Opportunities for Business Owners, Investors and Communities with Legalization of Cannabis

Throughout the country, many states are moving to legalize cannabis for medical or recreational use. McGuireWoods Consulting senior vice president, Randal Meyer, explores how businesses, investors and communities can take advantage of this growing industry in a Mar. 12 article for Area Development.

Many businesses are already thriving in states where cannabis is legal, due to the high demand and restricted supply. Both urban and rural areas are well suited to gain from investment by cannabis companies.

“There are significant opportunities for development along any point of the cannabis growth chain, including cultivation, manufacturing, distribution, and retail,” Meyer noted. “Many economically depressed areas in the southeast U.S. are prime areas for cultivating the cannabis plant, including Kentucky, Tennessee, and Oklahoma, and could provide much needed entry-level jobs and job training for these communities.”

While there are pitfalls and restrictions associated with the cannabis market, the newly created Opportunity Zone program could offset those risks for investors.

“Opportunity Zones provide another way to defray costs and risks associated with the cannabis industry and employ unrealized capital gains to invest in marijuana-specific infrastructure,” Meyer said. “Prior to the Opportunity Zone option, business owners looked to defray costs through antiquated arrangements, such as lease-to-own. Now Opportunity Zones provide a new source of capital and the chance for investors to get in on the ground floor of the fast-growing cannabis industry.”

In addition to opportunity zones, public-private partnerships (P3) provide another option to help encourage risk mitigation. P3 deals help to subsidize the cost of infrastructure and creates greater access to invest in non-commercial zones.

“Opportunities to pair qualified funds with P3 deals at all levels of government are unique investment structures for those interested in real estate and will likely intensify the growth of the cannabis industry,” Meyer said. “It is one of few industries that can strike the delicate balance of providing a profitable commercial investment opportunity, while bringing much needed capital and attention to underserved communities.”

He added, “For savvy investors and economically depressed communities, the emergence of legalized cannabis — with the aid of Opportunity Zones and public-private partnerships — is a win-win.”