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Growing, processing and manufacturing cannabis and its by-products are expensive. The majority of the expense comes from the cost of the real estate legally permitted for cannabis use. High demand and low supply have driven the lease prices of these compliant properties to, at times, four times market rate. For many cannabis operators, their lack of provable income and limited access to traditional bank loans make it near impossible to purchase the properties that their businesses so desperately need to operate.

Some real estate investors have identified this disparity and are raising money to purchase properties and sign lucrative long-term leases. This is not as easy as it seems as institutional commercial real estate investors, not know for a high-risk tolerance, would prefer to wait until the industry’s future is more clear. But, these are not the only sources of income for real estate funds.

Late last year Innovative Industrial Properties became the first publicly traded REIT (real estate investment trust) to specialize in cannabis properties. After an initial drop in price after its first public offering, at the time of publication, it has recovered to almost its original market cap of $64 million. Another company, Med-X, attempted to use a new crowdfunding regulation called Reg A+ to allow non-accredited investors to pool capital and make acquisitions. They have since ceased their campaign after the SEC called for a public hearing due to their failure to file a required annual report.

These are just two examples out of the many investment groups that are looking to squeeze some of the profitability out of cannabis companies. But, as prices of cannabis and infused products drop in legal states, smart entrepreneurs are looking towards reducing their costs to insure their margins as cannabis becomes more of a commodity. Luckily for them, they have an increasing number of options to help them buy their own property and with their own destiny.

The first option is short-term debt. While big banks are still not interested in traditional long-term real estate loans, certain private money lenders have embraced the nascent industry. One of those companies out of Santa Monica, California is DebtCraft. They source their funding from a pool of private investors and structure their debt, in short, one to five-year notes. Michael Waldman, head of investor relations at DebtCraft, told me, “We are lucky enough to have cultivated relationships with investors that are excited about the cannabis industry. They want to use their capital to help these companies grow…and get a nice return on their investment as well, of course.” The thought is that these loans will be able to be restructured once bigger banks get around to lending.

The other option is to find equity or angel investors. Profitable corporations are able to give a piece of their company to investors in return for the capital to expand operations and buy real estate. This takes a much different type of investor profile as the investment hinges on more than just the value of a property. Poor management, faulty strategy or even a bad harvest can send these investments tumbling. Being such a nascent industry most companies have only short track records to prove their ability to execute. Many investors are choosing to be part of a growing number of angel investor groups like ArcView and CannaAngels to help find the best deals and mitigate risks.

The same problem persists in both the real estate and equity investment for cannabis: inflated valuations.

Commercial loans are seldom given based on the proposed value of a property, no matter how high the demand it is at the time. Likewise, angel investors want to see honest company valuations based on past performance. They have a hard time buying a multi-million dollar valuation just because someone says they ”grow the best stuff”.

What I find fascinating is that the cannabis industry is actually merging the two polar opposite worlds of commercial real estate lending and venture funding. Real estate lenders are often getting a stake in these companies as an incentive to back a loan. Angel investors are getting the security of a real asset for their investment in a startup (unlike tech where sometimes all they get is a jumble of code and a lease at a co-working space).

For many cannabis companies, leasing space is the only option. They might not have the appropriate savings to attract investors or lenders. But, for the rest, there are options. The cannabis industry seems to be getting far more professional, suits and ties are replacing tie-dyed shirts, and I think a lot of that is due to the funding that is necessary to take the industry to the next level.