How to Manage Risks in the Cannabis Industry

It is no secret that the cannabis industry has a lot of associated risks that business owners need to be able to preempt and take the necessary steps to protect themselves from. There are different types of risks that should be evaluated in order to ensure your business thrives. Here are a few types of risk and how you can protect your business from them.

General Liability

A cannabis business is not much different than any other business when it comes to operation risk– Liability insurance (also known as Commercial General Business Liability) protects a company’s assets and pays for obligations – medical costs, for example –incurred if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees and is a good starting point for insurance for any business (not just cannabis business).

Legal and Statutory Risks

These are the most common risks that your cannabis business can be exposed to. There are numerous rules and regulations that guide the conduct of business in the industry. It does not help that each state in the country has their own specific laws too. Therefore, it goes without saying that you should be interested in protecting your business from these risks. A good way to do this is to seek for help from professionals who understand the industry and will be able to provide solutions that best suit your business. You can hire compliance officers to help you manage these risks. They will also handle the policies of your company more efficiently especially because they have the needed knowledge and they will also be able to look at your company’s situation from an objective perspective, thereby ensuring that there are no oversights due to any form of bias.

Contractual Risks

These involves risks due to contracts that may include local zoning laws, land ownership disputes and these risks are also common. Contracts usually contain a lot of complicated legal jargon that can be properly interpreted by a competent legal counsel. It is best that you seek extra help from a local licensed attorney even though it may be expensive. However, you should view it as an investment that will be beneficial in the long run. Additionally, an attorney will be able to help you write your risk management policies and they will also scrutinize every contract to ensure that the interest of your company is protected at all times. They will also help you establish the standard operating procedures with respect to the content of the contract, access to the contract, authority to modify contract and of course, termination of contract.

Reputational Risk

The public’s perception of your company is as important as what your company does, or even more important in some situations. In today’s world, the power of social media should not be underestimated especially because any corporate decision, actions or decisions can become public knowledge within minutes. It is therefore important that companies strive to maintain a good public image and avoid any risks posed by a bad reputation. It is advisable that you enforce strong corporate values and ensure that your employees believe and adopt them as well. In addition, it is important that you scrutinize every step of your production and supply chain for possible risks to your reputation and formulate strategies that will be used to eliminate or reduce them.

Product liability

This is one of the most important risks that a cannabis business will have to deal with. The provisions of the law regarding product liability varies from state to state, but the implications are generally the same thing. The law holds the producers, retailers and distributors accountable for any product liability. It cites strict liability, oversight, implied or express warranties and falsification or misrepresentation of concepts. This is a huge cause for concern among retailers and it results in them mounting pressure on the producers to improve on and maintain the quality of their products. Product liability is quite expensive and it is estimated that damage awards could be up to $350,000. This liability is most important for products that are ingested like edible products. The good news is that there are several ways by which you can reduce the risks of product liability.

Comprehensive Documentation

Documentation is one of the most important steps in ensuring your business has complete protection from the risks posed by product liability. With proper documentation, you can prove that your company followed all the good quality production guidelines, in the case of a lawsuit or even for inspections. Ensure that you have proper batch identification and also have informative labels on every product, bearing all the necessary information which include content, strength, date of manufacture, batch number, directions for use, storage advice and expiration date. It should also contain warnings where necessary and they should be clearly spelt out in a way that they can be easily understood. Proper documentation makes it easier to track a product in case of any problems down the line.

Take advantage of the product life cycle

Every product has a life cycle that has different stages which include pre-production, production, and post-production. When each of these stages are treated individually, it is a whole lot easier to figure out the different possible risks at each stage and how best to prevent them. It also makes it easier to improve on the quality of the product. This can be achieved by ensuring the design is flawless, the process is controlled and the products pass proper inspection tests before being released for consumption. Every step of the production process is subjected to routine inspections to ensure the final product meets all quality requirements.

Independent testing

It is advisable that every batch of your product should be inspected by a third party with no ties to your company that may result in bias. The aim of the testing is to ascertain the quality of the product and to ensure that the product is wholesome and free of contaminants and unwanted ingredients. After the results of the test have been obtained, it is also recommended that the test facility keep small samples of each tested batch for three months as “controlled” samples.

There are several other tips that would be helpful in protecting your business from the risks due to product liability. Your insurance provider will be able to provide more information. However, here are a few extra tips to help protect your business: Use a batch number for products in order to easily identify a lot that needs to be recalled

  • Use packaging that prevents tampering and preserves the quality of the product.
  • Make use of an efficient system that can capture patient information, product testing, and sample recall.
  • Ensure your retailers and vendors have their own insurance cover

In conclusion, the cannabis industry has a lot of risks, but by taking the necessary steps, you can preempt the risks and protect your business. With the right information and by securing experienced and professional help, your business will be better off for it in the long run.

November 19, 2017 / by / in
What Should You Look for in A Cannabis Insurance Agency?

%Cannabis Real Estate%420 InsuranceThe cannabis industry is a rapidly growing industry with very high stakes due to the fact that the potential for profit is high but the accompanying risk is also high. This stems from the nature of the product itself and the propensity for consumer claims to pile up just like they do with other consumable products. In the past few years, a lot of injury and product liability lawsuits have been filed against cannabis companies for a number of reasons, including the use of pesticides. Some of these cases were dismissed but others are still awaiting settlements and rulings and it does not look like this will end any time soon. With the growth in the industry, it is only rational that there is a possibility of an increase in the number of legal suits that will be brought against cannabis companies. It is therefore important that business owners take the needed steps to guarantee that they are sufficiently covered by their insurance policy. In addition to the fact that a good insurance cover would protect your business from the impact of risks, some states also demand that cultivators have an insurance cover.

Unlike regular insurance covers where you can just do a google search and you will be presented with a lot of options to choose from, purchasing a cannabis insurance is not that simple. This is due to the fact that there are a lot of restrictions and risks associated with the industry and only very few insurance companies have the capacity to handle the requirements. It is therefore crucial that business owners do their research in order to select the best insurance provider for their company. In this rapidly expanding but somewhat unstable industry, here are some of the things you should look for when selecting a cannabis insurance agency.

Experience

The legal waters of the cannabis industry require experience and knowledge of the industry in order to navigate it successfully; the insurance aspect is more or less the same thing. When choosing a provider, make sure they are very familiar with the workings of the system so as to ensure you get the best coverage possible. Working with an insurance agent who has no idea of how the cannabis industry works, the many intricacies, requirements and regulations, will leave you at risk of having the wrong coverage or one that does not sufficiently cover your business.

Experts are of the opinion that purchasing a cover from an industry that has dealings with the cannabis industry is the best option. This will ensure that you end up with a provider that understands your business, your peculiar business needs, the coverage types, the regulations of each state and the overall industry.

Specialization

When looking for an agency to provide your cannabis insurance cover, it is important that you go with a provider who specializes in the cannabis industry. This is not personal insurance where any insurance company who has their hands in many pies can offer you a cover that fits, it is the cannabis and it is easily one of the most complex and rapidly changing industries in America today. Therefore, do your research and find a provider who has proved themselves as specialists in the industry. Also, find out the states they have been practicing in so you will know if they are versed in the requirements of your own state. The extra knowledge and skill that comes with years of practice and specialization will be of added value to your business. This will ensure that you get the best advice possible and you can rest assured that your coverage will be comprehensive enough and you are completely protected from risks.

Extent of coverage

There is a simple rule that you can adopt when searching for the right cover for you and it goes something like this “if it isn’t all-inclusive and comprehensive, it isn’t for you.” The fact that there are several risks that your business will face cannot be overemphasized. Therefore, you should make sure that your insurance provider can offer you a robust cover that takes every part of your business into consideration. There are some packages that you should consider having in your insurance cover and these include:

  • General liability which covers any risks posed by the company itself or the employees. It also covers lawsuits brought against your business by third parties.
  • Cannabis product liability which provides protection in the case where a consumer uses your product and then claims to have adverse reactions due to your product.
  • Cannabis property coverage which provides protection in cases of damage to your business buildings or their contents due to theft or fire. This cover may also be expanded to include any extra expenses or loss of income that may arise due to the property damage.
  • Workers’ compensation
  • Cannabis crop insurance
  • Professional liability and
  • Excess liability

Your business has unique insurance needs and you will get the best deal with an insurance agent who understands your business and is willing to provide a fitting coverage for you.

Consistency

Having established that the cannabis industry is very unstable, it goes without saying that it is wise to have an insurance agency that will be there when you need them. Do some research on the history of the insurance partner you want to choose, make sure they are strong, have been around for a while and have a good history. This will ensure that you are going with a company that will likely be around for as long as you need them.

Dependability

Whatever company you decide to go with, it is important that you can trust them. So, find a company that inspires trust in you by their actions, response to enquiries, operational procedures and even their values. Ensure you ask all your probing questions and also look for recommendations from other people who they work with. This is a great way to begin establishing trust.

This is a very important aspect of your business, so take all the time you need, do your research and get answers to all the questions you have. Ensure you make the best decision for your company and you will be glad you did.

REQUEST A CANNABIS INSURANCE QUOTE TODAY

November 15, 2017 / by / in
Blazing Real Estate Demand Ignited by Cannabis

Unmarked warehouses are popping up across the country, and many individuals are unaware of what they house. In the past, these structures may have been home to a granite cutter, a screen printer, machine shop, or an industrial business of another type. However, today, they’re now home to many marijuana operations across the county.

The legalization of marijuana has upset many citizens, as it defies societal norms in the eyes of numerous people. On the other hand, the cannabis industry has become a source of tax revenue that has become extremely lucrative in recent years. But the cannabis industry has gone much further than this–it has significantly altered many real estate markets nationwide.

More than half of the states have now legalized the use of marijuana (medical or recreational), and this number only continues to grow. As a result, a growing number of structures are being repurposed specifically for the cultivation, processing, and sale of this substance. This includes self-storage facilities, factories, warehouses and strip malls in the suburbs.

Landlords are cashing-in as a result of this boom. The industry comes with some risks and landlords and property managers find they’re able to charge a premium for businesses wanting to partake in the cannabis and hemp industry.

What makes this real estate trend so unique is the fact that it is taking place in numerous parts of the country. The marijuana industry is changing the face of the market in diverse parts of the nation, transforming blighted areas into thriving neighborhoods and sending real estate property values skyrocketing. For certain Denver neighborhoods, the warehouse space average asking lease price has increased by greater than 50 percent in a five year period, and the city is now home to more retail pot stores than Starbucks in a stand-alone building. The ratio is actually five-to-one.

Investors are taking note of this boom in the real estate market as well. Innovative Industrial Properties, Inc. (NYSE:IIPR), a Real Estate Investment Trust (REIT) was set up for the purpose of acquiring and leasing warehouse space to marijuana cultivators and retailers.

One reason for the high demand for real estate devoted to the growth and sale of marijuana is the popularity of this substance—another is the lucrative retunes being made in the industry. In 2016, medical cannabis sales in the United States reached $6.7 billion dollars. ArcView Market Research predicts this figure will top $20 billion by 2021, thus as cannabis sales increase the need for facilities to cultivate and dispense cannabis will follow.

Some experts wonder if a new real estate bubble could be forming. Numerous landlords are converting old warehouses to structures suitable for the cultivation of cannabis at a rapid rate. The strong demand for cannabis properties has created opportunities for startups like 420 Property, which is a Zillow (NASDAQ:Z) like real estate marketplace specifically for cannabis properties, businesses, and professionals.

The experts, however, wonder if medical marijuana cultivators won’t turn to greenhouses to grow their crops, as this is a less expensive way to do so. Furthermore, as more states allow for the sale of cannabis, federal regulations may be loosened with regards to the transportation of this substance across state lines. Another concern is the federal government may find a way to impose regulations on this industry, and this could have a major impact on the industry and marijuana cultivators. However, businesses currently in the industry don’t appear to be worried about what could happen in the future. They are simply taking advantage of the boost in business and filling buildings that once sat empty.

Although Denver is a hot spot for those involved in the cultivation and sale of cannabis, this isn’t the only part of the country benefiting from these products. Investment firms are offering properties in California, Nevada, New York, Oregon, and many other areas.  420 Property has real estate business listings available in all 29 states that allow marijuana.

Before a property is converted, however, risks must be assessed. There is a great deal of capital needed for the tenant improvements needed to convert these buildings, and the cost to run the building once operational is extremely high. For example, powerful 1,000 watt lights are needed to grow marijuana, and this leads to high energy bills and a requirement for an enhanced electrical system. Furthermore, these buildings must be kept humid, which can bring about mold and mildew issues. As more businesses enter the industry prices of cannabis products will inevitability drop due to increased demand and competition, needless to say, diminishing profit margins will be realized by all, and therefore, high rents and property values will be economically unsustainable.

Today, however, business is booming. Certain locations are bringing in tens of thousands of dollars every day with no signs of sales slowing. Investors are taking advantage of this and profiting while they can, as no one can predict what the future will hold. With so much money to be made, it’s no wonder marijuana has attracted the attention of countless individuals looking to make a profit and be a part of history.

August 17, 2017 / by / in
Cannabis Industry – Cannabis Real Estate Demand

The normalization of cannabis as an industry is spreading like wildfire and it is now arguably out of its infancy and starting to bud into adolescents. But those in the Real estate sector remain perplexed with over valuations, demand anomalies, and financing complexities that have been created by the cannabis industry.

Retail marijuana dispensaries and commercial grow operations must meet specific zoning and setback requirements–which are referred to as restrictive zoning requirements. Some cities even have sanctioned “Green Zones.” For example, San Francisco, one of the most affluent cities in the world, home to many of the world’s leading tech companies, has sanctioned “Green Zones.” Cannabis dispensaries are not allowed to operate within 1,000 feet of a public or private elementary or secondary school; or a community facility and/or a recreation center that primarily serves persons under 18 years of age. In a City that is dense and culturally diverse, these zoning requirements leave approximately 462 acres of real estate zoned for cannabis use–when you factor in existing tenants and owner users and existing cannabis dispensaries –not many properties are available for new cannabis businesses. And as basic economic principles dictate–what lacks in supply when in high demand must increase in price… But in one of the most expensive cities in the world, how much higher can real estate get? Well, there is not enough data available (yet) to state a factual number as any such number would be impacted significantly on the demands and ambitions of both the buyer and seller in any given transaction, BUT in some instances, agents in San Francisco have reported as much as a 30% premium for desirable “Green Zone” locations.

Overvaluations are just one difficulty of buying a cannabis real estate– financing is a whole other issue. Because there is no true asset type or risk baselines established for real estate specifically used for cannabis, in conjunction with the fact that institutional financing is not yet available due to the federal legality of cannabis, the only financing available for cannabis-based business is from private investors, or private money lenders, which only lend on the asset. A typical private money loan will not exceed 65% loan-to-value (LTV) of the market value/ appraised value OR the 65% of the cost (LTC) of the property–whichever is less. These loans are short term (3-5 years, with hefty prepayment penalties, fees (between 3-6 points), and interest rates (between 8.99-14.99%). This is where things tend to get more complication–even know the lender is making a loan based on the value of the assets–the borrowers need to provide verification of funds needed for the loan–which can be problematic if you have been denied access to bank accounts like many of those in the cannabis industry. Now, if you are lucky enough to get in contract on a compliant property and get approved for a loan, one last hurdle to overcome– the appraisal of the property. If you are in contract to purchase the property of a reasonable value– you have nothing to worry about, but if not, the appraiser will not take into account of the value of the property for cannabis use. However, if you have the capital and the capacity to pay cash, and don’t mind paying a premium–most of these hurdles can be eliminated. And once you own the property, you can tap into your equity if needed (using private money of course).

The cannabis industry is still maturing and buying real estate for the specific use of cannabis may be difficult–but not impossible. Aligning yourself with the right professionals and capital sources will always be your first step. For a free real estate financing consultation for your cannabis business submit a request for financing on 420Property.com.

October 29, 2016 / by / in
Buying and Selling Cannabis-based Businesses
Cannabis is rapidly evolving from an illegal, counter-cultural activity into one of the prevailing industries in many states in the U.S. today. It’s no news that the normalization of cannabis laws is becoming realistic among many states, spawning a massive multi-billion dollar industry, and attracting a high traffic of venture capitalists, entrepreneurs, and individual investors.
It is high time to start investing in the emerging and fast-growing cannabis industry before it develops tremendously and the barriers to entry for organizations and investors get pricier.
Primarily, cannabis businesses are among a group of lucrative investments with tremendous room for multi-year growth. And since it is being legalized in many states, it had become the fastest-growing industry in the United States, based on ArcView Group’s latest research. The report has it that legal cannabis in the United States grew from $1.5 billion in 2013 to 74% increase in 2014 to about $2.7 billion. Now, imagine if cannabis business is legalized in all 50 states in the United States of America, there is an indication that cannabis will generate a “jaw-breaking” annual revenue than any other industry.
Due to this rapid growth in the cannabis or marijuana industry, the real estate industry has started to consider and take notice of this sector. And with respect to the high demands for it, the real estate industrial sector attribute extra-strong demand for the purchase and sales of this product. According to ArcView CEO, Troy Dayton, investors nationwide have placed their attention to the cannabis as a prospective explosive growth market. “It isn’t necessary for a rocket scientist to see that the marijuana industry is going to provide a lot of economic benefits,” Says Dayton. He went further to add that “one of the highest business sectors to observe has been the real estate sector.”
Apparently, industrial brokers have seized this opportunity to explore. Diverse marijuana growers are absorbing large square feet of landed properties or industrial spaces to plant cannabis legally. Studies have shown that the cannabis industry independently hiked up industrial property prices in many regions to an unusual level. Property prices have gone up to about four times higher than the usual sales before the sales of medical marijuana – the legitimate cannabis industry.
How about it? Do you want to buy or sell your cannabis business or property? Do you want to make that whooping sum of revenue you ever desired? Or do you want to go beyond the present challenges of locating and procuring the right facilities and financing necessary for you to operate? Then, we are here for you! 420 Property aims to eliminate any challenges you may face by serving as the most comprehensive commercial cannabis and hemp real estate marketplace dedicated to empowering consumers with data, inspiration, and knowledge around their business.
Search, post, and enjoy. Thank you for choosing 420Property.com.
May 9, 2016 / by / in ,
Demand For Real Estate in the Marijuana Industry Outweighs Supply

An apparent lack of “420 Friendly” Real Estate has been realised nationwide as many legal growers and dispensary owners scramble to locate properties to lease or purchase at affordable prices. Strict zoning requirements have put constraints on the supply of compliant retail, industrial, and land properties for cannabis-based business use, and not all building owners and landlords will accept medical marijuana tenants because of implied risk associated with cannabis-based businesses and moral reasons which make locating a complaint space even more challenging. Many of building owners and landlords who are “420 Friendly” are reaping the benefits of the Green Rush as they are collecting premiums on the property leases and have the upper hand in negotiations when selling a cannabis complaint property. Due to the lack of Federal support, banking and financing solutions are not easily obtainable unless obtained from a non-traditional institution which also has led to the increased difficulty of purchasing properties for many medical and recreational marijuana dispensaries and grower.

Previously undesirable industrial buildings are now a hot commodity in many U.S. States due to the emerging legal cannabis industry. Medical and recreational marijuana operations have fed a growing demand for industrial spaces of roughly 3,000 square feet to 40,000 sq. ft. and underutilised retail spaces are now home to many cannabis dispensaries which have helped fill empty buildings, drive down vacancy rates, and push rents to higher levels.

420Property.com, a “420 Friendly” real estate and professional marketplace launched in March of 2016 to assist in relieving the difficulties many cannabis-based business owners are facing when it comes to locating “420 Friendly” properties. 420Property.com is now the ‘go-to’ real estate resource in the cannabis industry and assist in locating “420 Friendly” properties for sale or lease, existing businesses for sale, business/ franchise opportunities, landlords, real professionals, real estate lawyers, property insurers, financing providers, and investors.

Get started with 420Property.com today.

April 7, 2016 / by / in ,