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PW > SEC Filings for PW > Form 10-Q on 15-Aug-2013All Recent SEC Filings

Show all filings for POWER REIT

Form 10-Q for POWER REIT


15-Aug-2013

Quarterly Report


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 includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of 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 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. 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.

MANAGEMENT'S DISCUSSION AND ANALYSIS

Power REIT ("we," "Registrant" or "Trust") is a Maryland domiciled real estate investment trust (REIT) thatacquires and manages transportation and energy infrastructure real estate assets within the United States. Within the transportation and energy infrastructure sectors, Power REIT is focused on new acquisitions of real estate that is or will be leased to renewable energy generation projects, such as utility-scale wind farms and solar farms, with low or minimal technology risk.

Power REIT is structured as a holding company and owns its assets through special purpose subsidiaries that are used for the purpose of holding real estate assets and generating lease revenue. Power REIT was formed through a reorganization and reverse triangular merger of the Pittsburgh & West Virginia Railroad ("P&WV") on December 2, 2011. P&WV survived the reorganization as a wholly-owned subsidiary of Power REIT. The Trust's business plan and infrastructure real estate-focused investment strategy builds upon its P&WV subsidiary's historical ownership of railroad real estate assets, which are currently triple-net leased to Norfolk Southern Corporation ("NSC").

At June 30, 2013, Power REIT's assets consisted of railroad infrastructure and related real estate owned by P&WV that is leased to NSC and 54 acres of fee simple land owned by our wholly-owned subsidiary PW Salisbury Solar, LLC ("PWSS") that is leased to a 5.7 megawatt solar farm in Massachusetts.

All of P&WV's railroad real estate property is leased to NSC for 99 years pursuant to a lease that commenced in 1964, with unlimited renewals at NSC's option on the same terms. The base rental is a fixed amount of $915,000 per year, with no provision for change during the term of the lease and any renewal periods. Pursuant to the lease, NSC is responsible for all operations and maintenance of P&WV's property.


The 54-acre solar farm property was acquired by PWSS on December 31, 2012. The PWSS transaction is consistent with Power REIT's business strategy of acquiring real estate that is leased to renewable generation projects.

During the second quarter of 2013, P&WV's revenues accounted for 91% of the consolidated revenues of Power REIT. Power REIT continues to seek additional acquisitions of real estate leased or to be leased to renewable energy generation projects.

Subsequent to the end of the second quarter, Power REIT, through its wholly-owned subsidiary, PW Tulare Solar, LLC ("PWTS"), acquired approximately 100 acres of land leased subject to 25-year leases to with 20MW of ground mounted, utility scale solar projects located neared Fresno, California and which are currently in construction. The leases provide for annual rent of $157,500, commencing with the operations dates of the solar projects, which are expected to occur during the first quarter of 2014. The transaction was structured with the developer to provide for interim rent commencing on October 1, 2013. At the lessee's option, the leases can be extended at the end of the initial 25-year term at fair market rent, potentially taking the lease terms through 2048.

Revenue during the second quarter of 2013 and second quarter of 2012 was approximately $251,000 and $229,000, respectively. Net loss for the three months ended June 30, 2013 and 2012 was approximately $(100,000) and $(98,000), respectively. The difference between our 2013 and 2012 second quarter results were principally attributable to the following: approximately $100,000 of increased litigation expenses related to the NSC litigation, which commenced at the end of 2011; increased revenue of approximately $22,000 due to the PWSS acquisition in 2012, which was offset by property taxes and interest expenses of $14,000; and a decrease in general and administrative expense of $90,000, primarily as a result of lower annual meeting and proxy expenses in 2013.

The Trust's cash outlays, other than dividend payments (which were temporarily suspended during the second quarter of 2013 and which we expect to reinstate once litigation costs with NSC diminish), are for general and administrative ("G&A") expenses, which consist principally of legal and other professional fees, consultant fees, trustees' fees, NYSE MKT listing fees, shareholder service company fees and auditing costs, litigation expenses, interest expense and property taxes. The Trust expects that its P&WV subsidiary will continue to incur substantial litigation expenses during the remainder of 2013 related to the NSC litigation and further expects that its expenses and revenues will increase over time as it expands its business activities. There can be no assurance that Power REIT will be successful in expanding its business.

During the first quarter of 2013, the Trust entered into an At Market Issuance Sales Agreement ("ATM Agreement") with MLV & Co. LLC ("MLV") and filed a prospectus supplement to its shelf registration statement on Form S-3, pursuant to which the Trust may offer and sell, from time to time, up to $5.4 million of its common shares. Under the terms of the ATM Agreement, the Trust pays to MLV fees equal to 3% of the gross proceeds of any sales made under the prospectus supplement. The Trust sold 22,105 shares during the second quarter of 2013 and received cash proceeds of $222,000, net of MLV's fees. The Trust did not sell any shares from July 1, 2013 to August 15, 2013.

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