Power REIT (PW) risk factors, FY2024 10-K

Risks Related to our Financial Position and Liquidity

1. 01We have incurred a loss for the year ended December 31, 2024 and may be unable to generate sufficient revenue to cover expenses or generate net income
2. 02We may need to raise additional capital or sell additional properties to fund our operations in order to continue as a going concern
3. 03Of the total amount of cash, approximately $2.2 million is non-restricted cash available for general corporate purposes and approximately $37,000 is restricted cash related to the Greenhouse Loan
4. 04If our acquisitions or our overall business performance fail to meet expectations, we could be restricted from paying dividends to shareholders and default on our loans, which are secured by collateral in our properties and assets
5. 05We have substantial debt and preferred shares outstanding with substantial liquidation preference, which could adversely affect our overall financial health and our operating flexibility
6. 06If we are unable to comply with the covenants in our loan agreements, we might be adversely affected
7. 07Secured indebtedness exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets subject to indebtedness

Risks Related to our Operations

1. 08Changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business and operating results
2. 09The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future
3. 10These conditions make it extremely difficult for us to accurately forecast and plan future business activities
4. 11○ manufacturing and supply chain disruptions for materials sourced from other geographies which may be experiencing shutdowns and shipping delays
5. 12We have a limited operating history and operate in an industry in its very early stages of development that has experienced significant business challenges
6. 13Our tenants may be unable to renew or maintain their licenses and authorizations for their cannabis operations, which may result in such tenants not being able to operate their businesses and defaulting on their lease payments
7. 14Our business strategy includes growth plans. Our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth or investments effectively
8. 15Even if we are able to execute our business strategy, that strategy may not be successful
9. 16We operate in a highly competitive market for investment opportunities and we may be unable to identify and complete acquisitions of real property assets
10. 17We acquired some of our properties, and expect to acquire other properties, “as-is” or otherwise with limited recourse to the prior owner, which significantly increases the risk of an investment
11. 18Because we may distribute a significant portion of our income to our stockholders or lenders, we will continue to need additional capital to make new investments. If additional funds are unavailable or not available on favorable terms, our ability to make new investments will be impaired
12. 19The investment portfolio is, and in the future may continue to be, concentrated in its exposure to a relatively few numbers of investments, industries and lessees
13. 20Our property portfolio has a high concentration of properties located in certain states
14. 21Our operating results may be negatively affected by potential development and construction delays and cost overruns
15. 22A failure to maintain properties can lead to deterioration of value
16. 23The valuation and accounting treatment of certain long-lived assets, such as real estate, or of intangible assets, such as goodwill, could result in future asset impairments, which would be recorded as operating losses
17. 24Many factors, including changes in interest rates and the negative perceptions of the cannabis sector generally, can have an adverse effect on the market value of our securities
18. 25Individual taxpayers might perceive REIT securities as less desirable relative to the securities of other corporations because of the lower tax rate on certain dividends from such corporations to the extent we pay dividends in the future, which might have an adverse effect on the market value of our securities
19. 26The issuance of securities with claims that are senior to those of our common shares, including our Series A Preferred Stock, may limit or prevent us from paying dividends on our common shares. There is no limitation on our ability to issue securities senior to the Trust’s common shares or incur indebtedness
20. 27From time to time, our management team may own interests in our lessees or other counterparties, and may thereby have interests that conflict or appear to conflict with the Trust’s interests
21. 28Our lessees and many future lessees will likely be structured as special purpose vehicles (“SPVs”), and therefore their ability to pay us is expected to be dependent solely on the revenues of a specific project, without additional credit support
22. 29Some losses related to our real property assets may not be covered by insurance or indemnified by our lessees, and so could adversely affect us
23. 30Discovery of previously undetected environmentally hazardous conditions may adversely affect our operating results
24. 31Accordingly, we may incur significant costs to defend against claims of liability, to comply with environmental regulatory requirements, to remediate any contaminated property, or to pay personal injury claims
25. 32Legislative, regulatory, accounting or tax rules, and any changes to them or actions brought to enforce them, could adversely affect us
26. 33Changes in interest rates may negatively affect the value of our assets, our access to debt financing and the trading price of our securities
27. 34Our quarterly results may fluctuate
28. 35We may not be able to sell our real property assets when we desire. In particular, in order to maintain our status as a REIT, we may be forced to borrow funds or sell assets during unfavorable market conditions
29. 36We may fail to remain qualified as a REIT, which would reduce the cash available for distribution to our shareholders and may have other adverse consequences
30. 37If an investment that was initially believed to be a real property asset is later deemed not to have been a real property asset at the time of investment, we could lose our status as a REIT or be precluded from investing according to our current business plan
31. 38Our failure to remain qualified as a REIT would subject us to U.S. federal income tax and applicable state and local taxes, which would reduce the amount of cash available for distribution to our stockholders and have significant adverse consequences on the market price of our common stock
32. 39If we are deemed to be subject to Section 280E of the Code because of the business activities of our tenants, the resulting disallowance of tax deductions could cause us to incur U.S. federal income tax and jeopardize our REIT status
33. 40Legislative, regulatory or administrative changes could adversely affect us or our stockholders
34. 41If we were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on the price of our securities
35. 42Net leases may not result in fair market lease rates over time
36. 43If a sale-leaseback transaction is recharacterized in a lessee’s bankruptcy proceeding, our financial condition could be adversely affected
37. 44Provisions of the Maryland General Corporation Law and our Declaration of Trust and Bylaws could deter takeover attempts and have an adverse impact on the price of our common shares
38. 45Our business and operations would suffer in the event of system failures
39. 46We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks
40. 47We have identified material weaknesses in our internal controls, and we cannot provide assurances that these material weaknesses will be effectively remediated or that additional weaknesses will not occur in the future

Risks Related to our Investment Strategy

1. 48Each property in our portfolio could be considered a special purpose use asset which may impact market value and the ability to lease to generate income
2. 49Our focus on non-traditional real estate asset classes including CEA, alternative energy and transportation infrastructure sectors will subject us to more risks than if we were broadly diversified to include other asset classes
3. 50Renewable energy resources are complex, and our investments in them rely on long-term projections of resource and equipment availability and capital and operating costs; if our or our lessees’ projections are incorrect, we may suffer losses
4. 51Infrastructure assets may be subject to the risk of fluctuations in commodity prices and in the supply of and demand for infrastructure consumption
5. 52Infrastructure investments are subject to obsolescence risks
6. 53Renewable energy investments may be adversely affected by variations in weather patterns
7. 54Investments in renewable energy may be dependent on equipment or manufacturers that have limited operating histories or financial or other challenges
8. 55Our portfolio of marketable securities, is subject to market, interest and credit risk that may reduce its value

Risks Related to our Securities

1. 56There is a 9.9% limit on the amount of our equity securities that any one person or entity may own
2. 57Factors could lead to our securities being delisted from the NYSE American
3. 58Low trading volumes in the Trust’s listed securities may adversely affect holders’ ability to resell their securities at prices that are attractive, or at all
4. 59Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common shares could incur substantial losses
5. 60Our ability to issue preferred stock in the future could adversely affect the rights of existing holders of our equity securities
6. 61The issuance of additional equity securities may dilute existing equity holders
7. 62Our Preferred Stock is subject to interest rate risk
8. 63Inflation may negatively affect the value of our preferred stock and the dividends we pay
9. 64Our Series A Preferred Stock has not been rated and is junior to our existing and future debt, and the interests of holders of Series A Preferred Stock could be diluted by the issuance of additional parity-preferred securities and by other transactions
10. 65Holders of Series A Preferred Stock have limited voting rights
11. 66Dividends on our Series A Preferred Stock can be suspended and not paid on a current basis
12. 67We may issue additional Series A Preferred Stock at a discount to liquidation value or at a discount to the issuance value of shares of Series A Preferred Stock already issued
13. 68Ownership limitations may restrict change in control or business combination opportunities in which our stockholders might receive a premium for their shares
14. 69We cannot assure you that our common shares and our Series A Preferred Stock will remain listed on the NYSE American
15. 70The U.S. federal government’s approach towards cannabis laws may be subject to change or may not proceed as previously outlined
16. 71We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation, the loss of such assets would have a severe negative affect on our operations and liquidity

Risks Related to Regulation

1. 72Laws, regulations and the policies with respect to the enforcement of such laws and regulations affecting the cannabis industry in the United States are constantly changing, and we cannot predict the impact that future regulations may have on us
2. 73We may be subject to anti-money laundering laws and regulations in the United States
3. 74Litigation, complaints, enforcement actions and governmental inquiries could have a material adverse effect on our business, financial condition and results of operations
4. 75State and local regulation of cannabis may negatively impact our properties and the viability of tenant operations related thereto
5. 76We and our cannabis tenants may have difficulty accessing the service of banks, which may make it difficult for us and for them to operate