws, but not all collect sales tax. In some states, the programs have yet to fully launch, or estimates of tax revenue have not yet been created.
New York became the 23rd state to pass a medical marijuana law in July of last year.
The state’s Health Department will soon be issuing its final regulations regarding the new program, and so far the law is much more restrictive than other states. Among the restrictions are that the state will initially allow only 20 dispensaries across the state, run by five organizations, the drug cannot be smoked, and only 10 conditions will qualify for medical use of marijuana.
Derek Peterson is the CEO of Terra Tech, a publicly traded marijuana company based in based in southern California. The firm recently applied for and won eight marijuana business licenses in Nevada, and is planning to apply for a license in New York.
Peterson’s firm is waiting for New York’s final regulations to be released, then his company will look at the zoning restrictions and begin to close on its real estate needs.
“We have a pretty good idea what it’s going to look like,” he said. The company’s strategy is to put together a short list of available properties, usually in industrially-zoned areas.
“When the laws are passed, so many people are competing and there’s such an intense scramble because sometimes the zoning is extremely restrictive and hard to find, and a lot of people are chasing a very small footprint,” said Peterson.
Terra Tech is looking to build out and acquire four dispensaries in New York City, and a production facility somewhere in central New York.
Dispensaries will be retail locations “similar to a coffee shop” that the firm will look to have a location with strong density and traffic, though there will be the challenge of making sure the locations are a certain distance from public parks and schools.
Locations the company is looking at include Manhattan, Brooklyn, Syracuse and other upstate locations.
Peterson said landlords and building owners were a lot more hesitant about working with medical marijuana companies last year. “They were really concerned about federal forfeiture and the Justice Department sending out letters to landlords threatening to take their properties,” he said.
Concerns were eased after President Obama came out in support of state regulation, and more bipartisan support in Congress over medical marijuana laws. Peterson’s firm has already been talking to landlords in Manhattan and hopes to do a lease option – where they lease with the option to buy, which gives them favorable lease rates while they go for permits.
“Some of that fear has dissipated, but there are a lot of buildings owners and landlords that don’t want that use,” said Peterson.
But Terra Tech isn’t just about marijuana. The company operates grows organic produce like butter lettuce and kale, and sells the goods to supermarkets. Peterson started Terra Tech in 2010, and took the company public in 2012.
Medical marijuana tax revenue rakes in between $59 to $109 million a year in California, where the sales tax is 8.4 percent, while in Colorado, that number is $6 million, with a sales tax of 2.9 percent.
“Some years ago, we started incorporating into medical marijuana and saw it was growing, no pun intended,” said Peterson. “Fast forward to today, we have a medical cannabis division and we secure permits for marijuana operations.”