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Background

In August 2019, a warehouse owner faced the challenge of repurposing a family business location following an unforeseen accident. Situated in a high crime area, the journey to finding a lucrative and reliable tenant seemed fraught with obstacles. However, leveraging local connections and a keen sense of market demand, the owner explored an unconventional yet flourishing industry—cannabis. This case study unveils how strategic networking and an open-minded approach to tenant selection led to a lease agreement that far exceeded typical market returns.

Our Strategy & Approach

Understanding the importance of community in business, the owner tapped into the experiences of neighboring property owners. This local insight revealed the lucrative potential of leasing to cannabis businesses, a sector ready to pay a premium for the right space.

Through diligent networking, we identified several prospective cannabis tenants, each with unique proposals. Prioritizing long-term stability and profitability, we facilitated the selection of a tenant offering the most favorable lease conditions.

Recognizing the unique value the warehouse offered to cannabis operations, especially in a challenging location, we negotiated a lease rate $.50 per square foot higher than other industries would bear. This strategic positioning capitalized on the high demand among cannabis businesses for compliant spaces.

To safeguard the investment's growth, the lease included a 3% annual increase, ensuring a steady rise in income over the 5-year term. Additionally, innovative clauses like tenant-funded improvements and later, a parking lot fee, maximized return without added owner expense.

Setting a New Benchmark in Real Estate Innovation

The warehouse's transformation from a shuttered family business to a premium cannabis operation exemplifies the power of strategic leasing in high-risk areas. By the lease's end, the property's enhanced value and income potential enabled the owner to sell at a premium and strategically 1031 exchange into cash-flowing properties. This journey not only highlights the potential within high crime areas but also underscores the value of adaptive strategies and the burgeoning opportunities within the cannabis industry.