Notes
to Unaudited Consolidated Financial Statements
1.
GENERAL INFORMATION
The
accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial information, and with the rules and regulations
of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, these interim
financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In
the opinion of the Trust, as defined below, these unaudited consolidated financial statements include all adjustments necessary
to present fairly the information set forth herein. All such adjustments are of a normal recurring nature. Results for interim
periods are not necessarily indicative of results to be expected for a full year.
These
unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and
notes included in our latest Annual Report on Form 10-K filed with the SEC on March 24, 2021.
Power
REIT (the “Registrant” or the “Trust”, and together with its consolidated subsidiaries, “we”,
“us”, “Power REIT”, unless the context requires otherwise) is a Maryland-domiciled real estate investment
trust (a “REIT”) that holds, develops, acquires and manages real estate assets related to transportation, alternative
energy infrastructure and Controlled Environment Agriculture (CEA) in the United States.
The
Trust was formed as part of a reorganization and reverse triangular merger of P&WV that closed on December 2, 2011. P&WV
survived the reorganization as a wholly-owned subsidiary of the Registrant.
The
Trust is structured as a holding company and owns its assets through seventeen wholly-owned, special purpose subsidiaries that
have been formed in order to hold real estate assets, obtain financing and generate lease revenue. As of March 31, 2021, the Trust’s
assets consisted of approximately 112 miles of railroad infrastructure and related real estate which is owned by its subsidiary
Pittsburgh & West Virginia Railroad (“P&WV”), approximately 601 acres of fee simple land leased to a number
of utility scale solar power generating projects with an aggregate generating capacity of approximately 108 Megawatts (“MW”)
and approximately 52 acres of land with approximately 327,000 sf of existing or under construction greenhouses leased to twelve
separate medical cannabis operators. Power REIT is actively seeking to grow its portfolio of real estate related to CEA for food
and cannabis production.
During
the quarter ended March 31, 2021, The Trust raised approximately gross proceeds of approximately $36.7 million and issued
an additional 1,383,394 common shares through a rights offering that closed on February 5, 2021. The offer commenced in December,
2020 whereby shareholders of record as of December 28, 2020 could purchase one additional share at $26.50 per share for every
share owned. See Note 6.
On
February 3, 2021, we issued 192,308 additional shares of Power REIT’s Series A Preferred Stock as part of a transaction
to acquire a property located in Riverside County, CA (the “Canndescent Property”) through a newly formed wholly owned
subsidiary (“PW Canndescent”). See Note 3.
During
the quarter ended March 31, 2021, the Trust paid a quarterly dividend of approximately $163,000 ($0.484375 per share) on Power
REIT’s 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.
The
Trust has elected to be treated for tax purposes as a REIT, which means that it is exempt from U.S. federal income tax if a sufficient
portion of its annual income is distributed to its shareholders, and if certain other requirements are met. In order for the Trust
to maintain its REIT qualification, at least 90% of its ordinary taxable annual income must be distributed to shareholders. As
of December 31, 2019, the last tax return completed to date, the Trust has a net operating loss of $17 million, which may reduce
or eliminate this requirement.
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
These
unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States (“GAAP”).”
Principles
of Consolidation
The
accompanying consolidated financial statements include Power REIT and its wholly-owned subsidiaries. All intercompany balances
have been eliminated in consolidation.
Income
per Common Share
Basic
net income per common share is computed by dividing net income available to common stockholders by the weighted average number
of common shares outstanding. Diluted net income per common share is computed similar to basic net income per common share except
that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential
common shares had been issued and if the additional common shares were dilutive. The dilutive effect of the Trust’s options
is computed using the treasury stock method.
The
following table sets forth the computation of basic and diluted Income per Share:
|
|
Three
Months Ended
|
|
|
|
March
31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
1,108,128
|
|
|
$
|
252,087
|
|
Preferred Stock Dividends
|
|
|
(163,210
|
)
|
|
|
(70,058
|
)
|
Numerator for basic and diluted EPS
- income available to common Shareholders
|
|
$
|
944,918
|
|
|
$
|
182,029
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic EPS - Weighted average shares
|
|
|
2,755,502
|
|
|
|
1,899,313
|
|
Dilutive effect of options
|
|
|
83,972
|
|
|
|
22,351
|
|
Denominator for diluted EPS - Adjusted
weighted average shares
|
|
|
2,839,474
|
|
|
|
1,921,664
|
|
|
|
|
|
|
|
|
|
|
Basic income per common share
|
|
$
|
0.34
|
|
|
$
|
0.10
|
|
Diluted income per common share
|
|
$
|
0.33
|
|
|
$
|
0.09
|
|
Real
Estate Assets and Depreciation of Investment in Real Estate
The
Trust expects that most of its transactions will be accounted for as asset acquisitions. In an asset acquisition, the Trust is
required to capitalize closing costs and allocates the purchase price on a relative fair value basis. For the quarter ended March
31, 2021, all acquisitions were considered to be asset acquisitions. In making estimates of relative fair values for purposes
of allocating purchase price, the Trust utilizes a number of sources, including independent appraisals that may be obtained in
connection with the acquisition or financing of the respective property, our own analysis of recently acquired and existing comparable
properties in our portfolio and other market data. The Trust also considers information obtained about each property as a result
of its pre-acquisition due diligence, marketing and leasing activities in estimating the relative fair value of the tangible acquired.
The Trust allocates the purchase price of acquired real estate to various components as follows:
|
●
|
Land
– Based on actual purchase price adjusted to an allocation of the relative fair value (as necessary) if acquired separately
or market research/comparables if acquired with existing property improvements.
|
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
|
●
|
Improvements
– Based on the allocation of the relative fair value of the improvements acquired. Depreciation is calculated on a straight-line
method over the useful life of the improvements.
|
|
●
|
Lease
Intangibles – The Trust considers the value of an acquired in-place lease if in excess of the value of the land improvements
and the amortization of the lease intangible is over the remaining term of the lease on a straight-line basis.
|
|
●
|
Construction
in Progress (CIP) - The Trust classifies greenhouses or buildings under development and/or expansion as construction-in-progress
until construction has been completed and certificates of occupancy permits have been obtained upon which the asset is then
classified as an Improvement.
|
Power
REIT has several leases with tenants whereby the tenants are responsible for implementing improvements to Power REIT’s properties
and Power REIT has committed to fund the cost of such improvements. Power REIT capitalized the costs of such property improvements
but has determined not to capitalize interest expense based on a determination that the amount for each project would not be material
and each project has a relatively short construction period.
Depreciation
Depreciation
is computed using the straight-line method over the estimated useful lives of up to 20 years for greenhouses and 39 years for
auxiliary buildings. The Trust recorded an increase in depreciation expense for the quarter ended March 31, 2021 related to depreciation
on properties that it acquired and the placement into service of tenant improvements at our properties. Depreciation expense for
the three months ended March 31, 2021 and March 31, 2020 is approximately $196,100 and $26,700, respectively.
Fair
Value
Fair
value represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. The Trust measures its financial assets and liabilities in three levels, based on the markets in which the assets
and liabilities are traded and the reliability of the assumptions used to determine fair value.
|
o
|
Level
1 – valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that
allow a company to sell its ownership interest back at net asset value on a daily basis. Valuations are obtained from readily
available pricing sources for market transactions involving identical assets, liabilities or funds.
|
|
|
|
|
o
|
Level
2 – valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for
similar assets or liabilities or quoted prices in markets that are not active. Level 2 includes U.S. Treasury, U.S. government
and agency debt securities, and certain corporate obligations. Valuations are usually obtained from third party pricing services
for identical or comparable assets or liabilities.
|
|
|
|
|
o
|
Level
3 – valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing
models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions.
Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or
liabilities.
|
In
determining fair value, the Trust utilizes valuation techniques that maximize the use of observable inputs and minimize the use
of unobservable inputs to the extent possible as well as considering counterparty credit risk.
The
carrying amounts of Power REIT’s financial instruments, including cash and cash equivalents, deposits, and accounts payable
approximate fair value because of their relatively short-term maturities. The carrying value of long-term debt approximates fair
value since the related rates of interest approximate current market rates. There are no financial assets and liabilities carried
at fair value on a recurring basis as of March 31, 2021 and December 31, 2020.
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
3.
ACQUISITIONS
On
January 4, 2021, Power REIT, through a newly formed wholly owned subsidiary, PW CO CanRE Grail, LLC, (“PW Grail”),
completed the acquisition of two properties totaling 4.41 acres of vacant land (“Grail Properties”) approved for medical
cannabis cultivation in southern Colorado for $150,000 plus acquisition costs. As part of the transaction, the Trust agreed to
fund the immediate construction of an approximately 21,732 square foot greenhouse and processing facility for approximately $1.69
million. On February 23, 2021, PW Grail amended the 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 is approximately $2.4 million. As of March 31, 2021, the total construction in progress that was funded
by Power REIT is approximately $407,000.
On
January 14, 2021, Power REIT, through a newly formed wholly owned subsidiary, PW CO CanRE Apotheke, LLC, (“PW Apotheke”),
completed the acquisition of a property totaling 4.31 acres of vacant land (“Apotheke Property”) approved for medical
cannabis cultivation in southern Colorado for $150,000 plus acquisition costs. As part of the transaction, the Trust agreed to
fund the immediate construction of an approximately 21,548 square foot greenhouse and processing facility for approximately $1.66
million. Accordingly, PW Apotheke’s total capital commitment is approximately $1.81
million. As of March 31, 2021, the total construction in progress that was funded by Power REIT is approximately $376,000.
On
February 3, 2021, Power REIT, through a newly formed wholly owned subsidiary, PW CA CanRE Canndescent LLC, (“PW Canndescent”),
completed the acquisition of a 37,000 square foot greenhouse cultivation facility on a .85 acre of property located in Riverside
County, CA (the “Canndescent Property”). The purchase price was $7.685 million and we paid for the property with $2.685
million cash on hand and the issuance of 192,308 shares of Power REIT’s Series A Preferred Stock.
The
following table summarized the preliminary allocation of the purchase consideration for the Canndescent Property based
on the relative fair values of the assets acquired:
Land
|
|
$
|
258,420
|
|
Assets Subject to Depreciation:
|
|
|
|
|
Improvements (Greenhouses / Processing
Facilities)
|
|
|
7,426,580
|
|
Acquisition Costs
Capitalized
|
|
|
92,289
|
|
Total Assets
Acquired
|
|
$
|
7,777,289
|
|
On
March 12, 2021, Power REIT, through a newly formed wholly owned subsidiary, PW CO CanRE Gas Station, LLC, (“PW Gas Station”),
completed the acquisition of a property totaling 2.2 acres of vacant land (“Gas Station Property”) approved for medical
cannabis cultivation in southern Colorado for $85,000 plus acquisition costs. As part of the transaction, the Trust agreed to
fund the immediate construction of an approximately 24,512 square foot greenhouse and processing facility for approximately $2.03
million. Accordingly, PW Gas Station’s total capital commitment is approximately $2.1
million. As of March 31, 2021, the total construction in progress that was funded by Power REIT is approximately $158,000.
The
acquisitions described above are accounted for as asset acquisitions under ASC 805-50. Power REIT has established a depreciable
life for the property improvements of 20 years for greenhouses and 39 years for buildings.
Concurrent
with the closing of the acquisitions, Power REIT entered in leases with tenants that are licensed for the production of medical cannabis
cultivation at the facilities. The combined annual straight-line rent from these four acquisitions and one expansion is approximately
$2.3 million. Each tenant is responsible for paying all expenses related to the properties including maintenance, insurance and taxes.
The term of the Grail, Apotheke and Gas Station leases are 20 years with options to extend for additional five-year periods and have
financial guarantees from affiliates of the tenants, whereas, the Canndescent lease was already in place and assigned to the Trust.
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
4.
LONG-TERM DEBT
On
December 31, 2012, as part of the Salisbury land acquisition, PW Salisbury Solar, LLC (“PWSS”) assumed existing municipal
financing (“Municipal Debt”). The Municipal Debt has approximately 10 years remaining. The Municipal Debt has a simple
interest rate of 5.0% that is paid annually, with the next payment due February 1, 2022. The balance of the Municipal Debt as
of March 31, 2021 and December 31, 2020 is approximately $64,000 and $70,000 respectively.
In
July 2013, PWSS borrowed $750,000 from a regional bank (the “PWSS Term Loan”). The PWSS Term Loan carries a fixed
annual interest rate of 5.0% for a term of 10 years and amortizes based on a 20-year principal amortization schedule. The loan
is secured by PWSS’ real estate assets and a parent guarantee from the Trust. The balance of the PWSS Term Loan as of March
31, 2021 and December 31, 2020 is approximately $544,000 (net of approximately $6,200 of capitalized debt costs which are being
amortized over the life of the financing) and $551,000 (net of approximately $6,800 of capitalized debt costs which are being
amortized over the life of the financing), respectively.
On
November 6, 2015, PWRS entered into a loan agreement (the “2015 PWRS Loan Agreement”) with a lender for $10,150,000
(the “2015 PWRS Loan”). The 2015 PWRS Loan is secured by land and intangibles owned by PWRS. PWRS issued a note to
the benefit of the lender dated November 6, 2015 with a maturity date of October 14, 2034 and an annual 4.34% interest rate. As
of March 31, 2021, and December 31, 2020, the balance of the 2015 PWRS Loan was approximately $8,185,000 (net of unamortized debt
costs of approximately $297,000) and $8,183,000 (net of unamortized debt costs of approximately $303,000), respectively.
On
November 25, 2019, Power REIT, through a newly formed subsidiary, PW PWV Holdings LLC (“PW PWV”), entered into a loan
agreement (the “PW PWV Loan Agreement”) with a lender for $15,500,000 (the “PW PWV Loan”). The PW PWV
Loan is secured by pledge of PW PWV’s equity interest in P&WV, its interest in the Railroad Lease and a security interest
in a deposit account (the “Deposit Account”) pursuant to a Deposit Account Control Agreement dated November 25, 2019
into which the P&WV rental proceeds were deposited. Pursuant to the Deposit Account Control Agreement, P&WV has instructed
its bank to transfer all monies deposited in the Deposit Account to the escrow agent as a dividend/distribution payment pursuant
to the terms of the PW PWV Loan Agreement. The PW PWV Loan is evidenced by a note issued by PW PWV to the benefit of the lender
for $15,500,000, with a fixed annual interest rate of 4.62% and the capitalized debt costs of $312,000 which is amortized over
the life of the financing which matures in 2054. The balance of the loan as of March 31, 2021 and December 31, 2020 is $14,948,000
(net of approximately $300,000 of capitalized debt costs) and 14,994,000 (net of approximately $302,000 of capitalized debt costs).
The
approximate amount of principal payments remaining on Power REIT’s long-term debt as of March 31, 2021 is as follows for
the subsequent years ending December 31:
|
|
Total
Debt
|
|
|
|
|
|
2021 (9 months remaining)
|
|
|
569,956
|
|
2022
|
|
|
675,374
|
|
2023
|
|
|
1,168,408
|
|
2024
|
|
|
715,777
|
|
2025
|
|
|
755,634
|
|
Thereafter
|
|
|
20,459,470
|
|
Long term debt
|
|
$
|
24,344,619
|
|
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
5.
LEASES
Information
as Lessor Under ASC Topic 842
To
generate positive cash flow, as a lessor, the Trust leases its facilities to tenants in exchange for payments. The Trust’s
leases for its railroad, solar farms and greenhouse cultivation facilities have an average lease term ranging between 20 and 99
years. Payments from the Trust’s leases are recognized on a straight-line basis over the terms of the respective leases.
Total revenue from its leases recognized for the quarter ended March 31, 2021 is approximately $1.82 million.
The
aggregate annual cash to be received by the Trust on all leases related to its portfolio as of March 31, 2021 is as follows for
the subsequent years ending December 31:
|
|
|
Total
|
|
2021 (9 months remaining)
|
|
$
|
7,488,252
|
|
2022
|
|
$
|
12,220,108
|
|
2023
|
|
$
|
11,770,002
|
|
2024
|
|
$
|
8,333,375
|
|
2025
|
|
$
|
6,420,368
|
|
Thereafter
|
|
$
|
111,801,966
|
|
Total
|
|
$
|
158,034,071
|
|
6.
EQUITY AND LONG-TERM COMPENSATION
Increase
in Authorized Preferred Stock
On
January 7, 2021, the Trust filed Articles Supplementary with the State of Maryland to classify an additional 1,500,000 unissued
shares of beneficial interest, par value $0.001 per share, 7.75% Series A Preferred Stock, such that the Trust shall now have
authorized an aggregate of 1,675,000 shares of Series A Preferred Stock, all of which shall constitute a single series of Series
A Preferred Stock. On February 3, 2021, as part of the closing for the Canndescent acquisition, the Trust issued 192,308
shares of Power REIT’s Series A Preferred Stock with a fair value of $5,000,008 less $2,205 of costs.
Stock
Issued for Cash
During
the quarter ended March 31, 2021, the Trust raised gross proceeds of approximately $36.7 million and issued an additional
1,383,394 common shares through a rights offering that closed on February 5, 2021. Offering expenses of $61,886 were incurred
in connection with the offering and recorded as contra-equity netting against the proceeds of offering. Hudson Bay Partner, LP
(“HBP”) which is 100% owned by David Lesser, is the Managing Member of PW RO Holdings LLC which participated in the
rights offering and acquired 132,074 shares, is the Managing Member of PW RO Holdings 2 LLC which participated in the rights offering
and acquired 155,000 shares and is the Managing Member of PW RO Holdings 3 LLC which participated in the rights offering and acquired
123,020 shares. HBP became the Co-Managing Member of 13310 LMR2A (“13310”) after the Trust acquired the Canndescent
property from 13310 which participated in the rights offering and acquired 68,679 shares.
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
Summary
of Stock Based Compensation Activity – Options
The
summary of stock based compensation activity for the quarter ended March 31, 2021, with respect to the Trust’s stock options,
is as follows:
Summary
of Activity - Options
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Number
of
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
Options
|
|
|
Exercise
Price
|
|
|
Intrinsic
Value
|
|
Balance as of December
31, 2020
|
|
|
106,000
|
|
|
|
7.96
|
|
|
|
-
|
|
Plan Awards
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Options
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Balance as of
March 31, 2021
|
|
|
106,000
|
|
|
|
7.96
|
|
|
|
3,951,680
|
|
Options vested
at March 31, 2021
|
|
|
106,000
|
|
|
|
7.96
|
|
|
|
3,951,680
|
|
The
weighted average remaining term of the options is approximately 1.36 years.
Summary
of Plan Activity – Restricted Stock
The
summary of Plan activity for the quarter ended March 31, 2021, with respect to the Trust’s restricted stock, was as follows:
Summary
of Activity - Restricted Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of
|
|
|
Weighted
|
|
|
|
Shares
of
|
|
|
Average
|
|
|
|
Restricted
|
|
|
Grant
Date
|
|
|
|
Stock
|
|
|
Fair
Value
|
|
Balance as of December
31, 2020
|
|
|
35,066
|
|
|
|
8.76
|
|
Plan Awards
|
|
|
-
|
|
|
|
-
|
|
Restricted
Stock Vested
|
|
|
(7,400
|
)
|
|
|
8.94
|
|
Balance as of
March 31, 2021
|
|
|
27,666
|
|
|
|
8.71
|
|
Stock-based
Compensation
During
the quarter ended March 31, 2021, the Trust recorded approximately $66,000 of non-cash expense related to restricted stock and
options granted compared to approximately $75,000 for quarter ended March 31, 2020. As of March 31, 2021, there was approximately
$241,000 of total unrecognized share-based compensation expense, which will be recognized through the second quarter of 2023.
The Trust does not currently have a policy regarding the repurchase of shares on the open market related to equity awards and
does not currently intend to acquire shares on the open market.
Power
REIT’s 2020 Equity Incentive Plan, which superseded the 2012 Equity Incentive Plan, was adopted by the Board on May 27,
2020 and approved by the shareholders on June 24, 2020. It provides for the grant of the following awards: (i) Incentive Stock
Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and
(vii) Other Awards. The Plan’s purpose is to secure and retain the services of Employees, Directors and Consultants, to
provide incentives for such persons to exert maximum efforts for the success of the Trust and to provide a means by which such
persons may be given an opportunity to benefit from increases in value of the common Stock through the granting of awards. As
of March 31, 2021, the aggregate number of shares of Common Stock that may be issued pursuant to outstanding awards is currently
235,917.
POWER
REIT AND SUBSIDIARIES
Notes
to Unaudited Consolidated Financial Statements
Preferred
Stock Dividends
During
the quarter ended March 31, 2021, the Trust paid a total of approximately $163,000 of dividends to holders of Power REIT’s
Series A Preferred Stock.
7.
RELATED PARTY TRANSACTIONS
The
Trust and its subsidiaries have hired Morrison Cohen, LLP (“Morrison Cohen”) as their legal counsel with respect to
general corporate matters. The spouse of the Trust’s Chairman, CEO, Secretary and Treasurer is a partner at Morrison Cohen.
During the quarter ended March 31, 2021, Power REIT (on a consolidated basis) did not pay any legal fees and costs to Morrison
Cohen.
A
wholly-owned subsidiary of Hudson Bay Partners, LP (“HBP”), an entity associated with the CEO of the Trust, David
Lesser, provides the Trust and its subsidiaries with office space at no cost. Effective September 2016, the Board of Trustees
approved reimbursing an affiliate of HBP $1,000 per month for administrative and accounting support based on a conclusion that
it would pay more for such support from a third party. The amount paid each month has increased over time with the Board of Trustees
approval and effective February 23, 2021, the monthly amount paid to the affiliate of HBP increased to $4,000. During the quarter ended March 31, 2021, with the Board of Trustee’s approval, a special
one-time payment of $15,000 was made to cover the time allocated to the processing of the Rights Offering. A total of $24,000
was paid pursuant to this arrangement during the quarter ended March 31, 2021 compared to $5,250 paid during the first quarter
of 2020.
Under
the Trust’s Declaration of Trust, the Trust may enter into transactions in which trustees, officers or employees have a
financial interest, provided however, that in the case of a material financial interest, the transaction is disclosed to the Board
of Trustees to determine if the transaction is fair and reasonable. After consideration of the terms and conditions of the retention
of Morrison Cohen described herein, and the reimbursement to HBP described herein, the independent trustees approved such arrangements
having determined such arrangements are fair and reasonable and in the interest of the Trust.
8.
SUBSEQUENT EVENTS
On
April 20, 2021, we acquired two properties (the “Cloud Nine Properties”) for $300,000 located in southern Colorado
through a newly formed wholly owned subsidiary (“PW Cloud Nine”) of our wholly owned subsidiary which is comprised
of approximately 4.0 acres. As part of the transaction, we 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.
On
April 30, 2021, the Registrant declared a quarterly dividend of $0.484375 per share on Power REIT’s 7.75% Series A Cumulative
Redeemable Perpetual Preferred Stock payable on June 15, 2021 to shareholders of record on May 15, 2021.