UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
(Commission file number)
(Exact name of registrant as specified in its charter)
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
common shares, $ par value, outstanding at May 14, 2025.
TABLE OF CONTENTS
| 2 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Land | $ | $ | ||||||
| Net investment in direct financing lease - railroad | ||||||||
| Total real estate assets | ||||||||
| Cash and cash equivalents | ||||||||
| Restricted cash | ||||||||
| Prepaid expenses and deposits | ||||||||
| Intangible lease asset, net of accumulated amortization | ||||||||
| Deferred rent receivable | ||||||||
| Mortgage loan receivables | ||||||||
| Assets held for sale | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Liabilities held for sale | ||||||||
| Current portion of long-term debt, net of unamortized discount | ||||||||
| Long-term debt, net of unamortized discount | ||||||||
| TOTAL LIABILITIES | ||||||||
| Equity: | ||||||||
| Series A | ||||||||
| Common Shares, $ par value ( shares authorized; shares issued and outstanding as of March 31, 2025 and December 31, 2024) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Equity | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 3 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| REVENUE | ||||||||
| Lease income from direct financing lease – railroad | $ | $ | ||||||
| Rental income | ||||||||
| Other income | ||||||||
| TOTAL REVENUE | ||||||||
| EXPENSES | ||||||||
| Amortization of intangible assets | ||||||||
| General and administrative | ||||||||
| Property expenses | ||||||||
| Property taxes | ||||||||
| Depreciation expense | ||||||||
| Impairment expense | ||||||||
| Interest expense | ||||||||
| TOTAL EXPENSES | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Gain on sale of properties | ||||||||
| Unrealized loss on marketable securities | ( | ) | ||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ||||||
| NET LOSS | ( | ) | ( | ) | ||||
| Preferred Stock Dividends | ( | ) | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | ( | ) | $ | ( | ) | ||
| Loss Per Common Share: | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | ( | ) | ( | ) | ||||
| Weighted Average Number of Shares Outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Cash dividend per Series A Preferred Share: | $ | $ | ||||||
| Accumulated undeclared dividend per Series A Preferred Shares: | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 4 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Quarters Ended March 31, 2025 and 2024
(Unaudited)
| Series A 7.75% Cumulative Redeemable Perpetual Preferred Stock Par Value $25.00 | Common Shares | Additional Paid-in | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-Based Compensation | - | - | ||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Stock-Based Compensation | - | - | ||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 5 |
POWER REIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of intangible lease asset | ||||||||
| Amortization of debt costs | ||||||||
| Stock-based compensation | ||||||||
| Impairment expense | ||||||||
| Depreciation | ||||||||
| Change in value of marketable securities | ||||||||
| Gain on sale of properties | ( | ) | ||||||
| Changes in operating assets and liabilities | ||||||||
| Deferred rent receivable | ( | ) | ||||||
| Prepaid expenses and deposits | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Prepaid rent | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Cash received for sale of properties | ||||||||
Investment in marketable securities | ( | ) | ||||||
| Cash received for mortgage loan receivables | ||||||||
| Net cash provided by investing activities | ||||||||
| Financing Activities | ||||||||
| Principal payment on long-term debt | ( | ) | ( | ) | ||||
| Proceeds received from debt | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net (decrease) increase in cash and cash equivalents and restricted cash | ( | ) | ||||||
| Cash and cash equivalents and restricted cash, beginning of period | $ | $ | ||||||
| Cash and cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Non-cash transactions | ||||||||
| Accrued interest transferred to loan | ||||||||
| Mortgage loan receivables entered into in connection with sale of properties | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| 6 |
Notes to Unaudited Consolidated Financial Statements
1 – GENERAL INFORMATION
Power REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “we”, “us”, or “Power REIT”, unless the context requires otherwise) is a Maryland-domiciled, internally-managed real estate investment trust (a “REIT”) that owns a portfolio of real estate assets related to transportation, energy infrastructure and Controlled Environment Agriculture (“CEA”) in the United States.
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and with the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Trust, as defined below, these unaudited consolidated financial statements include all adjustments necessary to present fairly the information set forth herein. All such adjustments are of a normal recurring nature. Results for interim periods are not necessarily indicative of results to be expected for a full year.
These unaudited consolidated financial statements should be read in conjunction with the Trust’s audited consolidated financial statements and notes included in its latest Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 31, 2025.
The Trust is structured as a holding company and owns
its assets through twenty-four direct and indirect wholly-owned, special purpose subsidiaries that have been formed in order to hold real
estate assets, obtain financing and generate lease revenue. As of March 31, 2025 the Trust’s assets consisted of approximately 112
miles of railroad infrastructure and related real estate which is owned by its subsidiary Pittsburgh & West Virginia Railroad (“P&WV”),
approximately
During the three months ended March 31, 2025, the
Trust did not declare a quarterly dividend of approximately $
On January 31, 2025 a wholly owned subsidiary of Power
REIT, PW CO CanRE JAB LLC, sold one of its interests in a cannabis related greenhouse cultivation property located in Ordway, Colorado.
The property was described in prior filings as Tam 18 and was vacant. The purchaser was an unaffiliated third party and the price was
established based on an arm’s length negotiation. The sale price was $
On January 24, 2025 the Trust entered into a sales agreement
(the “Sales Agreement”), with A.G.P./Alliance Global Partners pursuant to which it may, from time to time, issue and sell
its Common Shares, however, the Sales Agent is not obligated to sell any shares of Common Stock and there are limits on the dollar amount
of shares of common stock it can sell pursuant to the Sales Agreement. In addition, the Trust’s ability to raise capital through the sale of securities
may be limited by the rules of the SEC and NYSE American LLC (“NYSE American”) that place limits on the number and dollar
amount of securities that may be sold. There can be no assurances that the Trust will be able to raise the funds needed, especially in light
of the fact that its ability to sell securities registered on its registration statement on Form S-3 will be limited until such time the
market value of its voting securities held by non-affiliates is $
| 7 |
The Trust has elected to be treated for tax purposes
as a REIT, which means that it is exempt from U.S. federal income tax if a sufficient portion of its annual income is distributed to its
shareholders, and if certain other requirements are met. In order for the Trust to maintain its REIT qualification, at least 90% of its
ordinary taxable annual income must be distributed to shareholders. As of December 31, 2023, the last tax return completed to date, the
Trust has a net operating loss of $
As previously disclosed, the Greenhouse Loan has been in default, and the lender thereunder filed litigation and foreclosure actions. The Trust previously entered into forbearance agreements with the lender that expired on January 31, 2025. The loan was non-recourse to Power REIT but secured by the Greenhouse Portfolio (except for the property in Oklahoma). The Greenhouse Portfolio has been marketed for sale but, unfortunately, the market for these special purpose assets has been weak and the Trust has not been able to generate enough sales to satisfy the obligations to the lender. Effective April 11, 2025, the Trust entered into a settlement agreement with the lender with respect to the Greenhouse Loan. For more information, see “Note 12—Subsequent Events,” below for further information.
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
The Trust considers all highly liquid investments with original maturity of three months or less to be cash equivalents. Power REIT places its cash and cash equivalents with high-credit quality financial institutions; however, amounts are not insured or guaranteed by the FDIC. Amounts included in restricted cash represents funds held by the Trust related to debt service payment reserve required by the lender for the loan secured by the greenhouse properties and the balance of the controlled cash account to pay for collateralized property related expenses. See Note 6 for further discussion of the debt service payment reserve requirement. The following table provides a reconciliation of the Trust’s cash and cash equivalents and restricted cash that sums to the total of those amounts at the end of the periods presented on the Trust’s accompanying Consolidated Statements of Cash Flow:
| March 31, 2025 | December 31, 2024 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Cash and cash equivalents and restricted cash | $ | $ | ||||||
The Trust records all equity-based incentive grants to officers and non-employee members of the Trust’s Board of Directors in general and administrative expenses in the Trust’s Consolidated Statement of Operations based on their fair value determined on the date of grant. Stock-based compensation expense is recognized on a straight-line basis over the vesting term of the outstanding equity awards.
Basis of Presentation
These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
| 8 |
Principles of Consolidation
The accompanying consolidated financial statements include Power REIT and its wholly-owned subsidiaries. All intercompany balances have been eliminated in consolidation.
Basic net loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed similar to basic net loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Trust’s options is computed using the treasury stock method. As of March 31, 2025 and December 31, 2024 the total number of common stock equivalents was and composed of stock options.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Preferred Stock Dividends | ( | ) | ( | ) | ||||
| Numerator for basic and diluted EPS - loss available to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Denominator for basic and diluted EPS - Weighted average shares | ||||||||
| Basic and diluted loss per common share | $ | ) | $ | ) | ||||
Real Estate Assets and Depreciation of Investment in Real Estate
The Trust expects that most of its transactions will be accounted for as asset acquisitions. In an asset acquisition, the Trust is required to capitalize closing costs and allocates the purchase price on a relative fair value basis. For the three months ended March 31, 2025 and 2024, there were no acquisitions. In making estimates of relative fair values for purposes of allocating purchase price, the Trust utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, its own analysis of recently acquired and existing comparable properties in its portfolio and other market data. The Trust also considers information obtained about each property as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible acquired. The Trust allocates the purchase price of acquired real estate to various components as follows:
| ● | Land – Based on actual purchase if acquired as raw land. When property is acquired with improvements, the land price is established based on market comparables and market research to establish a value with the balance allocated to improvements for the land. | |
| ● | Improvements – When a property is acquired with improvements, the land price is established based on market comparables and market research to establish a value with the balance allocated to improvements for the land. The Trust also evaluates the improvements in terms of replacement cost and condition to confirm that the valuation assigned to improvements is reasonable. Depreciation is calculated on a straight-line method over the useful life of the improvements. |
| 9 |
| ● |
Lease Intangibles – The Trust recognizes lease intangibles when there’s an existing lease assumed with the property acquisitions. In determining the fair value of in-place leases (the avoided cost associated with existing in-place leases) management considers current market conditions and costs to execute similar leases in arriving at an estimate of the carrying costs during the expected lease-up period from vacant to existing occupancy. In estimating carrying costs, management includes reimbursable (based on market lease terms) real estate taxes, insurance, other operating expenses, as well as estimates of lost market rental revenue during the expected lease-up periods. The values assigned to in-place leases are amortized over the remaining term of the lease.
The fair value of above-or-below market leases is estimated based on the present value (using an interest rate which reflected the risks associated with the leases acquired) of the difference between contractual amounts to be received pursuant to the leases and management’s estimate of market lease rates measured over a period equal to the estimated remaining term of the lease. An above market lease is classified as an intangible asset and a below market lease is classified as an intangible liability. The capitalized above-market or below-market lease intangibles are amortized as a reduction of, or an addition to, rental income over the estimated remaining term of the respective leases. | |
| Intangible assets related to leasing costs consist of leasing commissions and legal fees. Leasing commissions are estimated by multiplying the remaining contract rent associated with each lease by a market leasing commission. Legal fees represent legal costs associated with writing, reviewing, and sometimes negotiating various lease terms. Leasing costs are amortized over the remaining useful life of the respective leases. | ||
| ● | Construction in Progress (CIP) - The Trust classifies greenhouses or buildings under development and/or expansion as construction-in-progress until construction has been completed and certificates of occupancy permits have been obtained upon which the asset is then classified as an Improvement. The value of CIP is based on actual costs incurred. |
Depreciation
Depreciation is computed using the straight-line method
over the estimated useful lives of
Assets Held for Sale
Assets held for sale are measured at the lower of their carrying amount or estimated fair value less cost to sell. As of March 31, 2025 and December 31, 2024, the Trust has several properties that are considered assets held for sale. See Note 7 for discussion of its assets held for sale.
Impairment of Long-Lived Assets
Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” A property to be held and used is considered impaired only if management’s estimate of the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges, are less than the carrying value of the property. This estimate takes into consideration factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.
If there is a triggering event in relation to a property to be held and used, the Trust will estimate the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.
The determination of undiscounted cash flows requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could impact the determination of whether an impairment exists and whether the effects could materially affect the Trust’s net income. To the extent estimated undiscounted cash flows are less than the carrying value of the property, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the property.
| 10 |
While the Trust believes its estimates of future cash
flows are reasonable, different assumptions regarding a number of factors, including market rents, listing prices, economic conditions,
and occupancies, could significantly affect these estimates. When impairment exists, the long-lived asset is adjusted to an estimate of
fair value. In estimating fair value, if appraisal reports are available, the Trust uses the sales comparable approach methodology where
applicable within appraisal reports; when appraisal reports are not available, the Trust uses opinions of value from brokers involved
with listing properties for sale and other market value information available to it. The Trust will record an impairment charge if it
believes that there is other than a temporary decline in market value below the carrying value of the investment. During the three months
ended March 31, 2025 and 2024, an impairment charge was expensed in the amount of approximately $
Any decline in the estimated fair values of the Trust’s assets could result in impairment charges in the future. It is possible that such impairments, if required, could be material.
Revenue Recognition
The Railroad Lease (“P&WV Lease”) is treated as a direct financing lease. As such, income to P&WV under the Railroad Lease is recognized when received.
Lease revenue from solar land and CEA properties are accounted for as operating leases. Any such leases with rent escalation provisions are recorded on a straight-line basis when the amount of escalation in lease payments is known at the time Power REIT enters into the lease agreement, or known at the time Power REIT assumes an existing lease agreement as part of an acquisition (e.g., an annual fixed percentage escalation) over the initial lease term, subject to a collectability assessment, with the difference between the contractual rent receipts and the straight-line amounts recorded as “deferred rent receivable” or “deferred rent liability”. Collectability is assessed at quarter-end for each tenant receivable using various criteria including past collection issues, the current economic and business environment affecting the tenant and guarantees. If collectability of the contractual rent stream is not deemed probable, revenue will only be recognized upon receipt of cash from the tenant. During the three months ended March 31, 2025 and 2024, the Trust did not write off any straight-line rent receivable against rental income. These tenants’ rent payments will be recorded as rental revenue on a cash basis. Expenses for which tenants are contractually obligated to pay, such as maintenance, property taxes and insurance expenses are not reflected in the Trust’s consolidated financial statements unless paid by the Trust.
Lease revenue from land that is subject to an operating lease without rent escalation provisions is recorded on a straight-line basis.
The following table provides the breakdown of rental income recognition (not including the direct finance lease):
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Straight-Line Rent | $ | $ | ||||||
| Cash Basis Rent | ||||||||
| $ | $ | |||||||
Deferred rent receivable as of March 31, 2025 and
December 31, 2024 is approximately $
Intangibles
A portion of the acquisition price of the assets acquired
by PW Regulus Solar, LLC (“PWRS”) have been allocated on The Trust’s consolidated balance sheets between Land and Intangibles’
fair values at the date of acquisition. The total amount of in-place lease intangible assets established was approximately $
| 11 |
Intangible assets are evaluated whenever events or
circumstances indicate the carrying value of these assets may not be recoverable. There were
The following table provides a summary of the Intangible Assets and Liabilities:
| For the Years Ended December 31, | ||||||||||||||||
| Cost | Accumulated Amortization | Accumulated Amortization | Net Book Value | |||||||||||||
| Through 12/31/24 | Through 3/31/2025 | |||||||||||||||
| Asset Intangibles - PWRS | $ | $ | $ | $ | ||||||||||||
The following table provides a summary of the current estimate of future amortization of Intangible Assets for the subsequent years ending December 31:
| 2025 (Nine months remaining) | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| 2029 | $ | |||
| Thereafter | $ | |||
| Total | $ |
Net Investment in Direct Financing Lease – Railroad
P&WV’s net investment in its leased railroad
property, recognizing the lessee’s perpetual renewal options, was estimated to have a current value of $
Fair Value
Fair value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Trust measures its financial assets and liabilities in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
| ○ | Level 1 – valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds. | |
| ○ | Level 2 – valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third party pricing services for identical or comparable assets or liabilities. | |
| ○ | Level 3 – valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. |
| 12 |
In determining fair value, the Trust utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considering counterparty credit risk.
The carrying amounts of Power REIT’s financial instruments, including cash and cash equivalents, prepaid expenses, and accounts payable approximate fair value because of their relatively short-term maturities. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.
The carrying amounts of Power REIT’s financial
instruments, including cash and cash equivalents, prepaid expenses, and accounts payable approximate fair value because of their relatively
short-term maturities. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current
market rates. As of March 31, 2025, the Trust owns publicly traded REIT securities with a fair market value of approximately $
Mortgage Loan Receivables
On October 30, 2023, PW ME CanRE SD LLC (“PW
SD”) provided seller financing in connection with the sale of the two Maine properties in the form of an $
On January 6, 2024, PW CO CanRE MF LLC (“PW
MF”) provided seller financing in conjunction with selling the Sherman 6 and Tamarack 14 properties in the amount of $
Other Income
Other income included in Total Revenue for the
three months ended March 31, 2025 and 2024 is approximately $
Other Assets
Other assets as of March 31, 2025 and December 31,
2024 is approximately $
Interest Expense
Interest expense for the three months ended March
31, 2025 was approximately $
| 13 |
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” to improve disclosures about the nature of expenses in commonly presented financial statement captions. ASU 2024-03 is effective for all public business entities for annual reporting periods beginning after December 15, 2026, on either a prospective or retrospective basis. Early adoption is permitted. The Trust is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
General and Administrative Expenses
General and Administrative Expense for the three months
ended March 31, 2025 and 2024 is approximately $
Preferred Stock
During 2014, the Trust expanded its equity financing
activities by offering a series of preferred shares to the public. As of March 31, 2025, the Trust has issued approximately $
3 – GOING CONCERN
The Trust’s objectives when managing its capital are to seek to ensure that there are adequate capital resources to safeguard the Trust’s ability to continue operating and maintain adequate levels of funding to support its ongoing operations and development such that it can continue to provide returns to shareholders. The Trust’s management evaluates whether there are conditions or events, considered in aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued.
As of December 31, 2024, the Trust had incurred recurring losses from operations and negative operating cash flows and had current liabilities that were in excess of current assets. These conditions raised substantial doubt about the Trust’s ability to continue as a going concern for a period of one year from the date of issuance of the December 31, 2024 financial statements.
However, management has developed and is implementing a plan intended to alleviate the substantial doubt about the Trust’s ability to continue as a going concern. The plan includes entering into a transaction related to the Greenhouse Loan. Based on the implementation of the plan and the resulting improvements in the Trust’s projected cash flows, Power REIT has concluded that substantial doubt about the Trust’s ability to continue as a going concern is alleviated. Accordingly, the financial statements for March 31, 2025 have been prepared assuming Power REIT will continue as a going concern.
On a consolidated basis, the Trust’s cash and
cash equivalents and restricted cash totaled $
As of March 31, 2025, the Trust’s current loan
liabilities on a consolidated basis totaled approximately $
Effective April 11, 2025, the Trust, through its subsidiaries, resolved issues with its lender concerning the Greenhouse Loan by providing deeds-in-lieu of foreclosure for the properties in Michigan and Nebraska. In return, the lender released the remaining collateral back to subsidiaries of the Trust and released obligations related to the Greenhouse Loan. The Trust will continue to seek to realize value from these retained assets, which are properties in Ordway, Colorado; a property in Walsenburg, Colorado; a property in Desert Hot Springs, California; a first mortgage on two properties in Ordway, Colorado; and a second mortgage on a property in Elliot, Maine. In addition, a subsidiary owns a greenhouse property located in Vinita, Oklahoma that was not security for the Greenhouse Loan.
| 14 |
The transaction related to the Greenhouse Loan that closed on April 11, 2025 will result in the write-off of the Nebraska and Michigan properties along with the remaining balance of the Greenhouse Loan. It will also relieve the ongoing costs associated with maintaining the Nebraska and Michigan properties. Power REIT will continue to seek to realize value from the retained greenhouse assets and is exploring a shift in focus (See Subsequent Events).
Based on the resolution of the Greenhouse Loan on April 11, 2025, Power REIT should alleviate the going concern doubt and Power REIT should be able to continue as a going concern albeit with a smaller portfolio of assets given that non-restricted cash should provide greater than twelve months of liquidity for capital needs (see Subsequent Events).
The Trust intends to continue to focus on selling greenhouse properties, entering into new leases, improving cash collections from existing tenants and raising capital in the form of debt or equity to provide liquidity. However, the Trust cannot predict, with certainty, the outcome of these actions to generate liquidity.
Power REIT’s cash outlays at the parent company level consist principally of professional fees, consultant fees, NYSE American listing fees, legal, insurance, shareholder service company fees, auditing costs and general and administrative expenses. The Trust’s cash outlays related to its various property-owning subsidiaries consist principally of principal and interest expense on debts, property maintenance, property taxes, insurance, legal as well as other property related expenses that are not covered by tenants. To the extent the Trust needs to raise additional capital to meet its obligations, there can be no assurance that financing on favorable terms will be available when needed. If the Trust is unable to sell certain assets when anticipated at prices anticipated, the Trust may not have sufficient cash to fund operations and commitments.
4 – DISPOSITIONS
2025 Disposition
On January 31, 2025 a wholly owned subsidiary of Power
REIT, PW CO CanRE JAB LLC, sold one of its interests in a cannabis related greenhouse cultivation property located in Ordway, Colorado.
The property was described in prior filings as Tam 18 and was vacant. The purchaser was an unaffiliated third party and the price was
established based on an arm’s length negotiation. The sale price was $
2024 Disposition
On December 26, 2024, a wholly owned subsidiary of
Power REIT, PW CO CanRE JKL LLC, sold its interest in a cannabis related greenhouse cultivation property located in Ordway, Colorado.
The property was described in prior filings as Sherman 21 and 22 and was vacant and construction was incomplete. The purchaser was an
unaffiliated third party and the price was established based on an arm’s length negotiation. The sale price was $
On January 30, 2024, a wholly owned subsidiary of
Power REIT, PW Salisbury Solar LLC, sold its interest in a ground lease related to a utility scale solar farm located in Salisbury, Massachusetts.
for gross proceeds of $
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On January 8, 2024, two wholly owned subsidiaries
of Power REIT, PW CO CanRE Sherman 6 LLC and PW CO CanRE MF LLC, sold two cannabis related greenhouse cultivation properties located in
Ordway, Colorado to an affiliate of a tenant of one of the properties. The properties are described in prior filings as Sherman 6 (the
tenant of which is affiliated with the tenant/purchaser) and Tamarack 14 which was vacant. The purchaser is an unaffiliated third party
and the price was established based on an arm’s length negotiation. The sale price was $
5 – DIRECT FINANCING LEASES AND OPERATING LEASES
Information as Lessor Under ASC Topic 842
To generate positive cash flow, as a lessor, the Trust
leases its facilities to tenants in exchange for payments. The Trust’s leases for its railroad, solar farms and greenhouse cultivation
facilities have lease terms ranging between
Due to significant price compression in the wholesale cannabis market, the Trust’s cannabis related tenants have experienced severe financial distress. Unfortunately, starting in 2022, collections from the CEA portfolio has diminished to a nominal amount. The Trust is exploring strategic alternatives with respect to the CEA portfolio and has listed the assets for sale.
Historically, the Trust’s revenue has been concentrated
to a relatively limited number of investments, industries and lessees. During the three months ended March 31, 2025, Power REIT collected
approximately
The following is a schedule by years of minimum future rentals on non-cancelable operating leases as of March 31, 2025 for assets and assets held for sale where revenue recognition is considered on a straight-line basis:
| Assets Held for Use | Assets Held for Sale | |||||||
| 2025 (9 months remaining) | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total | $ | $ | ||||||
6 – LONG-TERM DEBT
On December 31, 2012, as part of the Salisbury land
acquisition, PW Salisbury Solar, LLC (“PWSS”) assumed existing municipal financing (“Municipal Debt”). The Municipal
Debt has approximately
In July 2013, PWSS borrowed $
| 16 |
On November 6, 2015, PWRS entered into a loan agreement
(the “2015 PWRS Loan Agreement”) with a certain lender for $
On November 25, 2019, Power REIT, through a newly
formed subsidiary, PW PWV Holdings LLC (“PW PWV”), entered into a loan agreement (the “PW PWV Loan Agreement”)
with a certain lender for $
On December 21, 2021, a wholly-owned subsidiary of
Power REIT (“PW CanRE Holdings”) entered into a debt facility with initial availability of $
| - | The total commitment was reduced from $ |
| - | |
| - | Monthly payments on the Greenhouse Loan were to be interest only until maturity. |
| - | A portion of the proceeds from the sale of assets within the Borrowing Base for the Greenhouse Loan will be required to pay the outstanding loan amount. |
| - | The maturity date of the Greenhouse Loan was changed to |
| - | The Debt Service Coverage ratio will be |
| - | The definition of assets included in the Borrowing Base for the Greenhouse Loan no longer eliminates assets where tenants are in default for failure to make timely rent payments. |
| - | An agreed upon minimum liquidity amount shall be maintained in the amount of $ |
| - | A $ |
The balance of the loan as
of March 31, 2025 and December 31, 2024 was approximately $
| 17 |
As of March 31, 2025, PW CanRe Holdings, LLC has an
outstanding balance on the Greenhouse Loan of $
The transaction related to the Greenhouse Loan closed on April 11, 2025 and will result in the write-off of the Nebraska and Michigan properties, along with the remaining balance of the Greenhouse Loan. It will also relieve the ongoing costs associated with maintaining these properties. Power REIT will continue to seek to realize value from the retained assets and is exploring a shift in focus and is evaluating real estate distressed situations including properties, loans and companies (see Subsequent Events).
The amount of principal payments remaining on Power REIT’s debt as of March 31, 2025, which includes the Greenhouse Loan, is as follows:
| 2025 (Nine months remaining) | $ | |||
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| 2029 | $ | |||
| Thereafter | $ | |||
| Long term debt | $ |
7 – IMPAIRMENT AND ASSET HELD FOR SALE
For the three months ended
March 31, 2025, the Trust concluded that
A summary of the Trust’s impairment expense for the three months ended March 31, 2025 and 2024 is below:
| Impairment Expense | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Assets Held for Sale | $ | $ | ||||||
| Long-Lived Assets | ||||||||
| $ | $ | |||||||
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The Trust has aggregated and classified the assets and liabilities of properties to be sold as held for sale in its Consolidated Balance Sheets as of March 31, 2025 since all criteria under ASC 360-10-45-9 were met. The balance sheet as of December 31, 2024 also included the Tam 18 property which was sold during the first quarter of 2025 and therefore removed from the March 31, 2025 column. The assets and liabilities of assets held for sale were as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Land | ||||||||
| Greenhouse cultivation and processing facilities, net of accumulated depreciation | ||||||||
| Prepaid Expense | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS - Held for sale | ||||||||
| LIABILITIES | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Other liabilities | ||||||||
| TOTAL LIABILITIES - Held for sale | ||||||||
Other Liabilities
Other liabilities as of March 31, 2025 and December
31, 2024 is approximately $
Other Assets
Other assets as of March 31, 2025 and December 31,
2024 is approximately $
Summary of Stock Based Compensation Activity
Power REIT’s 2020 Equity Incentive Plan, which superseded the 2012 Equity Incentive Plan, was adopted by the Board on May 27, 2020 and approved by shareholders on June 24, 2020. It provides for the grant of the following awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and (vii) Other Awards. The Plan’s purpose is to secure and retain the services of Employees, Directors and Consultants, to provide incentives for such persons to exert maximum efforts for the success of the Trust and to provide a means by which such persons may be given an opportunity to benefit from increases in value of the common Stock through the granting of awards. As of March 31, 2025, the aggregate number of shares of Common Stock that may be issued pursuant to outstanding awards is currently which is subject to adjustment per the Plan.
Summary of Stock Based Compensation Activity – Options
On July 15, 2022, the Trust granted non-qualified stock options (“options”) to acquire shares of common stock at a price of $ to its independent trustees, officers and an employee. The term of each option is years. The options vest over three years as follows: in a series of thirty-six (36) equal monthly installments measured from the Vesting Commencement Date on the same date of the month as the Vesting Commencement Date which is August 1, 2022.
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The Trust accounts for share-based payments using the fair value method. The Trust recognizes all share-based payments in its financial statements based on their grant date fair values and market closing price, calculated using the Black-Scholes option valuation model.
| Expected Volatility | % | |||
| Expected Dividend Yield | % | |||
| Expected Term (in years) | ||||
| Risk Free Rate | % | |||
| Estimate of Forfeiture Rate | % |
The Trust uses historical data to estimate dividend yield and volatility and the “simplified method” as described in the SEC Staff Accounting Bulletin #110 to determine the expected term of the option grants. The risk-free interest rate for the expected term of the options is based on the U.S. treasury yield curve on the grant date. The Trust does not have historical data of forfeiture and used a 0% forfeiture rate in calculating unrecognized share-based compensation expense and will account for forfeitures as they occur. On February 29, 2024, options were forfeited due to the death of a Trustee.
The summary of stock-based compensation activity for the three months ended March 31, 2025, with respect to the Trust’s stock options, is as follows:
Summary of Activity - Options
| Weighted | ||||||||||||
| Number of | Average | Aggregate | ||||||||||
| Options | Exercise Price | Intrinsic Value | ||||||||||
| Balance as of December 31, 2024 | $ | |||||||||||
| Options Forfeited | ||||||||||||
| Balance as of March 31, 2025 | ||||||||||||
| Options exercisable as of March 31, 2025 | $ | |||||||||||
The weighted average remaining term of the options is years.
Summary of Stock Based Compensation Activity – Restricted Stock
Summary of Activity - Restricted Stock
| Number of | Weighted | |||||||
| Shares of | Average | |||||||
| Restricted | Grant Date | |||||||
| Stock | Fair Value | |||||||
| Balance as of December 31, 2024 | ||||||||
| Plan Awards | ||||||||
| Restricted Stock Forfeited | ||||||||
| Restricted Stock Vested | ( | ) | ||||||
| Balance as of March 31, 2025 | ||||||||
Stock-based Compensation
During the three months ended March 31, 2025, the Trust recorded approximately $ of non-cash expense related to restricted stock and approximately $ of non-cash expense related to options granted compared to approximately $ of non-cash expense related to restricted stock and approximately $ of non-cash expense related to options granted for the three months ended March 31, 2024. As of March 31, 2025, there was approximately $ of total unrecognized share-based compensation expense for restricted stock and approximately $ of total unrecognized share-based expense for options, which expense will be recognized through the third quarter of 2025. The Trust does not currently have a policy regarding the repurchase of shares on the open market related to equity awards and does not currently intend to acquire shares on the open market.
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Preferred Stock Dividends
During the three months ended March
31, 2025 and 2024, the Trust did not declare a quarterly dividend of approximately $
9 – SEGMENT INFORMATION
The Trust operates as
10 – RELATED PARTY TRANSACTIONS
Power REIT, through subsidiaries, had a relationship
with subsidiaries of Millennium Sustainable Ventures Corp., formerly Millennium Investment and Acquisition Company Inc. (“MILC’).
David H. Lesser, Power REIT’s Chairman and CEO, is also Chairman and CEO of MILC. MILC, through subsidiaries or affiliates, established
cannabis and food crop cultivation projects and entered into leases related to the Trust’s Oklahoma, Michigan and Nebraska properties
and MILC is a lender to the tenant of one of the Trust’s Colorado properties. As of March 31, 2025, these properties were not operational
and the Trust is evaluating alternatives related thereto. Total rental income recognized for the three months ended March 31, 2025 and
2024 from the tenants that are affiliated with MILC in Colorado, Oklahoma, Michigan and Nebraska was $
Under the Trust’s Declaration of Trust, the Trust may enter into transactions in which trustees, officers or employees have a financial interest, provided however, that in the case of a material financial interest, the transaction is disclosed to the Board of Trustees or the transaction shall be fair and reasonable. After consideration of the terms and conditions of the transactions with subsidiaries and affiliates of MILC, the independent trustees approved such arrangements having determined such arrangement are fair and reasonable and in the interest of the Trust.
11 – CONTINGENCIES
The Trust’s wholly-owned subsidiary, P&WV, is subject to various restrictions imposed by the Railroad Lease with NSC, including restrictions on share and debt issuance, including guarantees.
12 - SUBSEQUENT EVENTS
On April 11, 2025, Power REIT resolved issues with its lender concerning the Greenhouse Loan by providing deeds-in-lieu of foreclosure for the greenhouse properties in Michigan and Nebraska. In return, the lender released the remaining collateral back to subsidiaries of Power REIT and released obligations related to the Greenhouse Loan. Power REIT will continue to seek to realize value from these retained assets, which are properties in Ordway, Colorado; a property in Walsenburg, Colorado; a property in Desert Hot Springs, California; a first mortgage on two properties in Ordway, Colorado; and a second mortgage on a property in Elliot, Maine. In addition, a subsidiary owns a greenhouse property located in Vinita, Oklahoma that was not security for the Greenhouse Loan.
The transaction related to the Greenhouse Loan closed on April 11, 2025 and will result in the write-off of the Nebraska and Michigan properties, along with the remaining balance of the Greenhouse Loan. It will also relieve the ongoing costs associated with maintaining the Nebraska and Michigan properties
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “project,” “plan,” “assume” or other similar expressions, or negatives of those expressions, although not all forward-looking statements contain these identifying words. All statements contained in this Report regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, the future of our industries and results that might be obtained by pursuing management’s current or future plans and objectives are forward-looking statements.
You should not place undue reliance on any forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this Report, and those identified under Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2024 that we filed with the Securities and Exchange Commission on March 31, 2025 (the “2024 10-K”). Our forward-looking statements are based on the information currently available to us and speak only as of the date of the filing of this Report. New risks and uncertainties arise from time to time, and it is impossible for us to predict these matters or how they may affect us. Over time, our actual results, performance, financial condition or achievements may differ from the anticipated results, performance, financial condition or achievements that are expressed or implied by our forward-looking statements, and such differences may be significant and materially adverse to our security holders. Our forward-looking statements contained herein speak only as of the date hereof, and we make no commitment to update or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances or changes in expectations.
Overview
We are a Maryland-domiciled, internally-managed real estate investment trust (a “REIT”) that owns a portfolio of real estate assets related to transportation, energy infrastructure and Controlled Environment Agriculture (“CEA”) in the United States.
We are structured as a holding company and owns our assets through twenty-four direct and indirect wholly-owned, special purpose subsidiaries that have been formed in order to hold real estate assets, obtain financing and generate lease revenue. As of March 31, 2025, our assets consisted of approximately 112 miles of railroad infrastructure and related real estate which is owned by its subsidiary Pittsburgh & West Virginia Railroad (“P&WV”), approximately 447 acres of fee simple land leased to a number of utility scale solar power generating projects with an aggregate generating capacity of approximately 82 Megawatts (“MW”) and approximately 237 acres of land with approximately 2,053,000 square feet of existing or under construction CEA properties in the form of greenhouses (which amounts include certain properties that have been transferred to the lender under a loan secured by our Greenhouse Portfolio (the “Greenhouse Loan”), as described below).
During the three months ended March 31, 2025, we did not declare a quarterly dividend of approximately $163,000 ($0.484375 per share per quarter) on Power REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.
Our primary objective is to maximize the long-term value for our shareholders. To that end, our business goals are to obtain the best possible rental income at our properties in order to maximize our cash flows, net operating income, funds from operations, funds available for distribution to shareholders and other operating measures and results, and ultimately to maximize the values of our properties.
To achieve this primary goal, we have developed a business strategy focused on increasing the values of our properties, and ultimately of the Trust, which includes:
● Raising capital by monetizing the embedded value in our portfolio to improve our liquidity position and, as appropriate reducing debt levels to strengthen our balance sheet;
● Selling off non-core properties and underperforming assets;
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● Seeking to re-lease properties that are vacant or have non-performing tenants
● Raising the overall level of quality of our portfolio and of individual properties in our portfolio;
● Improving the operating results of our properties; and
●Taking steps to position ourselves for future growth opportunities.
Recent Events
On February 6, 2025, our wholly owned subsidiary, PW CO CanRE JKL LLC received a Final Order and Entry of Judgement in favor of PW CO CanRE JKL LLC against the former tenant and guarantors of the lease in the amount of $10,988,749. The ruling eliminated claims by the former tenant against PW CO CanRE JKL LLC. We are evaluating the potential to collect against this litigation for this Judgement, but will treat any recovery on a cash basis for accounting purposes.
On January 31, 2025 a wholly owned subsidiary of Power REIT, PW CO CanRE JAB LLC, sold one of its interests in a cannabis related greenhouse cultivation property located in Ordway, Colorado. The property was described in prior filings as Tam 18 and was vacant. The purchaser was an unaffiliated third party and the price was established based on an arm’s length negotiation. The sale price was $200,000 and the net proceeds were used to pay down the Greenhouse Loan and pay other accrued expenses related to the property. There was no gain/loss on sale recognized.
On January 24, 2025 we entered into a sales agreement (the “Sales Agreement”), with A.G.P./Alliance Global Partners pursuant to which we may, from time to time, issue and sell our Common Shares, however, the Sales Agent is not obligated to sell any shares of Common Stock and there are limits on the dollar amount of shares of common stock we can sell pursuant to the Sales Agreement. In addition, our ability to raise capital through the sale of securities may be limited by the rules of the SEC and NYSE American LLC (“NYSE American”) that place limits on the number and dollar amount of securities that may be sold. There can be no assurances that we will be able to raise the funds needed, especially in light of the fact that our ability to sell securities registered on our registration statement on Form S-3 will be limited until such time the market value of our voting securities held by non-affiliates is $75 million or more.
Settlement of Greenhouse Loan
As previously disclosed, the Greenhouse Loan has been in default, and the lender thereunder filed litigation and foreclosure actions. We previously entered into forbearance agreements with the lender that expired on January 31, 2025. The loan was non-recourse to us but secured by the Greenhouse Portfolio (except for the property in Oklahoma). The Greenhouse Portfolio has been marketed for sale but, unfortunately, the market for these special purpose assets has been weak and we have not been able to generate enough sales to satisfy the obligations to the lender. On April 11, 2025, we resolved issues with the lender concerning the Greenhouse Loan by providing deeds-in-lieu of foreclosure for the greenhouse properties in Michigan and Nebraska. In return, the lender released the remaining collateral back to our subsidiaries and released obligations related to the Greenhouse Loan. We will continue to seek to realize value from these retained assets, which are properties in Ordway, Colorado; a property in Walsenburg, Colorado; a property in Desert Hot Springs, California; a first mortgage on two properties in Ordway, Colorado; and a second mortgage on a property in Elliot, Maine. In addition, a subsidiary owns a greenhouse property located in Vinita, Oklahoma that was not security for the Greenhouse Loan. The transaction related to the settlement of the Greenhouse Loan closed on April 11, 2025 and will result in the write-off of the Nebraska and Michigan properties, along with the remaining balance of the Greenhouse Loan. It will also relieve the ongoing costs associated with maintaining the Nebraska and Michigan properties.
Improving Our Balance Sheet by Reducing Debt and Leverage; Maintaining Liquidity
Leverage
We continue to seek ways to reduce our debt and debt leverage by improving our operating performance and through a variety of other means available to us. These means might include leasing vacant properties, selling properties, raising capital or through other actions.
Capital Recycling
In the later part of 2022, we commenced property reviews to establish a plan for the portfolio and, where appropriate, have been disposing of and seeking to dispose of properties that we do not believe meet financial and strategic criteria given economic, market and other circumstances. Disposing of these properties can enable us to redeploy or recycle our capital to other uses, such as to repay debt, to reinvest in other real estate assets and development and redevelopment projects, and for other corporate purposes. Along these lines, in 2023 and 2024 we completed sales of assets for total gross proceeds of approximately $9.81 million which included $2.1 million of seller financing provided to the buyers. We also have several properties that we are marketing for sale and/or lease which have been classified as “Assets Held for Sale.”
Improving Our Portfolio
We are currently seeking to refine our property holdings by selling greenhouse properties and/or re-leasing them in an effort to improve the overall performance going forward. A loan secured by the greenhouse portfolio was in default as of March 31, 2025. As of March 31, 2025, the previously disclosed forbearance agreement with the lender for the Greenhouse Loan had terminated and the Greenhouse Portfolio was subject to foreclosure. Effective April 11, 2025, we entered into a settlement agreement with the lender under the Greenhouse Loan. See “Settlement of Greenhouse Loan,” above, for more information.
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The transaction related to the Greenhouse Loan closed on April 11, 2025 and will result in the write-off of the Nebraska and Michigan properties, along with the remaining balance of the Greenhouse Loan. It will also relieve the ongoing costs associated with maintaining the Nebraska and Michigan properties. We will continue to seek to realize value from the retained assets and is exploring a shift in focus and is evaluating real estate distressed situations including properties, loans and companies (see Subsequent Events).
Taking Steps to Position the Company for Future Growth Opportunities
We are taking steps designed to position ourselves to create shareholder value. In connection therewith, we have implemented processes designed to ensure strong internal discipline in the use, harvesting and recycling of our capital, and these processes will be applied in connection with seeking to reposition properties.
We may continue to seek to acquire, in an opportunistic, selective and disciplined manner, properties that have operating metrics that are better than or equal to our existing portfolio averages, and that we believe have strong potential for increased cash flows and appreciation in value. Taking advantage of any acquisition opportunities would likely involve some use of debt or equity capital. We will pursue transactions that we expect can meet the financial and strategic criteria we apply, given economic, market and other circumstances. In addition, we are exploring the potential to use our existing corporate structure for strategic transactions including potentially merging assets or companies with us.
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The following table is a summary of our properties as of March 31, 2025:
| Property Type/Name | Acres | Size1 | Gross Book Value3 | |||||||||
| Railroad Property | ||||||||||||
| P&WV - Norfolk Southern | 112 miles | $ | 9,150,000 | |||||||||
| Solar Farm Land | ||||||||||||
| California | ||||||||||||
| PWRS | 447 | 82 | 9,183,548 | |||||||||
| Solar Total | 447 | 82 | $ | 9,183,548 | ||||||||
| Greenhouse - Cannabis | ||||||||||||
| Ordway, Colorado | ||||||||||||
| Maverick 1 2,4,6,7 | 5.20 | 17,368 | 1,594,582 | |||||||||
| Maverick 142,4,6,7 | 5.54 | 26,940 | 1,908,400 | |||||||||
| Tamarack 72,4,6,7 | 4.32 | 18,000 | 1,364,585 | |||||||||
| Tamarack 7 (MIP)2,5,6,7 | 636,351 | |||||||||||
| Tamarack 192,4,6,7 | 2.11 | 18,528 | 1,311,116 | |||||||||
| Tamarack 8 - Apotheke 2,5,6,7 | 4.31 | 21,548 | 2,061,542 | |||||||||
| Tamarack 132,4,6,7 | 2.37 | 9,384 | 1,031,712 | |||||||||
| Tamarack 32,6,7 | 2.20 | 24,512 | 2,080,414 | |||||||||
| Tamarack 27 and 282,4,6,7 | 4.00 | 38,440 | 1,872,340 | |||||||||
| Maverick 5 - Jacksons Farms 2,5,6,7 | 5.20 | 15,000 | 1,358,634 | |||||||||
| Tamarack 4 and 52,4,6,7 | 4.41 | 26,076 | 2,239,870 | |||||||||
| Walsenburg, Colorado 2,4,6,7 | 35.00 | 74,800 | 4,219,170 | |||||||||
| Desert Hot Springs, California2,5,6,7 | 0.85 | 35,505 | 7,685,000 | |||||||||
| Vinita, Oklahoma4,6,7 | 9.35 | 40,000 | 2,593,313 | |||||||||
| Marengo Township, Michigan2,4,6,7,10 | 61.14 | 556,146 | 24,171,151 | |||||||||
| Greenhouse - Food Crop | ||||||||||||
| O’Neill, Nebraska2,4,5,7,10 | 90.97 | 1,130,575 | 9,350,000 | |||||||||
| Greenhouse Total | 236.97 | # | 2,052,822 | $ | 65,478,180 | |||||||
| Total Portfolio (Real Estate Owned) | $ | 83,811,728 | ||||||||||
| Mortgage Loan9 | $ | 597,000 | ||||||||||
| Mortgage Loan8 | 960,000 | |||||||||||
| Impairment | 35,316,251 | |||||||||||
| Depreciation and Amortization | 7,550,909 | |||||||||||
| Net Book Value Net of Impairment, Depreciation and Amortization | $ | 42,501,568 | ||||||||||
| 1 | Solar Farm Land size represents Megawatts and CEA property size represents greenhouse square feet | |
| 2 | Security for the Greenhouse Loan which is in default at 3/31/25 (see Subsequent Events) | |
| 3 | Gross Book Value for our Greenhouse Portfolio represents purchase price (excluding capitalized acquisition costs) plus improvements costs | |
| 4 | Property is vacant | |
| 5 | Tenant is not current on rent/in default | |
| 6 | An impairment has been taken against this asset | |
| 7 | Asset held for sale | |
| 8 | Loan secured by a first mortgage (Ordway Properties) sold on January 8, 2024 and is security for the Greenhouse Loan at 3/31/25 (see Subsequent Events) | |
| 9 | Loan secured by a second mortgage (Maine property) sold on October 30, 2023 | |
| 10 | No longer owned by the Trust as of the date of this filing. This property was transferred to the lender under the Greenhouse Loan pursuant to a settlement agreement entered into April 11, 2025. |
Critical Accounting Estimates
The consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. The critical accounting estimates that affect the consolidated financial statements and the judgments and assumptions used are consistent with those described under Part II, Item 7 of the 2024 10-K.
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Results of Operations
Three Months Ended March 31, 2025 and 2024
Revenue during the three months ended March 31, 2025 and 2024 was $485,794 and $534,612, respectively. Revenue during the three months ended March 31, 2025, consisted of revenue from lease income from direct financing lease of $228,750, total rental income of $210,779, and other income of $46,265. The decrease in total revenue was primarily related to a $49,860 decrease in rental income from the cannabis tenants due to defaulted leases related to the challenges within the cannabis industry and an increase in other income of $1,042. Expenses for the three months ended March 31, 2025 compared to 2024 decreased by $1,136,168 primarily due to no impairment expense in 2025 and a decrease in depreciation expense of $485,495 as several properties are considered held for sale. The difference is also due to a decrease in general and administrative expenses of $126,725 and a decrease in interest expense of $16,254 offset by an increase of property expense of $34,520, an increase of property tax of $7,343. Other income decreased by $394,394 due to no gain on sale on the disposal of the one property in the first quarter of 2025. Net loss attributable to common shares during the three months ended March 31, 2025 and 2024 was 1,576,319 and $2,240,205, respectively. Net loss attributable to common shares decreased by $663,886.
Liquidity and Capital Resources
Our cash and cash equivalents and restricted cash totaled $2,033,211 as of March 31, 2025, a decrease of $198,375 from December 31, 2024. During the three months ended March 31, 2025 and 2024, cash used in operating activities was $436,648 and $402,163, respectively. The increase is due to changes in operating assets and liabilities in the current period. Cash provided by investing a smaller net loss in 2025, offset by reduced non-cash expenses of depreciation and impairment. Investing activities during the three months ended March 31, 2025 and 2024 were $92,260 and $795,642, respectively. The difference is due to reduced proceeds from property sales and a new investment in marketable securities. Cash provided by financing activities during the three months ended March 31, 2025 was $146,013 and cash used by financing activities during the three months ended March 31, 2025 was $76,575, respectively. The difference is due to new debt proceeds in 2025 offset by higher principal payments on the Greenhouse Loan. offset by new debt proceeds in 2025. Of the total amount of cash as of March 31, 2025, approximately $2 million is non-restricted cash available for general corporate purposes and approximately $14,000 is restricted cash related to the Greenhouse Loan.
Our current loan liabilities totaled approximately $18.4 million as of March 31, 2025. The current loan liabilities include approximately $17.6 million of the Greenhouse Loan, a bank loan secured by most of the Greenhouse Portfolio and which was in default and non-recourse to us. Effective April 11, 2025, we entered into a settlement agreement with the lender under the Greenhouse Loan. See “Settlement of Greenhouse Loan”, above, for more information. We are not current on payment of property taxes for the Greenhouse Portfolio. These taxes are included on the Balance Sheet as accrued expenses and liabilities held for sale for approximately $1,175,000. Of this amount, approximately $178,000 relates to the Michigan and Nebraska properties and the balance relates to properties that will be retained by our subsidiaries after the resolution of the Greenhouse Loan. If the property taxes remain delinquent, the Greenhouse Portfolio will be subject to tax foreclosure actions starting in the first quarter of 2026.
On a consolidated basis, our current liabilities far exceed current assets as of March 31, 2025. Effective April 11, 2025, we entered into a settlement agreement with the lender under the Greenhouse Loan. See “Settlement of Greenhouse Loan,” above, for more information. Following the resolution of the Greenhouse Loan, our management believes that the going concern doubt discussed in our 2024 10-K and previous quarterly reports on Form 10-Q has been alleviated, and that our non-restricted cash should provide greater than twelve months of liquidity for our capital needs.
The transaction related to the Greenhouse Loan closed on April 11, 2025 and will result in the write-off of the Nebraska and Michigan properties, along with the remaining balance of the Greenhouse Loan. It will also relieve the ongoing costs associated with maintaining the Nebraska and Michigan properties. Power REIT will continue to seek to realize value from the retained assets and is exploring a shift in focus and is evaluating real estate distressed situations including properties, loans and companies (see Subsequent Events).
In the quarter ended March 31, 2024, we sold three four properties. The sale of the Salisbury, MA property in January 2024 yielded net proceeds of approximately $662,000 of unrestricted cash and eliminated approximately $504,000 of debt. We sold two greenhouse properties in a transaction that produced approximately $53,000 of restricted cash at closing and we provided seller financing in the amount of $1,005,000 which generated approximately $99,000 of restricted cash from the debt service related thereto. During the remainder of 2024, we generated an additional approximately $246,000 of restricted cash from the debt service related to the seller financing and sold one greenhouse property in a transaction that produced approximately $51,000 with the net proceeds used to service the Greenhouse Loan.
We sold one greenhouse property in a transaction that produced approximately $51,000 with the net proceeds used to service the Greenhouse Loan. We sold two greenhouse properties in a transaction that produced approximately $53,000 of restricted cash at closing and we provided seller financing in the amount of $1,005,000 which generated approximately $99,000 of restricted cash from the debt service related thereto. During the remainder of 2024, we generated an additional approximately $246,000 of restricted cash from the debt service related to the seller financing and during 2024.
In the quarter ended March 31, 2025, we generated approximately $73,000 of restricted cash from debt service related to the seller financing provided in 2024 and we sold one property in a transaction that produced approximately $132,000 of net proceeds that was used to service the Greenhouse Loan. The seller financing provided in 2024 has a remaining balance of $960,000 as of March 31,2025.
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Our cash outlays at Power REIT (parent company) consist principally of professional fees, consultant fees, NYSE American listing fees, legal, insurance, shareholder service company fees, auditing costs and general and administrative expenses. Our cash outlays related to our various property-owning subsidiaries consist principally of principal and interest expense on debts, property maintenance, property taxes, insurance, legal as well as other property related expenses that are not covered by tenants. To the extent we need to raise additional capital to meet our obligations, there can be no assurance that financing on favorable terms will be available when needed. Although we entered into the Sales Agreement the rules of the SEC and NYSE American place limits on the number and dollar amount of securities that may be sold. There can be no assurances that we will be able to raise the funds needed. If we are unable to sell certain assets when anticipated at prices anticipated, we may not have sufficient cash to fund operations and commitments.
FUNDS FROM OPERATIONS – NON-GAAP FINANCIAL MEASURES
We assess and measure our overall operating results based upon an industry performance measure referred to as Core Funds From Operations (“Core FFO”) which our management believes to be a useful indicator of our operating performance. Core FFO is a non-GAAP financial measure. Core FFO should not be construed as a substitute for net income (loss) (as determined in accordance with GAAP) for the purpose of analyzing our operating performance or financial position, as Core FFO is not defined by GAAP. The following is a definition of this measure, an explanation as to why we present it and, at the end of this section, a reconciliation of Core FFO to the most directly comparable GAAP financial measure.
Our management believes that Core FFO is a useful supplemental measure of our operating performance. Our management believes that alternative measures of performance, such as net income computed under GAAP, or Funds From Operations computed in accordance with the definition used by the National Association of Real Estate Investment Trusts (“NAREIT”), include certain financial items that are not indicative of the results provided by our asset portfolio and inappropriately affect the comparability of our period-over-period performance. These items include non-recurring expenses, such as one-time upfront acquisition expenses that are not capitalized under ASC-805 and certain non-cash expenses, including stock-based compensation expense, amortization and certain up front financing costs. Therefore, management uses Core FFO and defines it as net income excluding such items. We believe that Core FFO is a useful supplemental measure for the investing community to employ, including when comparing us to other REITs that disclose similarly computed Core FFO figures, and when analyzing changes in our performance over time. Readers are cautioned that other REITs may use different adjustments to their GAAP financial measures than we use, and that as a result, our Core FFO may not be comparable to the FFO measures used by other REITs or to other non-GAAP or GAAP financial measures used by REITs or other companies.
A reconciliation of our Core FFO to net income for the three months ended March 31, 2025, and 2024 is included in the table below:
CORE FUNDS FROM OPERATIONS (FFO)
(Unaudited)
| Three Months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | 485,794 | $ | 534,612 | ||||
| Net Loss | $ | (1,413,112 | ) | $ | (2,076,998 | ) | ||
| Stock-Based Compensation | 143,213 | 216,475 | ||||||
| Interest Expense - Amortization of Debt Costs | 7,847 | 7,877 | ||||||
| Amortization of Intangible Lease Asset | 56,872 | 56,872 | ||||||
| Depreciation on Land Improvements | - | 488,197 | ||||||
| Impairment Expense | - | 549,557 | ||||||
| Gain on sale of property | - | (394,394 | ) | |||||
| Core FFO Available to Preferred and Common Stock | (1,205,180 | ) | (1,152,414 | ) | ||||
| Preferred Stock Dividends | (163,207 | ) | (163,207 | ) | ||||
| Core FFO Available to Common Shares | $ | (1,368,387 | ) | $ | (1,315,621 | ) | ||
| Weighted Average Shares Outstanding (basic) | 3,389,661 | 3,389,661 | ||||||
| Core FFO per Common Share | (0.40 | ) | (0.39 | ) | ||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining adequate disclosure controls and procedures (as defined Rules 13a-15(e) and 15d-15(e) under the Exchange Act) (to provide reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of the inherent limitations in all control systems, internal controls over financial reporting may not prevent or detect misstatements. The design and operation of a control system must also reflect that there are resource constraints and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls.
During the quarter ended March 31, 2025, we analyzed accounting policies and procedures. In addition, management concluded that material weaknesses previously disclosed in the 2024 10-K regarding accounting for complex transactions still exist and that such controls are not effective. These material weaknesses could result in a material misstatement to the annual or interim condensed consolidated financial statements that would not be prevented or detected.
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Remediation Plan
To address the material weakness described above, we engaged an independent third party to enhance our analysis of accounting policies.
Limitations on the Effectiveness of Controls.
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Trust have been detected. The design and operation of a control system must also reflect that there are resource constraints and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls.
Our management assessed the effectiveness of the design and operation of our disclosure controls and procedures. Based on our evaluation, we have concluded that the historical treatment of our Preferred Shares and the requirement for the restatement thereof, represents a Material Weakness in our procedures and internal controls over financial reporting and that we had ineffective Disclosure Control and Procedures related thereto. This Material Weakness relates to the accounting treatment of complex transactions. As part of our process related to the treatment of the Preferred Shares, it retained a third-party consultant that specializes in accounting treatment and SEC reporting.
Changes in Internal Control over Financial Reporting:
Other than as discussed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are, from time to time, the subject of claims and suits arising out of matters related to our business. In general, litigation claims can be expensive, and time consuming to bring or defend against and could result in settlements or damages that could significantly affect financial results. It is not possible to predict the final resolution of the current litigation to which we are party to, and the impact of certain of these matters on our business, results of operations, and financial condition could be material. Regardless of the outcome, litigation has adversely impacted our business because of defense costs, diversion of management resources and other factors.
On March 13, 2024, East West Bank (“EWB”) initiated a complaint in the Superior Court of California, County of Los Angeles (Case 24STCV06180) against PW CanRE Holdings, LLC, PW CanRE of Colorado Holdings LLC, PW ME CanRE SD LLC, PW CO CanRE Walsenburg LLC, PW Co CanRE JKL LLC, PW CO CanRE JAB LLC, PW CO CanRE Tam 19 LLC, PW CO CanRE Mav 14 LLC, PW CO CanRE Gas Station LLC, PW CO CanRE Grail LLC, PW CO CanRE Tam 7 LLC, PW CO CanRE Cloud Nine LLC, PW CO CanRE Apotheke LLC, PW CO CanRE Mav 5 LLC, PW CO CanRE MF LLC, PW MillPro NE LLC, PW CA CanRE Canndescent LLC and PW MI CanRE Marengo LLC. The litigation relates to a loan secured by various properties held by PW CanRE Holdings, LLC through its ownership of the various subsidiaries that are also named in the complaint. The complaint is seeking (i) Judicial Foreclosure (ii) Specific Performance (iii) Appointment of Receiver; (iv) Injunctive Relief; (v) Breach of Contract (Security Agreement); (vi) Breach of Contract (Guaranty); (vii) Money Due; and (viii) Account Stated. A forbearance agreement with the lender for the Greenhouse Loan was effective on May 10, 2024, which provides additional time to retire the loan. The expiration date of the original forbearance agreement was September 30, 2024. On September 30, 2024, we entered into an amendment to the forbearance agreement which moved the expiration of the forbearance agreement to January 31, 2025. As of March 31, 2025, the forbearance agreement has terminated and the greenhouse portfolio is subject to foreclosure. Effective April 11, 2025, we, through subsidiaries, resolved issues related to the Greenhouse Loan and the litigation related thereto (see Subsequent Events).
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On February 6, 2025, our wholly owned subsidiary, PW CO CanRE JKL LLC received a Final Order and Entry of Judgement in favor of PW CO CanRE JKL LLC against the former tenant and guarantors of the lease in the amount of $10,988,749. The ruling eliminated claims by the former tenant against PW CO CanRE JKL LLC. We are evaluating the potential to collect against this litigation for this Judgement, but will treat any recovery on a cash basis for accounting purposes.
Item 1A. Risk Factors.
Our results of operations and financial condition are subject to numerous risks and uncertainties as described in the 2024 10-K, which risk factors are incorporated herein by reference. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in the 2024 10-K. You should carefully consider the risks set forth in the 2024 10-K and the following risks, together with all the other information in this Report, including our consolidated financial statements and notes thereto. If any of the risks actually materialize, our operating results, financial condition and liquidity could be materially adversely affected. Except as disclosed below, there have been no material changes from the risk factors disclosed in the 2024 10-K.
We have incurred a loss for the three months ended March 31, 2025 and may be unable to generate sufficient revenue to cover expenses or generate net income.
For the three months ended March 31, 2025, we had a net loss attributable to common shareholders of $1.58 million. There can be no assurance that we will be able to generate sufficient revenue to pay our expenses or generate net income.
We have identified material weaknesses in our internal controls, and we cannot provide assurances that these material weaknesses will be effectively remediated or that additional weaknesses will not occur in the future.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a- 15(f) under the Exchange Act. We identified a material weakness in our controls relating to accounting for complex transactions which has not been remedied as of March 31, 2025. Specifically, Preferred Shares were historically classified as mezzanine equity instead of being classified as equity.
While we have hired outside consultants to aid in our accounting for complex transactions and plan to take remedial action to address the material weakness in our internal controls, we cannot provide any assurance that such remedial measures, or any other remedial measures we take, will be effective. In addition, a material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operate effectively. Although management believes that the material weakness in our internal controls will be remediated, there can be no assurance that the deficiencies will be remediated in the near future or that the internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in our internal controls in the future.
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As a result of our failure to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, security holders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Our failure to maintain an effective system of internal controls, and any failure by us to implement required new or improved internal controls or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us, as and when required, conducted in connection with Section 404 of the Sarbanes-Oxley Act, or Section 404, or any subsequent testing by our independent registered public accounting firm, as and when required, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. As a growing company, implementing and maintaining effective controls may require more resources, and we may encounter internal control integration difficulties. Our failure to maintain effective internal controls over financial reporting, may result in us not being able to accurately report our financial results, detect or prevent fraud, or file our periodic reports in a timely manner, which may, among other adverse consequences, cause investors to lose confidence in our reported financial information and lead to a decline in the trading price of our common stock.
The investment portfolio is, and in the future may continue to be, concentrated in its exposure to a relatively few numbers of investments, industries and lessees.
Historically, our revenue has been concentrated to a relatively limited number of investments, industries and lessees. During the three months ended March 31, 2025, we collected approximately 98% of our consolidated revenue from two properties. The tenants were Norfolk Southern Railway and Regulus Solar, LLC which represent 52% and 46% of consolidated revenue respectively.
We are exposed to risks inherent in this sort of investment concentration. Financial difficulty or poor business performance on the part of any single lessee or a default on any single lease will expose us to a greater risk of loss than would be the case if we were more diversified and holding numerous investments, and the underperformance or non-performance of any of its assets may severely adversely affect our financial condition and results from operations. Our lessees could seek the protection of bankruptcy, insolvency or similar laws, which could result in the rejection and termination of our lease agreements and could cause a reduction in our cash flows. Furthermore, we may continue to concentrate our investment activities in the CEA and cannabis sectors, which subjects us to more risks than if we were diversified across many sectors. At times, the performance of the CEA and infrastructure sectors may lag the performance of other sectors or the broader market as a whole.
If our acquisitions or our overall business performance fail to meet expectations, the amount of cash available to us to pay dividends may decrease and we could default on our loans, which are secured by collateral in our properties and assets.
We may not be able to achieve operating results that will allow us to pay dividends at a specific level or to increase the amount of these dividends from time to time. Also, restrictions and provisions in any credit facilities we enter into or any debt securities we issue may limit our ability to pay dividends. We cannot assure you that you will receive dividends at a particular time, or at a particular level, or at all.
Unfortunately, our tenants related to the Greenhouse Portfolio have failed to perform on their lease obligations which has created a significant liquidity issue related to this portfolio of assets. A portion of the properties included in the Greenhouse Portfolio secure the Greenhouse Loan which is non-recourse to us and the lender under the Greenhouse Loan has liens against such properties. As of March 31, 2025, the balance of the loan was approximately $17,671,000, the loan was in default and such properties were subject to foreclosure. In March 2024, the lender filed a litigation seeking among other things, foreclosure and appointment of a receiver. In addition, Maryland law prohibits the payment of dividends if we are unable to pay our debts as they come due. A forbearance agreement with the lender for the Greenhouse Loan was effective on May 10, 2024, and expired, as modified, on January 31, 2025 (see Subsequent Events).
PW Regulus Solar, LLC (“PWRS”), one of our subsidiaries, entered into a loan agreement (the “2015 PWRS Loan Agreement”) that is non-recourse to us and secured by all of PWRS’ interest in the land and intangibles. As of March 31, 2025, the balance under the 2015 PWRS Loan Agreement was approximately $6,472,000 (net of unamortized debt costs of approximately $207,000).
Pittsburgh & West Virginia Railroad (“PWV”), one of our subsidiaries, entered into a Loan Agreement in the amount of $15,500,000 that is non-recourse to Power REIT and secured by our equity interest in our subsidiary PWV which is pledged as collateral. The balance of the loan as of March 31, 2025 is $14,143,000 (net of approximately $265,000 of capitalized debt costs).
We have substantial debt and preferred shares outstanding with substantial liquidation preference, which could adversely affect our overall financial health and our operating flexibility.
We require cash flows to satisfy our debt service. These obligations may prevent us from using our cash flows for other purposes. If we are unable to satisfy these obligations, we might default on our debt and our financial condition and results of operations would be adversely affected.
In an effort to conserve liquidity and create financial flexibility, the Trust has not declared dividends on its preferred shares since the fourth quarter of 2022. As a result, unpaid dividends increase the liquidation preference for our preferred shares. As of March 31, 2025, the amount of unpaid dividends on the outstanding preferred shares is approximately $1,632,000.
Our obligations arising from our indebtedness could have other negative consequences to our shareholders, including the acceleration of debt related to the loan secured by the greenhouse portfolio. Our failure to meet our obligations under our debt, we could lose assets due to foreclosure or sale on unfavorable terms. Also, our indebtedness and debt service might limit our ability to refinance existing debt or to do so at a reasonable cost, might make us more vulnerable to adverse economic and market conditions, might limit our ability to take advantage of opportunities, and might discourage business partners from working with us.
Furthermore, since a significant percentage of our assets are used to secure our debt, this reduces the amount of collateral available for future secured debt or credit support and reduces our flexibility in how we handle these secured assets. This level of debt and related security could also limit our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our business strategy or other purposes and could limit our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt.
In addition to our current debt, we might incur additional debt in the future in order to finance improvement or development of properties, acquisitions or for other general corporate purposes, which could exacerbate the risks described above. These consequences could have a material adverse effect on our business, financial condition and results of operations.
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The issuance of securities with claims that are senior to those of our common shares, including our Series A Preferred Stock, may limit or prevent us from paying dividends on our common shares. There is no limitation on our ability to issue securities senior to our common shares or incur indebtedness.
Our common shares are equity interests that rank junior to our indebtedness and other non-equity claims with respect to assets available to satisfy claims against us, and junior to our preferred securities that by their terms rank senior to our common shares in our capital structure, including our Series A Preferred Stock. As of March 31, 2025, we had outstanding debt in the principal amount of $38.8 million and $8.5 million (par value) of Series A Preferred Stock. This debt and these preferred securities rank senior to our common shares in our capital structure. We expect that in due course we may incur more debt, and issue additional preferred securities as we pursue our business strategy.
In the case of indebtedness, specified amounts of principal and interest are customarily payable on specified due dates. In the case of preferred securities, such as our Series A Preferred Stock, holders are provided with a senior claim to distributions, according to the specific terms of the securities. In contrast, however, in the case of common shares, dividends are payable only when, as and if declared by our board of trustees and depend on, among other things, our results of operations, financial condition, debt service requirements, obligations to pay distributions to holders of preferred securities, such as the Series A Preferred Stock, other cash needs and any other factors that the board of trustees may deem relevant or that they are required to consider as a matter of law. Incurring additional debt, or issuing of additional preferred securities, may limit or eliminate the amounts available to pay dividends on our Series A Preferred Stock and common shares.
From time to time, our management team may own interests in our lessees or other counterparties, and may thereby have interests that conflict or appear to conflict with our interests.
On occasion, our management may have financial interests that conflict or appear to conflict with our interests. For example, four of our properties were leased by tenants in which Millennium Sustainable Ventures Corp., formerly Millennium Investment & Acquisition Company (ticker: MILC) had controlling interests. David H. Lesser, Power REIT’s Chairman and CEO, is also Chairman and CEO of MILC. MILC established cannabis cultivation projects in Colorado (through a loan), Oklahoma, and Michigan which are related to our May 21, 2021, June 11, 2021, and September 3, 2021 acquisitions and a food crop cultivation project in Nebraska related to our March 31, 2022 acquisition. Total rental income recognized for the three months ended March 31, 2025 and 2024 from the affiliated tenants in Colorado, Oklahoma, Michigan and Nebraska was $0. The above leases are currently in default and the tenants have vacated the properties.
Although our Declaration of Trust permits this type of business relationship and a majority of our disinterested trustees must approve, and in those instances did approve, our involvement in such transactions, in any such circumstance, there may be conflicts of interest between us on one hand, and subsidiaries of MILC, Mr. Lesser and his affiliates and interests on the other hand, and such conflicts may be unfavorable to us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Unregistered Sales of Equity Securities
We did not sell any equity securities during the quarter ended March 31, 2025 in transactions that were not registered under the Securities Act other than as previously disclosed in our filings with the SEC.
(b) Use of Proceeds
Not applicable.
(c) Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
During the three
months ended March 31, 2025, no director or officer of the Trust
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Item 6. Exhibits.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-Q for the quarter ended March 31, 2025 to be signed on its behalf by the undersigned thereunto duly authorized.
| POWER REIT | |
| /s/ David H. Lesser | |
| David H. Lesser | |
| Chairman, CEO, CFO, Secretary and Treasurer | |
| Date: May 14, 2025 |
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