Robert Schiappacasse, co-chair of the Corporate Department at Sills Cummis in Newark, has been around the cannabis sector long enough to remember how challenging the real estate component used to be for potential entrepreneurs.
It seemingly stopped many before they could even get started.
When the industry in the state was only medicinal — and you needed to have your real estate secured before you could apply for a license — potential startups were at the mercy of landlords.
“Landlords really took advantage of the opportunity, because you couldn’t apply for a license unless you demonstrated what the regulations called ‘control of the real estate’ — and you could only demonstrate control under the original medicinal regulations by either having a firm contract to purchase or a firm lease to occupy the space,” he said.
“This put landlords in a position where they could charge exorbitant upfront, non-refundable deposits — and they could insist you commence paying rent almost immediately. And because there were a few locations and it was a much smaller market, it really put a tremendous strain on anybody who was applying for a license.”
Now that the state has added recreational use — and enables entrepreneurs to get a conditional license without a firm real estate deal — the situation is markedly better.
But it’s still not perfect.
That’s why Schiappacasse feels finding a lawyer well versed in all the issues is still a good starting point for those looking to enter the sector.
“Let’s say you have found a location you want to be, municipality x, but because of its zoning, you may only be able to be in a couple of different areas,” he said. “And in those areas, there’s only a few really viable locations. If you want one of them, the only way to be assured you have it, is to lock it down, so you may be paying rent for 3, 6, 9 months while the process finishes up before your doors are open to sell product.”
That’s just one of the issues.
Money always is the starting point, Schiappacasse said.
“As with a lot of startups, where we always start with the client is: What kind of funding do you have and to the extent you don’t have it, what’s your plan to get it?” he said.
Then, it moves onto what type of cannabis business you want to open. The difference between a dispensary and a cultivation facility could be millions of dollars in start-up costs — not to mention compliance with various rules and regulations.
“Opening a cannabis business comes with unique challenges,” he said. “You need to understand all of the up-front hurdles before you get started.”
Then there this: You need to understand a challenge that is facing every business — not only finding employees but being able to afford them.
“This is not unique to New Jersey,” Schiappacasse said. “In the post-COVID world, there is a depleted labor market. But on top of that, the cost of labor in New Jersey is very high compared to other states.”
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Reach Sills Cummis at: sillscummis.com or call 973-643-7000.
Robert Schiappacasse, co-chair of the Corporate Department at Sills Cummis in Newark, has been around the cannabis sector long enough to remember how challenging the real estate component used to be for potential entrepreneurs. It seemingly stopped many before they could even get started. When the industry in the state was only medicinal — and Read More
