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For plant-touching marijuana companies, most lending options tied to property

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When it comes to borrowing money as a marijuana company, most roads lead to real estate.

“The industry has challenges accessing capital markets that other industries do not,” Travis Goad, managing partner at Pelorus Equity Group, said of plant-touching marijuana companies.

“In a fully developed market, there’s real estate as one lending source and then there are pure corporate loans as another lending source. In this space, the vast majority of financing is tied to your real estate,” added Goad, whose firm is a cannabis-focused real estate lender.

Applications for cannabis business licenses often require proof of real estate, leaving precious little capital for successful applicants to get their companies up and running.

For marijuana businesses that own property, there are three main ways to borrow, according to Goad, who runs Pelorus’ New York office:

Real estate lending: These loans require borrowers to contribute 25%-40% in equity. The other 60%-75% of the facility’s cost is returned to the borrower in the form of a mortgage, which can be used for construction and other business purposes.

Sale-leaseback agreements: Some finance companies offering sale-leaseback agreements will purchase a property for 100% of a site’s cost to complete, though financing costs are typically higher than with traditional real estate lending.

Business-development company: Lenders in this category might offer up to 180% of a property’s value. However, the higher proceeds come with stringent corporate covenants, higher costs and often require giving up board seats or other control to the lender.

Lenders are looking for hard assets to back their loans, and few options exist for no-asset lending in the cannabis industry.

Shopping around

Dana Arvidson, chief operating officer of Boston-based Tilt Holdings, said that when his company started looking for options to raise funds, the executive team met with the “main providers in the market.”

Tilt, which provides cannabis technology and hardware as well as cultivation and  manufacturing, let the lenders know that its executives were meeting with other groups, the process was competitive and they were looking for the “most attractive rates and terms possible.”

Tilt ultimately chose Innovative Industrial Properties (IIPR), a San Diego-based real estate investment trust, to fund a $40 million sale-leaseback agreement on a 104,000-square-foot cultivation and manufacturing facility in Taunton, Massachusetts. The first deal closed in May 2022, and the multistate operator expects to close a second sale-leaseback on a cultivation-manufacturing property in White Haven, Pennsylvania, this quarter.

“We had done this calculus leading up to the transaction that we did in May of last year. One option that we explored pretty closely was to finance the property specifically with a mortgage, which can be pretty attractive in some ways, because you can get bank-level interest rates and retain ownership of the property,” Arvidson said.

“The challenge that we found with bank financing is that banks are somewhat limited in how they can value cannabis cultivation properties, given the federal status of cannabis. They don’t have the ability to value the property at quite the same level as a sale-leaseback.

“Given that, for us, the purpose of the (funding) was ultimately to retire long-term debt, it made the most sense for us to enter into a sale-leaseback,” he said.

The Massachusetts sale-leaseback agreement netted Tilt $27 million in proceeds. In exchange, Tilt will lease the facility back from IIPR for 20 years, with the possibility of two, five-year extensions.

Transactions slowing

In early January, Goad said Pelorus was offering construction loans with interest rates in the “mid-teens” and rates for “stabilized loans,” or facilities that are already operational, starting in the low teens.

Paul Smithers, CEO of IIPR, told MJBizMagazine via email that, “We continue to see 15-20-year lease terms and low- to mid- double-digit initial yields, with fixed-rate annual escalations.”

According to New York City-based Viridian Capital Advisors, cannabis capital raises were down 64% from the previous year as of Oct. 28, 2022, with debt financing accounting for more than 95% of all capital raised.

IIPR’s sale-leaseback deals, too, were down more than 75% from the previous year as of Sept. 30, 2022, according to an investor presentation by the REIT.

Smithers said that “all capital providers to the cannabis industry saw a slowdown in 2022 due to various headwinds experienced across the industry: lack of capital availability across the board and ever more stringent underwriting requirements.”

“This is not to say that the demand for capital—and specifically real estate capital—has waned in a material way from prior years, but sale-leaseback deal activity can mirror the broader capital raising/M&A ebbs and flows experienced by the industry in general.”

Al Brooks, head of commercial real estate for banking giant JPMorgan Chase & Co., said in a December 2022 report that he expects “challenges ahead” in 2023.

“Retail is at a crossroads, and the future of office space is unclear. Plus, supply chain issues persist, and inflation is near 40-year highs, prompting the (Federal Reserve) to steadily increase interest rates,” Brooks wrote.

 Weighing the options

Boca Raton, Florida-based multistate operator Jushi Holdings took on a sale-leaseback deal when it acquired Pennsylvania Medical Solutions (PAMS), a grower-processor with operations in Scranton, Pennsylvania, from Vireo Health in 2020.

“When we inherited the business, we inherited the current lease with the current market cap rates and the dollars that have been put toward the building that we are moving into,” said Trent Woloveck, chief strategy director at Jushi.

Woloveck said that Jushi carefully considered the sale-leaseback deal when it was conducting due diligence on the PAMS acquisition, given that Jushi had been able to grow its own business using other funding tools and assuming minimal debt.

“Financing other large capex (capital expenditure) projects … off our own balance sheet … has allowed us flexibility as we continue to move forward and be in a better position to take cheaper debt,” Woloveck said. “The issue with the sale-leaseback is it’s forever.”

While traditional real estate loans often have a clause for early repayment, sale-leaseback agreements are typically for 15-20 years, and refinancing options are few.

Goad, the marijuana lender from Pelorus, posited that “when there’s a legalization event … you don’t get to benefit from that, because you’ve locked in today’s cost of capital, and it goes up every year.”

“When all your competitors may be able to go borrow at 7%, you are stuck paying 12% or 15%,” he said.

That said, the timing of legalization is anyone’s guess.

Smithers, meanwhile, said that the long-term nature of sale-leasebacks provide operators with “long-term control over their mission-critical facilities … without the added risk of near-term maturity dates.”

Doubling down

In the case of Jushi’s Pennsylvania facility, the previous owner entered a 15-year, $8.6 million sale-leaseback deal in 2018. The amount included $2.8 million worth of tenant improvements on the 89,000-square-foot industrial space.

In 2021, after acquiring the property, Jushi expanded its agreement with IIPR for an additional $30 million. At the time, the MSO announced it would use the extra cash to finish building out the facility and expand it by 40,000 square feet.

Vireo’s initial sale-leaseback agreement with IIPR—the largest provider of such deals to the marijuana industry—was for annualized aggregate base rent equal to 15% of the sum of the purchase price and tenant improvements. In addition, rent was subject to annual increases of 3.5% for the term of the lease.

Woloveck said that Jushi has “done subsequent borrows on the property in deals with IIPR, and we’ve been able to negotiate a lower cap rates based on our credit.

“Those have been at different rates than what the original deal was struck at,” he added.

In December, Jushi entered a $2 million sale-leaseback deal with Los Angeles-based XS Financial, a capital financing provider, for heavy equipment such as Auto Cure, which automates the cannabis drying and curing process.

“Things that IIPR wouldn’t give us credit for roll into the principal amount. XS is a backstop from that perspective,” Woloveck said.

Source: https://mjbizdaily.com/for-plant-touching-marijuana-companies-most-lending-options-tied-to-property/

Business

EU Pressure Builds on Google as Regulators Face Calls for Massive Fine Over Search Practices

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A growing coalition of European industry groups is intensifying pressure on regulators to take decisive action against Google over allegations of unfair search practices that could reshape competition rules across the region’s digital economy.

Investigation Under Digital Markets Act Gains Momentum

The case is being examined by the European Commission under the European Union’s landmark Digital Markets Act (DMA), introduced to curb the dominance of major technology platforms and ensure fair competition.

Launched in March 2024, the investigation focuses on whether Google has been prioritising its own services in search results, potentially disadvantaging rival businesses that rely on online visibility to reach customers.

Industry Groups Demand Swift Action

Several prominent European organizations have jointly urged regulators to conclude the probe without further delay. They argue that prolonged investigations allow alleged anti-competitive practices to continue, putting European companies—especially startups—at a disadvantage.

Signatories include the European Publishers Council, the European Magazine Media Association, the European Tech Alliance, and EU Travel Tech.

In a joint statement, these groups warned that delays in enforcement are affecting innovation, profitability, and growth prospects for regional businesses competing in digital markets.

Google Denies Allegations

Google has rejected claims of bias, stating that its search algorithms are designed to deliver the most relevant and useful results to users. The company has also proposed adjustments to address regulatory concerns.

However, critics argue that these changes are insufficient and fail to address the core issue of market dominance.

Potential Billion-Euro Penalties

If found in violation of the DMA, Google could face significant financial penalties. Under EU rules, fines can reach a substantial percentage of a company’s global turnover, potentially amounting to billions of euros.

Regulators may also impose corrective measures requiring changes to business practices, which could have long-term implications for how digital platforms operate in Europe.

Wider Implications for Big Tech

The case highlights ongoing tensions between European regulators and major U.S. technology firms. In recent years, the EU has taken a more aggressive stance in enforcing competition laws, aiming to create a level playing field for local businesses.

A final ruling against Google could set a major precedent, influencing future enforcement actions and shaping the regulatory landscape for global tech companies operating within Europe.

As scrutiny intensifies, the outcome of the investigation is expected to play a critical role in defining the future of digital competition across the European Union.

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AI & Technology

Amazon Faces Potential Criminal Trial in Italy Over €1.2 Billion Tax Evasion Allegations

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Milan: U.S. tech giant Amazon is facing the prospect of a major legal showdown in Italy, after prosecutors in Milan formally requested a court to move forward with criminal proceedings over alleged tax evasion totaling approximately ₹12,500 crore (€1.2 billion).

The case targets Amazon’s European division along with four senior executives, marking one of the most significant tax-related investigations involving a global e-commerce platform in Europe.

Trial Push Despite Multi-Million Euro Settlement

The move comes even after Amazon reached a financial settlement with Italian tax authorities in December, agreeing to pay around ₹5,500 crore (€527 million), including interest, to resolve part of the dispute.

Typically, such settlements lead to the closure of criminal investigations. However, Milan prosecutors have opted to proceed, signaling a tougher stance on alleged corporate tax violations.

A preliminary hearing is expected in the coming months, where a judge will decide whether to formally indict the company and its executives or dismiss the case.

Allegations of VAT Evasion Through Marketplace Sellers

At the center of the investigation are claims that Amazon’s platform enabled non-European Union sellers to avoid paying value-added tax (VAT) on goods sold to Italian consumers between 2019 and 2021.

Prosecutors allege that the company’s marketplace structure allowed thousands of foreign vendors—many reportedly based in China—to operate without fully disclosing their identities or tax obligations. This, authorities argue, led to substantial VAT losses for the Italian government.

Under Italian law, online platforms facilitating sales can be held partially liable if third-party sellers fail to comply with tax requirements, a key point in the prosecution’s case.

Italian Government Named as Affected Party

In their filing, prosecutors identified Italy’s Economy Ministry as the injured party, citing significant financial damage resulting from the alleged tax evasion.

Legal experts say the outcome of the case could have wide-ranging implications across the European Union, where VAT systems are harmonized and similar compliance rules apply to digital marketplaces.

Multiple Investigations Add to Pressure

The VAT probe is just one of several legal challenges facing Amazon in Italy. The European Public Prosecutor’s Office is reportedly examining additional tax-related issues covering more recent years.

Meanwhile, Milan authorities are pursuing separate investigations into alleged customs fraud linked to imports from China and whether Amazon maintained an undeclared “permanent establishment” in Italy—potentially exposing it to higher tax liabilities.

In a separate regulatory action, Italy’s data protection authority recently ordered an Amazon unit to stop using personal data from over 1,800 employees at a warehouse near Rome.

Amazon Denies Allegations

Amazon has consistently denied wrongdoing and indicated it will strongly contest the allegations in court if the case proceeds. The company has also warned that prolonged legal uncertainty could impact investor confidence and Italy’s appeal as a destination for international business.

Broader Impact on Europe’s Digital Economy

If the case moves to trial, it could become a landmark moment for the regulation of global e-commerce platforms in Europe. Governments across the region are increasingly scrutinizing how digital marketplaces handle tax compliance, especially in cross-border transactions.

With online retail continuing to expand, regulators are under mounting pressure to ensure that multinational platforms and third-party sellers adhere to the same tax rules as traditional businesses.

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Aviation

IndiGo Crisis Exposes Risks of Monopoly: What If Telecom or E-commerce Collapses Next?

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Airports across India witnessed scenes of distress and confusion as thousands of passengers were stranded due to IndiGo’s massive flight disruptions. Families with medical emergencies, funerals, and personal crises were left helpless as the airline cancelled hundreds of flights without adequate communication or support.

Passengers described desperate situations — a mother pleading for sanitary pads for her daughter, a woman unable to transport her husband’s coffin, and others stranded while trying to reach family funerals or hospitals. “It was like a lockdown at the airport,” one passenger said, describing the panic that unfolded as IndiGo’s mismanagement crippled operations nationwide.

Root Cause: IndiGo’s Market Monopoly

The turmoil, industry experts argue, stems from IndiGo’s monopolistic control over India’s domestic aviation market. The airline operates nearly 2,100 flights daily and holds around 60% market share — meaning every second plane flying within India belongs to IndiGo.

This dominance has given the company unparalleled influence. When IndiGo falters, the entire aviation system suffers. Passengers are left with few alternatives, as other airlines lack capacity to absorb stranded travellers. The result: skyrocketing ticket prices, chaos at terminals, and total dependence on a single private operator.

Aviation pioneer Captain G.R. Gopinath, founder of Air Deccan, criticised the government’s inaction, noting that on some routes, IndiGo’s economy fares surged to ₹1 lakh. He compared the situation to a hostage crisis, writing that the airline “held the system ransom” and forced regulators to defer new safety rules meant to protect pilots and passengers.

Government Intervention and Regulatory Weakness

The crisis erupted after IndiGo failed to comply with the Flight Duty Time Limitations (FDTL) — rules introduced by the DGCA in January 2024 requiring adequate rest for pilots. Despite having nearly two years to adapt, IndiGo blamed the rule for operational disruptions, citing a shortage of pilots.

Under mounting public pressure, the government stepped in, temporarily relaxing FDTL norms and capping airfare hikes. Officials claimed the move was to protect passengers, but analysts say it exposed the state’s vulnerability to corporate monopolies. “The government had no option but to yield,” said one aviation policy expert, pointing out that ignoring safety regulations for short-term relief could have long-term consequences.

The crisis also rekindled memories of the June 2025 Air India crash near London, which claimed over 240 lives. Experts warn that compromising pilot rest and safety standards to maintain flight schedules could risk another tragedy.

If Telecom Giants Fail: A National Paralysis

The article raises a troubling question — what if a similar crisis struck the telecom sector, where Jio and Airtel together control nearly 80% of subscribers and serve over 780 million users?

If both networks failed simultaneously, the repercussions would be catastrophic. Internet shutdowns would halt UPI transactions, online banking, OTP verifications, video calls, OTT streaming, and emergency communications. Critical services such as airports, hospitals, stock exchanges, and small businesses — many of which rely on WhatsApp and digital payments — would come to a standstill.

In essence, a telecom breakdown could paralyse India’s digital economy, exposing the nation’s dependence on a duopoly.

E-commerce Monopoly: Another Fragile Ecosystem

The same risk looms over the e-commerce sector, where Amazon and Flipkart dominate nearly 80% of the market. A disruption similar to IndiGo’s could cripple daily life — halting delivery of groceries, medicines, and essential goods, freezing refunds and customer support, and leaving small sellers without platforms to trade.

Local retailers, freed from competition, might exploit shortages by inflating prices. Such a scenario underscores the perils of market centralisation in sectors critical to everyday living.

A Wake-Up Call for Regulators

The IndiGo crisis, analysts say, is a warning shot for policymakers and regulators. A single company’s operational failure exposed systemic weaknesses in India’s infrastructure and consumer protection mechanisms.

As the aviation regulator DGCA investigates and IndiGo works to restore normalcy, the broader lesson remains clear: unchecked monopoly power in any essential service — whether air travel, telecom, or e-commerce — poses a direct threat to economic stability and citizen welfare.

Without stronger competition laws, redundancy frameworks, and regulatory oversight, India risks repeating this crisis across multiple sectors — each time with millions of citizens paying the price.

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