Reclassifying Cannabis: Impact on Real Estate and Lending Industry

The potential reclassification of cannabis as a lower-risk substance could have a significant impact on the real estate and lending sectors within the industry. This change could lead to relaxed lending regulations, allowing more funds to be directed towards cannabis facilities.

Cannabis operators may also experience reduced tax obligations, which could attract more lenders to enter the market as the financial standing of these companies improves. Charlie Alovisetti, a partner at cannabis law firm Vicente LLP, believes that the increased cash flow from reduced tax burdens could provide financing for the expansion of various licenses.

California-based Innovative Industrial Properties Inc. (NYSE:IIPR) anticipates that rescheduling cannabis from Schedule I to Schedule III could pave the way for descheduling within the next two to three years. However, even under Schedule III, state operators would still be in conflict with federal law by selling cannabis without a prescription.

The current classification of cannabis as a Schedule 1 drug has hindered cannabis businesses, despite nearly half of the states legalizing adult recreational use. IIPR’s tenants include major cannabis companies like Trulieve, Curaleaf, and Cresco Labs, with 30 tenants in total.

Relaxed regulations could open up the industry to more research, increasing demand for research space at hospitals, universities, and life science facilities. This could also lead to increased demand for industrial properties for cultivation, manufacturing, and retail activities.

Overall, the potential reclassification of cannabis could have far-reaching effects on the real estate and lending sectors within the industry, potentially spurring growth and innovation in the market.