Power REIT — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 29, 2024. This is an annual report, not a standalone fourth-quarter filing. Power REIT owns railroad, solar-land and controlled-environment agriculture (CEA) properties, primarily leased to tenants.
Business context and financial results
The portfolio at year-end included about 112 miles of railroad infrastructure, 501 acres leased to solar projects with approximately 88 MW of generating capacity, and 256 acres with roughly 2.16 million square feet of greenhouse and processing space. The company’s results and liquidity were materially affected by distress among greenhouse tenants, particularly in cannabis cultivation.
| Metric | FY 2023 | FY 2022 |
|---|---|---|
| Revenue | $2.36 million | $8.52 million |
| Net loss | $14.37 million | $14.25 million |
| Net loss attributable to common shareholders | $15.02 million; $4.43 per share | $14.91 million; $4.41 per share |
| Core FFO available to common shareholders (non-GAAP) | $(4.17) million; $(1.23) per share | $4.45 million; $1.32 per share |
| Cash from operating activities | $(2.62) million | $6.84 million |
| Cash from investing activities | $5.23 million | $(20.96) million |
| Cash from financing activities | $(2.35) million | $14.79 million |
| Cash and restricted cash at year-end | $4.10 million | $3.85 million |
| Debt principal at year-end | Approximately $36.7 million | Not stated here on a comparable principal basis |
Revenue fell about 72% year over year, primarily as greenhouse tenants defaulted and rental income declined. The company recorded $8.24 million of non-cash impairment charges in 2023, compared with $16.74 million in 2022. Property expenses, depreciation and interest expense increased. The filing reports common-shareholder loss before impairment of $6.78 million in 2023, versus income of $1.83 million in 2022.
At year-end, total assets were $70.21 million, total liabilities $39.44 million, and total equity $21.46 million. Of $4.10 million cash and restricted cash, approximately $2.20 million was unrestricted and $1.90 million was restricted. Current loan liabilities were approximately $15.5 million; current liabilities overall exceeded current assets.
Material changes and transactions
- Rental income declined sharply as cannabis and food-crop greenhouse tenants stopped paying, vacated properties or operated under rent restructurings. Revenue collected from Norfolk Southern Railway and Regulus Solar represented approximately 45% and 39% of 2023 consolidated revenue, respectively, versus a broader four-property concentration in 2022.
- Power REIT sold five Tulare County, California solar ground leases for $2.5 million in January 2023 and a Maine greenhouse property for total consideration of $4.787 million in November 2023. The Maine sale included $3.4 million cash, release of a $537,000 security deposit and an $850,000 seller-financed note bearing 8.5% interest.
- After year-end, two Colorado greenhouse properties were sold for $1.325 million, largely with seller financing, and the Salisbury, Massachusetts solar property was sold for $1.2 million; related Salisbury debt was repaid. In February 2024, the Nebraska greenhouse subsidiary entered a 20-year lease with initial annual rent of $1 million after a six-month deferral, alongside a non-binding letter of intent to sell the property for $9.2 million by December 31, 2024. The filing cautions that neither arrangement is assured.
- Preferred dividends were not declared in 2023. Unpaid cumulative preferred dividends were approximately $816,000 at year-end. Common dividends were also suspended.
Liquidity, outlook and principal risks
- Going concern: Management and the independent auditor disclosed substantial doubt about the company’s ability to continue as a going concern. Management plans to sell assets, re-lease vacant properties, improve rent collections and seek debt or equity capital, but stated that the outcome is uncertain.
- Greenhouse Loan default and litigation: The approximately $14.36 million loan secured by most of the CEA portfolio was in default and classified as current. In March 2024, the lender sued seeking, among other remedies, foreclosure and appointment of a receiver. The loan is described as non-recourse to Power REIT, but foreclosure could substantially reduce assets and future income and could force distressed sales.
- Cash generation: Operating activities used $2.62 million in 2023. Management anticipated approximately $1.7 million of cash rent from the Regulus solar and railroad leases based on leases in place at year-end. Debt service on the Regulus and railroad loans was expected to be about $700,000 over the following 12 months; the defaulted Greenhouse Loan balance was due subject to the lender dispute and default interest.
- Business and portfolio risks: Tenant distress, concentrated revenue, specialized and potentially difficult-to-re-lease greenhouse assets, further impairments, environmental and property-maintenance costs, and exposure to cannabis-sector price declines may weigh on results. Cannabis remains illegal under U.S. federal law, and banking, regulatory, tax and REIT-qualification uncertainties persist.
- Other risks and contingencies: The filing describes additional tenant and property litigation, including a Michigan contractor dispute and Colorado tenant litigation. It reports no assurance that asset-sale proceeds or new financing will be sufficient to meet obligations. No quantitative earnings guidance was provided.
- Controls and audit: Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation. The auditor’s report included a going-concern emphasis and identified CEA property impairment valuation as a critical audit matter.
Important facts for investors to verify
- Current status and potential resolution of the East West Bank lawsuit, default, foreclosure or receivership proceedings, and the Greenhouse Loan balance and terms.
- Cash available for general use, near-term obligations and whether post-year-end property sales generated the stated proceeds and debt repayments.
- Whether the Nebraska tenant begins paying rent and whether the proposed $9.2 million purchase closes by its stated deadline.
- Tenant rent collections, occupancy, property operating and maintenance costs, and the realizable sale or re-leasing value of impaired and held-for-sale assets.
- Preferred-dividend arrears, any future dividend policy, and the company’s ability to raise capital while meeting debt and REIT requirements.
- Core FFO is a non-GAAP measure; review its reconciliation and adjustments alongside GAAP losses and operating cash flow.