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Landlords lease to marijuana dispensaries at own peril

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Landlords who have marijuana dispensaries for tenants are taking a risk -- and nobody knows that better than Seymor Weksler, who is being forced to evict two of the facilities on El Cajon Boulevard by the end of May.

In one of the cases, Weksler -- who believes in marijuana's therapeutic value -- knew he was leasing a strip center space at 6957 El Cajon Blvd. for use as a dispensary.

In the other case, he thought he was leasing out a property at 3140-3150 El Cajon Blvd. for a residence and a general workspace to the same lessee as at 6957 El Cajon Blvd.

What Weksler said he didn't know was the tenant would also open a dispensary at the 3140-3150 location. Workers at the dispensary, which is known as Green Urban Association, declined comment for this story.

"She [the lessee] told me she was looking for a residence," Weksler said.

In both cases, the City Attorney's office is shutting the operations down as a non-conforming use and Weksler, who didn't identify his existing tenant, needs to find businesses for his buildings.

"I'm not happy about this at all," Weksler said.

Weksler said he "went by the book" to gain needed authorizations for the dispensary at 6957 El Cajon Blvd. and was assured last year by then-Mayor Bob Filner that the city would lay off landlords who were in the process of getting required approvals.

After Filner resigned last August, Interim Mayor Todd Gloria took a different approach, by working closely with City Attorney Jan Goldsmith to shut down more than 20 medicinal pot shops before the end of 2013 -- regardless of whether they were going through the motions to become "legitimate businesses."

Since then, closures have continued with the apparent goal of eliminating them all.

While medical marijuana is legal in the state of California, dispensaries are restricted. They are not supposed to be within 1,000 feet of schools or 100 feet of residential areas in San Diego -- provisions that would significantly restrict their existence.

Many, if not most, of the ones that do exist are out of compliance with these provisions, and would be slated for removal.

Just how many brick-and-mortar dispensaries exist -- there are also many mobile operations -- is unclear.

The San Diego City Council recently moved to limit them to around 30 citywide by allowing so many per council district, but estimates for the so-called "bootleg" operations have run as high as 50 in the city. All are currently subject to removal.

Whether or not they planned to lease to a medical marijuana facility, Weksler's attorney Mark Robert Bluemel said landlords could be subject to heavy fines if they have a dispensary as a tenant.

"The fines can be up to $1,000 a day," Bluemel said. "That's something that could crush a small business."

Bill Thaxton, a Flocke & Avoyer senior vice president, said while he has received numerous calls from prospective tenants who would like to lease space for a medicinal marijuana facility, landlords haven't shared the interest.

"None of the landlords I've talked to are interested," Thaxton said. "They fear the [federal government] could take the property."

However, "the dispensaries are typically not in shopping centers, although I have seen them in small strip-centers," Thaxton said. "Most of these are in smaller single buildings."

Bradley Peters, a Marcus & Millichap senior financial analyst, said despite the dispensary issue being in a holding pattern until there is a further legal clarification, some landlords are profiting handsomely -- that is until they are shut down by the city or federal government.

"Some landlords are charging $5 a square foot in rents," Peters said, adding that most of these leases are on a month-to-month basis. "Dispensaries are willing to pay it out, but if they are shut down, the landlords are back to square one. Also, it's not worth taking the risk of losing the property."

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