Investor Presenta,on February 2015

Transcription

1 Investor Presenta,on February 2015

2 FORWARD LOOKING STATEMENTS Power REIT ( we or the Company ) has filed a registra,on statement (including a prospectus supplement and accompanying prospectus) with the SEC for the offering referred to in this communica,on. Before you invest, you should read the prospectus supplement and accompanying prospectus, and other documents the issuer has filed with the SEC, for more complete informa,on about the Company and the offering. You may get these documents for free by visi,ng EDGAR on the SEC website at by visi,ng our website at and looking under Investor Rela,ons/ SEC filings or by ing us at ir@pwreit.com. Alterna,vely, we will arrange to send you the prospectus supplement and accompanying prospectus if you request them by calling Throughout this presenta,on, we may make forward- looking statements as that term is defined in Sec,on 27A of the Securi,es Act of 1933, as amended (the Securi,es Act ) and Sec,on 21E of the Securi,es Exchange Act of 1934, as amended (the Exchange Act ). Forward- looking statements include the words may, would, could, likely, es,mate, intend, plan, con,nue, believe, expect or an,cipate and similar words, as well as statements rela,ng to our acquisi,on, development and expansion plans, objec,ves and expecta,ons, liquidity projec,ons, status and possible outcomes of li,ga,on and similar topics. Forward- looking statements are not guarantees of future performance, and a variety of factors could cause our actual results to differ materially from the an,cipated or expected results expressed in these forward- looking statements. Readers are cau,oned not to put undue reliance on any forward- looking statements and are advised to consider factors listed under the headings Risk Factors in our Annual Report on Form 10- K, as may be supplemented or amended by the Company s Quarterly Reports on Form 10- Q, Current Reports on Form 8- K and other filings with the SEC. The Company assumes no obliga,on to update or supplement forward- looking statements that become untrue because of subsequent events, new informa,on or otherwise. 2

3 POWER REIT AT A GLANCE Exci&ng Story with Mul&ple Drivers of Value and Growth Power REIT is a real estate investment trust focused on infrastructure assets As of this presenta&on, Power REIT owns and leases through its subsidiaries: 112 miles of railroad located in Marcellus Shale territory (Pennsylvania, West Virginia and Ohio) Approximately 600 acres of land leased to over 105 Megawags of u,lity scale solar farms Two paths to create shareholder value: Near to Medium Term: Upside from P&WV subsidiary li,ga,on with Norfolk Southern Near to Long Term: Accre,ve acquisi,ons with yields > Power REIT long- term cost of capital 3

4 INFRASTRUCTURE FOCUS REIT Opportunity: significant real estate embedded within infrastructure INFRASTRUCTURE REAL ESTATE Renewable Energy Solar Farms Wind Farms Other Renewables Transporta&on Railroads, ports, etc. Opportunis&c Infrastructure Assets Hydro, Geothermal, Transmission, etc. Loca&on, loca&on, loca&on Long- life assets that are complicated to develop, permit Hard to replace and/or relocate i.e. cap,ve tenants Predictable cash flows Minimal technology risk 4

5 RENEWABLE ENERGY OPPORTUNITY ARrac&ve Near- term Opportuni&es within Renewable Energy Solar Opportunity 1 US installed 1.33 GW in Q1 of 2014, which is up 79% from Q GW of solar installa,ons are forecasted in 2014, approximately worth $13.2 Billion 13.4 GW of cumula,ve opera,ng solar capacity in US as of Q Wind Opportunity 1 Over $100 billion of cumula,ve investment in U.S. U.S. wind energy capacity is more than 19% of global wind energy capacity U.S. installed 1.1 GW of wind capacity in 2013, 61+ GW of total capacity installed U.S. wind energy industry has 5- year average annual growth rate of 19.5% ( ) Other Renewable Opportuni&es Hydro Geothermal Transmission 1. Source: Solar Energy Industry Associa,on, American Wind Energy Associa,on and management es,mates

6 6 SOLAR LAND

7 SOLAR LAND ACQUISITION DECEMBER 2012 Approx. 6MW of solar land located near Boston, MA Approximately $1.0 million acquisi&on price with a recent appraisal of $1.3 million Portland 70 miles 54 acres in Salisbury, MA Formerly zoned as an industrial park Located near I- 495 and I- 95 intersec,on Leased to largest solar farm in New England 5.7MW- DC project Over 25,000 solar panels Power sold to investment grade municipali,es Tenant sponsored by large private equity fund with over $250mm of solar assets 20+ year lease Boston 44 miles 7

8 SOLAR LAND ACQUISITION JULY 2013 Approx. 20MW of solar land located near Fresno, California Approx. $1.55 million to acquire 100 acres leased to u&lity scale solar projects Revenue of $157,500 per annum pursuant to leases with a 25 year ini&al term Real- estate tax liability capped at approx. $26,500 (tenant responsible for any increase) High quality private equity sponsor Long- term power purchase agreements with Southern California Edison (SCE) Pacific Gas & Electric (PG&E) Expected to generate mid- teens equity returns Ini,ally 100% financed with acquisi,on bridge loan in order to close transac,on Expected to be re- financed with equity and long- term debt 8

9 SOLAR LAND ACQUISITION APRIL 2014 Approx. 82 MW of solar land located in Kern County, California Approx. $9.2 million to acquire approximately 450 acres in Kern County (approximately 10 miles from Bakersfield) Revenue of $745,000 per annum pursuant to leases with a 20 year ini&al term 1% annual increases Triple Net Lease with tenant responsible for expenses Developed and owned by SunEdison (&cker: SUNE) and owned by TerraForm Power (&cker: TERP) and Google (&cker: GOOG) Long- term power purchase agreements with Southern California Edison Expected to generate mid- teens equity returns Financed with combina,on of debt and preferred stock proceeds 9

10 SMALL CAPITALIZATION INCREASES ARBITRAGE Significant opportunity to grow future dividends per share through accre&ve acquisi&ons CASH FLOW PER SHARE Impact of a similar sized acquisi&on Pro- Forma Power REIT Pro- Forma Mid- sized Pre- Transac,on POWER REIT Mid- sized REIT COMPANY SIZE The chart above is for illustra,ve purposes only; actual results may vary 10

11 P&WV SUBSIDIARY Power REIT s wholly- owned subsidiary, PiRsburgh & West Virginia Railroad ( P&WV ), owns 112 miles of railroad track and related real estate Hard- to- replace railroad right of way in Western Pennsylvania and Eastern Ohio Significant rail volume growth related to Marcellus Shale ac,vity Oil and gas development on P&WV s property P&WV has leased its railroad property to Norfolk Southern Railway Company ( NSC ) pursuant to a 99- year lease (the Lease ) Lease went into effect in 1964 NSC has unlimited renewal op,ons on the same terms (absent breach by NSC) NSC has sub- leased P&WV s property to Wheeling & Lake Erie Railway ( WLE ) NSC is currently paying base cash rent of $915,000 per annum on a quarterly basis and is responsible for all opera&ng costs NSC has historically paid addi,onal cash rent in the form of debt totaling approximately $17 million based on NSC s records (as of 12/13/12) P&WV believes amounts owed to P&WV are significantly higher and is seeking payment P&WV is currently in li&ga&on with NSC and WLE to enforce its rights under the lease and protect its property rights Pigsburgh & West Virginia Railroad ( P&WV ) is a wholly- owned subsidiary of Power REIT 11

12 POSSIBLE RANGE OF LITIGATION OUTCOMES Power REIT s wholly- owned subsidiary, P&WV has mul&ple claims against NSC 1 Win Lose Indebtedness Owed By NSC 2 16,600, Undisclosed Oil and Gas / Other Leases 3 8,000, Interest on Indebtedness??? 0 Addi,onal Rent Correc,ons??? 0 Li,ga,on Costs 4?????? Higher Lease Rate aver Default/Re- Lease 5??? 0 Value of NOL if Wrigen Off 6 n/a 5,810,000+ Total Value 24,600,000+/-??? Per Share Value 7 $14.40+/-??? Upside to Current Share Price 7 >150%??? This chart is based on management assump,ons. There can be no assurance that P&WV will prevail in its counterclaims or achieve the outcomes presented in this chart. The chart is intended to only provide a road map to understanding elements of P&WV s claims. Investors should not place undue reliance on projec,ons of future outcomes. See Power REIT s SEC filings for addi,onal risks and disclosure related to the li,ga,on. 2. As reported by NSC at the end of 12/31/ P&WV has supplemented its counterclaims to seek recovery rela,ng to previously undisclosed oil and gas and other leases entered into by NSC and/or WLE related to P&WV property. 4. Through Q4 2014, P&WV has incurred approx. $2.3 million on the li,ga,on, costs which it believes are reimbursable under the lease. P&WV believes its worst case exposure is li,ga,on costs, offset by value of NOL if the indebtedness is wrigen off. 5. If P&WV succeeds in declaring a default, the railroad may be re- leased at higher rates based on current market. 6. Assumed valued of 35% of P&WV current tax basis of $16.6 million. 7. Based on basic shares outstanding as of 12/31/14 and share price on 12/31/2014 of $9.58.

13 LITIGATION STATUS P&WV feels strongly about the merits of its case The li,ga,on is designed to protect P&WV s rights under the Lease and to its property P&WV is confident that pursuing the li,ga,on is in the best interest of P&WV P&WV has spent approximately $2.3 million through Q on the li&ga&on, however, management believes P&WV s li&ga&on expenses are reimbursable by NSC pursuant to lease provisions P&WV and NSC/WLE have filed Mo&ons for Summary Judgment Fully briefed as of the fourth quarter of 2014 Legal costs to diminish pending ruling from the court The next step is either a resolu,on or par,al resolu,on through summary judgment and/or a trial. Shareholders are encouraged to read the case docket Case is pending in the Federal District Court in Pigsburgh Docket is publicly available on PACER Key documents available at under Shareholder Presenta,ons Li&ga&on Risks: Li,ga,on is inherently unpredictable, lengthy and expensive Shareholders are encouraged to review risk factors that have been disclosed on the company s annual reports filed on Form 10- K, quarterly reports filed on Form 10- Q and other filings with the SEC. Pigsburgh & West Virginia Railroad ( P&WV ) is a wholly- owned subsidiary of Power REIT 13

14 MANAGEMENT Thought leadership within infrastructure REIT & renewable energy sector Knowledge- Driven Business Plan Track Record of Execu&on Aligned Interests 14

15 CORPORATE STRUCTURE AND FINANCIAL OVERVIEW 15

16 POWER REIT CORPORATE STRUCTURE Power REIT is structured as a holding company and owns all of its leased assets through four wholly- owned subsidiaries POWER REIT Listed on NYSE MKT (,cker PW) Over 2,000 Public Shareholders PiRsburgh & West Virginia Railroad ( P&WV ) PW Regulus Solar LLC PW Salisbury Solar LLC PW Tulare Solar LLC Fee ownership of 112 miles of railroad located in PA, WV and OH, leased to Norfolk Southern Corp. Fee ownership of 450 acres leased to ~82MW solar farm located in Kern County, CA Fee ownership of 54 acres leased to a opera,ng 5.7MW solar farm located near Boston, MA Fee ownership of 100 acres leased to ~22MW of solar farms located in Tulare County, CA $915,000 of annual rent Pending li,ga,on to determine P&WV s rights under the lease and poten,al addi,onal sums due $735,000 of annual rent with 1% escala,ons per annum $80,800 of annual rent, with a 1% escala,on per annum $157,500 of annual rent 16

17 CAPITAL PLAN Power REIT is seeking to limit near- term dilu&on to help maximize shareholder rewards from P&WV li&ga&on Minimize issuance of common stock at current prices U,lize non- dilu,ve capital (debt, bridge financing, preferred equity, JV capital) to fund acquisi,ons Fund li,ga,on expenses through temporary suspension of dividend Power REIT has an ongoing offering for Series A Preferred Stock pursuant to a prospectus Projected use of proceeds includes addi,onal accre,ve acquisi,ons Expect to resume common dividends as li&ga&on expenses decline Historical dividend rate at $0.10 / quarter (prior to li,ga,on) POWER REIT S ACCESS TO NON DILUTIVE CAPITAL High Quality Assets With Long- term Predictable Cash Flow Moderate Leverage Rela&ve to Asset Class 17

18 REGULUS ACQUISITION PRO FORMA ACCRETION TO CORE FFO Management believes Core FFO reflects the cash performance of the company s assets 2013 Q Q Core FFO Core FFO Annualized Core FFO Net Income $(481,000) $(303,000) $(1,212,000) Adjustments Li,ga,on Expense 956, ,000 1,376,000 Property Acquisi,on Expense 49, Stock Based Compensa,on 145,000 54, ,000 Finance expense - 99, ,000 Amor,za,on 8,000 60, ,000 Unrealized loss on interest rate swaps - 61,000 (244,000) Preferred Stock Dividends - (61,000) Core FFO Available to Common $676,000 $254,000 $1,016,000 Shares Outstanding 1,676,955 1,731,788 1,731,788 Core FFO Per Share $0.40 $0.15 $0.59 Per Share Pro Forma FFO Growth 46.7% 1. Core FFO is a non- GAAP financial measure. See Appendix for disclosure regarding non- GAAP financial measures. 18

19 POWER REIT CONSOLIDATED NET ASSET VALUE (NAV) 30#Sep#14 (unaudited) Assets $ Consolidated/Cash ///////////// 758,000 Pittsburgh/&/West/Virginia/Railroad/ ///////// 9,150,000 Solar/Land/Intangibles /////// 11,622,000 Miscellaneous ///////// 1,050,000 Total0Assets ,580,000 Liabilities Accounts/Payable/Other ///////// 1,260,000 Debt ///////// 9,343,000 Preferred/Stock/(@par) ///////// 3,462,000 Total0Liabilities ,065,000 Net0Asset0Value0("NAV") 0(f) 08,515,000 Market0Capitalization0 (g) Discount0to0Adjusted0NAV Common/Shares/Outstanding ///////// 1,731,788 Adjusted Non#GAAP (a) 30#Sep#14 (unaudited) $ $/share/ (b) /////////////// 758,000 /////////// 0.44 ////////// 22,875,000 (c) ////////13.21 ////////// 14,500,000 (d) /////////// 8.37 //////////// 1,050,000 /////////// ,183,000 //////// //////////// 1,260,000 /////////// 0.73 //////////// 9,343,000 /////////// 5.40 //////////// 3,462,000 /////////// ,065,000 /////////// ,118, ,586, % HIGHLIGHTS Power REIT trades at a 38% discount to Adjusted NAV Excludes the $16.6 million indebtedness owed to P&WV by NSC* (P&WV believes this amount is understated) Excludes any other upside from the P&WV li,ga,on Balance sheet is underleveraged providing opportuni,es for growth * P&WV is currently in li,ga,on with Norfolk Southern Corpora,on (NSC) to collect on the indebtedness and other amounts 19

20 POWER REIT CONSOLIDATED NET ASSET VALUE (NAV) (CONTINUED) Footnotes to previous slide a) Management has adjusted certain of its reported GAAP asset values to provide an indica,on of current asset value. Net Asset Value ( NAV ) and Adjusted NAV are calculated as total assets minus total liabili,es, using the reported GAAP amounts and the adjusted non- GAAP amounts set forth on slide 16, respec,vely. The adjustments made to certain of the asset values used in calcula,ng Adjusted NAV are described in footnotes (c), (d) and (e). NAV and Adjusted NAV are non- GAAP financial measures. See Appendix for disclosure regarding non- GAAP financial measures. b) Based on basic share count of 1,731,788 as of 9/30/2014 including vested and unvested stock grants. c) Under the Lease, P&WV receives $915,000 in base rent from NSC each year, in exchange for giving NSC almost complete control of the leased assets for at least 99 years. In recent decades, the leased assets have been valued in P&WV s balance sheet at $9,150,000. Management believes that the value of the assets can also be expressed as the present value of NSC s future lease payments, discounted at the rate at which NSC issues its long- term debt. Hence, management has used a 4% discount rate (as compared to NSC s unsecured long- term debt of approximately 3-5%) to the remaining lease cash- flows, resul,ng in a value of $22,875,000. P&WV is currently in li,ga,on with NSC to collect addi,onal sums it believes are due to P&WV including indebtedness, legal costs and other sums. These amounts are not included in this es,mate of NAV and are substan,al on a per share basis. P&WV recognizes that li,ga,on is lengthy and li,ga,on outcomes are uncertain. Investors should not place undue reliance on projec,ons of possible future outcomes. d) Solar land value has been established based on recent indica,ons of comparable sales and is based on a capitaliza,on rate of 6.5%. 20

21 CONCLUSION: ATTRACTIVE RISK ADJUSTED RETURN WITH EVENT DRIVEN UPSIDE Pigsburgh & West Virginia Railroad ( P&WV ) is a wholly- owned subsidiary of Power REIT 21

22 APPENDIX DISCLOSURE REGARDING NON- GAAP FINANCIAL MEASURES This presenta,on contains supplemental financial measures that are not calculated pursuant to U.S. generally accepted accoun,ng principles ("GAAP"), including the measures iden,fied by us as Net Asset Value ( NAV ), Adjusted NAV, Core Funds From Opera,ons ( Core FFO ) and Adjusted Capitaliza,on. Further details regarding Power REIT's consolidated results of opera,ons and financial condi,on are contained in the Company s reports filed with the SEC, including its quarterly and annual reports filed on Form 10- K and 10- Q, which can be viewed at the Company's website at under the Investor Rela,ons sec,on and on the SEC s website at Following are defini,ons of these supplemental measures, explana,ons as to why we present them and reconcilia,ons of them to the most directly comparable GAAP financial measures, if available. Core Funds from Opera&ons ( Core FFO ) Management believes that Core FFO is a useful supplemental measure of the Company's opera,ng performance. Management believes that alterna,ve measures of performance, such as net income computed under GAAP, or Funds From Opera,ons computed in accordance with the defini,on used by the Na,onal Associa,on of Real Estate Investment Trusts ( NAREIT ), include certain financial items that are not indica,ve of the results provided by the Company's asset por}olio and inappropriately affect the comparability of the Company's period- over- period performance. These items include non- recurring expenses, such as those incurred in connec,on with li,ga,on, one-,me upfront acquisi,on expenses that are not capitalized under ASC- 805, and certain non- cash expenses, including non- cash equity compensa,on expense. Therefore, management uses Core FFO and defines it as net income excluding such items. Management believes that, for the foregoing reasons, these adjustments to net income are appropriate. The Company believes that Core FFO is a useful supplemental measure for the inves,ng community to employ in comparing the Company to other REITs, as many REITs provide some form of adjusted or modified FFO, and in analyzing changes in the Company s performance over,me. Readers are cau,oned that other REITs may use different adjustments to their GAAP financial measures, and that as a result the Company's Core FFO may not be comparable to the FFO measures used by other REITs or to other non- GAAP or GAAP financial measures used by REITs or other companies. Net Asset Value ( NAV ), Adjusted NAV and Adjusted Capitaliza&on NAV and Adjusted NAV are calculated as total assets minus total liabili,es, using the reported GAAP amounts and the adjusted non- GAAP amounts set forth on slide 19, respec,vely. The adjustments made to certain of the asset values used in calcula,ng Adjusted NAV are described in footnotes on slide 20. Fair market value is a subjec,ve es,mate of valua,on prepared by management and is not the same as the carrying values on the company s consolidated balance sheet prepared under GAAP. The terms NAV, Adjusted NAV and Adjusted Capitaliza,on do not have any standardized meaning according to GAAP and therefore may not be comparable to similar measures presented by other companies. There are no comparable GAAP measures presented in Power REIT s consolidated financial statements and thus no applicable quan,ta,ve reconcilia,on for such non- GAAP financial measures can be or is supplied. Management believes that NAV and Adjusted NAV can provide informa,on useful to shareholders in understanding the Company s performance and valua,on, and may assist in the evalua,on of its business rela,ve to that of its peers. However, readers are cau,oned that other REITs may use different measures and that as a result Power REIT s measures may not be comparable to GAAP or non- GAAP financial measures used by other REITs or other companies. NAV and Adjusted NAV are calculated as of a par,cular date and may not be reflec,ve of Power REIT s future business performance, values that could be realized in a sale or sales or future trading prices. 22

23 CONTACT US Contact us if you have ques&ons or commercial opportuni&es to discuss: t e ir@pwreit.com w 23