CONSIDERATIONS AND PLANNING FOR INDOOR SUCCESS

Story by Cassandra Dowell

CULTIVATORS NEED TO do much more than just achieve the proper nutrient mix and ideal amount of light as California’s cannabis industry emerges from the gray area and enters a state of legitimacy starting Jan. 1st with the roll-out of adult-use legislation and stricter medical cannabis rules. The cultivators best able to absorb the barrage of new rules and more easily adapt will find themselves on track to participate in the state’s new regulatory environment. Of course, the new regulations do not change the biology of the cannabis plant or the science behind how it grows, yet growing cannabis will never be quite the same.

One major question that must be answered before a single seed is planted: where to locate? For most traditional businesses, this is a fairly simple matter, as business owners typically have the luxury of picking the best space based on location, functionality, and cost. But, because of the strict zoning rules placed on the cannabis industry, choices are much more limited. Many cities and counties have already passed zoning ordinances completely banning all cannabis operations. Even in cities that allow cannabis, there are often numerous restrictions and permit fees that may not be sustainable. If an ideal space is not already approved for cannabis usage, working with local officials to make zoning changes can be a very long, expensive process, and there are no guarantees of success. Finally, cannabis operations have some unique utility requirements with regards to power and water, particularly when contemplating an indoor grow. Upgrading utilities can be very expensive, and as in some remote locations, may not even be possible.

So how is the average grower supposed to navigate these complicated decisions? One new company was recently founded with the sole purpose of providing cannabis business owners a fast, easy, and cost effective solution to their real estate dilemma. Canna-Hub, founded by cannabis industry veteran Tim McGraw, has already done the heavy lifting of finding cannabis- appropriate spaces with the required infrastructure, while working with local authorities to pass flexible zoning ordinances with sustainable permit fees. And these are not isolated properties that will become the subject of bidding wars only won by the grower with the most money. The Canna-Hub sites are being developed into cannabis business parks that will be considered home to dozens of operators, each of whom will recognize real cost saving synergies as they grow and become a part of a cannabis business community.

For those that prefer the challenge of a hunt over the convenience of a one-stop shop like Canna-Hub, here are some of the basic matters that must be addressed:

• You must have your permit before filing an application – Documented proof of a local permit is required to be included with the state license application. Just because you may have an existing business that was permitted for growing prior to the new regulations does not necessarily mean that permit will be acceptable for your state application. No permit means no license.

• Special zoning is required – Your local city or county government must have passed a special ordinance that allows for cannabis operations on the desired property. This information can usually be found by searching the local city or county government’s website or meeting directly with local planning directors. It is possible to lobby local governments to pass new cannabis zoning ordinances or to amend existing ones to accommodate your needs, but this is a long and potentially expensive process offering no guarantees.

• The fine print – Even with an approved zoning ordinance, the devil is always in the details. Not all license types are necessarily included and there may be burdensome rules written into the ordinance, such as minimum hiring requirements from the local jurisdiction. It is important to review the ordinance carefully to make sure you understand every requirement before committing to any property.

• Local fees and taxes – Perhaps the most important information to consider is the fee structure imposed on cannabis businesses by your host city or county. Local permit fees are usually based upon square footage or revenue, and often times both. These are not one-time start-up fees, but actually recurring fees payable each and every year, so it is absolutely vital that these are included in the overall assessment of budgeted operating costs and they must be sustainable given your expected revenues.

• Utilities and Infrastructure – As it relates to any specific property, key utilities such as power and water supply must be assessed to make sure it can support your business. Upgrades can be very expensive, and in some cases, particularly in more remote areas, may not even be possible. Other questions related to infrastructure should be addressed, such as the quality of the HVAC system and whether the building is up to code for a cannabis operation.

The list is daunting and the margin for error is slim, as even the most minor mistake can put your business at risk either legally or financially. For those that want to stick to what they do best, companies like Canna-Hub are there and ready to help.

“As an experienced real estate developer and a former licensed operator who has designed and built specialized cannabis facilities, I am very familiar with everything that goes into finding a suitable property and the entitlement process,” McGraw said. “Operators can get into a Canna- Hub facility quickly because the permitting process is already in place, and our scale enables our host cities to offer the lowest permit fees in the state. The entitlement process is now a critical part of the cannabis business, but it is something that growers should not have to worry about.”

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