Competition for Ohio marijuana dispensary licenses is red hot, presenting a windfall for

This is creating some nice cash flow for property owners whose sites have caught the interest of dispensary license applicants — regardless of whether they have a dispensary operator to sell or lease to in the future. Most won’t discuss terms of their agreements publicly because of confidentiality.

Brokers and consultants won’t disclose names of their clients for the same reasons. But some are large, well-known brands with operations in multiple states. Others are completely new to the marijuana industry.

Interested parties are reaching out from across the country and across the spectrum in terms of marijuana industry experience, said Mike Herzfeld, a sales agent with Reisenfeld & Co. He’s hearing from people and companies not just in various pockets of Ohio but also out-of-state groups from Indiana, Pennsylvania, Illinois and California who need help finding suitable commercial sites for their potential dispensaries.

With requirements that prospective dispensary sites be located no less than 500 feet from certain areas (including schools, parks, churches and libraries), and with many municipalities refusing to allow any marijuana business at all, it’s common for sites that are available and appropriate for one of these retail stores to draw interest from several parties.

“It creates a challenge for sure,” said Kirsten Paratore, an analyst with Cushman & Wakefield who’s been working on identifying potential marijuana retail sites in Northeast Ohio since March. “The amount of fluctuation in interest in these sites since the spring is driving market prices through the roof. People are definitely willing to pay for this product.”

Others have echoed that sentiment.

“As it relates to the real estate side, RFA II might as well have been called the Landlord Stimulus Act of 2021,” Haren said. “There is no doubt real estate is at a premium for these applicants.”

With competition for space heating up as the Nov. 4 to Nov. 18 application window opened, some landlords have agreed to sign letters of intent to sell or lease property to multiple applicants. Of course, the license lottery is first-come, first-served. So if there are multiple applications from different parties pulled for a singular site, the first drawn wins out.

In most cases, applicants are paying up to have a property delisted until the license drawing happens and they know their fate, which at its soonest may be early next year.

There’s been no promise of when the drawing might be. State regulators have only said they want to move faster this time than in past licensing rounds, where applications were scored and ranked. About six months passed between the application period closing and provisional licenses being awarded the first go around.

Many property owners have asked for nonrefundable fees to sign a letter of intent to an aspiring dispensary operator. And in high-demand areas near population centers, it’s not uncommon for applicants to agree to pay double the market price or more should they win a license.

“That, let’s call it an option fee, which says I give you the right to buy this, that can be anywhere from $5,000 to $100,000. It’s a huge range,” said Kevin Patrick Murphy, a cannabis lawyer with Walter | Haverfield and a co-owner of a Cleveland-based vertically integrated marijuana company that is applying for additional dispensary licenses.

“It depends on how bad you want this property. Are you going to put that hard, nonrefundable money down? That is part of the risk, too. You are paying rent or option fees on a property subject to a lottery.”

Murphy said he’s seen owners of properties that have been difficult to lease charging about $12 per square foot for retail space. But in terms of dispensary interest, he said, “Ohio is a very hot market right now.”

“And if a dispensary comes knocking,” Murphy said, “the number could double.”

Leb said the competition for retail space is “unprecedented” when it comes to the dispensary dynamic.

“We have properties in the middle of nowhere that have gone from having no business for three years to now having six people interested in them,” Paratore said. “It’s like the wild, wild West. It really is.”