Power REIT — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Power REIT is an internally managed REIT with railroad, solar-land and controlled-environment agriculture (CEA) assets. The filing reports unaudited interim results; period results may not indicate full-year performance.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $534,612 | $1,004,732 |
| Net loss | $(2,076,998) | $(339,046) |
| Net loss attributable to common shareholders | $(2,240,205); $(0.66) per share | $(502,253); $(0.15) per share |
| Core FFO attributable to common shares (non-GAAP) | $(1,315,621); $(0.39) per share | $(632,641); $(0.19) per share |
| Cash from operating activities | $(402,163) | $(876,840) |
| Cash from investing activities | $795,642 | $2,409,178 |
| Cash used in financing activities | $(76,575) | $(73,545) |
At March 31, 2024, total assets were $68.9 million, total liabilities $40.0 million, and cash plus restricted cash $4.42 million, including $2.98 million unrestricted and $1.44 million restricted. Balance-sheet debt, net of discounts, was approximately $35.66 million, including $15.04 million current and $20.62 million long-term. The company also had $9.47 million of Series A preferred stock carrying value. It accrued $163,207 in preferred dividends for the quarter; the statements report no cash dividend paid.
Changes and significant transactions
- Revenue declined about 47% year over year, primarily because rental income from cannabis tenants fell by $434,053 amid tenant defaults; other income also declined.
- Expenses increased $781,774, mainly from a $549,557 non-cash impairment charge on greenhouse assets held for sale and increased interest expense, including default interest on the Greenhouse Loan.
- Lower gains on property sales also contributed to the larger net loss. The company sold two Colorado greenhouse properties for $1.325 million, with $1.25 million financed by a seller note, and sold the Salisbury, Massachusetts solar ground-lease interest for $1.2 million. The Salisbury sale proceeds were used in part to repay associated debt.
- In February 2024, the Nebraska greenhouse entered a 20-year triple-net lease with initial annual rent of $1 million after a six-month deferral. The tenant also signed a letter of intent to purchase the property for $9.2 million by December 31, 2024; neither the lease performance nor purchase is assured.
Liquidity, outlook and risks
Management concluded that substantial doubt exists about the company’s ability to continue as a going concern, citing current liabilities exceeding current assets, recurring losses, expected lower revenue and greenhouse-related costs. Management plans to sell properties, secure new leases, improve collections and seek debt or equity capital, but states that outcomes and access to financing are uncertain. The filing provides no formal earnings guidance.
- The approximately $14.36 million Greenhouse Loan was in default at quarter-end and classified as current. East West Bank filed litigation in March 2024 seeking, among other remedies, foreclosure and appointment of a receiver. The loan is non-recourse to Power REIT, but foreclosure could substantially reduce assets and income.
- A forbearance agreement effective May 10, 2024 extends the period to address the loan through September 30, 2024. The company cautions that asset sales, re-leasing or recapitalization may not satisfy the agreement.
- CEA tenants have experienced financial distress, and collections from that portfolio have been nominal since 2022. Of Q1 revenue, approximately 81% came from two properties: Norfolk Southern Railway (43%) and Regulus Solar (38%).
- The company recorded impairment charges on two assets held for sale and warns that further declines in estimated asset values could lead to additional impairments. Nine properties were classified as held for sale at March 31, 2024.
- Series A preferred dividends accrued at $0.484375 per share for the quarter. The company’s ability to pay common dividends depends on cash availability, debt obligations and board decisions; the filing does not provide a common-dividend forecast.
Important facts for investors to verify
- Progress and deadlines under the Greenhouse Loan forbearance, including whether the debt is repaid, refinanced or otherwise resolved by September 30, 2024.
- Cash available for general purposes versus restricted cash, near-term obligations, and the company’s ability to fund operations without additional financing or asset sales.
- Collections, occupancy and lease performance across the greenhouse portfolio, especially the Nebraska tenant’s performance and purchase intentions.
- Expected proceeds and timing from properties held for sale, and whether sale prices could trigger further impairments or distressed dispositions.
- Concentration of revenue in Norfolk Southern and Regulus Solar, and any changes in their lease terms or payment status.