Executive Summary / Key Takeaways

• Power REIT ($PW) is undergoing a significant transformation, shifting focus and resolving a major debt overhang following the settlement of its defaulted Greenhouse Loan in April 2025.
• The company's Q1 2025 results reflect the challenges of its distressed Controlled Environment Agriculture (CEA) portfolio, with total revenue declining year-over-year primarily due to defaulted cannabis tenant leases, resulting in a net loss attributable to common shareholders of $1.58 million.
• Despite the Q1 loss and a balance sheet showing current liabilities exceeding current assets as of March 31, 2025, the post-quarter Greenhouse Loan settlement has alleviated management's going concern doubt, releasing collateral and obligations related to the defaulted loan.
• Power REIT's strategy is now centered on realizing value from its retained diverse assets (railroad, solar, remaining CEA) and exploring new opportunities in distressed real estate, while addressing remaining challenges like property tax delinquencies and a material weakness in internal controls.
• The investment thesis hinges on management's ability to successfully execute this strategic pivot, monetize retained assets effectively, and identify profitable new ventures, leveraging its unique asset base against more specialized competitors.

Setting the Scene: A REIT in Transition

Power REIT is a Maryland-domiciled, internally-managed real estate investment trust with a distinct portfolio spanning transportation infrastructure (railroad), renewable energy (solar farm land), and Controlled Environment Agriculture (CEA), including greenhouses for food and cannabis cultivation. This diversified approach, rooted in the company's history dating back to at least 2011, was designed to capture opportunities across varied, often specialized, real estate sectors. The Trust operates through a holding company structure, utilizing numerous subsidiaries for asset ownership and financing.

Within this structure, Power REIT has positioned itself in niche markets, contrasting with larger, more specialized players. In the CEA space, it competes with entities like Innovative Industrial Properties (IIPR), which focuses heavily on cannabis. In renewable energy land, it faces global giants like Brookfield Renewable Partners (BEP), and in transportation-adjacent real estate, it operates alongside logistics leaders like Prologis (PLD). Power REIT's strategic differentiation has historically centered on a "Triple Bottom Line" approach, emphasizing sustainable and eco-friendly designs, particularly in its greenhouse and solar assets. While specific, quantifiable technological performance metrics were not detailed, the strategic intent behind this focus is to offer benefits such as enhanced energy efficiency and reduced operating costs compared to conventional facilities, potentially attracting environmentally conscious tenants and supporting higher margins in these green segments. This sustainability angle serves as a potential competitive moat against the scale and standardization offered by larger competitors.

However, Power REIT's smaller scale and financial profile present significant challenges when compared to these larger rivals. While its niche focus allows for potential differentiation, it also means less diversification at the individual asset level, exposing the company to greater risk from the underperformance or default of a single tenant or property. This vulnerability became acutely apparent with the recent distress in the cannabis market, which heavily impacted the CEA portfolio.

The Weight of Distress: Q1 2025 Performance

The financial results for the first quarter ended March 31, 2025, starkly illustrate the impact of the challenges faced by the CEA portfolio. Total revenue for the quarter was $485,794, a decrease from $534,612 in the same period of 2024. This decline was primarily driven by a $49,860 decrease in rental income from cannabis tenants whose leases were in default, reflecting the severe financial distress within that industry due to price compression.

Despite the revenue pressure, total expenses saw a significant decrease, falling from $3.01 million in Q1 2024 to $1.87 million in Q1 2025. This improvement was largely attributable to the absence of impairment expense in 2025 (compared to $549,557 in 2024) and a substantial decrease in depreciation expense ($2,702 in 2025 vs. $488,197 in 2024), as several properties were classified as held for sale. Interest expense also saw a slight decrease, from $1.02 million to $998,908.

The net result for the quarter was a net loss of $1.41 million, improving from a net loss of $2.08 million in the prior year period. After accounting for preferred stock dividends of $163,207 (which were not declared but accrue), the net loss attributable to common shareholders was $1.58 million, or $0.47 per basic and diluted share, compared to a loss of $2.24 million, or $0.66 per share, in Q1 2024.

Core Funds From Operations (Core FFO), a non-GAAP measure used by management, showed a Core FFO available to common shares of $1.37 million, or $0.40 per share, for Q1 2025, compared to $1.32 million, or $0.39 per share, for Q1 2024. This metric excludes non-cash items like stock-based compensation ($143,213 in Q1 2025) and amortization, as well as impairment expense and gain on sale of property. While Core FFO per share saw a modest increase, the GAAP net loss highlights the significant non-cash charges and operational challenges impacting the bottom line.

Liquidity, Debt, and a Pivotal Settlement

As of March 31, 2025, Power REIT's balance sheet reflected the strain from the distressed CEA portfolio and associated debt. Cash and cash equivalents, along with restricted cash, totaled $2.03 million, a decrease of $198,375 from December 31, 2024. This decrease was primarily attributed to ongoing expenses related to vacant greenhouse properties and payments towards the Greenhouse Loan.

A critical point of concern was the company's current liabilities, which significantly exceeded current assets as of the balance sheet date. Total current loan liabilities stood at approximately $18.40 million, including a substantial $17.60 million balance related to the Greenhouse Loan. This loan, secured by most of the Greenhouse Portfolio, was in default as of March 31, 2025, and subject to foreclosure proceedings initiated by the lender, East West Bank. While non-recourse to Power REIT at the parent level, the default posed a significant threat to the underlying assets and created substantial doubt about the company's ability to continue as a going concern.

However, a material subsequent event occurred effective April 11, 2025. Power REIT's subsidiaries reached a settlement agreement with the Greenhouse Loan lender. Under this agreement, the subsidiaries provided deeds-in-lieu of foreclosure for the greenhouse properties in Michigan and Nebraska. In return, the lender released the remaining collateral (properties in Colorado, California, and Maine, plus associated mortgage receivables) back to Power REIT's subsidiaries and released all obligations related to the Greenhouse Loan.

This settlement is transformative. It will result in the write-off of the transferred Michigan and Nebraska properties and the remaining $17.67 million balance of the Greenhouse Loan, significantly reducing the company's debt burden. Crucially, it also relieves the ongoing costs associated with maintaining those specific properties. Following this resolution, management believes that the going concern doubt has been alleviated, projecting that non-restricted cash should provide liquidity for capital needs for greater than twelve months.

Despite this major step, challenges remain. The Trust is not current on approximately $1.18 million in property taxes for the Greenhouse Portfolio (including retained properties), which could lead to tax foreclosure actions starting in Q1 2026 if not addressed. Additionally, unpaid dividends on the Series A Preferred Stock have accumulated to approximately $1.63 million as of March 31, 2025, increasing the liquidation preference of these shares, which rank senior to common stock.

Strategic Pivot and Outlook

With the resolution of the Greenhouse Loan, Power REIT is embarking on a strategic pivot. The immediate focus is on realizing value from the retained assets, which include properties in Ordway, Colorado; Walsenburg, Colorado; Desert Hot Springs, California; a first mortgage on two properties in Ordway, Colorado; a second mortgage on a property in Elliot, Maine; and a greenhouse property in Vinita, Oklahoma (which was not collateral for the defaulted loan). The company intends to continue efforts to sell these properties, enter into new leases, and improve cash collections from existing tenants where applicable.

Beyond the existing portfolio, management is exploring a shift in focus, evaluating real estate distressed situations, including properties, loans, and companies. This suggests a potential move towards opportunistic acquisitions or investments in undervalued or troubled real estate assets, leveraging the company's REIT structure and experience in specialized sectors.

The ability to execute this strategy will depend, in part, on the company's capacity to raise additional capital. While a sales agreement is in place allowing for the potential issuance of common shares, the company's ability to raise significant funds through this mechanism is currently limited by NYSE American rules until the market value of its voting securities held by non-affiliates reaches $75 million or more. There is no assurance that financing on favorable terms will be available when needed, or that asset sales will occur at anticipated prices, which could impact liquidity and the ability to fund operations and new initiatives.

Risks and Considerations

While the Greenhouse Loan settlement has removed a significant overhang and alleviated immediate going concern concerns, several risks persist for Power REIT investors:

• Concentration Risk: Despite the portfolio diversity across sectors, revenue remains highly concentrated. In Q1 2025, approximately 98% of consolidated collected revenue came from just two tenants: Norfolk Southern Railway (NSC) (52%) and Regulus Solar, LLC (46%). Default or poor performance by either of these tenants would severely impact financial results.
• Retained CEA Portfolio Performance: The retained greenhouse assets still face challenges from the distressed cannabis market. The ability to re-lease or sell these properties at favorable terms is uncertain, and ongoing costs associated with vacant properties will continue to pressure liquidity.
• Property Tax Delinquency: The outstanding property taxes on the Greenhouse Portfolio pose a risk of tax foreclosure if not paid, potentially leading to the loss of these assets.
• Internal Control Weaknesses: The identified material weakness in internal controls related to accounting for complex transactions still exists as of March 31, 2025. While remediation efforts are underway, the inability to assure effective remediation could impact the reliability of financial reporting and investor confidence.
• Capital Availability: The limitations on raising equity capital and the uncertainty of obtaining debt financing on favorable terms could constrain the company's ability to fund operations, address liabilities (like property taxes and preferred dividends), and pursue new strategic opportunities.
• Related Party Transactions: Conflicts of interest may arise due to the Chairman and CEO's affiliations with tenants in the Greenhouse Portfolio, which have defaulted on leases. While the Declaration of Trust permits such transactions with independent trustee approval, the potential for conflicts remains a risk.

Conclusion

Power REIT stands at a critical juncture, having successfully navigated the immediate threat posed by the defaulted Greenhouse Loan. The settlement, while involving the relinquishment of certain assets, has significantly de-leveraged the balance sheet and provided a clearer path forward. The Q1 2025 results underscore the operational and financial impact of the challenges in the CEA segment, but the subsequent events offer a new narrative centered on portfolio transformation and strategic redirection.

The investment thesis for Power REIT is now fundamentally tied to management's ability to effectively manage and monetize the retained assets, while successfully identifying and executing on new opportunities in the distressed real estate market. The company's unique asset base and potential for sustainable differentiation provide a foundation, but the path ahead is fraught with risks, including significant revenue concentration, ongoing challenges with the retained CEA properties, and the need to secure capital. Investors should closely monitor the execution of the new strategy, progress on asset sales and re-leasing efforts, resolution of property tax delinquencies, and the remediation of internal control weaknesses as key indicators of the company's potential to unlock value and achieve sustainable profitability in this next chapter.