In the United States, the use and possession of cannabis is illegal under federal law. At the state level, however, policies regarding medical and recreational use of cannabis vary greatly, and in many states, policies conflict significantly with federal law. The medical use of cannabis is legal (with a doctor’s recommendation) in 33 states and the recreational use of cannabis is legal in 10 states. Under the Controlled Substances Act, cannabis is placed in the strictest Schedule I category, alongside heroin and LSD. Recent efforts to place cannabis in a less-restrictive category have not succeeded.
With the legalization of medical and recreational use in many states, sales of cannabis to the public through storefronts are growing. As more cannabis sellers seek space, the demand creates a concern for landlords, including the ability to finance the property and whether cannabis tenants can create a default under existing loans.
Often commercial mortgage loans contain language allowing the mortgagee/lender to call the loan due if the property is being used to conduct “illegal activity.” Remember, use and possession of cannabis is illegal under federal law. So banks will not make loans on properties with cannabis tenants.
But CMBS loans from “non-bank” CMBS lenders are available for commercial properties with cannabis tenants. The only criteria are the tenant activity needs to be legal in the state and the tenant must be underwritten as “vacant.” If the proposed loan otherwise meets debt-service coverage and debt yield requirements, we have a deal!
If you have a property with a cannabis tenant and want a fixed-rate CMBS conduit loan, contact Mike Sneden at email@example.com, Dennis Suh at firstname.lastname@example.org Gary Unkel at email@example.com.