A developer who aims to invest up to $400 million in a test of the industry's potential to expand nationally has reached a deal with a producer of products containing compounds found in cannabis to establish as many as 100 CBD lounges, starting in Miami.
Can B, situated in Hicksville, New York, announced that it had reached an agreement with American Development Partners, based in Nashville, Tennessee, to fund and create consumption lounges that would sell hemp-derived goods without THC, the psychoactive ingredient in cannabis. CBD, or cannabidiol, is a substance that helps people relax.
As part of the agreement, American Development would finance and create up to 100 CBD lounges, with Can B committing to the first 50 and the option to develop another 50. Can B will run the venues, with the first one opening in April in Miami's Wynwood neighborhood. Can B and American Development did not respond to emails and phone calls requesting comment on their intentions or the location of the lounge, where patrons can use CBD products in a social setting.
CBD and cannabis, according to some analysts, will be a growing business both domestically and internationally, with more states, including New York and New Jersey, legalizing the recreational use of cannabis by adults in recent years.
However, state and local officials are taking a long time to create CBD and cannabis-related rules, delaying the launching of farms, warehouses, dispensaries, and lounges that are involved in the manufacture and distribution of the products. And, once the guidelines are in place, they may be extremely restricted in terms of where CBD and cannabis businesses can operate, requiring buffer zones between them and schools and churches.
In 2019, at least one additional business, New York City-based GenTech Holdings, declared ambitions to open a national chain of CBD cafes, but those plans never materialized. According to Bryan McLaren, CEO of Scottsdale, Arizona-based Zoned Properties, a real estate development and advising firm specialized in the cannabis market, "there hasn't been a crazy rush into the sector because of the barriers."
"I'm not sure there has been much of a chance for these to establish nationally — at least true lounges that allow people to legally drink on the premises akin to a bar/pub," he told CoStar News in an email. "I've seen a few that are just coffee shops that also sell CBD products and are trying to pass themselves off as lounges."
According to McLaren, even Denver, which is located in one of the most cannabis-friendly states in the US, took years to witness the launch of CBD consumption lounges.
Because each of Can B's proposed CBD lounges will cost around $4 million to build, American Development is providing an initial $200 million, with an option for an additional $200 million. During the 10-year life of the agreement, the company will be the only developer of the lounges, and will receive a fee of 10% of the total development cost for each lounge.
Can B also intends to sign a 20-year lease with American Development for each lounge it develops. In a filing with the Securities and Exchange Commission, the business detailed the leases.
According to the petition, "rent will equal total development expenditures, including site acquisition costs and the development fee, multiplied by a rent factor to be set on a lounge-by-lounge basis, which factor will be capped at 10." "Rent will increase by 2% every year."
According to the SEC filing, the leases will be triple-net leases, with the tenant covering expenses such as real estate taxes, building insurance, and maintenance for a 20-year duration.
Can B produces hemp-derived cannabis products under the Canbiola, Seven Chakras, NuWellness, Pure Leaf Oil, and Duramed brands, among others. It sells products to medical facilities, doctors' offices, and stores, as well as selling them online and directly to consumers. In Lacey, Washington, and in Florida, the corporation has research & development and production facilities.
CBD is one of many components of both hemp and marijuana, which has been defined as "a relative of the marijuana plant." Hemp includes less than 0.3 percent THC, whereas marijuana contains more than 0.3 percent THC, which is the legal distinction.
In a statement, Marco Alfonsi, CEO of Can B, stated, "Our CBD lounges will cover food, drink, and entertainment while highlighting our health and wellness CBD products." "We have a strategy to open a number of locations over the next few years and feel it will be a significant revenue generator for our firm without diluting our shareholders."
Capital, site selection, design, architecture and engineering, building, and sale-leaseback transactions are among American Development's specialties. It builds single-tenant, free-standing commercial real estate in all 50 states.
In a statement, Peter Cantel, American Development's communications director, stated, "Our team is always looking to partner with interesting growth prospects, especially with new or emerging concepts." "With companies like American Family Care, Church's Chicken, and Taco Johns, we've done a lot of build-outs in healthcare and food hospitality, and we're happy to add Can B to our portfolio of clients."
According to McLaren, the company and Can B face a severe hurdle in the CBD market, which is identical to all cannabis-related ventures and real estate development: local governmental zoning and permission.
"Even if the federal government considers hemp and most CBD products legal as a result of the 2018 agricultural bill, there are still a lot of regulatory disputes among state and local governments," McLaren said. "Many states have begun to create particular legislative wording, licensing, and permission for consumption lounges, but it's extremely complicated."
That's because, according to McLaren, businesses contemplating such lounges must comply with smoking and health requirements, as well as cannabis legislation.
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