Month: June 2020

While states ordered mandatory shutdowns for most businesses as the COVID-19 pandemic spread across the U.S., several states allowed exceptions for businesses that were deemed “essential” to residents. Not surprisingly, essential businesses included hospitals and other healthcare facilities, grocery stores, gas stations, and banks. In a surprise to some observers, cannabis dispensaries were also declared “essential businesses” during the pandemic. So, what does this mean for the cannabis industry as a whole? And will the classification of cannabis retail distributors as “essential” create new opportunities for investors?

What Makes Marijuana Dispensaries “Essential”?

Given how long it took for recreational and medical marijuana use to be legalized in certain states, it might have come as quite a shock to see state and local governments so strongly embracing the cannabis industry as the coronavirus forced many other types of retail businesses to temporarily close their doors. The government’s embrace of marijuana as an essential product can be viewed as a response to public demand: when Denver dispensaries were initially ordered to shut down at the beginning of the pandemic, the resulting outcry from residents essentially forced the city government to reverse the order and allow marijuana retailers to remain open during the crisis. To put it bluntly: people did not want to be denied access to marijuana while they were stuck at home and struggling with the stress and uncertainty brought on by the coronavirus pandemic. (To say nothing of sick people who depend on medical marijuana as part of their treatment regimens.)

Beyond public demand for cannabis products, there is another sense in which states recognized that cannabis is essential: marijuana is now a critical component of the economy. With unemployment at an all-time high and the closures of many traditional businesses in the wake of the pandemic putting immense pressure on the U.S. economy, it has become clear to a lot of state and city lawmakers that legal cannabis could be an important source of tax revenues going forward.

Cannabis Operators Look to Leverage New Opportunities Created by the Coronavirus Outbreak

The recognition of cannabis dispensaries as “essential” has spurred innovation and encouraged business strategies that anticipate strong, sustained growth in the industry after the COVID-19 pandemic has subsided. While most traditional businesses struggle to survive during the coronavirus outbreak, the cannabis industry finds itself in an advantageous position to leverage new opportunities. Some of these new opportunities may include:

• Legalization: Cannabis brands and industry leaders believe that this is an opportune time to communicate the benefits of marijuana to the public, with the ultimate goal being to accelerate efforts to legalize recreational marijuana throughout the country. If cannabis is an essential part of the U.S. economy, then it only stands to reason that cannabis should be legalized at both the federal and state levels.
• Easing State Regulations: Cannabis operators are also hoping that the “essential” nature of their businesses will help them to persuade state and local governments to ease regulatory restrictions on cannabis distribution. Even a slight reduction in investment restrictions, banking access, and tax laws could lead to increased sales for marijuana retail dispensaries and increased profitability for the cannabis industry generally.
• Better business strategies: Cannabis dispensaries have adapted to changing circumstances by implementing home delivery and curbside pickup options as part of the retail distribution process. While many states are only allowing these options on a temporary basis during the pandemic, the hope is that pot delivery can become a permanent way of doing business.

Strong Outlook for Cannabis Real Estate Investments in the Future

During these uncertain times, it is important for individuals to have confidence in the industries in which they choose to invest. The cannabis industry is strong right now, and the expectation is that it will remain strong in the future. Some investors see cannabis real estate as an opportunity to broaden their portfolios beyond the stock market and other traditional sectors, while others see cannabis real estate investing as a steady source of fixed income.

Scythian Real Estate is a commercial real estate company that specializes in long-term lease agreements in the cannabis sector. Scythian acquires, develops, and stabilizes properties serving the cannabis industry. Since 2014, Scythian Real Estate and its principals have formed premier partnerships with The Green Solution, Grassroots Cannabis, and other nationally recognized cannabis operators. For more detailed information about Scythian Real Estate, please email them here.

PLEASE NOTE THAT THIS BLOG IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN SCYTHIAN REAL ESTATE FUND.

As the COVID-19 pandemic continues to negatively impact the American economy, U.S. cannabis growers and cannabis operators have been forced to make significant adjustments to their daily operations and, in some cases, to their business models. Interestingly, this could ultimately have a long-term positive effect on the cannabis industry as marijuana cultivators and cannabis retail businesses continue to come up with creative ways to reduce overall costs, increase productivity, and generate greater profitability.

Cannabis Cultivators & Dispensaries Adjust to Pandemic by Becoming Self-Reliant

While many businesses struggled when states across the country issued stay-at-home orders and imposed mandatory shutdowns of most stores, marijuana retail operators avoided the most serious economic consequences of the pandemic because state governments declared that pot dispensaries were “essential businesses.” This meant that cannabis dispensaries could remain open during the pandemic and continue to sell to customers. Moreover, some pot dispensaries expanded their reach by offering delivery services to consumers who were otherwise stuck at home. Sales of both recreational marijuana and medical marijuana largely remained strong even as other sectors of the U.S. economy cratered.

Additionally, Cannabis growers and distributors responded to the COVID-19 crisis by lowering costs and rethinking the way they do business. For example, instead of using third-party companies to perform necessary maintenance and make on-site improvements at cannabis processing and production facilities, some marijuana cultivators opted for a Do It Yourself (DIY) approach. As a result, these cultivators have stronger brands, are prepared to be more self-reliant going forward, and may be better equipped to remain profitable long after the coronavirus pandemic is over.

Economic Strategies Being Used by Cannabis Growers & Operators

Cannabis operators were proactive about avoiding the effects of the country’s overall economic downturn. Many operators conducted audits of their entire businesses to help them craft new, more economically viable strategies during COVID-19. Some of the resulting strategies included:

• Using in-house workers to repair machines used in the cultivation process. A lot of marijuana growers have now begun to train workers to make necessary repairs themselves – without needing to hire outside technicians. Also, it is common for marijuana growers to make sure that workers fully understand the different systems used during cannabis cultivation, such as dehumidification and HVAC.
• Mixing their own chemicals. The costs of chemicals and sanitation supplies are on the rise and production materials are increasingly scarce. So, some cannabis cultivators are opting out of using expensive brand-name products. Instead, the cultivators purchase an active ingredient in the chemical mixture, then source the ingredient directly and mix it in-house.
• Stricter oversight to ensure no waste by employees. Prior to the pandemic, some pot companies may have been a bit cavalier when it came to conserving resources during the cannabis cultivation process. Now, a lot of cannabis company executives are getting their hands dirty on a daily basis and making sure that workers do not burn through materials or equipment.

Scythian Real Estate Acquiring Cannabis Properties During the Coronavirus Pandemic

The recent news that marijuana is an “essential service” led to a boom in pot sales in many states. Beyond that, the improved business strategies implemented by cannabis cultivators and operators in response to the COVID-19 pandemic bodes well for investors in cannabis in the future. In fact, the cannabis industry offers a unique opportunity for accredited investors looking to strengthen their investment portfolio and secure their economic future right now. One of the best ways to invest in this industry is through cannabis real estate.

Scythian Real Estate is one of the largest privately held real estate companies in the cannabis sector. Scythian partners with well-capitalized, state-licensed cannabis operators on both sale/leaseback deals and sourcing and acquiring new retail locations. Scythian Real Estate Fund LLC also has a pipeline of cannabis property acquisitions in Colorado, Pennsylvania, Arkansas, Utah, and other markets in the U.S. where legalized marijuana provides strong investment opportunities. To learn, please contact Scythian Real Estate here.

PLEASE NOTE THAT THIS BLOG IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN SCYTHIAN REAL ESTATE FUND.

As unemployment climbs and businesses continue to make tough adjustments around ever-changing circumstances, some industries have proven to be more sustainable than others. One of the industries that has managed to continue with growth plans through the COVID-19 pandemic is the cannabis industry.

What Is the Impact of Coronavirus on the Cannabis Industry?

Cannabis was recently declared an “essential business” in many states, including Colorado, while coronavirus-related shelter-in-place orders and mandatory business shutdowns were imposed in states around the country. This meant that cannabis dispensaries were allowed to remain operational during the pandemic and could continue to fulfill cannabis orders from customers who were stuck at home and looking for some relief by buying weed. As a result, marijuana sales surged. For instance, Curaleaf reported seeing a 20% increase in their cannabis sales in March, even as most other U.S. businesses struggled. This was a trend that could be spotted across the cannabis industry, with increased cannabis sales being the rule rather than the exception for many marijuana retail operators.

“All in, we continue to believe cannabis is well-positioned versus other industries to outperform on a relative basis during unknowns on the coronavirus impact.”

Aaron Grey, Alliance Global Partners analyst

Although the cannabis industry’s most celebrated holiday, 4/20, was a bit of a “mixed bag” for some marijuana businesses, the majority of cannabis operators were happy to see their sales remain relatively consistent in the days and weeks leading up to 4/20. The Green Solution CEO Steve Lopez echoed this enthusiasm: “We have seen steady business over the past few weeks as we’ve settled into new protocols.” While the coronavirus pandemic is having an adverse effect on most industries, such as oil and gas, the health sector, and retail businesses, the cannabis industry has remained stable and investor returns have been consistent.

Predicting What Happens Next: Will Cannabis Continue to Surge in 2020 and Beyond?

If anyone were looking to make a prediction about how the cannabis industry will continue to weather COVID-19, it would probably be instructive to look to how the alcohol industry fared during the country’s last recession. In 2008, while many U.S. businesses were struggling to stay afloat, wholesale alcohol sales remained steady and even showed eventual growth as the country emerged from the recession. Remarkably, in the first full year of the recession – when the unemployment rate was at 5.8% – alcoholic beverage sales expanded by more than 9%.

The fact that alcohol sales previously surged at the same time as a recession suggests that certain businesses and products might actually thrive during tough economic times. Could the same be true of marijuana? The recent success seen by cannabis businesses during the COVID-19 pandemic would seem to indicate that marijuana, like alcohol, is impervious to a larger economic decline. In fact, the cannabis industry may even be viewed as recession-proof. COVID-19 and related shutdown measures in several states did not disrupt any aspect of this essential industry: cannabis cultivation, processing, distribution, and retail all remained intact and largely unaffected by the virus. Moreover, consumer demand for marijuana increased dramatically as people adjusted to a new way of life brought on by coronavirus.

Investing in Cannabis During COVID-19

One of the best ways to invest in the cannabis industry right now is to invest directly in cannabis real estate opportunities. When pot was recently declared an “essential service” during the coronavirus pandemic, cannabis operators saw a huge surge in sales. And what was the one thing that those cannabis operators had in common? Real estate. Businesses that legally sell marijuana need real estate on which to operate, and that presents a strong investment opportunity for anyone who is looking to invest in the cannabis industry.

Scythian Real Estate is a full-service real estate company that specializes in working with sophisticated, well-capitalized cannabis operators in Colorado, North Dakota, and throughout the United States. As the cannabis sector continues to prove that it can withstand uncertain economic times, Scythian Real Estate is generating significant interest from accredited investors looking for cannabis investing options.

“We have a strong pipeline of new acquisitions as cannabis companies continue to implement growth plans for 2020. We are looking forward to new partnerships and bringing on new investors as people look for fixed income through real-estate-backed opportunities outside of the stock market or other more traditional sectors getting impacted by the current pandemic. We feel strongly that the cannabis industry will remain steady through these uncertain times.”

Ryan Arnold, Scythian Real Estate partner

Contact Scythian Cannabis Real Estate

Since 2015, Scythian Real Estate has demonstrated its ability to acquire and manage a portfolio of cannabis real estate assets. Email Scythian to learn more.

PLEASE NOTE THAT THIS BLOG IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN SCYTHIAN REAL ESTATE FUND.