When the owners of Plantae Health wanted to open a medical marijuana dispensary in Bend, their third in Central Oregon, they looked at dozens of possible locations.
“I spent a lot of time and had a lot of people look for a place,” said Andrew Anderson, co-owner with his wife, Jocelyn, of Plantae Health, which operates dispensaries in Madras and Prineville . “We’ve been looking since last November, and we’ve seen a lot of unreasonable prices.”
Opening a marijuana-related business continues to be difficult for those in the industry due to a conflict between state and federal laws that affects nearly every step, from location to leasing to withholding employee taxes.
Oregon voters legalized commerce in marijuana within the state when they legalized recreational marijuana with Measure 91 in November 2014. Yet, the U.S. Controlled Substances Act labels marijuana a dangerous, illegal drug, without medical benefits.
Since Jan. 4, the Oregon Liquor Control Commission has accepted 17 license applications from prospective marijuana businesses in Deschutes County. The number of applicants from Bend was not immediately available, although Mark Pettinger, spokesman for the OLCC recreational marijuana program, said no licenses have been issued yet. Of 19 existing medical marijuana dispensaries in Bend, only one does not sell recreational marijuana.
At least 11 applicants, some of them existing businesses, have filed paperwork with the city indicating they plan on opening a retail marijuana dispensary, an indoor marijuana farm or a facility to process marijuana or produce edible marijuana products.
A stigma still attaches to the marijuana business. Of four applicants or their representatives contacted for this article, two agreed to speak. Two declined, one saying he didn’t wish to jeopardize a lease before it was finalized; the fourth, a lawyer for a license applicant, said he did not wish to attract attention to the firm by speaking on the record.
Some existing medical marijuana businesses found financing from private investors, friends or family; others found willing owners to lease property or bought property outright. Working with banks and real estate brokers in Bend has been difficult, business owners have said.
While the U.S. Justice Department under the Obama administration issued guidelines that allow banks and related businesses to do business with the marijuana sector, those guidelines do not have the force of law and could be reversed in the next presidential administration.
Most bankers say the expense of complying with those guidelines, and uncertainty over the federal approach to legal marijuana in Oregon, prompt them to hold those businesses at arm’s length.
“It is a cash industry right now,” said Kevin Christiansen, government affairs director for the Oregon Bankers Association. “Most folks don’t have access to payment systems; they’re not allowed or able to open accounts. There are a few exceptions here and there, but by and large, I think most financial institutions have purposely shied away from getting involved in this particular space.”
And it’s not just the financial sector. The reluctance of bankers to open accounts, lend money and provide other services to marijuana businesses extends to real estate brokers, insurance providers and title and escrow companies.
“Looking at the law as it’s presently stated, it’s just fraught with huge risks,” said David Criswell, a managing partner at the Ball Janik law firm. “If you’re a regulated institution, you’re talking about things like losing your charter, losing deposit insurance, being prosecuted criminally, individual (bank) officers being prosecuted, a parade of horribles.”
Criswell, Christiansen and Pat Kesgard, president of Compass Commercial Real Estate Services, Bend, spoke Thursday at a panel discussion on marijuana, banking and real estate hosted by the Risk Management Association, East Cascades Chapter. Kesgard repeated the stance his firm has taken, a position he’s made clear at previous public forums.
“My advice was, don’t do leases, don’t get involved in representing landlords, tenants, whatever, in this industry,” he said Thursday during the discussion at the Bend Golf and Country Club. “It it is fraught with problems. The liabilities don’t just stop with the Realtors.”
In Bend, city officials treat applications for businesses that would grow or process marijuana as they would any other business, said Colin Stephens, planning manager for the Community Development Department. Recreational marijuana shops and medical marijuana dispensaries are the exception, he said. They may not be located with 1,000 feet of one another or a school, according to state law, or within 150 feet of a day care center or public park, according to city law.
So far, only medical marijuana shops may sell small amounts of recreational marijuana to any member of the public age 21 or over. Licenses for recreational marijuana shops, regulated by the OLCC, are expected later this year. House Bill 4094, passed by the Legislature but still awaiting Gov. Kate Brown’s signature, would lift prohibitions in state law against financial transactions involving marijuana. It does not affect federal law affecting banks, however, under which most banks operate. Another bill, Senate Bill 1511, if signed by Brown, would allow recreational dispensaries to sell medical marijuana.
Some tenants in the marijuana business attempt to cloak their activities behind some other front, or simply don’t tell the truth about what their doing, Kesgard said. That has led to eviction in several cases, Kesgard said.
“We try to put in every lease a provision that if you engage in any industry related to marijuana, you’re in default of your lease,” Kesgard said.
Not all averse
Not every property owner or real estate broker is averse to dealing with marijuana businesses, as the Andersons discovered. They located a property on Bend’s east side that met city code and belonged free and clear to a willing owner, Kruse Properties LLC, of Fort Rock. Mike Hoover, principal broker with Partners Property Managers & Sales, in Bend, which represents Kruse, said the Andersons met several benchmarks: a track record running similar businesses, solid financial backing and a reasonable business plan.
The owner of Kruse Properties, after the Andersons approached him, visited the Madras location and came away “so amazingly impressed that it gave him that next level of comfort that the decision was OK,” Hoover said.
He said the existing tenants in the property, a strip center at 2115 NE U.S. Highway 20, were approached about having a dispensary as a neighbor.
“Some didn’t care at all,” Hoover said. “Some had mild concerns and would ask questions about the types of clients, foot traffic, loitering, what would happen if there were problems.”
And the Andersons also pay a higher lease rate to cover the higher insurance costs that the property owner incurred by leasing to them, Hoover said. He said the property owner considered the amount of traffic and type of clientele the dispensary would attract, among other questions, before agreeing to lease the Andersons the property. Hoover declined to identify his client, but Oregon records indicate Kenneth Kruse is the manager of the firm.
Jocelyn Anderson said she and her husband are transparent about their businesses. In Madras, for example, they invited members of the Madras-Jefferson County Chamber of Commerce for a tour of their dispensary in October.
“We would always prefer to be upfront,” she said Wednesday. “Generally, when we show what our other stores look like, people are a lot more comfortable.”
Hoover said he’s received numerous inquiries about commercial property since recreational marijuana became legal in Oregon. But most would-be marijuana business owners cannot meet the criteria set by banks, real estate brokers and property owners. The Andersons may end up his only clients in the marijuana business, he said.
“If I were asked to represent somebody and go out and find it (again), there would be a lot of difficulties. Probably what has already happened is the people that are looking for those locations are doing the heavy lifting themselves,” Hoover said. “It’s pretty time consuming, especially in Bend, where the (economic) recovery is going so well and we don’t have very many vacancies.”
— Reporter: 541-617-7815, email@example.com