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A bag of marijuana being prepared for sale sits next to a money jar at BotanaCare in Northglenn, Colorado Dec. 31, 2013. (REUTERS/Rick Wilking) A bag of marijuana being prepared for sale sits next to a money jar at BotanaCare in Northglenn, Colorado Dec. 31, 2013. (REUTERS/Rick Wilking)  

Private money quietly funding Colorado’s marijuana boom

The vacuum in banking services for Colorado’s nascent marijuana industry is being filled by private lenders, according to the Denver Post — and the terms of some loans have pot entrepreneurs paying through the nose.

With the explosion of the recreational marijuana industry in Colorado, available warehouse space to grow the product is at a premium, with the Post reporting that some especially desirable properties are leasing for nearly $1,000 per square foot. Others aren’t as pricey, but property that once leased for $50 per square foot is now $100.

And the money being loaned for these properties is also more expensive, with average loans returning 14-16 percent. Lenders can charge high rates for the same reason banks won’t lend money at all — the risk of federal seizure if drug agents suspect a business isn’t complying with Colorado’s regulations and running an illegal operation.

“It’s the biggest wild card in any industry, with the threat of the feds coming in and stealing your property, a loss on the order of a few million,” Kerry Blasdel, a real-estate investor who used private loans to help finance warehouses he leases to marijuana grow operations told the Post.

“I owe a debt of gratitude to these guys, even if they’ve screwed me on the deal,” he said. “Without them, the rest of the chain doesn’t exist.”

Blasdel told the Post he has two loans — one of them being an interest-only loan that’s due in full in eight months, which he called “the worst terms I’d ever had in my life.”

But there is little choice. Even though the U.S. Justice Department issued guidance to bankers giving them a green light to do business with marijuana operations under certain conditions, the assurances weren’t as iron-clad as many had hoped. Some banks have ordered their loan-holders to evict marijuana stores or pay their loans in full.

Because of the risk, the Post found that private lenders — in some cases private-equity firms — tend to keep a low profile.

Using public land records, the paper found one company, Montegra Capital Resources, made a two-year $600,000 loan on a building being leased to a marijuana company, but the records didn’t include the interest rate.

Its founder, Robert Amter, told the Post he wasn’t interested in discussing it.

“How we assess risk and how we do it is part of our investment program, and we simply don’t discuss it,” he said.

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