CLEVELAND, Ohio — Brent Zimmerman and Matt Jenkins have an appetite for the unconventional, a low tolerance for boredom and strong stomachs for risk.
The Ohio natives left the New York investment world and boomeranged to the Buckeye State, where they’ve held high-level roles at hedge funds. Last year, they stepped out on a limb, forming a private real estate financing business to provide hard-to-find construction debt for buildings that house marijuana cultivation and production.
That company, REspring, is finalizing its first deal, a $6-million-plus loan on a $13.3 million project in Nevada. Jenkins and Zimmerman won’t talk about interest rates or potential returns. But it’s clear they see tremendous upside in the real estate needs of legalized pot.
As voters and legislatures in more states, including Ohio, make allowances for cannabis, hunger is growing for warehouses, greenhouses, storefronts and land. In Denver, demand – and pricing – for warehouse space shot up after large-scale cultivation started in 2009. Savvy investors in other cities have purchased properties early and jacked up prices after legalization.
But funding for cannabis-related commercial real estate deals is tough to find.
Traditional lenders won’t touch the stuff because of the conflicts between state and federal laws. At the federal level, it’s still illegal to possess, sell or consume marijuana. Though construction debt and mortgages for landlords are, arguably, one step removed from the plant, that’s not enough distance to allow banks to treat those properties like any other building.
“You put a banker in the room, and they just throw up their hands,” said Gerard Mildner, an associate professor and academic director of the center for real estate at Portland State University in Oregon. “They can’t participate.”
That’s where Jenkins, who is 36, and Zimmerman, 38, found an opportunity.
Using some of their own cash and