What’s the newest niche to hit note investing? Think green, Up in Smoke, and now legal (in some states) for medical and/or recreational use. With differences in Federal versus state laws, marijuana businesses find it difficult to obtain traditional bank financing. The result? Seller financed Weed Loans or MJ Paper has entered the market.
Recently we were asked to buy a private debt financed note secured by commercial real estate being used as marijuana dispensary. It was time to learn more about the world of cannabis financing and pick the brain a leading weed loan investor.
The Colorado Dispensary Seller Carry Note
The owner sold a 5,000 square foot warehouse for $525,000. The buyer put down $50,000 cash and the seller carried back a Note and Deed of Trust for $475,000 at 8% with monthly payments of $3973.09. A little over three years of payments had been made with a balloon due in under seven years. Values had been appreciating and the equity was solid.
If the note had been just commercial real estate, it would have been a slam dunk. However, the property was being used as a marijuana dispensary. While we elected not to purchase this particular note, it did provide the opportunity to make contact with specialty investors for future transactions.
An Interview With A Leading Weed Loan Investor
Windsor Pappis, Sr. is a pioneer in the private equity and secondary markets for cannabis investment banking. He is currently a Senior Vice-President and second in command at the nation’s largest Investment Banking Firm for USDA Agriculture loans through the Farm Service Agency. You can read his full bio at the end of this interview.
Win (that’s his nickname) has a wealth of knowledge and agreed to share some insights with our readers in this Q&A.
Important Update As Of February 8, 2017 from Windsor Pappis, Sr.
“With the confirmation of Sen. Jeff Sessions today to the office of US Attorney General, we do not recommend anyone invest in any notes, real estate, or businesses that promotes the sale, growth, or distribution of recreational MJ in any State. Stay tuned for another article on how to invest in the Government sanctioned medical sector of the MJ business”.
Question: Where do you see potential risk for the marijuana business?
Win: Once marijuana becomes legalized at the federal level the private equity investment sector will minimize significantly having a devastating effect on the “Mom-N-Pops” establishments. At this point, unless you already have a:
- Nationally branded product with a wholesale sales platform.
- Or a niche market with multifunctional Starbucks type retail locations.
………. You’re fu**ed!
When the government takes over and deals are struck between Big-GOV. Corporations like Phillip Morris and Wal-Mart, the M-N-P shops will be put out of business because they cannot compete on levels of price points and variety.
What will stand is the boutique locations that cater specifically to the high-end segment of the marketplace and control them by having established brand strains.
Question: Where do you see the opportunity?
Win: Looking back on the legalization history, Medically and Recreationally, over the past 4 years. Big bills like Prop. 64 get inked the first day a new president-elect is crowned. With this history combined with the Government Revenue plans of Donald Trump, it is our prediction that it will be legalized recreationally by the end of Trump’s second 4 year term. As such, we are still looking at another 2ish years before the leaders of town counsels’ and local municipalities regulate the restrictions to meet their moral and financial desires and it hits the streets for consumers over the age of 21 to legally buy in retail locations.
Our belief is that it is the perfect time to enter this sector in market specific states, with a planned investment agenda and exit strategies because unless you are planning to do it the 2 ways I mentioned above, ALL other investments have an expiration date to becoming a cannabis millionaire of about 10 years.
Question: What about the Federal and State laws being different for marijuana use? How does this effect marijuana business owners and private real estate investors?
Win: Yes, let’s talk about legalities:
To my dear friends at the FCC, State and Federal Authorities:
“I am not a lawyer or investment advisor and anyone reading this should never take any advice from me EVER because I am an Idiot!”
Now that my disclaimer is out of the way, I can tell you what I have learned from the Governor’s offices of the states I am actively mining about how the private equity and banking markets, including the active Secondary Market, are able to legally function in a non-Federally approved sector…
If you are an individual wanting advice on how to grow or sell weed, I will introduce you to one of my partners with 10+ plus years experience in their given fields of Botany and Retail/Wholesale Sales Distribution.
If you are an individual reading this who desires to earn investment profits through the Real Estate sector, you need to incorporate an LLC before we will do any business with you and we have cannabis specific accountants who will do it all for you. We will not accept any corporations who incorporated using a “LegalZoom.com” type business.
If you want a loan and have an approved corporation, we are loaning/brokering private equity with zero Government regulations and this equates to underwriting and approval standards similar to the ones that caused the subprime mortgage crisis. For those of you who do not know what this means, we have no FICO (Credit score) requirements. Loans up to 80% of Value (LTV) with seller carrybacks allowed so 20% cash down payment can be eliminated J Stated income (No income-No Asset) verifications. It really is the Wild West again for loan requirements.
If you want to transact a note on the secondary market-The Feds blessed the transaction through Proposition 64. They just allowed another 150ish Federally Insured “FDIC” depository institutions accept marijuana cash from licensed business owners in legal states and most territories. As a holder of a weed note, you are protected at the state and federal level through the exact same laws and regulations you are protected under as the holder of any other note. To date, there are zero instances where a holder has lost any real property, deed of trust, or note as the result of a Federal Seizure.
Question: How do you feel about Non Disclosure Agreements (NDAs)?
Win: The next part is going to make me sound like a d**k but get over it, because there is still a very active and profitable out of state black market, we will not speak to anyone without first having executed a NDA. This protects all parties and legally privileges the conversation.
To receive a signed NDA please email: Elizabeth@wnsfirm.com
Question: How can someone contact you for more information?
Win: We offer a free first consultation via Skype for an unlimited time. You can contact or company here:
Pioneer Investment Banking
Loans and Secondary Market Trading
230 West 100th 16th St. Suite 4-A
New York, NY 10026
Corp Office: (917) 727-8161
Cell/Text: (615) 618-7010
Bio For M. Windsor (Win) Pappis, Sr.
Win began his business career in the Loan origination and brokerage industry in 2004 after attending the University of Tennessee. He expanded his business profile from being a loan officer to becoming the minority partner in 3 brokerage firms in TN, CA, and DE.
In 2009 he broadened his business expertise and entered the legal field as the Managing Director of a firm specializing in real estate and collections. In 2011 as the financial crises heated up he initiated a program specializing in accumulating a residential and commercial real estate portfolio that spanned $5 million dollars in total assets. After turning his portfolio over to a management company, he continued buying and selling distressed residential real estate in TN, FL, and TX.
As the managing member of Pioneer Investment Banking Firm, www.weedloans.net, Win combines his knowledge and “Book” of contacts in banking, private equity, real estate, and legal businesses together to lead the Firm as President until 2026, when he will step up to Chairman of the Board.”