Feature: Steph Smith Talks Cannabis Real Estate
Steph Smith is California’s largest landlord to the cannabis industry. Her firm, Industrial Partners Group, develops and leases to cannabis growers, distributors, retail stores, testing labs, and product manufacturers. Smith’s portfolio includes multi family, single family, retail, office, industrial and agricultural land.Stephanie Smith lives in Pacific Palisades, California.
How did you get into leasing to cannabis industry?
In 2008 I was having trouble leasing up an old pawn shop in Los Angeles because it didn’t have parking. A friend asked to use it to grow cannabis. When he retired I put the space on Craigslist and bidding war broke out. I had it leased to another cannabis grower in less than 45 minutes for twice my asking rate. I knew in that instant that cannabis was an underserved market.
How has your business changed since recreational marijuana became legal last year?
The legalization of recreational cannabis brought about a boom in leasing and development. For the first time, the cannabis industry had confidence that the government would support their growth and so investors deployed development money.As a landlord, having clear regulations let me move ahead with everything from new cannabis development projects to evictions of groups that were unable to move forward with full licensure.
How have things changed in terms of demand for cannabis-manufacturing industrial space in the past year?
We’ve seen a dramatic jump in the space requirements from the industry, especially manufacturing and processing. We have a 10,000 ft minimum for leasing cannabis space and that minimum was a big issue for manufacturers prior to 2018. Now it’s not an issue at all.
What’s the best way to deal with conservative NIMBY’s who don’t want any cannabis business permits issued in their neighborhood?
Thankfully, this just isn’t much of an issue any more. The same folks who were freaked out about a dispensary within 10 miles of their house now want the jobs and investment that cannabis brings. Legalization happened because too many people knew someone whose life was saved by cannabis. Cannabis NIMBY’s are dying out for a similar reason: too many people know someone who started a cannabis business or works in cannabis.
How does financing work with cannabis related properties?
It’s sometimes hard to remember that federally cannabis is still illegal. This inconsistency between State and Federal law simplifies cannabis real estate financing: private money or all cash. No traditional bank financing, no SBA loans, no VA loans are allowed.
What’s the number one piece of advice you give a real estate investor about the cannabis industry?
Do your homework and work with a real estate attorney. While legal marijuana is for sale on nearly every block, complete laws and regulations have yet to be written. I think most people think that because shops are open that the laws are set, but this is far from the case. Land use entitlements are usually the last thing lawmakers codify.
