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What does Medical Marijuana have to do with Real Estate?


By: Jing Yu

This January Yanjia Lui and I worked as externs for the commercial real estate acquisition team at Campanelli, a vertically integrated real estate investment and development company based in Braintree, MA.  My externship experience was divided into two parts: two and a half weeks of research on the “Legalization of Medical Marijuana & its impact on Massachusetts Real Estate” and one week of research assistance on a multi-state value-add portfolio acquisition.

“What does medical marijuana have to do with real estate?”  You, too, are probably asking the same question I did when first presented with the topic.  However, if you consider the facilities and the retail spaces needed for growing and dispensing medical marijuana, then the connection is much more obvious.  Our supervisors at Campanelli provided us with a research framework and helpful guidance.  While our finance training at MIT had prepared us with fundamental analytical skills, the cannabis industry is so unique that each step of our research demanded an innovative approach to analysis.  Due to legal ambiguities and the confidentiality concerns of shop owners, market and financial data are difficult to collect and nascent regulations and tax policies are subject to significant change.  Instead of pulling data from Bloomberg, we used GIS software to estimate market size.  Without historical reference, we had to propose elements of the facilities program based on published news and educated guess.  Even pro forma analysis had to be run differently to account for the cannabis industry’s unconventional tax deduction policy to get a better idea of the real profit margin and effective tax rate.  I started to realize the different and interdependent roles played by various components in real estate investment decision making after I ran the in-depth research myself.  These analyses allowed me to truly connect classroom materials to real business scenarios.  Our externship, while unconventional, turned out to be a very challenging and rewarding experience.

Completing a preliminary valuation of over 15 properties in one week may sound a little dry and a lot of work, but it was also quite fulfilling. It gave me the perfect opportunity to learn Argus valuation software, define the relevant empirical assumptions, and explore alternative value creation strategies.

The best part of my externship was the interaction with my mentor and supervisor, Stephen Murphy (CRE ’87), who is the Partner in charge of acquisitions at Campanelli and an alumnus of the MIT MSRED program.  Coming from a similar design background, Stephen really understood our strengths and weaknesses and was always happy to share his personal experience with us and offer constructive feedback. He not only helped us focus on the critical issues in investment decision making, but also improved our communication skills by teaching us how to attract our audience within limited time frame, and how to restructure our presentation for better clarity…

Campanelli’s office culture is very friendly and engaging. During our short stay, Yanjia and I were constantly invited to their asset management meetings and construction meetings.  There was a company-sponsored lunch every Thursday to foster interdisciplinary collaboration.  I undertook the externship with Campanelli to gain practical experience and to further cultivate my professional network.  I received a lot more than I ever expected.