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Power REIT (PW)·Q1 2022 Earnings Summary

Executive Summary

  • Q1 2022 revenue was $1.99M, up 9% YoY, while basic EPS fell to $0.25 and Core FFO/share declined to $0.40 due to straight-line rent eliminations and tenant stress from wholesale cannabis price compression .
  • Management highlighted significant tenant headwinds in cannabis and is proactively backfilling space; diversification progressed with a 1.12M sq. ft. tomato greenhouse acquisition in Nebraska at an ~11% yield .
  • Relative to prior guidance, Q1 Core FFO/share of $0.40 undershot the previously signaled Q1 2022 run-rate of ~$0.92 given rent collectability concerns and paused Michigan straight-line rent (which would add ~$0.38/share per quarter when resumed) .
  • Catalysts ahead include resolution of Michigan litigation/licensing, tenant replacements, and scaling food-focused CEA assets (tomatoes) to reduce cannabis volatility .

What Went Well and What Went Wrong

What Went Well

  • Largest greenhouse acquisition to date: $9.35M O’Neill, NE tomato facility (1,121,513 sq. ft.) leased for 10 years at ~$1.10M straight-line annual rent (~11% yield), funded at 5.52% fixed debt cost .
  • Portfolio growth and diversification: 22 CEA properties totaling >2.1M sq. ft.; continued focus on sustainable greenhouses with lower energy and water intensity than warehouse-style cultivation .
  • Michigan tenant received hemp cultivation license effective April 27, 2022, enabling operations and experience with cannabis strains, supporting agricultural property designation narrative .

What Went Wrong

  • Wholesale cannabis price compression materially impacted tenants, prompting elimination of straight-line rent for two Colorado properties over collectability concerns, reducing Core FFO by ~$0.06/share; Michigan straight-line rent also omitted pending licensing/litigation .
  • Eviction and litigation: Cloud Nine eviction granted (appealed with $25K bond); additional claims filed in Colorado (JKL2 et al.) and federal action in Michigan (Marengo), elevating operating risk and legal costs .
  • Core FFO/share (reported $0.40) below prior run-rate guidance of ~$0.92 for Q1 2022; even excluding one-time adjustments, Core FFO/share was $0.46, underscoring persistent tenant stress versus expectations .

Financial Results

Quarterly Comparison (oldest → newest)

MetricQ3 2021Q4 2021Q1 2022
Revenue ($USD)$2,547,346 $1,785,809 $1,985,516
Net Income Attributable to Common ($USD)$1,662,800 $670,730 $997,880
EPS (Basic/Diluted as disclosed)$0.49 (diluted) $0.21 (basic) $0.25 (basic)
Core FFO Available to Common ($USD)$2,072,205 $1,115,079 $1,348,533
Core FFO per Common Share$0.62 $0.35 $0.40

Year-over-Year Q1 Comparison

MetricQ1 2021Q1 2022
Revenue ($USD)$1,820,927 $1,985,516
Net Income Attributable to Common ($USD)$1,108,128 $997,880
EPS (Basic)$0.34 $0.25
Core FFO Available to Common ($USD)$1,274,939 $1,348,533
Core FFO per Common Share$0.46 $0.40

Segment/Portfolio KPIs

KPIValueSource
CEA Properties22 properties; >2,100,000 sq. ft.
Solar Ground Leases7 leases; 601 acres
Railroad Property112 miles
Debt Facility Drawn$11.5M at 5.52% fixed (as of 3/31/22)
Preferred Dividend Paid (Q1 2022)~$163,000 ($0.484375/share)
Weighted Avg Shares (Basic, Q1 2022)3,367,531

Notable Adjustments and Effects

  • Reported Core FFO/share of $0.40 reflects a ~$0.06/share reduction from eliminating straight-line rent for two Colorado tenants; excluding one-time items, Core FFO/share would have been $0.46 .
  • Michigan property straight-line rent excluded; inclusion would add ~+$0.38/share per quarter to FFO upon resumption .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent/ReportedChange
Core FFO per Share (Run-Rate)Q1 2022~$0.92 run-rate (no further acquisitions) $0.40 reported; $0.46 excluding one-time adjustments Lowered vs prior run-rate due to rent collectability changes and tenant stress
Michigan Straight-Line Rent EffectOngoing (per quarter)N/A+~$0.38/share when resumed Future upside contingent on licensing/litigation resolution
Debt Cost of CapitalOngoingN/A5.52% fixed rate facility Maintained; supports positive investment spread
Portfolio Mix Diversification2022+N/AAdded tomato greenhouse (NE) at ~11% yield Positive diversification from cannabis volatility

Earnings Call Themes & Trends

Note: No Q1 2022 earnings call transcript was found in company filings/IR materials .

TopicPrevious Mentions (Q3 2021)Previous Mentions (Q4 2021)Current Period (Q1 2022)Trend
Cannabis market pricingExpansion and MI acquisition; strong MI market growth Tenant lease terminations; adjustments impacting FFO Wholesale price compression materially impacting tenants Negative vs prior; tenant stress increasing
Tenant turnover/backfillPSP eviction; exploring replacement tenants Cloud Nine and Grail terminations; adjusted FFO Colorado straight-line rent eliminated; active backfilling; Sandlot new lease Active remediation and backfill continues
Diversification to food CEANot highlightedLimitedNE tomato greenhouse acquisition (largest to date) Positive diversification away from cannabis
Legal/regulatoryPSP litigation; tenant disputes Impact from write-offs; Q4 adjustments Michigan federal case; Cloud Nine appeal; Colorado JKL2 complaint Elevated legal exposure persists
Capital structureShelf registration; rights offering proceeds New $20M debt facility at ~5.42% $11.5M drawn at 5.52%; funding acquisitions Stable access to debt; supporting accretive growth
Sustainability/CEA efficiencyCEA efficiency messaging Sustainability profile reiterated Emphasis on greenhouses vs warehouses; energy/water efficiency Consistent sustainability narrative

Management Commentary

  • “The price for wholesale cannabis has compressed dramatically over the past several quarters, which has had a significant impact on our cannabis tenants. As we work through these headwinds, we are proactively backfilling space and are in active negotiations with replacement tenants. We have also now diversified to add a greenhouse focused on the cultivation of tomatoes.” — David Lesser, CEO .
  • “We remain optimistic that our investments in greenhouse properties provide a sustainable platform for indoor farming of food as well as cannabis… Greenhouses are more cost efficient to build and more energy efficient to operate than warehouse style indoor cultivation facilities.” — David Lesser .
  • On NE acquisition: “The Nebraska transaction was funded using the Trust’s debt facility with a 5.52% interest rate… cost basis… approximately $8.81 per square foot and represents a substantial discount to replacement cost.” — David Lesser .

Q&A Highlights

  • No Q1 2022 earnings call transcript was available; management communication was via the May 10, 2022 8-K press release and Q1 2022 10-Q filing link on the IR site .

Estimates Context

  • Wall Street consensus estimates via S&P Global were unavailable for Q1 2022 in this workflow; therefore, estimate comparison could not be performed. When available, we will anchor comparisons to S&P Global consensus.

Key Takeaways for Investors

  • Reported Core FFO/share of $0.40 was materially below the previously indicated ~$0.92 run-rate for Q1 2022 due to rent collectability changes and cannabis tenant stress; excluding one-time items, $0.46 still fell short, highlighting near-term earnings pressure relative to guidance signals .
  • Strategic diversification into food-focused CEA via the NE tomato greenhouse (1.12M sq. ft., ~11% yield) improves risk profile and reduces reliance on volatile cannabis pricing, while preserving positive spread to a 5.52% fixed-rate debt facility .
  • Michigan licensing/litigation is a swing factor: resuming straight-line rent would add ~+$0.38/share per quarter to FFO, implying significant upside to run-rate upon resolution .
  • Active leasing actions (e.g., Sandlot lease, Walsenburg amendment) and backfilling efforts should stabilize occupancy and cash flows, but legal proceedings (Cloud Nine appeal; JKL2 complaint; Michigan federal case) remain overhangs .
  • Sustainability and greenhouse efficiency advantages (energy and water savings vs warehouse cultivation) support long-term economics of the platform, particularly in food CEA, which may attract more resilient tenant demand .
  • Near-term trading: expect sentiment to track tenant replacement progress and Michigan case milestones; medium-term thesis depends on successful pivot to food CEA scale and normalization of cannabis tenant performance .