Appraising Cannabis Facilities

[Scott.A]

How are they any different that any other ag grow house?

 

[CANative]

Most around here is grown outdoors on entitled properties in hoop houses. Land pricing skyrocketed to insane levels in 2016 and into 2017. But it was like wine vineyards. Novices wanted the bucolic lifestyle and easy money (lots of it) but then found out how freaking complicated and difficult it is. A big hurdle was breaking into the close-knit culture and falling prices due to volume. Different hybrids and specialties, complex timing and chemical fertilization, and constant work. And you have to have 40 acres in certain types of ag districts, plenty of water and water rights, proof of prior cultivation at the site. And you still can grow more than a 10,000 sf canopy not matter how many acres you have.

Still, they are becoming more professional and experienced. They have certifications, all their legal ducks are in a row, supply and distribution chains. I missed an opportunity to be the appraiser of choice for a commercial operation that was expanding. Including appraising commercial/industrial properties they were contemplating purchasing. But I took too long on one (I saw the writing on the wall and knew the MV opinion one one of their 2015 purchases was going to be devastating for them) and my OMV was less than they bought it for. Haven't heard from them again.

Indoor grows in urban or industrial areas is completely different. Very scientific, nothing left to chance. My cousin is heavy into CBD operations and was going great guns. But recently a test turned up a slightly elevated level of THC in a billion dollar crop and it all had to be destroyed. It's kind of BS at this point. Keeping THC levels down can be difficult and susceptible to light cycles, a bit of contamination, gases, temperature fluctuations.. or even just random. Lots of risk.

 

[glenn walker]

Most around here is grown outdoors on entitled properties in hoop houses. Land pricing skyrocketed to insane levels in 2016 and into 2017. But it was like wine vineyards. Novices wanted the bucolic lifestyle and easy money (lots of it) but then found out how freaking complicated and difficult it is. A big hurdle was breaking into the close-knit culture and falling prices due to volume. Different hybrids and specialties, complex timing and chemical fertilization, and constant work. And you have to have 40 acres in certain types of ag districts, plenty of water and water rights, proof of prior cultivation at the site. And you still can grow more than a 10,000 sf canopy not matter how many acres you have.

Still, they are becoming more professional and experienced. They have certifications, all their legal ducks are in a row, supply and distribution chains. I missed an opportunity to be the appraiser of choice for a commercial operation that was expanding. Including appraising commercial/industrial properties they were contemplating purchasing. But I took too long on one (I saw the writing on the wall and knew the MV opinion one one of their 2015 purchases was going to be devastating for them) and my OMV was less than they bought it for. Haven't heard from them again.

Indoor grows in urban or industrial areas is completely different. Very scientific, nothing left to chance. My cousin is heavy into CBD operations and was going great guns. But recently a test turned up a slightly elevated level of THC in a billion dollar crop and it all had to be destroyed. It's kind of BS at this point. Keeping THC levels down can be difficult and susceptible to light cycles, a bit of contamination, gases, temperature fluctuations.. or even just random. Lots of risk.

I have a feeling that billion dollar crop was a old fashioned shakedown , someone didn't play by someone else's rules and next thing you know, Fed's are in there saying levels were too high. I doubt anyone would be crazy enough to intentionally kill their crop by playing games, especially on a site that was licensed and permitted to operate. Maybe it was those Pesky Russians : ) LMAO

 

[CANative]

Hemp is carefully tested at a certain time (flowering). Sometimes a perfectly legal crop can suddenly start growing hot (THC spikes) which can be caused by many known things (and unknown things.)

Hemp Production - Keeping THC Levels Low

Leo Stefanile, Margaret Bloomquist, and Zeke Overbaugh showing differences in root development of two hemp varieties.Read the full article Hemp Production in North Carolina is new and changing rapidly. There is a massive shortage of research-based info regarding the basic agronomic...

catawba.ces.ncsu.edu

"Growers need to be aware that plant stresses (drought, flooding, excessive nutrients, not enough nutrients, heat, cold, etc) can result in THC spikes... "

"We don’t have solid data on the causes of THC spikes but here are some considerations. While excess nitrogen is often blamed for THC spikes, Dr. Angela Post, NC State University Small Grains Specialist, disagrees with this. In one research trial that Dr. Post conducted, nitrogen was applied at rates of 50, 100, 150, 200, 250, and 300 lbs per acre. While there was no advantage at putting out more than 100 lbs of nitrogen per acre there was no spike in THC. In fact, from just this first year of preliminary data, Dr. Post did not see any relationship between nitrogen and THC or CBD. In fact, Dr. Post wonders if nitrogen deficiencies could result in plant stress, thus causing a THC spike... "

"Altitude or cooler weather at certain stages of plant development may affect THC. Again, there is no multi-year, replicated research information for NC hemp, but a variety trial of hemp was conducted at the Piedmont Research Station (elevation 703 feet) near Salisbury and the Mills River Research Station (elevation 2,069 feet) near Asheville. The same varieties were planted at both locations. None of the varieties had high levels of THC in the Piedmont location while all of the varieties tested ‘hot’ in the mountains!"

 

[glenn walker]

I can see this business model going down the tubes, farmers cannot afford to have a billion dollars go up in smoke because THC level went up. O' well back to the old business model, if your going to be bankrupted doing it the legal way whats the point.

 

[Terrel L. Shields]

How are they any different that any other ag grow house?

Since the states do tightly regulate the stuff, one thing is that they require 24 hr surveillance cameras...meaning they require a back up power supply...and you know the situation with the black outs in California. Further those back up generators are large. There is an odor issue. Neighbors complain so they have large energy gobbling filter systems in many operations. It is also a labor intense business.

@CANative points out that the stuff has to be tested rigorously. A good hemp scientist can cost $50,000 a month testing and developing varieties. The oils and cannabinoids are complex. So there is a huge investment in a green house operation and since they are not allowed to deduct any expenses (IRS doesn't recognize it yet) they are not making much money and many are losing money...which explains why no small number are "illegal" operations. It is a choice, starve or go outside the laws.

 

[CANative]

Since the states do tightly regulate the stuff, one thing is that they require 24 hr surveillance cameras...meaning they require a back up power supply...and you know the situation with the black outs in California. Further those back up generators are large. There is an odor issue. Neighbors complain so they have large energy gobbling filter systems in many operations. It is also a labor intense business.

@CANative points out that the stuff has to be tested rigorously. A good hemp scientist can cost $50,000 a month testing and developing varieties. The oils and cannabinoids are complex. So there is a huge investment in a green house operation and since they are not allowed to deduct any expenses (IRS doesn't recognize it yet) they are not making much money and many are losing money...which explains why no small number are "illegal" operations. It is a choice, starve or go outside the laws.

The test is like $59 and if it has spiked they can get it retested for about $150. Of course they have to collect some biomass and the plants are very sensitive. Looks like they're working on this issue.

But the science cost (testing, staff, DNA manipulation) is just part of the cost of doing a billion dollar business.

 

[Scott.A]

Since the states do tightly regulate the stuff, one thing is that they require 24 hr surveillance cameras...meaning they require a back up power supply...and you know the situation with the black outs in California. Further those back up generators are large. There is an odor issue. Neighbors complain so they have large energy gobbling filter systems in many operations. It is also a labor intense business.

@CANative points out that the stuff has to be tested rigorously. A good hemp scientist can cost $50,000 a month testing and developing varieties. The oils and cannabinoids are complex. So there is a huge investment in a green house operation and since they are not allowed to deduct any expenses (IRS doesn't recognize it yet) they are not making much money and many are losing money...which explains why no small number are "illegal" operations. It is a choice, starve or go outside the laws.

Interesting. Thanks for the rundown.

 

[Restrain]

In CA, there is a big worry from the legal growers over the disparity in price between legal and illegal, with illegal taking the market shares due to taxes pushing the legal MJ costs up. Now there is a new round of tax hikes hitting, which is reported to be threatening the viability of some growers. CA may end up killing the ‘green gold’ industry through greed. Something appraisers probably need to watch.

 

[CANative]

Illegal grows means one can hide from taxes. But it comes at what some consider an unacceptable risk. OTOH, a legal grow has little risk and even cooperation from the local jurisdiction but the price is paying more taxes. I talk to a lot of growers, legal and not legal. Taxes is seldom a talking point.