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

Show all filings for POWER REIT

Form 10-Q for POWER REIT


15-Nov-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) that acquires and manages transportation,energy and other 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 hold real estate assets and generate lease revenue. Power REIT was formed through a corporate reorganization of the Pittsburgh & West Virginia Railroad ("P&WV") effected 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 P&WV's historical ownership of railroad real estate assets, which are currently triple-net leased to Norfolk Southern Corporation ("NSC").

At September 30, 2013, Power REIT's assets consisted of railroad infrastructure and related real estate owned by P&WV and leased to NSC, and 150 acres of fee simple land that is owned by Power REIT's wholly-owned subsidiaries, PW Salisbury Solar, LLC ("PWSS") and PW Tulare Solar, LLC ("PWTS") and leased to operating and in-construction solar farms.

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.


During the fourth quarter of 2012, PWSS acquired approximately 54 acres of fee simple land located near Boston, Massachusetts and which is leased to an operational 5.7MW solar farm. During the third quarter of 2013, PWTS acquired approximately 100 acres of fee simple land located near Fresno, California and which is leased to in-construction solar farms. PWTS' 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 developer of the solar projects is paying interim monthly rent from October 1, 2013 to the commercial operations date of the projects. At the lessee's option, the PWTS leases can be extended at the end of the initial 25-year term at fair market rent, potentially taking the lease terms through 2048.

Power REIT continues to seek additional acquisitions of real estate leased or to be leased to renewable energy generation projects.

During the third quarter of 2013, P&WV's revenues accounted for 91% of the consolidated revenues of Power REIT and PWSS's revenue accounted for the remainder. PWTS did not contribute to revenue during the third quarter. Power REIT expects PWTS to begin contributing to consolidated revenues during the fourth quarter of 2013, at which point it is expected that P&WV's revenue contribution to Power REIT's consolidated revenue shall decline to 79%.

Revenue during the third quarter of 2013 and third quarter of 2012 was approximately $251,000 and $229,000, respectively. Net (loss) income for the three months ended September 30, 2013 and 2012 was approximately $(181,000) and 18,000, respectively. The difference between our 2013 and 2012 third quarter results is principally attributable to the following: approximately $78,000 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 December 2012, increased property tax and interest expense of approximately $40,000 due to the PWSS and PWTS acquisitions; acquisition expenses of approximately $49,000 related to the PWTS acquisition which were expensed and not capitalized pursuant to Accounting Standards Codification Topic
805 "Business Combinations" ("ASC-805"); and an increase in general and administrative expense of $55,000, which is attributable principally to an increase in non-cash expenses related to equity grants under our equity incentive plan and to our switch in audit firms during the third quarter from a regional firm to a national firm. Our new audit firm bills us quarterly for progress payments towards our annual audit and we expect the progress payments should result in lower audit expenses during the first quarter of 2014 compared to historical first quarter audit expenses.

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, NYSE MKT listing fees, shareholder service company fees and auditing costs, litigation expenses, interest expense and property taxes. The Trust also expenses acquisition related closing costs in the quarter in which it closes an acquisition in accordance with ASC 805. The Trust also incurs non-cash expenses related to equity grants made under its 2012 Equity Incentive Plan. 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 generally 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 did not sell any shares during the third quarter or from October 1, 2013 through the filing date of this quarterly report. During the nine months ending September 30, 2013, the Trust sold 22,105 shares and received cash proceeds of approximately $222,000, net of fees and expenses.

The Trust filed a preliminary prospectus supplement to its shelf registration statement on November 6, 2013, in anticipation of commencing the offer and sale from time to time of up to 150,000 shares of 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock with a liquidation preference of $25.00 (the "Series A Preferred Stock"). As of the date of this filing, the Trust did not have any issued or outstanding Series A Preferred Stock.


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