Denver-based AmeriCann Inc. acquired a 53-acre site in Freetown for $4.475 million, where it intends to install a large marijuana cultivation facility. AmeriCann plans to build a 977,000-square-foot growing facility on the vacant Campanelli Drive parcel, previously owned by Boston Beer Co.
Retailers typically look for locations with plenty of foot traffic, good highway access and convenient public transit connections.
Toss those considerations out the window when looking for a marijuana dispensary site, says Kris Krane, whose Roslindale consulting company 4Front Ventures advises the rapidly-evolving cannabis industry.
“Finding a landlord that’s willing to site this on their property can be a challenge,” Krane said.
“You may be fairly restricted in the number of properties that are usable within the zoning, and a smaller subset of landlords who are willing to take the call. It’s unique to this industry compared to most.”
Massachusetts voters next week will decide whether to legalize recreational marijuana. Under ballot question 4, every city or town could get one marijuana dispensary for every five existing liquor stores beginning in January 2018. With nearly 3,000 package stores statewide, that would open the door for nearly 600 dispensaries, although a maximum of 75 could open in the first year.
The ballot question sets up a three-member state Cannabis Control Commission which would oversee licensing, with existing medical marijuana dispensaries given preference until January 2018. Subsequently, licenses would be issued by lottery.
Communities would retain control of location, hours and signage. They also could ban or restrict the number of recreational dispensaries through a ballot question at a biannual state election.
Massachusetts already has had a dry run in the form of the nascent medical marijuana sector. Just eight dispensaries have opened statewide since 2012, when Bay State voters approved a ballot question legalizing medical marijuana. Setting up the state licensing framework and local permitting reviews delayed the first dispensaries from getting up and running until mid-2015. A maximum of 35 are allowed statewide.
Massachusetts’ requirement that dispensaries receive letters of support or non-opposition from local authorities is one of the biggest hurdles in the Bay State’s siting process, said Krane, who’s worked with clients in 38 states including eight in Massachusetts.
“That’s a pretty challenging factor for applicants here that they have not had to face in other states,” he said.
State regulations also ban dispensaries within 500 feet of a school, daycare center or other facility where children gather.
But navigating the permitting process can pale in comparison with finding a commercial property for a dispensary.
Multiple Applicants Compete For Prime Sites
The shortage of good sites is reflected in a hodgepodge of locations where dispensaries have been proposed or opened since 2015, ranging from a former Massachusetts Lottery office in Fairhaven to a former Cumberland Farms store in Grafton.
So rare are good sites that it’s not unusual for multiple applicants to be vying for the same storefront, Krane said.
The process is playing out in Somerville, where Mayor Joseph Curtatone recently announced his support for four medical marijuana dispensaries. In announcing his decision, Curtatone cited the city’s overwhelming support for medical marijuana, with 73 percent of voters backing the 2012 ballot question.
Somerville committed to awarding up to two dispensaries each in Davis Square, Union Square and East Somerville, Director of Planning George Proakis said. Applicants were scored on factors ranging from the quality of their team and plans to the appropriateness of the site. The city recently submitted letters of non-opposition for two sites in Davis Square, one in Union Square and one in the East Broadway business district.
Two applicants sought to open in a former tax preparation office at 304 Somerville Ave. in Union Square. Four dispensaries submitted applications for the same storefront at 245 Elm St. in Davis Square, currently occupied by a Family Dollar store and owned by Dana Family Realty Trust of Newton.
In Grafton, a company previously known as Milford Medicinals signed a letter of intent in November 2015 for a 3,000-square-foot dispensary in a former Cumberland Farms storefront at 206 Worcester St. The five-year lease called for payments of $66,000 annually, with 2.5 percent annual increases. The company dropped its plans in June amid neighborhood opposition. Since renamed Sage Cannabis, it’s pursuing locations in Cambridge, Needham and Davis Square.
In Bridgewater, Stephen Werther has agreed to buy a 7.7-acre parcel at 396 Elm St. for a combined cultivation site and dispensary. Werther is partnering with Alternative Compassion Services on the dispensary. The purchase price for the property, including an 18,400-square-foot industrial building, is $1.05 million.
The Scituate resident said he focused on Bridgewater because town officials indicated they would support medical marijuana facilities, and looked for available properties in the town.
“They said they would offer us a letter of non-opposition and I immediately called the broker and said, ‘Is that building still available?’” he said.
Seeing Risk And Dollar Signs
With marijuana still classified as a Schedule 1 drug by the federal Controlled Substances Act, many landlords remain wary of asset forfeiture risk, said Paul Bauer, real estate and environmental practice area leader at Bowditch & Dewey LLP in Boston.
“These deals are laden with opportunities but fraught with peril,” Bauer said. “There’s a great value proposition, in that the leases tend to be above-market to some degree.”
Multitenant strip malls tend to be poor locations for dispensaries, because of lease restrictions and fear of diminishing the value of the property, Bauer said.
“You’re going to see these in standalone buildings or ones with a couple of other tenants. You wouldn’t want to get that premium in rent, but have it reduce the value of your property or reduce your ability to lease to other tenants,” he said.
It’s not uncommon for landlords to demand 1 to 2 percent of a dispensary’s gross revenues and other multipliers tied to the performance of the business, 4Front Ventures’ Krane said.
“It’s pretty rare to see a lease that’s market rate,” he said. “We do often see these types of bidding wars where you go into a municipality where there’s only a handful of (suitable) properties. A landlord may see dollar signs.”
