Aaron Strauss: You're listening to The Dealmakers’ Edge with A.Y. Strauss, diving deep into stories behind commercial real estate leaders.

Hello, everybody. Welcome to The Dealmakers’ Edge. Today, I'm honored to be joined by two of my partners, Jennifer Cabrera and Sahar Ayinehsazian, who lead our cannabis group day-to-day here at the firm. They're also working in our corporate group. They previously worked together at one of the country's top-ranked cannabis law firms. Sahar chaired the Banking and Financial Services Committee and Jen led the New Jersey branch of the firm in support of the development and growth of cannabis businesses in the state. In this conversation, we're going to talk about the intersectionality between commercial real estate, specifically in leasing and lending and financing of cannabis, some of the regulatory issues that people need to be aware of, trends on a macro level. And also things people don't consider, legality of beverages versus actual dispensaries, where they're sold, how they're sold, how things are advertised. It's a fun conversation. And also I get to enjoy working with these two amazing people every single day. So I hope you enjoy the conversation and without further ado, here we go. Hello, everyone. Welcome to the DealMakers Edge. Today we have a really cool, special episode. Two great friends of mine, partners of mine, super talented women, Jen Cabrera, and obviously Sahar Ayinehsazian as well. And they've been with the firm for under a year, but we've done so much together in a short period of time. They're both running the cannabis group here at the firm, so every day we're on the phone talking about how the cannabis industry is surviving or thriving, depending on the context and the client's specific circumstances and also how it pertains to commercial real estate. Exactly, depending on the state, which we'll get into. And also all the interplay between cannabis and commercial real estate. So the listeners of this podcast, it's called THE DEALMAKERS EDGE. Predominantly, it's most of the dealmakers in commercial real estate. Some of them have some exposure to analyzing the legal aspects of cannabis, how it pertains to their portfolio, different tenants they're representing, or landlords they're representing. But here we're really going to drill into it, because there's so many nuances that I think we can really educate our listeners on. So I never had two guests at the same time. So we're going to give it a shot. Just going to ask some questions. We're going to see where the conversation goes. I really appreciate you guys taking the time. And if people are listening to this and they don't get the full answers and scope of what they're looking for and we don't cover everything, which is impossible in about 30 minutes, I will also share that Sahar and Jen will be hosting a webinar on April 21st, where they'll really do a deep dive on the input into the regulatory outlook of the cannabis market for this year and beyond. So guys, really appreciate you being on with us today.

Sahar Ayinehsazian: Thanks for having us.

Jennifer Cabrera:Yeah, it's our pleasure.

Aaron Strauss: Yeah, it's a party.

Jennifer Cabrera: I know it's been great since joining the firm.

Aaron Strauss: We've been having fun just watching those conflict checks come in and the fabulous operators and dispensaries and regulatory hurdles you're clearing for clients. It's been amazing. But maybe we'll kick it off with a real estate type question first. Retail leasing. I think, Jen, we had met years ago, because we needed to bring in cannabis counsel for landlords, understanding who they're leasing to, on what terms. But just maybe you could talk about big picture trends in the retail leasing world in cannabis that you're seeing in real time. Obviously, they're state and federal. We want to get to Sahar with some questions too, but maybe you'll kick us off with that.

Jennifer Cabrera: That's right. We first were connected probably like four years ago now, because one of the attorneys at your firm, Sarah Ho, had an issue with a large landlord that was looking to lease space to a cannabis dispensary, as is the main intersection of cannabis and real estate, in the state of New Jersey and many places as well. So most states require a couple of things. They require both local approval from the town, where you're operating, from a cannabis license holder and they also require that the landlord specifically, is on board with this use. And so, as landlords are going through this negotiation process with license holders, they run into a few issues. One of those big issues is, do you have a mortgage on the property? And that's something I think we'll probably be getting into more later. As well as, what is the local approval process going to look like? But when you are a landlord with a property that is both zoned for cannabis and that has that local approval, you've got a really valuable asset and you're going to have a lot of operators vying for that property. So the trend has really been a positive one. And so in states like New Jersey, landlords are doing well and also often can become part owners of those businesses. So it's been an interesting development to watch.

Aaron Strauss: Great. And maybe we can just get right into it as well, because the interplay between a lease, a landlord and a lender, they're all interconnected, they all play a role. And obviously, from a financing perspective, one of the biggest issues with cannabis is the state issues versus federal issues and having the creditworthiness, frankly, to ensure that that stream will be there, there won't be some federal law that will create a problem. But how are you seeing the interplay? And Sahar, feel free to jump in. I know we're all chatting around the day on a regular basis. Between the lender, the landlord, obviously, and the tenant, how can either sponsors, or people looking to lease space the cannabis operators, try to get in front of these conversations with their lender, to make sure that they can get approvals for such?

Jennifer Cabrera: One of the things that I think is an overarching theme, when it comes to cannabis in its current form and I say in its current form as we've seen it in the last 10 to 15 years, is the importance of being very, very upfront and honest about what's going on. And so with respect to a lender, I would say that if you are a landlord, who has found a good operator that you want to lease your space to, so somebody who is licensed, somebody who has passed you know all the background checks that they need to, somebody who has the backing of their locality, who's in good graces with the state regulators and whatnot. You should talk to your lender and let them know, you know, this is what we're thinking of doing. Don't try to hide the ball and be cute and then hope that your lender just like never finds out about something. And you can just keep it going that way. Obviously, if your mortgage holder is one of the larger banks or larger financial institutions that's not yet comfortable with cannabis, you may be running into issues there. But if you have a smaller lender, or one of the non-big bank lenders, they are more likely to come to the table and become a little bit more educated about what cannabis currently looks like and then be willing to move forward from there. But it's really important to have the conversation with them up front and start kind of almost educating your lenders about what's going to be happening. And the fact that canvas operators actually have to adhere to a very, very strict set of regulations, on an ongoing basis, more so than I would say most other tenants. And it's an interesting thing because when I first got into the industry seven years ago, there were very few banks that were willing to have a mortgage on a property being used for cannabis. It just wasn't really happening, or at least I wasn't seeing it.

Sahar Ayinehsazian: It wasn't a thing.

Jennifer Cabrera: And in the last few years, there are certain banks that are willing to do this. And you have some banks that are even making business loans to these companies. But more often, it's in the form of a mortgage, because a property is a great thing to have a security interest in. It's a lot safer than a license as a means of security. So it's interesting, like it's really a matter of finding a bank willing to do so. And there are a handful that are doing it.

Sahar Ayinehsazian: I think what are the roads to finding a bank that's willing to do this? So let's say you want to buy a property specifically for using it either yourself as a cannabis operator or becoming a landlord to a cannabis operator. There are more and more banks now that are willing to offer depository services to licensed cannabis operators. And oftentimes, it's those banks that also are willing to work with landlords and with mortgages and properties related to cannabis. And so they're out there. It's just a matter of being able to network with them and to access them.

Aaron Strauss: One of the things I think we've talked about a bit, over the last number of months, is just fundraising and it ties into financing and it ties into the investor community, oftentimes leads to confusion, or potential disagreement and whatnot. It's still obviously an industry finding its way through the traditional business channels, but maybe we could talk about just financing sources. Obviously, if there's great real estate to secure a loan and there's banks that will be willing to finance it, that's one thing. What about the sponsor and operator that just won a license, or somebody's interested in getting into the space? What is that appetite for either investment or alternative financing available for some of these sponsors and operators? I know that's a kind of a broad question, but I think that's one of the challenges if I'm correct, in the industry, it's just consistent financing sources, consistent investment platforms to raise equity to, you know, how are people finding the resources, frankly, to scale these businesses that are not, you know, private equity backed.

Jennifer Cabrera: Yeah, I think you need to have your own assets to be able to do it, because it's really hard to raise money in cannabis. Your options are if you don't have your own financing, then you're selling a substantial part of the company. It's very hard to get loans in cannabis to the extent you can, the interest rates are really quite high, like sort of towards 20% area. So honestly, for an operator, when you are a landlord working in this space, like just from the, simply from the landlord's point of view, you're going to want, number one, someone who has the financial wherewithal to make this dream a reality. You can't count on somebody being able to go out to the market and raise funds. They have to have already a plan in place, is what I would say, if I were advising a landlord in this situation. And a lot of the most successful businesses are buying the properties themselves, because then that is a source of credit that you can get.

Sahar Ayinehsazian: Yeah, I think when we talk about financing in the cannabis space, I would divide it largely between the two types of financing that are generally available to any business, which is equity versus loan financing. And then I would further divide it into what state are you looking at. So some of the more established markets on the West Coast, we're finding that financing for them in equity is a little bit more difficult than it is, in terms of loans now. Just because I think we have more of a track record of how those businesses can expect to be doing and a lot of the prices are normalizing and we're actually seeing a little bit of price compression, which makes lending make a little bit more sense. And then as you go more onto the east coast you have more emerging markets and you have markets that are not yet subject to price compression, we see a little bit of appetite for equity, but like Jen said, not a ton where you have someone coming in and saying, hey, I'm going to give you like $5 million and you give me a portion of your business and you just like do with it as you please. We're definitely seeing more debt financing to the extent that financing is available. But debt financing in cannabis is also very, very specific. It has generally a higher rate of interest than one would expect. And then there's also, like Jen said, the collateralization question of like, what are you going to actually collateralize? And that's why, to the extent that any cannabis operator actually has the ability to collateralize their own real estate, that opens up an entire new world of financing to them, versus if they aren't able to collateralize something as universally understood as real estate.

Aaron Strauss: We talked about leasing. We'll talk more about leasing more, because obviously it's driving the value of any of these real estate platforms, but you're negotiating a retail lease. Obviously, there's use and occupancy and all the good things that you need in a traditional space and then there's obviously state-specific provisions as well. But I pose this to either of you, Sahar, Jen. You know, somebody comes to you and says, cannabis tenant, you know, what are the three, four or five critical items as a landlord, I need to have a unique circumstance on? Why do I need to hire cannabis counsel? Why can't I just say it's permitted use? This is what it is. There are certain risks. What are the three to four or five items you're constantly negotiating? For those who are not aware, I mean, some people listening to this may not have ever touched a lease tied to cannabis. Why is it so critical that somebody who knows what they're doing is really advising that landlord or tenant from them that transaction?

Sahar Ayinehsazian: One of the first things is zoning. Are you actually zoned properly for cannabis? And locality zoning can sometimes be a lot more confusing than expected, when it comes to cannabis. So you want regulatory counsel, who is used to looking at these issues to first and foremost make sure that the zoning is what you think it actually is. And then a lot of states are going to look at the lease itself, too and make sure that there's cannabis-specific language in the lease. So that's something that you want regulatory counsel to be able to negotiate and make sure that it meets what your tenant requires and what the state requires, but that it's not overdoing it. Additionally, these, you know, as we've said, are highly, highly regulated businesses. So it's not enough to just, you know, take a look at the paper license that they have and say, okay, great, you've got a cannabis license. Wonderful. This is going to be great. You want somebody who actually understands how to look up these licenses, make sure that they're valid and in good standing, both on the state side, as well as the local side. And sometimes on the local side, you can't get a full license to start operations, until you have your space locked up and ready to go. And so you want somebody who understands those nuances and can make sure that you don't end up signing a lease with somebody and then they actually can't start operations and they can't end up paying you. You also want to make sure you're working with good actors and good operators and someone, who doesn't have, you know, a record of having a bunch of regulatory issues, which is an indicator that they may not be able to continue to operate, which in turn means they can't profit and they can't pay you. So it really is making sure that you have somebody who's experienced and can look at the finer regulatory side of things, to ensure that you're entering into a relationship that's sustainable and that's going to bring you, what you expect from it on an ongoing basis.

Aaron Strauss: Jen, I can see you nodding. You've got stuff to add for sure.

Jennifer Cabrera: I would say that one of the weirdest things, it really varies a lot by state. One of the strangest things about cannabis in New Jersey is the great deal of local control. And that makes sense across the board, right? It's a home rule state. So if you're already in real estate, you are familiar with dealing with your municipality and going in front of the zoning board, or the planning board. And just what a long and frustrating process that can be, because a lot of these folks are volunteers and may not really understand the use. Well, and cannabis, that's not better. If anything, it's worse, because you've got, number one, you may have had a council that decided, yes, we're going to opt into cannabis retail or cultivation. Great. Then it gets to the planning board. The planning board members didn't vote on that. Some of them may be ideologically opposed to this altogether. One thing I've seen come up, in multiple towns, across the state is traffic concerns. The planning board gets their hand on it and they're thinking, this is going to be the most popular business in town. There is going to be a constant stream of cars going in and out of this store. They don't think of it as what it is, which is a liquor store. And no one lingers at the liquor store. You can, unless you're in a very bad part of town, you don't go and hang out at the liquor store. You're in, you buy your rosé, you leave. That's what a dispensary is, except more regulated, because every dispensary in the state has a security guard making sure that nobody lingers in that parking lot. They want you out. Exactly. It's 15 minutes in and out.

Sahar Ayinehsazian: They want you in and out. They don't want to talk to you. They don't want you to talk to people. This is not a place to go and make friends at all.

Jennifer Cabrera: It's really not.

Sahar Ayinehsazian: You're in, you buy, you're out.

Jennifer Cabrera: But then the planning board often doesn't realize that, so you have to commission a traffic study. And that is a very expensive process to bring on a traffic engineer, who has to sit outside and count cars for an hour. Another factor that is very weird in New Jersey is that that planning board process often comes up front, before the business is even completely licensed. So you want a business only that's licensed? No, you're stuck in this catch-22 loop, where they can't get their license until they have planning approval. Then there's the other factor that overwhelmingly so, these are conditional uses in most towns. Like, it's a conditionally permitted use, but you have to satisfy, like, you have to go through a site plan approval. Even if you're going retail to retail, you just still have to go through that. And I think this is where having experienced counsel makes all of the difference. It's all the things Sahar said of vetting the prospective owner and making sure that the lease accounts for all the regulatory requirements. It's also just getting a realistic idea of how long the local approval process is going to take.

Aaron Strauss: Totally. And walk me through a default. Oh, go ahead, Sarah.

Sahar Ayinehsazian: You know, I'm going to actually add one more thing, which is that it's also important to have experienced regulatory counsel, who also understands real estate really, really well, because you want to make sure that you can get out of the lease, if this is not going to work out. Not necessarily for force majeure, things like acts of God and whatnot, but things that also are still out of the control of the parties. Like in the state of New York, for example, we saw last summer the state saying to a bunch of licensees, hey, we actually miscalculated the distance between you and a school, so you guys are going to have to move. Sorry, we're really invested in making this work. But also, you know, that spot that you look for forever and then had to go through the rigmarole of getting a lease and all of that, you're going to have to move that. And so you want to make sure that you have counsel that's seen this before and can plan for it, so that you aren't stuck in a lease with a business that's not really going to be able to continue operating. Which obviously this isn't an act of God, it's not a force majeure, it's not a war or anything like that, but it also is something that's not necessarily curable on either side.

Aaron Strauss: Absolutely. And obviously there's defaults in the lease that happen before occupancy and there's defaults that happen post-occupancy. Maybe we could talk about default post-occupancy. I think somebody told me, years ago, there's two types of tenants. There's Tenants that have not yet gone bankrupt and tenants who have gone bankrupt. Because ultimately, nothing lasts forever. These income streams don't last forever and that's probably a morbid way of looking at the real estate industry right there. But the bottom line is, default...

Sahar Ayinehsazian: It's lawyerly and true.

Aaron Strauss: Lawyerly and true and you're building for the default. So walk us through, you own a shopping center, maybe you own a mixed-use building. I know state and city, municipality, they're all different. But what are the special concerns, either from a regulatory or operational perspective of a cannabis operator versus any other use? Obviously, you have highly regulated substances and whatnot, but as a landlord, you just got notice, either they vacated, they can't make the rent, who knows? Any special things you have to do immediately or just be aware of generally that are different from all other uses?

Jennifer Cabrera: I think I'm going to answer an adjacent question, which is that I don't… number one, I don't think that there are too many special factors. Like you don't owe this business any more than you would any other business. It's all going to come down to the contractual obligations. And if the tenant is in default and a default allows you to remove them, then you just go through that process that you would for any other tenant. What is unique here is, well, it's similar, actually, in the liquor licensing sector, is there are only a limited number of these licenses in a given town. And it's previously been approved. So this tenant goes under, is there an opportunity for the landlord to salvage some value here? And sometimes there is. It's either by working with that departing tenant to find a new tenant as possibly a way to get some forgiveness on past due rent. That's helpful. Or the landlord sometimes, if a tenant just falls through, not because the business isn't viable. If the business isn't viable, then maybe it's just not a good location for a dispensary, or there are too many, because you're in a saturated market. But if it's not that and it's simply that the tenant hasn't raised enough money and can't get open, it may be a great location. And you as a landlord might be able to capitalize on that by getting the local approval transferred over to a new entity that you control. And then you have something that you can sell, you can bring in a new tenant that either you have points on their license, or some favorable arrangement. But there are definitely opportunities there as a lender.

Aaron Strauss: Especially everybody else that put those investments to work.

Sahar Ayinehsazian: Very much so. Another thing that I would advise folks to really think about on the topic of the morbid bits and pieces that lawyers love to dig into, is that cannabis operators do not get bankruptcy protection. So if you are a landlord and you are used to, you know, being able to plan for worst case scenario of like, OK, well, you know, if my tenant goes bankrupt, this is how I'm going to protect myself. This is, you know, the contingency plan and whatnot. That contingency plan with respect to bankruptcy will not work in cannabis. And so it's important, I think, up front to think about the worst case scenario, what am I going to do, knowing that I can't rely on what you usually would rely on with a business that just kind of goes under and how you're going to recover. And there are creative ways of doing that. Sometimes you can get yourself as a landlord into the liquidation waterfall of the operator up front, depending on your appetite for potentially being disclosed to regulators. Sometimes you can have that specifically written into your lease, but that's something that you want to think about initially, when things are nice and when things are great, because default with cannabis may look slightly different than default with a regular operator.

Aaron Strauss: Great answer. Both you guys, thank you. I want to talk about licensing too. Obviously, here in the licensing business, people are coming to you all the time. I've got this license. I'm raising equity. I'm purchasing a license. I'm selling a license. There's a huge industry around it. But it does seem, if you go to many main streets or downtowns, there is almost like an oversupply of these cannabis dispensaries. You just see so many, so many. I wonder, you know, you always wonder how many are actually carrying a license, how many are not, especially in a city like New York. I know that there's been different enforcement levels and different sorts of laissez-faire, let the market do its thing. But to what extent do you think that's a problem of just stores just selling without licensing? Is that something that you think is going to get cracked down on? Is it something that these licenses will have less value? How can you think about that in a macro stage?

Jennifer Cabrera: It's a massive problem.

Aaron Strauss: Massive, right?

Sahar Ayinehsazian: In, I want to say like the pre-2020, in like 2018-ish or so, the city of Los Angeles, which is just massive in and of itself, right, was poised to become one of the epicenters of cannabis, right? And the city, or the locality of Los Angeles, I should say, created a specific office for cannabis management and whatnot. And the plan was to ensure that licensed cannabis in this locality can really truly thrive. When you go down any street in Los Angeles, you see a bunch of the green crosses for a cannabis operator, right? And to this day, a good number of those are not necessarily licensed themselves. And we've seen that end up being hugely detrimental to the licence market, because keep in mind, these unlicensed folks, they are not complying, which means that they're saving money that you have to spend on compliance, on the taxes, on the fees and whatnot that go into licensing. And to me, any time that there's the question of, well, you know, are these shops licensed? And what are we looking at, if we continue to allow for unlicensed businesses to operate? I think about the promise and then the reality of what happened in Los Angeles and really in California largely. And so when we talk about, you know, a New York, for example, where you see a bunch of these shops and you're like, well, which one of them are licensed? Which ones are not? And how is that going to have an effect on the market? It's very easy to figure out who's licensed and who's not. The folks who are licensed are required to have their license prominently displayed. And you can also look it up, pretty easily, on the state's licensing website. Now, as far as what the effects are on the market for having these unlicensed shops, to me, I think one of the most detrimental pieces out there on the cannabis industry, are those unlicensed businesses, that are just not effectively policed and cracked down on. Because those guys can often sell at a much lower rate, which brings in more customers. They may look like a legitimate operator, so the average consumer is not thinking, like, are they licensed? Are they not? They're thinking, okay, this place looks legitimate. I'm gonna go in, I'm gonna purchase and I'm gonna be done. But what they end up doing is really sucking away a lot of resources and a lot of consumers from the licensed operators. And these licensed operators already have various things that they have to pay for at quite a high price. And so to me, a lack of enforcement on the unlicensed and unregulated folks is one of the greatest challenges and one of the easiest ways, I think, to really kneecap your licensed operators. And then just generally speaking, I think any new market that you establish, where folks are interested in it and they want to kind of be the first pioneers entering, you're going to have an inflation of people coming in, trying their hands and whatnot. And then you see market forces kind of regulating them. And so, you know, the folks who can crack it will continue onward. And then the folks, who are not meant to be in that industry, just kind of fall away.

Aaron Strauss: What about landlord responsibility? I mean, there's a lot of brokers around, you know, who are representing tenants who are looking for space and a lot of landlords, they can just throw up their hands and claim, you know, they may not know the ins and outs and intricacies of the licensing process. And they figure if they come in, they got shut down, it's rent. Is there any liability at all on landlords?

Jennifer Cabrera: It's rare that a city goes after a landlord.

Aaron Strauss: Not really prevalent. That's why they're allowing it. Yeah, makes sense.

Jennifer Cabrera: Like in New York, there was an effort to crack down on landlords, because there was this proliferation of illegal businesses, a few years back. I think 2023 or so, you go into the city and it was insane. The smell of cannabis was everywhere and the number of illegal stores, it was really upsetting honestly, because post pandemic, you had a lot of empty storefronts and landlords are filling it with this, because the police weren't enforcing any of the rules on this. And that's really started to go away, just because there are so many licensed dispensaries at this point. But at the height of that, when the governor's office and the mayor's office were both like sort of jointly trying to go after landlords, I don't think there were any real prosecutions. So I'm sure landlords feel that concern, but it doesn't really translate into too much liability.

Sahar Ayinehsazian: There's the possibility of criminal charges and whatnot, but then there's the reality of that not really happening. And so the more that we see the possibility not aligning with the reality of what should be, the more we see folks being willing to take advantage of the opportunity that lies in that gap.

Aaron Strauss: I mean, to what extent do people have to be aware who are, whether they own buildings with billboards, whether they have dispensaries licensed or not in their space? There's a lot of advertising rules that I understand that are regulated around such substances as cannabis. You know, what are the kind of core precepts or tenets that people in the advertising space need to be aware of? Or if they're not advertising, they have space, a billboard space on their building, or a shopping center or what have you, that you have to be critical of, you know, in engaging and hosting these types of ads.

Jennifer Cabrera: Well, both New York and New Jersey, at least until recently, have made billboards completely illegal. New York may be changing that rule, but is it always enforced? Not entirely. Every state has different rules on this. Like in New Jersey, you're limited to your sign. If there's a pole sign or something attached to the property or part of the strip mall, you can have the sign up there, but you're limited to just the name of the business. You can't have a DBA even. Now, there are also limits on where the sign can be. It has to be somehow physically attached to the premises. So it really is a matter of digging into what the specific state or locality says.

Sahar Ayinehsazian: Yeah. I mean, even for rules that are kind of accepted across the board, in all legalized markets, like you can't advertise something that is attractive to children. That rule itself is understood, interpreted and has specific bits and pieces that vary state by state. Some states may have no pictures allowed whatsoever, because any picture can be seen as being attractive to children. Others say, you know, no bubble letters or no colors and whatnot, or no cartoons. And then the question is, well, what counts as a cartoon? And so it is if you're going to be a landlord that participates or allows for any kind of advertising, anywhere on property that you own. It's really important to have an understanding of how your specific state and sometimes even your specific locality view advertising for cannabis, because you don't want to go through the process of setting all of this up, only to find out that you got to shut it down the day after.

Aaron Strauss: Totally. Somebody listening to this, they may not even know when they really need to be consulting counsel. So what are the other types of problems and issues you see regularly come up that you say, wow, you know, I wish that client would have talked to me first,because it really would have saved them some big problems or issues, or just day-to-day things that people should be aware of to know to consult with cannabis counsel, because it's still a pretty evolving industry, day by day and state by state.

Sahar Ayinehsazian: I would honestly say that the answer is kind of the response you would get from your attorney across the board, which is if you're thinking about entering into this space on any level, you should consult your counsel immediately, as soon as you start thinking about it. And the reason that I use counsel instead of attorney is, because you want somebody, who can walk you through the realities of not just the written word of the regulations, but also the realities of the market that you may be entering into. Who has seen and understood the difficulties that go far beyond the rules and the regulations and can explain to you what you may really be getting into. And so to the extent, for example, that you're thinking of becoming a landlord to cannabis operators, you should consult counsel immediately, not only to understand, am I zoned correctly, what's the lease going to take and whatnot, but to understand, hey, what are the possibilities of default? What are the possibilities of success versus failure here? If you're looking at somebody who wants to become an operator, get in touch with your lawyers immediately and ask them what is it actually going to take for me to be able to go from being licensed to being operational and what are the odds of me failing in year one, based on what you've seen and how can I steer clear of that. And then take all that information and synthesize it with respect to your own understanding of your expectations for the business, as well as your proposed operations, to see whether this path makes sense going down. Because a couple hours of your attorney's time, frankly, is cheaper and a lot easier to contend with, than spending months building something, negotiating and going through the process of trying to figure it out, only to realize it's not doable, or it's not worth it and it's not going to be something that can last.

Aaron Strauss: Absolutely. Jen, any macro trends that you see on the horizon for the industry today, or Sahar, that may not have been in the arena a year or two or three ago? I mean, it's evolved so much in the seven years you've been in it and Sahar, you've also been in for a similar time period. Kind of where you think it's going and I'm sure it changes often, depending on, you know, rumor, innuendo, potential legislation, gut feel, talking to people in the business. You guys are always at conferences speaking to people who know what's happening. Any kind of predictions or feelings about which way the industry is going to go on a macro level? Anything positive that you're optimistic about for people listening to this? Do they want to either invest in, acquire a license, lease to, or otherwise engage a cannabis business?

Jennifer Cabrera: I think that every market is at a different stage of maturity. So on the East Coast, we have a number of markets that only really opened up in the last few years. And usually, markets have a few very strong years up front. And it does start to calm down, as you have more businesses open. So you'll have some towns, for instance, in Somerset County, in New Jersey, where there is an element of market saturation. You'll have neighborhoods in Brooklyn where you're seeing saturation, like you just have a lot of dispensaries in a small area. Customers are going to vote on their checkbook, right? Like how much money do you actually… How much are these stores charging for their products? So it does bring down the initial very large profits that some of these stores have. However, that's not a bad thing, because I think that landlords and most of us in the sector would do well to just think of this, from the liquor store model. This is a product that people use consistently and regularly. Demand doesn't really go away. What makes a big difference is, are you getting competition from the black market or from the gray market? One thing we haven't talked about on this podcast that really is the elephant in the room, is the hemp beverages industry. So, a lot of... You don't see this as much in New York anymore, though it was very prevalent as of a few years ago, but in New Jersey at liquor stores, you can still buy THC beverages. How is that legal? The answer is it's not derived from the cannabis program. It comes from hemp and it's high THC, but it's through this loophole, effectively. So it's made out of state and it's transported across the country. That loophole is going to be sunset at the end of year. Now, without getting too much into the details, because we haven't really talked about it, there could be a congressional change that means that these beverages will continue to be sold. But more likely than not, they won't, based on a recent federal change, which means that a lot of the dispensaries are no longer going to have competition from liquor stores, in terms of THC beverages. And that's something that really is going to help the businesses, the bottom line for these businesses. Same thing with the elimination of the black market. You don't buy bathtub gin right? Like it's just not a thing anymore, the days of that are over. That's going to happen with cannabis as well. Like you're just going to have… the black market just goes away, because it's readily available inexpensively. It's lab tested, when you buy it at a store.

Aaron Strauss: And the cannabis drinks, they're not going to be sold in dispensaries, right? Because it's a different regime. It's not tied to traditional cannabis. It's through hemp. Or would they be sold in dispensaries going forward after legislation?

Jennifer Cabrera: So they can be sold at dispensaries, but they haven't generally, up till now, because manufacturers haven't been making this as much. You see it a little bit in different states. Like in California, it's more prevalent. In New Jersey, because it's sold at liquor stores, the dispensaries haven't been touching it. Also, there have been these regulatory roadblocks, which are kind of stupid, but that's going away. And so it is going to start moving into the dispensary. But what's interesting is, so I'm a mom and a lot of the suburban moms around me and parents, they are much more comfortable drinking a THC beverage that they got at the liquor store, than they are going to a dispensary. It's just culturally something that's more accepted. And I think that has sort of been a hook for a lot of new consumers that I don't think are going to walk away once it gets out of liquor stores.

Aaron Strauss: Interesting.

Sahar Ayinehsazian: On the opportunity side that you mentioned, Aaron, thinking about investors and the folks who want to get into the cannabis space now, one of the things that I actually am really excited about, with market maturation, is that the quantity of opportunities shrinks, but the quality of opportunities starts to really, really balloon. Because as we continue to have market maturation, the folks that are able to continue going onward, are the folks that have been able to overcome legitimate competition from other licensed entities, overcome the gray market, as Jen mentioned and overcome the illegal market as well. And so you have proof of concept that these folks really know how to be agile and how to get around various different roadblocks. And you also have, as an investor, more and more macro, as well as micro data to look at and to really have an understanding of what may await you for investment, in a certain state, investment in a certain locality, investment in a certain branch of the industry and then investment in this one specific business that you're looking at. So from an investor perspective, I actually am very, very excited for what lies ahead, because more and more so, it's going to become easier to make more positive, or more likely positive investments.

Aaron Strauss: Well said. Any final thoughts, guys? We've covered a lot. Obviously, this is years and years of dedication to your craft and practice. We tried to give a general overview, in just a few minutes here. But that webinar on April 21st, will have a deep dive into more of the regulatory framework. Anything else kind of on a macro level we didn't cover, we should have asked, thoughts to leave listeners with?

Jennifer Cabrera: I think thoughts to leave folks with is if you're thinking about getting into this space, don't be spooked by the additional regulatory bits and pieces. Because where folks see fear, there lies a great amount of opportunity. But the way to really seize that opportunity is to consult with counsel, who can guide you through not just legalities, but realities. And so if you're looking at an opportunity that most other folks are afraid to get into or hesitant, if you have the right counsel on your side, you can turn that hesitancy into a real opportunity for yourself. But make sure that you're working with somebody who is experienced and can look ahead at the possibilities of failure to be able to drive around them and make sure that you're being guided around and over those possibilities.

Aaron Strauss: Well said. Well, I want to wrap up here, because I want to be sensitive to your time, both of you guys and also just go on record. I'm so thrilled to work with you daily, the conversations we have, the integration with other team members. It's always a great time. I know this was a very technical conversation, but I think listeners will appreciate it a lot and they'll know who to call if they have a lot of follow-up questions. And just being awesome to work with, on behalf of all of our colleagues, clients, friends, such a joy and a privilege to work together and we appreciate you guys. And make sure people check out the webinar on April 21st, where we can share more details in this podcast launch as well. And with that, I guess we'll wrap here and we'll get back to advising all our clients for the rest of the day and the week. So appreciate you guys very much.

Jennifer Cabrera: Thank’s Aaron.

Sahar Ayinehsazian: Thank you guys.

Aaron Strauss: Thank you for joining The Dealmakers’ Edge. Don't forget to follow us on your favorite podcast platform. And please give us a five-star rating so more people can follow the conversation.