Michigan, get ready! The commercialization of adult use marijuana nears. Last November, when the voters approved the marijuana adult use ballot initiative known as Michigan Regulatory and Taxation Marijuana Act (MRTMA), commercialization seemed a long ways away. Not true anymore. Less than 100 days.
The Marijuana Regulatory Agency (MRA) of the Department of Licensing and Regulation (LARA) recently issued Emergency Rules for regulating and controlling aspects of the adult use business. They then indicated that, if all went well, MRA would begin accepting applications for MRTMA licenses on November 1, 2019. Not long now. Current MMFLA licensees are chomping at the bit to get applications submitted and licenses issued within a short period of time after the application window opens at MRA. Adult use products could be available for the holidays this year.
Why is all this important for members of CAR? There is tremendous demand for locations for operations to serve the adult use business. Prospective licensees need to find industrial and agricultural properties for growers and processors under both MMFLA and MRTMA. Both laws mandate that they locate facilities in zones allowing industrial and agricultural uses. Then there’s the retail outlets: the “Provisioning Center” under MMFLA and the “Marijuana Retailer” under MRTMA. Commercial districts are targets. As we’ve seen in Grand Rapids, the main business thoroughfares have had multiple properties placed under contract as possible sites for the medical marijuana operations at this time. Keep in mind, MRTMA future uses. Eight locations in Traverse City alone in a two block area on Front Street.
The prices potential licensees are paying for these locations is enormous compared to current assessed values. Just saw that a fully licensed, non-operating Provisioning Center of 4,000 square feet in the River Rouge area has an asking price of 18 million dollars.
There are currently 251 MMFLA licensees (99 Growers and 125 Provisioning Centers). Keep in mind that in the former category, several of the licensees are extremely large entities and hold numerous Class C licenses (up to 1,500 plants per license). Those licenses right now are $66,000 per year. If you stack 10 of those licenses in one location for up to 15,000 plants, that’s a big operation. This is what you may come to see in the future as this marijuana business develops in Michigan.
The trick for prospective licensees and realtors is to find a municipality which allows some form of marijuana business enterprise to be located within its boundaries. Under the MMFLA, the key is “opt-in”. That means that we started with the 1,773 municipalities in the State not allowing any operations. That law gives to each municipality the right to carve out its own law if it wanted to allow operations for medical marijuana businesses within the municipal boundaries. Until recently, less than 120 municipalities had opted in. That’s expanding as community leaders realize the benefits.
Under MRTMA, it’s the opposite. Every municipality is in, unless it chooses to “opt-out”. For the most part, every municipality which has been faced with the decision has opted out or will do so by November 1. If they miss the deadline and MRA starts receiving applications, they’re in and they did not get to carve out their own ordinance provisions. Many of the municipalities have stated they want to carve their own ordinance and so opt out first, giving time to see what the Emergency Rules provide as well as what they want in their community. As your clients look for places in every municipality in the State, remember that every ordinance is different. Every municipality carves its own provisions as to types of licensed establishments it will allow and numbers. In the case of the City of Grand Rapids, it developed a system for scoring and a draw for locations. There’s the 2,000 foot radius buffer zone and another 1,000 foot radius buffer from “sensitive areas”. You have to know what every municipality wants. Nowadays, most are holding drawings so applications for municipal preliminary licenses have due dates.
Then with MRTMA there are new types of additional licenses which business people will be looking at using. There’s the licensed designated consumption establishment (ie: smoking lounges). Will a convenience store want to add it? What about a bar owner with an additional location for the smoking lounge? Then there’s the temporary marijuana event license. Instead of Celebration on the Grand, how about a Cannabis Celebration on Calder Plaza or in the parking lot of a mall, or in an open field? Then there’s the new Microbusiness for up to 150 plants for state residents who are not now MMFLA licensed.
Lots of opportunities ahead for CAR realtors in all areas of Michigan in this burgeoning field. Stay up to date on municipal requirements and find those primo locations for your clients.
On December 28, 2018 the Michigan legislature passed Senate Bill 671 which amends the MTA. The bill took effect on March 29, 2019. Prior to the amendments, the MTA limited a title examination to the most recent 40 years (20 years for mineral interests) with any defects occurring prior to that time disregarded. While the amendments to the MTA attempt to clean up and simplify title in in certain situations, they may have unintended consequences for homeowners associations and condominium associations as affirmative actions will now be required to preserve certain use restrictions.
For example, if a homeowners association has a 40 year old subdivision deed restriction against building unattached garages or decks, a sale of a lot within the subdivision without a specific reference to that 40 year old restriction could wipe out that restriction with respect to that lot. In this situation it is not clear who should file notice under the amendments to preserve the restriction, the seller or the homeowners association. The homeowners association may ultimately be forced to review all deeds in the subdivision to make sure any old restrictions are properly referenced so they will continue to be enforceable against new purchasers.
Prior to the amendments, concerns were raised as to what exactly the MTA required to preserve an interest or use restriction. It is common for deeds to have generic statements such as “subject to anything of record”, “subject to existing use restrictions, if any” or “subject to easements and restrictions of record” and some title companies were reluctant to issue title insurance in these instances. The amendments to the MTA seek to clean up title in situations where deeds contain these generic statements or where title is subject to restrictions that are over 40 years old (20 years old for mineral interests). Simply using this generic language will no longer restart the 40 or 20 year time period and the amendments generally will invalidate a reserved interest or use restriction that is not specifically identified in the chain of title within the last 40 years.
The amendments to the MTA do provide for a 2 year window (from March 29, 2019) for recording a notice to preserve such interests or use restrictions that are more than 40 year old (20 years for mineral interests). The amendments require the notice to contain very specific information. After March 29, 2021 when the window closes, notice of interests or restrictions must be recorded within the 40 year time period (20 years for mineral interests) and must contain the required identifying information or the claimed interest or restriction will no longer be preserved and will be void as a matter of law.
Many questions are still left unresolved, including who is a claimant entitled to file notice under the amendments to MTA. Deed and use restriction may or may not go away and closings may be delayed as title companies, sellers and buyers seek to sort through the confusion and figure out what deed and use restrictions are still valid under the amended MTA.
Since 2012, RPR has offered REALTORS® an exclusive resource to support clients and customers in the commercial marketplace. In an industry of rapidly evolving technology and strong competition, RPR has consistently worked to improve its commercial resources, including the RPR Commercial Mobile app.
In 2019, RPR is further expanding its commercial programs and features through:
Expanded licensing of commercial data
High value commercial product integrations
New strategic outreach programs focused on building stronger relationships with commercial brokers and franchisors.
Expanded Data Licensing Increases RPR Active Commercial Listing Counts in 2019
RPR has more than 665 thousand active commercial listings and 43 million off-market properties to-date, including a direct partnership with Catylist, licensing over 100,000 listings representing more than 45 Associations across the country. Additionally, RPR is pleased to announce the execution of an agreement with Brevitas, which will add 40 thousand commercial listings nationwide.
"An integration between Brevitas.com and RPR's comprehensive database gives REALTORS® an instant competitive advantage. Real time insights into commercial property are critical to making informed decisions. The connection to the data provided by RPR will be invaluable to the REALTORS® listing and searching on Brevitas.com. We're extremely excited about our partnership."
Ardian Zagari, Co-Founder & CEO – Brevitas, San Francisco, CA
RPR is working with two additional national commercial listing platforms with each currently reviewing data licensing terms. These partnerships, along with the new collaboration with Brevitas, gives RPR the potential of adding almost 200,000 commercial listings in the first half of 2019. This would bring the total number of active listings on the RPR Commercial platform to more than 850,000 properties, all exclusively for REALTORS® as a benefit of membership.
RPR also continues to support NAR's Commercial Leadership on the Commercial Listing Platform initiative. With balanced results from members on the value of multiple systems, RPR is collaborating with each of the selected companies allowing members to choose the public listing platform they prefer. Each platform will provide a data feed to RPR, which will allow members to access properties and network with REALTORS® nationwide.
The Value of Commercial integrations – Valuate® Case Study
RPR is investing resources to create integrations with products that create easy, streamlined business solutions for members. It's not just about what each product can do, but how the products interact together producing the most straightforward experience for agents and brokers.
For example, Valuate® is an analysis program that allows REALTORS® to present and market investment properties from both the RPR website and Mobile app. Since its integration with RPR in 2016, Valuate® has evolved as the REALTOR'S®'s go-to tool for projecting investment returns, comparing multiple properties and scenarios, and assessing risks resulting in the best investment opportunity for the client.
With the RPR and Valuate® teams working in tandem on studying member usage and applying member feedback to continuously improve the experience, more than 125 thousand REALTORS® across the country have adopted this offering and produced more than 270 thousand analyses for clients on properties valuing at more than $261 billion dollars.
"Valuate® is an easy to use analysis tool within RPR that makes evaluating an investment property common sense. Most programs take hours to learn and still are too difficult or not practical to use. This is why most REALTORS® give up using investment software. Thank you RPR for bringing this member value to us!"
Mike Vachani, MBA, CIPS, President and Managing Broker – Realty & Investment, Los Angeles, CA
Commercial Brokerage Outreach in 2019
In 2011, RPR released its Broker Tool Set (BTS), a suite of products and features for brokerage firms and franchises, including:
Affiliated Services Support Modules
Market Data Tool
Broker Automated Valuation Model (AVM)
Brokerages ability to Insert Custom PDF pages into all RPR reports
Today, BTS participation includes over 8,000 companies representing over 520,000 REALTORS® including 186 of the top 250 brokers in the U.S. As a measure of success, RPR usage in companies utilizing Company Branding is 45% higher than those that are not branded. This serves to increase RPR's overall value through increased adoption, and also supports the tremendous investment companies make into their brand by extending it to the RPR web and Mobile platforms. As well as all the reports agents create for consumer use in buying, selling and leasing properties across the U.S.
In 2019, RPR is extending that success to identify, research and engage key franchisors, brokerages and offices in a new Commercial 100 program (C100). This will focus on offering top commercial firms and divisions with high value programs and support, such as customized monthly webinars, commercial branding on the RPR site, reports, the Mobile app and best practice articles to help each respective company share the value across their markets.
A couple of the most engaged C-100 companies include SVN and First Weber Commercial. At the start of 2019, RPR was invited to join SVN's preferred vendor program which was created to support more than one thousand commercial professionals. This program identifies key commercial products and services that benefit SVN and their franchisees across the country.
With career development a top priority, First Weber Commercial has collaborated with the RPR team to customize trainings, so their agents can maximize the RPR resources. Many commercial practitioners at First Weber have integrated RPR for their business as a result of learning the depths of information they can make available for their clients.
"I made six figures on a deal thanks to resources I have as a REALTOR® and national retailers have referred me to other businesses based on the depths of data, analysis capabilities and informational reports they receive as a result of choosing me. It was a no-brainer for me to share the importance of this resource with the SVN Corporate Team so my colleagues across the country take advantage of RPR."
Deena Zimmerman, Vice President – Chicago Commercial, Chicago, IL
"First Weber Commercial Division couldn't be more pleased with the ever improving and evolving RPR product for commercial/investment real estate. RPR's database of properties is robust and superior in most rural areas. The support staff have been very proactive in delivering training in a wide variety of methods and the cost cannot be beaten as it is included in REALTOR® dues."
Dan Lee, Vice President – Weber Co, Madison, Wisconsin
Since the amount of available vacant space is so limited, the two primary objectives a prospective tenant or owner-occupant need to keep in mind are compromise and creativity.
Compromise- If a company needs to change or add locations soon, it is highly likely that the perfect space in the perfect location at the perfect price simply doesn’t exist. For example, a company looking to locate within a mile of US 131 might need to expand that radius to within three or even five miles of US 131. Much of the vacant space in our market is new construction. Typically, the price to lease a new building is higher than an existing building, so the client may need to be willing to compromise on the price. Some of this increased cost can by offset by lower utility costs due to better insulation and more efficient mechanical systems, both of which you would likely find in a new building.
Creativity- Location and price aren’t the only areas where the client may have to compromise. The other could be with the physical attributes of the space or property. This is where the creative minds of a broker, architect, or engineer could be the key component to getting a deal done. Maybe the ceiling heights are a little lower than desired, or the office layout isn’t exactly what the client had in mind. Maybe the manufacturing area is cut up into a few sections rather than being a wide-open space. Or, maybe there isn’t enough parking onsite. Rather than walking through a building and immediately saying, “this won’t work”, it is better to ask, “is there a way to make this work?” Or better yet, “how can we make this work?” Look into the possibility of moving or removing interior walls. Is there additional parking that can be leased at an adjacent property. Maybe a loading dock or drive-in door can be added.
Location, price and space won’t always align with our client’s needs. Setting realistic expectations upfront in the process is vital. Thinking creatively and researching options for our clients will create more work and require consistent communication. However, these are critical components to serving our clients and are some of the most important ways that brokers can add value, especially in our current market.