Opening: "I'm Laura Munoz and welcome to Let's Talk Commercial Real Estate a newly created video blog covering topics of interest for commercial brokers and borrowers sponsored by American Life Financial. We'll be chatting with members of the real estate community asking them questions that you use submit on social media."
Laura Munoz: "I'm Laura Munoz and welcome back to let's talk commercial real estate today we have Richard Graves he is the president of Commercial Mortgage Consultants, Richard welcome to the show."
Richard Graves: "Thank you for having me."
Laura Munoz: "You're welcome. You're coming in from Florida."
Richard Graves: "Sarasota Florida that's right."
Laura Munoz: "that's wonderful, well we have a very hot topic in this business and that is cannabis properties I understand you have some experience in cannabis properties and come share with us"
Richard Graves: "Yeah it's been a hot topic for about 10 years and we've been doing now loans on cannabis since actually before it was legalized, when we were in Colorado so a little over 10 years ago."
Laura Munoz: "So you started in Colorado and you moved to Florida?"
Richard Graves: "Correct."
Laura Munoz: "Yeah alright so tell us a little bit about the marijuana landscape as far as commercial lending"
Richard Graves: "Well you know marijuana is well it's legalized in 33 States for medical but the recreational is a handful of states and I really believe that a lot of the states are going to not continue with the recreational but the medical is here to stay and even though it's illegal in some states and a lot of lenders and banks can't lend on it because they're between regulations etc that it's still a hot topic for private money and for lenders that don't have to answer to the banks and the regulations because there's some great loans out there some low loan to values and some great returns on investment most marijuana loans return double-digit rates."
Laura Munoz: "Wow"
Richard Graves: "So, most investors are very happy with that kind of return on investment."
Laura Munoz: "They're returning double-digit rates because they're hard to get …"
Richard Graves: "Because it's supply and demand."
Laura Munoz: "Okay, so the government has not approved medical marijuana legally, Federally, so is that risky for you as a lender?"
Richard Graves: "Well there is and some of the risk is on Title. Title insurance is very hard to get on a lot of these properties some states, it's a like Oregon, we can't get Title insurance at all under one the properties right now but because of the carve-outs that they put in the Title insurance that if it's seized by the government if the government comes in because it's illegal, they can come in and take the property under the RICO Act so a lot of lenders won't touch it."
Laura Munoz: "How do you value a marijuana property?"
Richard Graves: "Well that's an interesting question because when you value a proper commercial property on the income approach obviously you go off the leases but the way we value our Marijuana properties is off market rents because typically the marijuana leases are inflated 150 to 200 percent of market rate so you have to take market rate and they also have to take market vacancies quite frankly a lot of the marijuana properties that come in with appraisals are one and a half to two times the value they would be if they were just rented as a warehouse or as a light industrial property."
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Richard Graves, President of Commercial Mortgage Consultants, Inc., speaks on the growing cannabis market and how it affects the Commercial Real Estate and lenders.