Power REIT (NYSE-AMEX: PW and PW.PRA) (“Power REIT” or the
“Trust”) today announced that it has closed on its previously
announced greenhouse cultivation facility acquisition in Marengo
Township, Michigan (the “Property”) through a wholly owned
subsidiary (“PropCo”). The Property is comprised of approximately
556,000 square feet and is located in the “Marijuana Overlay
District” of Marengo County which allows for unlimited cannabis
cultivation licenses. The 61-acre property has existing
plans in place to add 330,236 square feet and has
additional land available for further expansion.
Property Details
The state-of-the-art “Dutch Venlo Style”
greenhouse is 26 feet tall which helps control the growing
environment. The diffused glass roof is beneficial to plant growth
and allows greater plant density. The greenhouse features advanced
cultivation controls and a best-in-class irrigation/fertigation
system. There are also two large, multi-functional boilers that
heat and help dehumidify the greenhouse and also provide the crop
with enhanced CO2 levels to improve plant yields. There is a
1-million-gallon hot water storage tank that allows the boilers to
run during the day to provide enhanced CO2 to the plants for
photosynthesis, but then use the stored heat at night or as
otherwise needed. The greenhouse also includes an exceptional
irrigation system with 500,000 gallons of feed tanks that can water
the entire greenhouse in under 20 minutes. The irrigation system is
configured with 12 different feed zones. This allows for precision
crop feeding targeting each zone based on the plant growth stage
and cultivar. This facility is labor-efficient with an under-bench
radiant heating system that acts as a dual-purpose rail system for
carts and other equipment to enhance labor efficiency.
Capital Improvements
As part of the transaction, Power REIT has
agreed to fund capital improvements for the Property to position it
for cannabis cultivation. Power REIT’s current capital commitment
for the initial phase of improvements is approximately $3 million
which includes costs related to permitting and licensing, fire
suppression, security and site work. Power REIT is working with its
tenant to finalize the budget for additional property improvements
that Power REIT will fund and amend the lease accordingly. These
improvements are expected to include a light deprivation system
which is important to maximize plant yields, dry and cure
space, a state-of-the-art propagation room, as well as an
early-stage plant nursery at the facility as well as upgrades to
facilities to support the needs of employees such as bathrooms and
lockers.
David Lesser, Power REIT’s Chairman and
CEO, commented, “This is a very exciting transaction
for Power REIT – it is our largest acquisition to-date and one of
our more complex transactions. Due to our flexible balance sheet
and focused investment strategy on greenhouses, we were able to
opportunistically acquire this property through a receivership
process. The property is believed to be one of the largest cannabis
greenhouse cultivation facilities in the United States. This
property was previously used for cultivating red-bell peppers and
demonstrates Power REIT’s ability strategically re-purpose existing
greenhouse structures for cannabis cultivation.”
Lease Structure
Concurrent with the acquisition, PropCo entered
a 20-year “triple-net” lease (the “Lease”) with Marengo Cannabis
LLC, a wholly owned subsidiary of Millennium Cannabis LLC
(“Millennium Cannabis”), allowing use of the Property as a cannabis
cultivation and processing facility. The Lease requires Millennium
Cannabis to pay all property related expenses including
maintenance, insurance, and taxes. After the initial 20-year term,
the Lease provides two, five-year renewal options and has a
guarantee from Millennium Cannabis LLC. As mandated by the Lease,
Millennium Cannabis will maintain a medical marijuana license and
will operate in accordance with all Michigan and municipal
regulations. The Lease also prohibits the retail sale of cannabis
at the Property.
After an initial deferred rent period to allow
for renovations, the Lease stipulates rental payments that provide
PropCo with a full return of its invested capital over the next
three years, and thereafter, provides an
approximately 14.7% yield increasing thereafter at a rate
of 3% per annum. The Lease, as structured, provides straight-line
annual rent of approximately $4.3 million,
representing an unleveraged Core FFO yield
of approximately 20% on the invested capital.
Millennium Cannabis
Millennium Cannabis is a wholly owned subsidiary
of Millennium Investment & Acquisition Co. Inc. (Ticker:
“MILC”). David H. Lesser, MILC’s Chairman and CEO is also
Chairman and CEO of Power REIT. Millennium
Cannabis operates three cannabis cultivation greenhouse
facilities located in Oklahoma, Colorado and Michigan. All three
properties are leased from Power REIT, which Power REIT believes
represents an attractive strategic alliance. With the Michigan
transaction, Millennium Cannabis now boasts one of the largest
multi-state cannabis cultivation footprints in the United
States.
Millennium Cannabis is led by Jared
Schrader, who has built a team of more than 50 seasoned cannabis
cultivators and operators. Millennium Cannabis engages
agriculture experts from outside of the cannabis industry to
incorporate proven growing methods from traditional crops into
successful cannabis cultivation operations in low-energy greenhouse
environments. Millennium Cannabis shares Power REIT’s
thesis that greenhouses represent the sustainable solution for
cultivating cannabis at a low cost and with a significantly reduced
carbon footprint when compared to the expensive indoor warehouse
cultivation facilities that are more typical across the cannabis
industry.
Millennium Cannabis strategically deploys
this wide range of expertise to empower strong local operating
partners to apply Millennium Cannabis proven growing
protocols and best-in-class production methods to meet the evolving
needs of consumers within their local markets. Its partners in
Michigan include the long-time Facility Director of the
greenhouse’s prior use, a leading women-owned and minority-owned
operations advisory group with more than a decade of experience
creating and leading state-legal cannabis operations, and a
locally-based women-owned licensing partner who most recently
oversaw regulatory and compliance affairs for two of the largest
greenhouse operators in the country.
Commenting on Power REIT’s alliance with
Millennium Cannabis, David Lesser stated, “We
believe Power REIT’s most viable approach at this juncture was to
work with Millennium Cannabis as the tenant/operator. Together, we
have jointly developed an operating platform that focuses on
greenhouse cultivation technology and will marry that with the
necessary cannabis growing expertise.”
Jared Schrader, Millennium Cannabis’
President, commented, “Millennium Cannabis is excited
to commence operations at this truly state-of-the-art greenhouse
cultivation facility. We believe this property can be a
large-scale, low-cost producer that is well positioned to compete
favorably in the Michigan cannabis market. The nascent
Michigan market is experiencing dramatic growth and has current
pricing that far exceeds the national averages. In the near-term
this represents an opportunity to generate significant cash
flow. Given our focus on using greenhouse technology to lower
the cost of cultivation, we are confident we can compete favorably
even as the prices inevitably compress in this market. As such, the
Power REIT rent structure is well suited for a long-term
sustainable venture.”
The Michigan Cannabis
Market
In 2008, Michigan passed the Michigan Marihuana
Act and became the 10th state to legalize medical cannabis.
During 2020, its first full year of recreational sales, the
Michigan market generated $1 billion in total legal medical and
adult-use revenue. Revenue for 2021 is projected to reach $1.8
billion, an increase of 80% YoY. This would make Michigan the
second largest cannabis market in the country, second only to
California.
NON-DILUTIVE CAPITAL PLAN AND FORWARD
CORE FFO PER SHARE GUIDANCE
Power REIT has now deployed all of the capital
raised in its recently closed Rights Offering across several
transactions. These transactions have been highly accretive to Core
FFO. Power REIT intends to focus on non-dilutive capital in order
to finance the additional requirements to fund property
improvements for the Michigan property as well as additional
acquisitions. Power REIT is currently focused on debt as well as
the potential to issue additional preferred stock.
Mr. Lesser continued, “Our
updated business plan that we put into motion in the second half of
2019 continues to drive substantial growth. Our dynamic growth is a
function of the attractive yields we can achieve with our strategic
greenhouse investments coupled with our relatively small size which
amplifies the impact of these transactions. With a recent stock
price of $44.92 and a forward Core FFO run rate of $3.59 per share
based on our in-place transactions and without additional growth,
Power REIT trades at a 12.5 multiple. We believe we can continue to
drive significant additional growth through acquisitions by
employing non-dilutive capital as well as re-investing capital from
our unique lease structure which has a front-loaded rent that
returns Power REIT’s invested capital in the early years of leases.
We believe our potential growth rate driven by acquisitions
combined with a relatively low forward Core FFO multiple provides a
compelling value proposition for investors. We have an active
pipeline of acquisitions and hope to announce additional activity
in the near future.”
Updated Investment
Presentation
Power REIT has posted an updated investor presentation which is
available using the following
link: https://www.pwreit.com/investors
Statement on Sustainability
Power REIT owns real estate related to
infrastructure assets including properties for Controlled
Environment Agriculture facilities with a focus on greenhouses,
Renewable Energy and Transportation.
CEA facilities in the form of greenhouses,
provide an extremely environmentally friendly solution, which
consume approximately 70% less energy than indoor growing
operations that do not benefit from “free” sunlight. greenhouses
use 90% less water than field grown plants, and all of Power REIT’s
greenhouse properties operate without the use of pesticides and
avoid agricultural runoff of fertilizers and pesticides. These
facilities cultivate medical Cannabis, which has been recommended
to help manage a myriad of medical symptoms, including seizures and
spasms, multiple sclerosis, post-traumatic stress disorder,
migraines, arthritis, Parkinson’s disease, and Alzheimer’s.
Renewable Energy assets
are comprised of land and infrastructure associated with utility
scale solar farms. These projects produce power without the use of
fossil fuels thereby lowering carbon emissions. The solar farms
produce approximately 50,000,000 kWh of electricity annually which
is enough to power approximately 4,600 homes on a carbon free
basis.
Transportation assets are
comprised of land associated with a railroad, an environmentally
friendly mode of bulk transportation.
About Power REIT
Power REIT, with a focus on the “Triple Bottom
Line” and a commitment to Profit, Planet and People is a
specialized real estate investment trust (REIT) that owns
sustainable real estate related to infrastructure assets including
properties for Controlled Environment Agriculture, Renewable Energy
and Transportation. Power REIT is actively seeking to expand its
real estate portfolio related to Controlled Environment Agriculture
in the form of greenhouses for the cultivation of food and
cannabis.
Additional information about Power REIT can be
found on its website: www.pwreit.com
About Millennium Investment &
Acquisition Co. Inc.
Millennium Investment and Acquisition Co. Inc.
(ticker: MILC) is an internally managed, non-diversified,
closed-end investment company. During 2020, MILC announced that it
was seeking to de-register as an Investment Company that is
regulated under Investment Company Act of 1940. MILC is currently
seeking an Order from the SEC declaring that it has ceased to be an
Investment Company as it no longer meets the definition of holding
itself out as investing in securities but rather has pivoted to
focus on direct investments in operating businesses.
MILC is currently focusing on opportunities in
sustainable cannabis cultivation and sustainable production of
activated carbon.
Additional information about MILC can be found
on its website: www.millinvestment.com
Cautionary Statement About
Forward-Looking Statements
This document includes forward-looking
statements within the meaning of the U.S. securities laws.
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”,
“seek” or other similar expressions, or negatives of those
expressions, although not all forward-looking statements contain
these identifying words. All statements contained in this document
regarding our future strategy, future operations, 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
document. 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.
Contact:
David H. Lesser, Chairman & CEO |
Mary Jensen, Investor Relations |
dlesser@pwreit.com |
mary@irrealized.com |
212-750-0371 |
310-526-1707 |
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301 Winding RoadOld Bethpage, NY
11804 |
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www.pwreit.com |
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