Formerly the CEO of Illinois-based Revolution Enterprises (and cover subject of CBT’s November/December 2016 issue), Tim McGraw left the Midwest to pursue real estate opportunities in cannabis’ biggest market: California. In this quick-paced interview, McGraw shares insight into how he created his newest venture, Canna-Hub (a cannabis-zoned real estate development company housing a variety of cannabis businesses), offers tips on how growers should approach and negotiate real estate licenses and identifies pitfalls to avoid when purchasing property.
Brian MacIver: You’ve returned to your roots as a real estate developer, but this time focused on the cannabis industry. How did you go about rebranding yourself?
Tim McGraw: The rebranding part wasn’t that difficult: Once I identified the biggest opportunity in the U.S. cannabis market for my particular skill set, I created the company and the brand, found the money, and here I am. Fortunately over the years I have become fairly well-known in the industry, which opens a lot of doors and smoothed the transition. The Canna-Hub model is a natural progression of my involvement in the cannabis industry based on my experience in real estate, finance and cannabis operations. I saw an opportunity to apply my expertise in a large and explosive market here in California, and my early assumptions have proven out.
MacIver: Why do you think industrial parks are necessary for the industry?
McGraw: [When] you can build a community with shared interests, you are stronger together. In addition to saving our operators millions, due to a 0-percent [municipal] revenue tax [negotiated by Canna-Hub prior to construction] and the efficiency of dozens of operators in one location, we are excited about the collaboration that will happen in our communities. When you bring together some of the brightest minds in the industry, innovation happens. Canna-Hub campuses will be occupied by dozens of top-tier brands that, through competition and collaboration, will advance the science and social impact of cannabis. Steel sharpens steel, and competition is healthy.
MacIver: How should growers approach communities with which they are going to negotiate a license?
McGraw: First things first—build a support team that covers all your bases, including legal, construction, finance, etc., and be well prepared. Demonstrating how the community will benefit, what you have done to minimize any perceived negative impacts and why your group is the right partner are imperative. Be able to demonstrate that you have done your due diligence, and the community can be confident you won’t make it look bad. Also, don’t overlook optics. How you present yourself is important. Many cities or counties equate cannabis with “stoners” or “burnouts.” Professional presentations, blueprints, renderings and appearance will help to defeat the stoner stereotype that unfortunately still exists. Obviously, don’t go to a city council meeting stoned, wearing flip flops and tie-dye.
MacIver: What is your biggest piece of real estate advice for cannabis cultivators?McGraw: Raise enough money. Commercial cannabis cultivation is expensive to set up and operate. Add 50 percent or more to your construction budget—you only get one chance at doing it right—and budget enough money to burn operational costs for one year. Well-funded operations can overcome a lot of the hurdles you will surely face. If you limp in on a shoe-string budget, one small mistake can sink you. One other important piece of advice for California operators is [to] bring in talent from regulated states. Experience with regulation and compliance in a state like Illinois, New York or Colorado is invaluable, as it helps to cut the learning curve substantially.
MacIver: What red flags should cultivators be aware of when it comes to real estate?
McGraw: High taxes and councils that aren’t fully on board. You also need to closely evaluate things like infrastructure, environmental reports and additional local regulations. Do your research: power, water, data, sewer, environmental concerns, fine print in the local ordinance. Before you sign on the line, you need clarity on how much all of it will cost you on scale and how long the time line is. All these issues can be terminal to your project. If you don’t identify issues and create solutions early on, you can waste months or years and lots of money.