The city of Albuquerque has passed over proposed zoning amendments that would have imposed major restrictions on where cannabis companies would be allowed to operate in the city. But for many would-be recreational cannabis entrepreneurs, finding real estate that will accommodate a marijuana business is still proving difficult.

While the state appears to be acting in good faith when it comes to establishing a recreational cannabis industry, concerns from some city leaders and even the mayor’s office in recent weeks surrounding the placement of marijuana businesses near main street and residential areas threatened to limit the space available in which new businesses could operate.

However, the proposed amendments were rejected by the City Council, opening up large areas of real estate across the city where marijuana facilities could make a home. Many spots in Nob Hill and Downtown appeared open and ready for business under the approved zoning rules. But those expecting a path to open up before them after the zoning debate was settled have been disappointed to find other hurdles in place.

Risky Business

The first of those hurdles is the unavailability of many bank-owned properties. Some banks consider working with cannabis companies too risky a practice. In an interview with The [Rolling] Paper, Southwest Capital Bank President and Chief Operating Officer Lonnie C. Talbert pointed out that while federal law currently forbids financial institutions from doing business with anyone who sells prohibited substances (including cannabis), the Cole Memorandum—issued during the Obama administration in 2013—instructs federal prosecutors to avoid pursuing cases in states that have legalized marijuana. He also cited guidance issued in 2014 by the investigative arm of the U.S. Treasury, the Financial Crimes Enforcement Network (FinCEN), which instructs financial institutions to conduct due diligence on cannabis companies and consider whether those companies implicate one of the Cole Memo’s priorities or violate state law before doing business with them. While it encourages banks to make their own decisions on a case-by-case basis, it does not prohibit them from doing business with pot companies.

But whether banks are concerned with legal repercussions or not, they might still be unwilling to work with the marijuana industry. “With any industry that is considered high risk,” said Talbert, “whether it be a money service business, third-party payment processors, cash intensive businesses, gun companies, strip clubs, medical marijuana, recreational marijuana—anything that is considered a high-risk activity. … Many banks won’t want to touch those businesses, whether they’re legal or not, because they take a lot more compliance work.”

This severely limits the space available to cannabis companies, forcing them to look to the private sector for facility locations. Unfortunately, many property owners in the city are just as leery as the banks about working with cannabis companies.

“There’s still a lot of stigma around cannabis,” says John Garcia, founder of HAPPYDAZE, a new cannabis microbusiness that will be jumping into the recreational market this year. “People who own buildings have some hesitancy to let producers grow in them because they’re worried about security and other tenants in the area.”

Garcia has had trouble finding a place to house what he hopes will become his grassroots operation where he will grow and sell recreational pot. “There’s quite a bit of things that go on behind the scenes that people don’t know about,” he tells me. “You have to have insurance. You have to have your accounting set up. You have to hire lawyers. You have to have your business entity registered with the city and get your LLC approved. For us, all of that is done. We’re just waiting for this one thing—a place to operate.”

He says some landlords are more open to leasing to cannabis companies now that the city has settled the zoning dispute, but many are still holding back based on personal concerns over the impact of hosting these businesses. They may have available space under the city’s zoning regulations, but they aren’t under any obligation to lease them.

Potential cannabis entrepreneurs are finding, again and again, that many landlords are worried that the odor of pot plants and the overall riskiness of cannabis businesses will drive away neighbors and negatively affect their ability to produce revenue.

Options For Producers

It appears as though burgeoning Albuquerque cannabis companies will be left to come up with creative solutions to get around the barriers that are currently in place and set up shop. Some have discussed options like splitting up larger venues between smaller units, although it is unclear if zoning rules would allow pot companies to operate that close together.

Producers might be forced to areas outside the city centers or attempt greenhouse grows. This is bad news for microbusinesses looking to compete with larger, more established companies or those with better financial backing—giants who will likely have much less trouble procuring real estate for their businesses.

This is also bad news for consumers, who will have to travel further to purchase products—the quality of which could potentially suffer without the luxury of a controlled, indoor setting.

Garcia says the answer is educating people about cannabis and changing perceptions around the drug. That means that entrepreneurs looking to break into the industry have their work cut out for them. The debate over cannabis zoning rules will seem simple compared to the uphill battle of overcoming the stigma around marijuana. After all, no amount of legislating can win the hearts and minds of property owners. That can only come about through a cultural shift.

“We sell cigarettes. We sell liquor. We have gambling in New Mexico. Cannabis is just another form of entertainment for some people,” says Garcia. “And it can also be really helpful. There are lots of medical benefits.”

But the sea change needs to happen quickly. With the deadline fast approaching for recreational stores to open their doors, producers will need to start growing their plants sometime around September at the latest in Garcia’s estimation.

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