Grand Rapids Stops Marijuana Facility Applicants – 6 Month Moratorium Enacted

By |2018-09-24T13:10:44+00:00September 19th, 2018|Marijuana News, Michigan, Municipality Updates|
  • Grand Rapids placed a 6 month hold on the marijuana application process
  • They are considering removing the prequalification requirement
  • Discussion workshop scheduled for Oct 9

The Grand Rapids City Commission voted 5-1 to enact a 6 month moratorium on medical marijuana applications at Tuesday’s meeting. Grand Rapids is one of the only cities that intentionally considered local small business owners by providing space for micro businesses in their ordinance. They have made a strong effort to maintain ‘buy local’ values and support entrepreneurs within the city.

However, the effect that this moratorium will have on those entrepreneurs is unclear. We do know that this substantial delay is going to leave hundreds of potential applicants scrambling for money. This is why.

When a major city like Grand Rapids opts in to allow for medical marijuana facilities, there is a pretty standard chain of events that occurs. We have seen it over and over across the state, and it typically goes something like this.

  1. The city opts in to allow medical marijuana facilities. People in the industry start to take notice. More than likely, a select few were involved in the chain of events that caused the municipality to pass the ordinance. Investors and operators want to get in as fast as possible to get the best deal on real estate, secure prime locations, and gain their foothold in the market. They quietly start procuring property.
  2. A zoning ordinance is drafted, and more people start making offers on real estate. Some people actually intend on purchasing the property. However, a LOT of them are just trying to lock up real estate to prevent competition. The same groups go from city to city utilizing the same tactics. They drive up prices to unreasonable numbers that keep actual operators out of the market. As this happens, property owners realize that their real estate is ‘green zoned’ and prices continue to climb.
  3. The zoning ordinance is finalized and the city starts to get media attention. Operators who actually intend on opening a business start looking at property, only to find that a lot of it is already under contract. They have to make aggressive offers, often involving non-refundable deposits, monthly payments while the property is under contract, along with an inflated purchase price.
  4. Here is the step where an operator would normally start the application process with the municipality, hoping that the approval will happen before they have to close on the property. In a normal scenario, this may be a 2 – 4 month process at the city level, so a six month contract on a piece of property is typically sufficient. HOWEVER – Grand Rapids just threw a wrench in this process, pushing the timeline out at least six months. All of the people that spent thousands, often hundreds of thousands of dollars to get through step 3, are now scramble to keep the property they have security. A lot of them will lose the deal and have to start over.

Over the next six months, we are going to see a lot people run out of money trying to hold onto real estate in an extremely competitive space while they wait for the city. Their contracts will expire, and many of those properties will come back on the market and go to the next buyer. Unfortunately, it seems the groups that will suffer the most are the small business owners. They don’t have the funding behind them that the bigger operations do, and they won’t be able to continue burning the cash needed to extend purchase agreements and keep locations secured.

Some say that there was no room for smaller operators anyway because of the inflated real estate prices. However, we can be certain that the groups that were well prepared, got in early, and had just enough money to start their own business will definitely suffer.

There is a work session scheduled for October 9 to discuss the marijuana facility application process, as well as some potential changes to the ordinance. One of the proposed changes include removing the prequalification requirement from the ordinance. If this happens, it would drastically increase the number of people eligible to apply for a facility permit within the city. Whether that will be good for the small businesses in the City of Grand Rapids is yet to be seen, as it will likely increase demand and drive up real estate prices even farther. 


About the Author:

Stephanie Goodman
Real estate broker, investor, and serial entrepreneur