MANATEE -- A real estate company that has been buying local warehouse space for possible future medical marijuana grow operations will likely keep its profile strictly commercial when it starts marketing three buildings it owns in the Whitfield industrial district.
Cannabis Rx of Scottsdale, Ariz., bought 209,000 square feet of former Wellcraft manufacturing buildings for $1.26 million in January, 11 months ahead of a statewide vote that could legalize medical marijuana use in Florida. Now, several months into a major renovation of the buildings, the company's CEO Llorn Kylo, says a booming market for industrial space has his company selling buildings almost as quickly as it acquires them to provide maximum profit to its investors.
The market is so good, Kylo is looking at two more similar buildings in the same area as acquisition prospects.
Cannabis Rx has sold nine properties this year, all for conventional use. The company has yet to bring a single legal grow operation into one
of its buildings. Returns averaging more than 20-percent are driving the selloff.
"To date, we've sold all of our properties," Kylo said. "The returns have been so compelling."
Touring the Manatee renovation site at 7150 15th St. E. Thursday morning, Kylo found the project well on its way to an October completion date. A building crew of up to 20 working under general contractor Solomon Construction has already completed a new steel skin on one of three previously battered and derelict metal buildings. Workers are in the process of laying up block and replacing rusted structural members on the others.
Keep buildings or sell
Ideally, Kylo said he'd like to lease the buildings and keep them in his company's 37-property portfolio. But he's torn because he believes the $3 million Cannabis Rx has invested in buying and rehabbing the property can result in a $5.25 million payday at the selling table.
Rob Wilhoit, commercial property director for Sarasota-based Sarabay Realty, agrees with that assessment.
"I'm quite certain I'll have it sold before the project is finished," he said.
Even with more Manatee building purchases in the pipeline -- Kylo is eyeing two in the 50,000- to 200,000-square-foot-range -- the future of medical marijuana grows in Manatee County is uncertain. Not only must voters approve the drug's use in the state, but any grow operation would have to qualify for one of just four licenses that would be available.
On top of that, the development costs are high. Kylo said he recently evaluated a building in Denver, for the type of renovation necessary to convert it for marijuana growing. Added plumbing, electrical, air conditioning and security features made the work a $7 million proposition on a one-year build out timeline.
Good future prospect
Still, Kylo believes Manatee County is a good prospect for a future medical marijuana growing operation. Cannabis Rx may soon get several marijuana growers under lease in the other states where it has properties, Kylo said. If Florida were to follow the lead of Washington state and Colorado in legalizing the drug, the company and its investors are ready to commit to grow clients.
Founded in 2013 under the name Longview Real Estate, Cannabis Rx buys and renovates properties with money provided by outside investors. It owns property in Florida, Illinois, California and Washington. According to the company's website, Cannabis Rx will not only build to suit marijuana growers, but will help grow tenants set up their facilities and finance their operations. The company charges lease rates 30 to 40 percent higher than their standard commercial lease rates, according to the company's website.
Matt M. Johnson, Herald business reporter, can be reached at 941-745-7027, or on Twitter @MattAtBradenton.