How to Value a Cannabis Farm, Warehouse or Dispensary Building

Start by identifying exactly what the seller is offering. A California cannabis real estate deal can include land, buildings, fixtures, an operating lease and a separate business. A buyer may assign a different value to each component depending on title, approvals, condition, usable infrastructure and the ability to occupy or re-lease the property after closing.

Explore California cannabis properties for sale · Discuss a cannabis property valuation

Separate the purchase price into the assets being sold

| Component | Evidence that helps establish value |

|—|—|

| Land and buildings | Relevant closed sales, permitted and lawful uses, condition, usable area, location, utility capacity and comparable alternative uses. |

| Specialized improvements and equipment | Ownership, condition, permit history, remaining useful life, cost to install or replace, and the cost to adapt or remove the equipment. |

| Existing lease | Signed lease and amendments, rent actually collected, term, tenant obligations, credit support, downtime and re-leasing costs. |

| Operating business or assets | Verified earnings, purchase-price allocation, working capital, liabilities, contracts and approvals affecting continuity. |

An asking price can combine several of these items. Before using a listing or sale as a comparable, confirm what was included. Ask your appraisal and tax advisers to review any purchase-price allocation that affects your transaction.

Select the evidence for the type of property

Cannabis farms

Start with comparable rural land and permitted agricultural improvements. Evaluate legal access, reliable and documented water, usable acreage, approved canopy and the scope of existing structures. Price out any water, access or permit work a buyer needs to complete. How to verify cannabis farm water rights

Cannabis warehouses and greenhouse facilities

Compare conventional industrial or agricultural building sales with facilities whose electrical, mechanical and water infrastructure has similar utility. Document available power and finaled improvements. Estimate how much value a typical buyer would assign to the existing systems, based on condition and how much work they avoid. Also budget what a buyer would spend to change the building to another use.

Dispensary buildings

For an owner-user sale, review location, parking, access, occupancy and permitted use. For a leased investment, evaluate the tenant’s payment history and the signed lease. If the dispensary business is included, analyze its financial records and the approvals required for the buyer to operate separately from the value of the property. California dispensary real estate for sale

Compare the sales, income and cost approaches

1. Sales comparison. Start with closed property sales and adjust for meaningful differences such as location, use, condition, access or infrastructure. Confirm whether an operating business or equipment was included.

2. Income. For a leased asset, estimate sustainable net operating income using documented rent and property expenses. Consider lease rollover, downtime and capital costs in the analysis.

3. Cost. For specialized improvements, compare the cost to reproduce useful features with their condition, age and usefulness to an actual buyer. Document the costs to restore or repurpose the property where they are material.

For illustration, a property with sustainable annual net operating income of $120,000 would indicate $1.5 million at an assumed 8% capitalization rate or $1.2 million at an assumed 10% rate. These are example inputs. Use comparable sales and deal-specific rent and risk to evaluate a rate.

Commercial property valuation approaches

Prepare a valuation package before you market the property

Gather the APN, title materials, site plan, permits and inspections, utility records, equipment inventory, occupancy records and the lease or operating records appropriate to the deal. State which assets are included and which fixtures or equipment the seller will retain. If a permit issue or investment decision depends on the change of operator, identify that issue before asking buyers to price the opportunity. DCC licensing regulations

Monterey County cannabis greenhouses · California cannabis financing · Selling commercial property · Contact Diamond Real Estate Group