With recreational use of marijuana set to be legalized for Californians in 2018 and with more cities in San Diego County approving medical use, investors in the marijuana industry are snatching up properties with the hopes of getting a piece of the pot economy.
Some real estate brokers are calling this feeding frenzy the “green rush,” comparing pot investors to settlers who came to California in the 1800’s looking to strike it rich from gold mining.
In November, California voters approved Proposition 64, a measure allowing residents to recreationally consume marijuana.
“Once recreational [use] passed, it created a clearly defined path to get to profitability,” Jason Klein, a local real estate broker said. “It has created a feeding frenzy, just in terms of purchasing and so property owners here are looking to capitalize on the green rush and to be able to cash in.”
Klein showed NBC 7 Investigates some of the properties he’s been selling to people who say they have plans for future marijuana operations.
Before the passage of Proposition 64, businesses distributing, cultivating or manufacturing marijuana for medical use could only operate on a not-for-profit basis, according to SB 420, the state measure allowing medical marijuana use in California.
Proposition 64 changes this. It allows businesses to sell marijuana, for both medical and recreational use and for a profit. Some marijuana investors are getting a head start by focusing on properties in cities that allow medical marijuana operations, like the City of La Mesa.
“There are people coming in from all over the state and outside of the country even, to get properties there in La Mesa because they were able to see clear defined guidelines,” Klein said.
One of the properties Klein showed NBC 7 Investigates was a Chinese restaurant on Parkway Drive in La Mesa. He said it is being sought after to sell pot.
According to Klein, the owners were reluctant at first to sell it for use as a marijuana business. But, after La Mesa voters passed an ordinance allowing dispensaries to operate, Measure U, Klein said things changed.
“Money started to talk and a Chin's Chinese food restaurant just couldn't compete with the prices that were being offered for medical marijuana dispensary owners,” Klein said.
Finding a property for the purpose of selling, growing or manufacturing marijuana or marijuana goods is not like finding a space for your average retail location, according to Klein. A number of factors play a role when finding a location, including zoning and what is located nearby. For the cities of La Mesa and San Diego, city guidelines require a buffer zone between approved dispensaries, so, if a property is purchased in the right zone it can cancel out any other applications in the area.
Klein showed NBC 7 Investigates another property, located on the 8200 block of Commercial Street in La Mesa. Klein said the property was recently purchased with the intention for marijuana cultivation.
“For a traditional use, it should be a million dollar property but for medical marijuana, because it's zoned and situated appropriately, [it’s worth] probably somewhere in the 2.5 to 3.5 million dollar range,” Klein said.
Klein said one of his clients, who is from Morocco, hopped on a flight to come to La Mesa, just to look at properties like the one on Commercial Street for the intent to start a marijuana business.
“I think a lot of people have the misconception that these businesses are run by a bunch of stoners and what we are seeing now is that these businesses are being run by professionals,” said Michael Cindrich, a San Diego attorney who has specialized in medical marijuana defense and representation for nine years.
“The money coming in isn't money that was earned from illegal operations, this is institutional money, these are investors from hedge funds, people from Wall Street are coming to California to invest in this industry,” Cindrich said.
After La Mesa voters passed Measure U, the city held a workshop on January 9 to explain the application process for the public. The room at the workshop was packed with standing-room only.
So many questions and comments were shared with city officials the city had to delay the process for releasing official applications until city officials could address all of the questions and comments.
On February 6 the City of La Mesa officially began accepting applications for marijuana permits. According to La Mesa Police, some of the entrepreneurs were lining up and camping outside of City Hall in hopes of being one of the first to submit an application for a certain location.
Captain Matt Nicholass with La Mesa Police told NBC 7 Investigates the city decided to hand out ‘line status numbers’ to avoid people camping out for nights. According to information posted online by the city of La Mesa, the city handed out 81 line status numbers.
Wednesday, the City of La Mesa released a list of locations where marijuana business permits were requested. Each will have to be approved by the City before any operations begin. The approval process could take up to 14 months, according to city officials.
Click here to see the list of requested locations.
For the rest of 2017, marijuana businesses legally operating can only do so with the intent to sell for medicinal use. Recreational-use will not take effect until January 1, 2018.
Alex Traverso with the California Bureau of Medical Cannabis Regulation (BMCR) said the state agency anticipates a large number of businesses applying for recreational permits.
“It’s safe to say that there is a lot of interest,” Traverso told NBC 7 Investigates over the phone.
Traverso also said there’s no way of quantifying that interest with data at this point, but his agency is currently working on regulations and BMCR expects to open the door for license applications sometime before 2018.