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Classifying A Marijuana Grow Operation

Would you classify as original use, warehouse storage, or converted use, light mfg

  • Light Manufacturing

    Votes: 3 42.9%
  • Warehouse Storage Building

    Votes: 4 57.1%

  • Total voters
    7
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makuck

Freshman Member
Joined
Jun 9, 2011
Professional Status
Appraiser Trainee
State
Nebraska
These typically start as a warehouse shell with minimal electrical & plumbing systems.

When a building is converted into a grow there is typically a beefy 800 amp electrical service installed, extra plumbing is added including service lines & long floor drains, a permanent high CFM air handling system, heat pumps for cooling, and a permanently wired security system. Also the office areas are typically larger to accommodate 24 hour staff or a permanent resident overseer.

So my initial thought is this is a retrofit from a warehouse storage to a light manufacturing facility. They are no longer storing anything, and the primary use is no longer storage. The building has been improved to allow the consistent production of a crop through permanent alteration & improvement to the building itself.

The lights and grow beds are not permanently affixed so they are classified as personal property.

Any thoughts or comments on my line of thinking would be greatly appreciated.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
I received a call about appraising a marijuana greenhouse a few months ago, which was described to me as having the glass panel walls, rather than how some are being designed, and I didn't feel competent to take on the assignment, nor comfortable with trying to gain the competency to do so. With that said, I received a email from someone looking for comps that was appraising one of these types of properties based on light industrial sales/ rentals, which would parallel the light manufacturing that you mentioned. I'm certainly not suggesting that as the appropriate direction to take though.
 

miktay

Senior Member
Joined
Jul 3, 2007
Professional Status
Certified Residential Appraiser
State
Texas
We're now discussing the appraisal process of pot farms.
"The Times They Are A-Changin' "
 

timd354

Elite Member
Joined
Jan 11, 2008
Professional Status
Certified Residential Appraiser
State
Maryland
These typically start as a warehouse shell with minimal electrical & plumbing systems.

When a building is converted into a grow there is typically a beefy 800 amp electrical service installed, extra plumbing is added including service lines & long floor drains, a permanent high CFM air handling system, heat pumps for cooling, and a permanently wired security system. Also the office areas are typically larger to accommodate 24 hour staff or a permanent resident overseer.

So my initial thought is this is a retrofit from a warehouse storage to a light manufacturing facility. They are no longer storing anything, and the primary use is no longer storage. The building has been improved to allow the consistent production of a crop through permanent alteration & improvement to the building itself.

The lights and grow beds are not permanently affixed so they are classified as personal property.

Any thoughts or comments on my line of thinking would be greatly appreciated.
Appraising a building with a marijuana grow operation brings up an interesting highest and best use problem. While these operations may comply with local zoning restrictions and be legal under state law, the fact is that marijuana production and distribution remains illegal under federal law although federal law regarding these operations is only rarely enforced. However, that could change at any time and the feds may decide at some point to come in and shut down these operations.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
Appraising a building with a marijuana grow operation brings up an interesting highest and best use problem. While these operations may comply with local zoning restrictions and be legal under state law, the fact is that marijuana production and distribution remains illegal under federal law although federal law regarding these operations is only rarely enforced. However, that could change at any time and the feds may decide at some point to come in and shut down these operations.
Hence a reason for my passing on these assignments. I heard that Illinois is discussing a bill that could legalize marijuana, but also heard about the new AG not being lax on states that have legalized marijuana. Governmental regulations add an extra wrinkle into the risk component of appraising these types of properties that isn't worth the fee in my opinion.
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico
It's sort of like a brewery which at least here in Albuquerque having been built at the rate of it seems like 5-10 a year. Almost without exception they have been built in existing industrial buildings that were typically utilized as warehouses, office/warehouses, or light manufacturing. The only new construction has been expansion of the two largest breweries in the state which were additions to their existing operations.

It's a tough one as there are probably few (or no) sales of properties that have been renovated for that purpose. I know of a couple of industrial buildings here that have been purchased for renovation to marijuana growing operations (medical), though one was planning to manufacture edibles I believe. They purchased crappy old industrial buildings for $30-40/SF and invested who knows how much to renovate them for their purpose. How much would a another marijuana growing operation pay for a property that had already been remodeled? Maybe a bit more than the cost of an old building plus renovation as they're saving time, but maybe less than that cost as it may not fit their planned design exactly.
 

AMF13

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Do growers of more conventional cut flowers use indoor grow space, or all outdoors?
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Plants aren't real estate.
 
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