The Real Estate Business Behind Selling Medical Marijuana in the U.S.

Ever since Colorado and the state of Washington legalized the recreational use of marijuana back in January, 2013, American venture capitalists have been slowly investing money into the development of a “weed infrastructure.” An entire industry is being funded to facilitate the production, distribution and sale of recreational and medicinal marijuana to the masses. There appears to be some faith in the idea that the government controlled system implemented in Colorado, will inevitably spread nationally, creating a market for domestically grown marijuana that will amount to billions in revenue. Alice Zhang draws information from the Marijuana Business Factbook (purchase at Amazon) to suggest that that retail marijuana industry could reach sales of more than $8 billion by 2018, outpacing that of smartphones.

One of the more high profile investments that made it in the news recently involves Silicon Valley VC Peter Thiel (famous for his investment in PayPal with Elon Musk) and his venture firm, Founders Fund. A $75 million round was raised for Privateer Holdings, a Seattle-based private equity company that owns two marijuana companies and a website focused on marijuana production. One of these companies is Marley Natural, a global pot brand launched by Bob Marley’s family, projected to launch in late 2015. According to their website, the firm…

“…uses strategic investments in the cannabis industry to acquire and create mainstream brands, professionalizing the cannabis business landscape through the power of private enterprise.”

A Chicago-based startup called Herbfront, one of five in the second class at the ElmSpring real estate-tech incubator. Interesting sidenote, the other real estate online technologies borne out of this unique incubator include CondoGuide, which grades the financial health of condominium associations, PeerRealty, which connects investors to real estate developers; Megalytics, a comprehensive portal for business risk evaluations based on real-time third-party data; and CampNative, a platform to book campsites around the world. HerbFront’s primary objective is to locate marijuana-growing and distribution facilities near you, and allowing real estate owners to sell properties to these businesses specifically.

According to Teresa Novellino of UpStart, Herbfront co-founder Matt Chapdelaine previously worked as a commercial real estate broker, and recognized that the distribution and manufacturing of medical marijuana in states where it is legalized, is governed by specific zoning restrictions, including those that prohibit the construction of these medical marijuana dispensaries near schools, parks and other facilities. Only about 5% of properties are zoned properly for this use, which is the primary issue Herbfront addresses. The website collects publicly available zoning information to build maps that account for these restrictions, ensuring that no laws are ever broken in a commercial real estate transaction for a medical marijuana dispensary.

Not to be outdone is a rising competitor by the name of 420MLS, a website that serves a similar function as HerbFront, but for an entirely different purpose. Whereas HerbFront is a communication tool to connect marijuana business owners will 420-friendly real estate developers and sellers, 420MLS is more of an all-around marijuana business classified, with an emphasis on letting potential medical marijuana dispensary owners connect with landlords and property owners who do not discriminate against these types of businesses.

Jason Quintal | February 26, 2015

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