Power REIT 8-K, filed May 7, 2021
Power REIT (PW)
About this 8-K
Power REIT filed this 8-K on May 7, 2021.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 7, 2021
POWER REIT
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
001-36312
(Commission File Number)
45-3116572
(IRS Employer Identification No.)
301 Winding Road
Old Bethpage, NY 11804
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (212) 750-0371
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol |
Name of Each Exchange on Which Registered | ||
Common Shares |
PW |
NYSE (American) | ||
7.75% Series A Cumulative Redeemable Perpetual Preferred Stock, Liquidation Preference $25 per Share |
PW.A |
NYSE (American) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. [ ]
Item 2.02 Results of Operations and Financial Condition.
On May 7, 2021, Power REIT (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2021. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.
The information in this Item 2.02, and Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed “filed” for the purposes of or otherwise subject to the liabilities under Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | Description of Exhibit | |
| 99.1 | Power REIT Press Release issued on May 7, 2021. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| POWER REIT | ||
| Date: May 7, 2021 | By | /s/ David H. Lesser |
David H. Lesser Chairman of the Board and Chief Executive Officer | ||
Exhibit 99.1
FOR IMMEDIATE RELEASE
Acquisitions Drive Year-Over-Year Growth
Net Income Per Share Increased 267% - Core FFO Per Share Increased 142%
Old Bethpage – New York – May 7, 2021 - (GLOBE NEWSWIRE) – Power REIT (NYSE - AMEX: PW and PW.PRA) (“Power REIT” or the “Trust”), Power REIT with a focused “Triple Bottom Line” strategy and a commitment to profit, planet, and people, today announced that it is providing an update that includes highlights of the Trust’s financial and operating results for the three months ended March 31, 2021.
1Q-2021 HIGHLIGHTS
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | 1,820,927 | $ | 787,388 | ||||
| Net Income Attributable to Common Shareholders | $ | 944,918 | $ | 182,029 | ||||
| Net Income per Common Share (diluted) | 0.33 | 0.09 | ||||||
| Core FFO Available to Common Shareholders | $ | 1,274,939 | $ | 351,650 | ||||
| Core FFO per Common Share | 0.46 | 0.19 | ||||||
| Growth Rates: | ||||||||
| Revenue | 131 | % | ||||||
| Net Income Attributable to Common Shareholders | 419 | % | ||||||
| Net Income per Common Share (diluted) | 267 | % | ||||||
| Core FFO Available to Common Shareholders | 263 | % | ||||||
| Core FFO per Common Share | 142 | % | ||||||
*See Net Income to Core FFO Reconciliation at the end of this release.
| ● | Raised over $36.6 million in an investor friendly Rights Offering that was launched at the end of December 2020 and closed in February 2021. | |
| ● | Acquired 5 CEA facilities in Colorado and California totaling approximately 110,000 square feet of greenhouse and cultivation/processing space. | |
| ● | Entered into 3 new triple-net leases, one lease amendment and was assigned an existing lease with state-licensed cannabis operator. |
Commenting on the results and Q1-2021 achievements, David Lesser, Chief Executive Officer stated, “Power REIT made significant progress during the quarter by completing a Rights Offering that allowed existing investors to participate at an attractive stage of our growth trajectory. Existing investors were offered the right to purchase additional shares at $26.50. With the common stock trading at $43.98, these investors have generated gains exceeding 66% within a few months. As we deploy the capital raised in additional accretive acquisitions, we also continue to explore non-dilutive capital sources to fund our growth in an effort to create ongoing shareholder value.”
Mr. Lesser continued, “The updated business plan that Power REIT put into motion in the second half of 2019 is driving substantial growth. This is reflected in our first quarter 2021 Core FFO per common share of $0.46, which increased 142% year over year. Our dynamic growth is a function of the attractive yields Power REIT can achieve with its strategic CEA investments coupled with our relatively small size which amplifies the impact of these transactions. With the current stock price at $43.98 and a forward Core FFO run rate of $3.18 per share, Power REIT trades at a 13.8x multiple. We believe our potential growth rate driven by acquisitions combined with a relatively low forward Core FFO multiple provides a compelling value proposition for investors. We have an active pipeline of acquisitions and hope to announce additional activity in the near future.”
FORWARD CORE FFO PER SHARE
Power REIT has now deployed approximately $10 million of the capital raised in its recently closed Rights Offering across several transactions. This leaves approximately $26.5 million to deploy. Power REIT’s current run-rate of Core FFO based solely on transactions closed and not taking into account deployment of additional capital is approximately $6.6 million as described in our most recently published Investor Presentation which is available at: www.pwreit.com/investors
Reflecting on the impact of Power REIT’s recent Rights Offering and assuming the full deployment of its remaining proceeds into additional acquisitions at an average 16% yield to common equity, the Trust estimates a forward Core FFO per share run rate of $3.18. However, it is important to understand that near-term quarterly results could be below this run-rate due to uncertainty of transaction timing and dilution from the additional shares issued pursuant to the Rights Offering that generated the available cash on Power REIT’s balance sheet for investment.
The following table provides a roadmap and sensitivity analysis for forward Core FFO per share:
| Common Shares Outstanding (Pre Rights Offering) | 1,916,139 | |||||||||||
| Shares Sold in Rights Offering | 1,383,394 | |||||||||||
| Total Shares Outstanding (Post Rights Offering) | 3,299,533 | |||||||||||
| Rights Offering Price | $ | 26.50 | ||||||||||
| Rights Offering Capital Raise – Gross | $ | 36,659,941 | ||||||||||
| Proceeds Net of Costs (est.) | 0.25 | % | $ | 36,568,291 | ||||||||
| Announced Transactions Using Proceeds from Rights Offering: | ||||||||||||
| Apotheke | 1,813,398 | |||||||||||
| Canndescent | 2,685,000 | |||||||||||
| Grail Project Expansion | 517,663 | |||||||||||
| Gas Station | 2,118,717 | |||||||||||
| Cloud Nine | 2,947,905 | |||||||||||
| Total | 10,082,683 | |||||||||||
| Remaining Rights Offering Proceeds for Investment | $ | 26,485,608 | ||||||||||
| Unleveraged FFO Yield on Investments (Net) | 14.0 | % | 16.0 | % | 18.0 | % | ||||||
| Annualized Run Rate Core FFO Guidance (existing portfolio) | $ | 6,558,874 | $ | 6,558,874 | $ | 6,558,874 | ||||||
| Incremental FFO from Acquisitions with remaining RO Proceeds | 3,707,985 | 4,237,697 | 4,767,409 | |||||||||
| Incremental G&A to expand Power REIT team | (300,000 | ) | (300,000 | ) | (300,000 | ) | ||||||
| Annualized Run Rate Pro Forma Core FFO | 9,966,859 | 10,496,571 | 11,026,283 | |||||||||
| Annualized Run Rate Pro Forma Core FFO Per Share | $ | 3.02 | $ | 3.18 | $ | 3.34 | ||||||
| Increase from Q4 2020 | 48 | % | 56 | % | 64 | % |
Distributions
For the quarter ended March 31, 2021, the Trust paid dividends of approximately $163,000 (or $0.484375 per share per quarter for a total of $1.9375 per share total) on Power REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.
Subsequent to the end of the first quarter in 2021, the Board of Trustees declared a cash dividend of $0.484375 per depository share on its 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock, which equates to an annual dividend rate of $1.9375 per depository share. The dividend is payable on June 15, 2021 to stockholders of record as of May 15, 2021.
Capital MARKETS ACTIVITY
On February 5, 2021 Power REIT closed on its Rights offering, generating proceeds of approximately $36.6 million of proceeds and issued an additional 1,383,394 common shares. Through this Offering, shareholders of record as of December 28, 2020 were offered the opportunity to purchase additional shares at $26.50 per share.
As part of the acquisition of the Canndescent Property (described below), Power REIT issued 192,678 shares of Power REIT Series A Preferred Stock.
Cash and Cash Equivalents totaled approximately $37 million as of March 31, 2021 compared to $5.6 million as of December 31, 2020. The increase is the result of the capital raised in the Rights Offering offset by investment activity.
ACQUISITION ACTIVITY
During the first quarter, Power REIT acquired four new properties and signed long-term leases in conjunctions with these transactions.
| ● | On January 4, 2021, acquired two properties located in southern Colorado through a newly formed wholly owned subsidiary (“PW Grail”) of the Trust’s wholly owned subsidiary. The properties (the “Grail Properties”) are comprised of 4.41 acres. As part of the transaction, Power REIT agreed to fund the immediate construction of an approximately 21,732 square foot greenhouse and processing facility for approximately $1.84 million including the land acquisition cost. Concurrent with the acquisition, PW Grail entered into a 20-year “triple-net” lease (the “Grail Project Lease”) with The Grail Project LLC (“Grail Project”) which will operate a cannabis cultivation facility. The lease requires Grail Project to pay all property related expenses including maintenance, insurance and taxes. After the initial 20-year term, the Grail Project Lease provides four, five-year renewal options. The lease also has a personal guarantee from the owner of the Grail Project. |
| ● | On January 14, 2021, acquired a property (the “Apotheke Property”) located in southern Colorado through a newly formed wholly owned subsidiary (“PW Apotheke”) of the Trust’s wholly owned subsidiary, which is comprised of 4.31 acres. As part of the transaction, Power REIT agreed to fund the immediate construction of an approximately 21,548 square foot greenhouse and processing facility for approximately $1.8 million including the land acquisition cost. Concurrent with the acquisition, PW Apotheke entered into a 20-year “triple-net” lease (the “Apotheke Lease”) with DOM F, LLC (“Dom F”), which will operate a cannabis cultivation facility. The lease requires Dom F to pay all property related expenses including maintenance, insurance and taxes. After the initial 20-year term, Apotheke Lease provides two, five-year renewal options. The lease also has a personal guarantee from the owner of Dom F. and Dom F intends to operate the Apotheke Property as a licensed cannabis cultivation and processing facility. |
| ● | On February 3, 2021, acquired a property located in Riverside County, CA (the “Canndescent Property”) through a newly formed wholly owned subsidiary (“PW Canndescent) for $7.685 million. Power REIT paid for the property with $2.685 million cash on hand and issued 192,308 shares of Power REIT Series A Preferred Stock to the seller. PW Canndescent received an assignment of a lease (the “Canndescent Lease”) to allow the tenant (“Canndescent”) to operate the 37,000 square foot greenhouse cultivation facility on the Canndescent Property. |
| ● | On February 23, 2021 PW Grail amended the aforementioned Grail Project Lease making approximately $518,000 of more funds available to construct an additional 6,256 square feet to the cannabis cultivation and processing space. Accordingly, the Trust’s total capital commitment was approximately $2.4 million. |
| ● | On March 12, 2021, acquired a property (the “Gas Station Property”) located in southern Colorado through a newly formed wholly owned subsidiary (“PW Gas Station”) of the Trust’s wholly owned subsidiary, which is comprised of 2.2 acres. As part of the transaction, Power REIT agreed to fund the immediate construction of an approximately 24,512 square foot greenhouse and processing facility for approximately $2.1 million including the land acquisition cost. Concurrent with the acquisition, PW Gas Station entered into a 20-year “triple-net” lease (the “Gas Station Lease”) with The Gas Station, LLC (“Gas Station”) who will operate a cannabis cultivation facility. The lease requires Gas Station to pay all property related expenses including maintenance, insurance and taxes. After the initial 20-year term, Gas Station Lease provides two, five-year renewal options. The lease also has a personal guarantee from the owners of Gas Station and they intend to operate the Gas Station Property as a licensed cannabis cultivation and processing facility. |
Subsequent events
As of May 7 2021, the Trust engaged in the following business activities after the period ended, March 31, 2021:
| ● | On April 20, 2021, Power REIT acquired two properties (the “Cloud Nine Properties”) located in southern Colorado through a newly formed wholly owned subsidiary (“PW Cloud Nine”) of the Trust’s wholly owned subsidiary, which is comprised of approximately 4.0 acres. As part of the transaction, Power REIT agreed to fund the immediate construction of an approximately 38,440 square foot greenhouse and processing facility for approximately $2.95 million including the land acquisition cost. Concurrent with the acquisition, PW Cloud Nine entered into a 20-year “triple-net” lease (the “Cloud Nine Lease”) with Cloud Nine Farms LLC (“Cloud Nine”), which will operate a cannabis cultivation facility. The lease requires Cloud Nine to pay all property related expenses including maintenance, insurance and taxes. After the initial 20-year term, the Cloud Nine Lease provides two, five-year renewal options. The lease also has a personal guarantee from the owner of Cloud Nine who will operate the Cloud Nine Property as a licensed cannabis cultivation and processing facility. |
PORTFOLIO
Power REIT’s portfolio currently comprises:
| ● | 18 Controlled Environment Agriculture (CEA) properties with totaling almost 365,000 square feet; | |
| ● | 7 solar farm ground leases totaling 601 acres; and | |
| ● | 112 miles of railroad property. |
Power reit’s investment thesis
Power REIT believes agricultural production is ripe for technological transformation and the industry is in the early stages of an agricultural venture capital boom that, among other things, will shift food production for certain crops from traditional outdoor farms to Controlled Environment Agriculture “plant factories.” Since a significant portion of any given CEA enterprise is real estate, the Trust has identified a unique opportunity to participate in the upward trend of indoor agriculture.
CEA for Cannabis
Power REIT is focused on investing in the cultivation and production side of the cannabis industry through the ownership of real estate. As such it is not directly in the cannabis business and also not even indirectly involved with facilities that sell cannabis directly to consumers. By serving as a landlord, Power REIT believes it can generate attractive risk adjusted returns related to the fast-growing cannabis industry, which is anticipated to offer a safer approach than investing directly in cannabis operating businesses.
CEA for Food
CEA for food production is widely adopted in parts of Europe and is becoming an increasingly competitive alternative to traditional farming for a variety of reasons. CEA caters to consumer desires for sustainable and locally grown products. Locally grown indoor produce will have a longer shelf life as the plants are healthier and also travel shorter distances thereby reducing food waste. In addition, a controlled environment produces high-quality pesticide free products that eliminates seasonality and provides highly predictable output that can be used to simplify the supply chain to the grocer’s shelf.
Statement on Sustainability
Power REIT owns real estate related to infrastructure assets including properties for Controlled Environment Agriculture (CEA Facilities), Renewable Energy and Transportation.
CEA Facilities, such as greenhouses, provide an extremely environmentally friendly solution, which consume approximately 70% less energy than indoor growing operations that do not benefit from “free” sunlight. CEA facilities use 90% less water than field grown plants, and all of Power REIT’s greenhouse properties operate without the use of pesticides and avoid agricultural runoff of fertilizers and pesticides. These facilities cultivate medical Cannabis, which has been recommended to help manage a myriad of medical symptoms, including seizures and spasms, multiple sclerosis, post-traumatic stress disorder, migraines, arthritis, Parkinson’s disease, and Alzheimer’s.
Renewable Energy assets are comprised of land and infrastructure associated with utility scale solar farms. These projects produce power with the use of fossil fuels thereby lowering carbon emissions. The solar farms produce approximately 50,000,000 kWh of electricity annually which is enough to power approximately 4,600 home on a carbon free basis.
Transportation assets are comprised of land associated with a railroad, an environmentally friendly mode of bulk transportation.
ABOUT POWER REIT
Power REIT is a specialized real estate investment trust (REIT) that owns sustainable real estate related to infrastructure assets including properties for Controlled Environment Agriculture, Renewable Energy and Transportation. Power REIT is actively seeking to expand its real estate portfolio related to Controlled Environment Agriculture for the cultivation of food and cannabis.
Power REIT is focused on the “Triple Bottom Line” with a commitment to Profit, Planet and People.
Additional information about Power REIT can be found on its website: www.pwreit.com
Additional Information
Further details regarding Power REIT’s consolidated results of operations and financial condition as of and for the year ended December 31, 2020 are contained in the Trust’s annual report on Form 10-K filed with the Securities and Exchange Commission, which can be viewed at the Trust’s website at www.pwreit.com under the Investor Relations section, and in EDGAR on the SEC’s website, www.sec.gov.
Forward-Looking Statements
This document may contain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can usually identify forward-looking statements as containing the words “believe,” “expect,” “will,” “anticipate,” “intend,” “estimate,” “would,” “should,” “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 document regarding Power REIT’s future strategy, future operations, projected financial position, estimated future revenues and annual run rate, projected costs, acquisition pipeline, future prospects and growth from potential investments, the future of Power REIT’s industries and results that might be obtained by pursuing management’s current or future objectives are forward-looking statements. While Power REIT believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this release. These forward-looking statements are subject to various risks and uncertainties, many of which are difficult to predict that could cause actual results to differ materially from current expectations and assumptions from those set forth or implied by any forward-looking statements. Important factors that could cause actual results to differ materially from current expectations include, among others, Power REIT’s ability to implement its future strategy and achieve the estimated future revenues, including an annual run rate of Core FFO per share of approximately $2.04, as planned, Power REIT’s ability to complete future acquisitions and generate growth from the investments, as planned, Power REIT’s ability to maintain compliance with the NYSE listing requirements, and the other factors discussed in the Power REIT’s Annual Report on Form 10-K for the year ended December 31, 2019 and Power REIT’s subsequent filings with the SEC, including subsequent periodic reports on Forms 10-Q and 8-K. The information in this release is provided only as of the date of this release, and Power REIT undertakes no obligation to update any forward-looking statements contained in this release on account of new information, future events, or otherwise, except as required by law.
Non-GAAP Financial Measures
This document contains supplemental financial measures that are not calculated pursuant to U.S. generally accepted accounting principles (“GAAP”), including the measure identified by us as Core Funds From Operations Available to Common Shares (“Core FFO”). Management believes that Core FFO is a useful supplemental measure of the Trust’s operating performance. 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 the Trust’s asset portfolio and inappropriately affect the comparability of the Trust’s period-over-period performance. These items include non-recurring expenses, such as those incurred in connection with litigation, one-time upfront acquisition expenses that are not capitalized under ASC-805 and certain non-cash expenses, including non-cash, stock-based compensation expense. Therefore, management uses Core FFO and defines it as net income excluding such items. Management believes that, for the foregoing reasons, these adjustments to net income are appropriate. The Trust believes that Core FFO is a useful supplemental measure for the investing community to employ, including when comparing the Trust to other REITs that disclose similarly adjusted FFO figures, and when analyzing changes in the Trust’s performance over time. Readers are cautioned that other REITs may use different adjustments to their GAAP financial measures than we do, and that as a result the Trust’s 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.
RECONCILIATION NET INCOME TO CORE FFO
Management believes that Core FFO is a useful supplemental measure of the Trust’s operating performance. Management believes that alternative measures of performance, such as net income computed 56 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 the Trust’s asset portfolio and inappropriately affect the comparability of the Trust’s period-over-period performance. These items include non-recurring expenses, such as those incurred in connection with litigation, 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. Management believes that, for the foregoing reasons, these adjustments to net income are appropriate. The Trust believes that Core FFO is a useful supplemental measure for the investing community to employ, including when comparing the Trust to other REITs that disclose similarly adjusted FFO figures, and when analyzing changes in the Trust’s performance over time. Readers are cautioned that other REITs may use different adjustments to their GAAP financial measures than Power REIT do, and that as a result, the Trust’s 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.
CORE FUNDS FROM OPERATIONS (FFO)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | 1,820,927 | $ | 787,388 | ||||
| Net Income | $ | 1,108,128 | $ | 252,087 | ||||
| Stock-Based Compensation | 66,158 | 75,159 | ||||||
| Interest Expense - Amortization of Debt Costs | 8,527 | 8,527 | ||||||
| Amortization of Intangible Asset | 59,285 | 59,285 | ||||||
| Depreciation on Land Improvements | 196,051 | 26,650 | ||||||
| Core FFO Available to Preferred and Common Stock | 1,438,149 | 421,708 | ||||||
| Preferred Stock Dividends | (163,210 | ) | (70,058 | ) | ||||
| Core FFO Available to Common Shares | $ | 1,274,939 | $ | 351,650 | ||||
| Weighted Average Shares Outstanding (basic) | 2,755,502 | 1,899,313 | ||||||
| Core FFO per Common Share | 0.46 | 0.19 | ||||||
| Growth Rates: | ||||||||
| Revenue | 131 | % | ||||||
| Net Income | 340 | % | ||||||
| Core FFO Available to Common Shareholders | 263 | % | ||||||
| Core FFO per Common Share | 142 | % | ||||||
CONACT:
| David H. Lesser, Chairman & CEO | Mary Jensen, Investor Relations |
| dlesser@pwreit.com | mary@irrealized.com |
| 212-750-0371 | 310-526-1707 |
301 Winding Road Old Bethpage, NY 11804 |
|
| www.pwreit.com |