July 2014 - Vol. 8 Issue 7
Rental Housing Journal Valley
2. The Coach – Can Your Rental Center Walls…Sell?
4. Multifamily NW – “I Just Do Maintenance”
3. Dear Maintenance Men:
6. Shoptalk
EUGENE • SALEM • ALBANY • CORVALLIS
VALLE
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EUGENE • SALEM • ALBANY • CORVALLIS
Where’s the Inventory? By Gabe Johansen, Apartment Broker
A
s the economy slowly improves and banks get back in the business of lending there has been a steady increase of incoming phone calls being directed to my office and it’s not the institutional investors who have composed the buying majority of multifamily transactions throughout the recession who are calling. Rather, it is the smaller investors who have been sitting on the sidelines for a while who are once again interested in getting in the game. This is great news for many reasons, but it does pose one fairly large challenge… in today’s market finding that perfect apartment acquisition may prove to be more difficult than it sounds. Do you remember the famous Wendy’s hamburger commercial from the 1980’s that, for what seemed like the whole decade, kept asking us where the beef was? Almost thirty years later the question on many of our industry’s minds is… where’s the inventory? A quick search on LoopNet, CoStar, MLS or any other property search engine will paint you a picture of a pretty sparse shelf. Most investors and apartment brokers are currently abuzz about how few apartment projects are listed for sale. Where there was once several pages of listings in many of the major markets in Oregon, now you will find one page or two at most in some cases. Contrary to the supply, demand for multifamily real estate is very high. Cap rates continue to compress and several Oregon markets are seeing multifamily properties reaching pre-crash level rates. Most apartment projects have already recaptured a large percentage of the value Continued on page 2 Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007
Understanding Oregon Medical Marijuana Dispensary Tenants By Cliff Hockley and Special Contributors Jacob Zahniser and Chris Walters
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building owner asked to lease to a marijuana dispensary is faced with a host of complex legal considerations unique to marijuana dispensary tenants. This arises from the inconsistent state of play between federal, state, and local regulators: • Marijuana remains a controlled substance under federal law. • Oregon law permits dispensaries, subject to licensing and other requirements. • Oregon cities have the right to prohibit dispensaries within their jurisdiction. This article summarizes the key considerations a building owner must keep in mind when thinking about leasing to a dispensary. The Legal Morass Federal Law The sale of medicinal marijuana is illegal under federal law and marijuana remains a federally controlled substance. As long as marijuana remains a federally controlled substance, there will always be a risk that federal law enforcement will shut down a dispensary and potentially seize the premises. The U.S. Department of Justice, however, has stated that federal prosecution will occur only when the sale of medicinal marijuana touches on one of the following: 1. The distribution of marijuana to minors 2. Revenue from the sale of marijuana goes to support criminal organizations, gangs, and cartels 3. The diversion of marijuana from states where it is legal in some form under state law to other states where it is illegal
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4. State-authorized marijuana activities being used as a cover for trafficking other illegal drugs or engaging in other illegal activities 5. The use of firearms or violence in the cultivation and distribution of marijuana 6. The exacerbation of other adverse public health consequences associated with marijuana use such as driving under the influence 7. Growing marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands 8. Marijuana possession or use on federal property Civil Forfeiture If federal law enforcement steps in to shut down the dispensary, it may also seek to take the premise through civil forfeiture laws. Under federal and state civil forfeiture law, the government has the authority to seize property used to commit a crime, even if the owner of the property is not charged with, or convicted of, a crime. As long as the property itself is linked to the criminal activity, it may be seized. Typically, the government first seizes the property and then builds its case as to whether the property should be forfeit. This can take months or years before the forfeiture is final, during which time the
building owner is deprived of any revenue from the property. Consequently, while the threat of federal law enforcement is mitigated when a dispensary is operated in compliance with state law, the risk associated with federal law enforcement remains very real (and very high), especially considering that federal enforcement policy may change with a new administration. State Law A building owner would be wise to include terms in the lease that mandate the tenant to provide the owner with documentation of compliance with all state requirements. For example, the premises cannot be within 1000 feet of a school or another dispensary, it must be equipped with an alarm system and video monitoring, and the dispensary tenant must pass a criminal background check. In order to know if the dispensary tenant is in compliance, the building owner should be familiar with the state’s regulations governing dispensaries. Regular property inspections will show tenants that they cannot deviate from their obligations to the law and the lease agreement. Local Law Under Oregon law, any Oregon city may pass a moratorium on dispensaries until May 2015. At least 70 cities across Oregon have passed Continued on page 7
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