10-K: Power REIT Faces Liquidity Crunch, Sheds Cannabis Assets

Power REIT reports significant net losses and a going concern warning, driven by underperforming cannabis greenhouse assets, as it pursues asset sales and strategic alternatives.

Summary

• Power REIT reported a net loss attributable to common shareholders of $2.8 million for FY2025, a significant improvement from $25.4 million in FY2024.
• Revenue decreased to $2.01 million in FY2025 from $3.05 million in FY2024, primarily due to reduced rental income from related parties and other rental income.
• The company resolved issues with its Greenhouse Loan lender on April 11, 2025, by providing deeds-in-lieu of foreclosure for properties in Michigan and Nebraska, resulting in a non-cash gain of approximately $1.09 million and relieving ongoing maintenance costs.
• The Greenhouse Portfolio continues to perform poorly with most properties vacant or occupied by defaulting tenants, leading to significant impairment charges.
• Cash, cash equivalents, and restricted cash totaled $2.24 million as of December 31, 2025, a slight increase of $3,720 from December 31, 2024.
• The company is in arrears on property taxes for certain Greenhouse Portfolio properties, totaling approximately $1.33 million, which could lead to tax foreclosure actions starting in the first quarter of 2026.
• Power REIT has identified a material weakness in its internal controls related to accounting for complex transactions (specifically, the classification of Series A Preferred Stock).
• The company is actively pursuing a strategy to monetize its Greenhouse Portfolio through sales and re-leasing, and is exploring broader strategic alternatives, including potential mergers or investments in distressed real estate situations.
• Dividends on Series A Preferred Stock have not been declared since Q4 2022, with cumulative undeclared dividends totaling approximately $2.12 million as of December 31, 2025.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a highly concerning report, primarily due to the "going concern" warning, persistent net losses, significant revenue decline, and severe underperformance of the core cannabis portfolio, despite some expense reductions and a non-cash gain from debt extinguishment.

Positives

• Net loss attributable to common shareholders significantly decreased from $25.4 million in FY2024 to $2.8 million in FY2025.
• Resolution of the Greenhouse Loan issues through deeds-in-lieu of foreclosure for Michigan and Nebraska properties resulted in a non-cash gain of approximately $1.09 million and eliminated associated debt and ongoing maintenance costs.
• Cash, cash equivalents, and restricted cash slightly increased by $3,720 to $2.24 million as of December 31, 2025.
• Expenses decreased by $22.7 million, primarily due to a reduction in impairment expense/allowance for receivable ($18.8 million decrease) and interest expense ($1.8 million decrease).
• The company generated approximately $239,000 of cash from debt service related to seller financing in 2025.
• The company has a net operating loss of $41.0 million as of December 31, 2024, which may reduce or eliminate REIT distribution requirements.

Negatives

• Incurred a net loss attributable to common shareholders of $2.8 million for FY2025.
• Revenue decreased by over $1 million from $3.05 million in FY2024 to $2.01 million in FY2025.
• The Greenhouse Portfolio has performed poorly, with most properties vacant or occupied by tenants in default, leading to a deterioration of value.
• The company is in arrears on property taxes for certain Greenhouse Portfolio properties, totaling approximately $1.33 million, risking tax foreclosure actions in Q1 2026.
• Substantial doubt exists about the company's ability to continue as a going concern for the next twelve months.
• Dividends on Series A Preferred Stock have not been declared since Q4 2022, with cumulative undeclared dividends of approximately $2.12 million.
• The company has substantial debt ($20.42 million long-term debt as of Dec 31, 2025) and preferred shares outstanding with substantial liquidation preference.
• Identified a material weakness in internal controls related to accounting for complex transactions (Series A Preferred Stock classification).
• The investment portfolio is highly concentrated, with 93% of rental and direct financing lease income from two tenants (Norfolk Southern Railway and Regulus Solar LLC) in FY2025.
• The company's ability to raise additional capital through its at-the-market offering is limited until the market value of voting securities held by non-affiliates reaches $75 million.

Risks

• Incurred losses and may be unable to generate sufficient revenue to cover expenses or generate net income.
• May need to raise additional capital or sell additional properties to fund operations in order to continue as a going concern.
• May continue to be restricted from paying dividends and could default on secured loans.
• Substantial debt and preferred shares outstanding with substantial liquidation preference could adversely affect overall financial health and operating flexibility.
• Inability to comply with the covenants in loan agreements might adversely affect the company.
• Secured indebtedness exposes the company to the possibility of foreclosure.
• Arrears on property taxes for certain Greenhouse Portfolio properties expose the company to the possibility of foreclosure.
• Business and operating results may be adversely impacted by changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond control.
• A significant portion of the Greenhouse Portfolio is vacant or has leases in default, which can result in a deterioration of value.
• Tenants have limited operating histories and may be more susceptible to payment and other lease defaults.
• Business activities, and the business activities of cannabis tenants, are currently illegal under U.S. federal law.
• Business could be negatively affected if the company fails to grow or fails to manage growth effectively.
• Even if the business strategy is executed, that strategy may not be successful.
• May be unable to identify and complete acquisitions of real property assets.
• Acquisition of properties as-is or with limited recourse to the prior owner significantly increases the risk of an investment.
• Will need additional capital to make new investments.
• Investment portfolio is, and in the future may continue to be, concentrated in a relatively few numbers of investments, industries and lessees.
• Property portfolio has a high concentration of properties located in certain states, exposing it to catastrophic weather and other natural events.
• Operating results may be negatively affected by potential development and construction delays and cost overruns.
• A failure to maintain properties can lead to deterioration of value.
• May not be able to timely sell cannabis-related properties at attractive values, or at all, and the transition could adversely affect results and financial condition.
• A perceived difficulty of operating special purpose properties may affect profitability and property values.
• The 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.
• The illiquidity of real estate investments might delay or prevent selling properties that no longer meet strategic and financial criteria.
• Many factors, including changes in interest rates and the negative perceptions of the cannabis sector generally, can have an adverse effect on the value of assets, access to debt financing and the trading price of securities.
• Individual taxpayers might perceive REIT securities as less desirable relative to the securities of other corporations because of the lower tax rate on certain dividends.
• The issuance of securities with claims that are senior to those of common shares, including Series A Preferred Stock, may limit or prevent dividend payments on common shares.
• Dependent upon Mr. David H. Lesser for success, and his other business interests may conflict with the Trust's interests.
• Management team may own interests in lessees or other counterparties, and may thereby have interests that conflict or appear to conflict with the Trust's interests.
• Lessees and many future lessees will likely be structured as special purpose vehicles (SPVs), and therefore their ability to pay is expected to be dependent solely on the revenues of a specific project, without additional credit support.
• Some losses related to real property assets may not be covered by insurance or indemnified by lessees, and so could adversely affect the company.
• Discovery of previously undetected environmentally hazardous conditions may adversely affect operating results.
• Legislative, regulatory, accounting or tax rules, and any changes to them or actions brought to enforce them, could adversely affect the company.
• Quarterly results may fluctuate.
• May not be able to sell real property assets when desired, and may be forced to borrow funds or sell assets during unfavorable market conditions to maintain REIT status.
• If an investment initially believed to be a real property asset is later deemed not to have been a real property asset, the company could lose REIT status or be precluded from investing according to its current business plan.
• Failure to remain qualified as a REIT would subject the company to U.S. federal income tax and applicable state and local taxes, reducing cash available for distribution and adversely affecting common share price.
• If deemed to be subject to Section 280E of the Code because of the business activities of tenants, the resulting disallowance of tax deductions could cause the company to incur U.S. federal income tax and jeopardize REIT status.
• Legislative, regulatory or administrative changes could adversely affect the company or stockholders.
• If deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical to continue business as contemplated and could have a material adverse effect on the price of securities.
• Net leases may not result in fair market lease rates over time.
• If a sale-leaseback transaction is recharacterized in a lessee's bankruptcy proceeding, financial condition could be adversely affected.
• Provisions of the Maryland General Corporation Law and Declaration of Trust and Bylaws could deter takeover attempts and have an adverse impact on the price of common shares.
• Business and operations would suffer in the event of system failures.
• Increasingly dependent on information technology, and systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
• Identified material weaknesses in internal controls, and cannot provide assurances that these material weaknesses will be effectively remediated or that additional weaknesses will not occur in the future.
• Failure to maintain an effective system of internal control over financial reporting may result in a loss of confidence in financial and other public reporting.
• Each property in the portfolio could be considered a special purpose use asset which may impact market value and the ability to lease to generate income.
• Real estate investments include greenhouse properties suitable for the cultivation of cannabis, and a decrease in demand for such facilities has and could continue to materially and adversely affect business.
• Focus on non-traditional real estate asset classes including CEA, alternative energy and transportation infrastructure sectors will subject the company to more risks than if broadly diversified.
• Renewable energy resources are complex, and investments in them rely on long-term projections of resource and equipment availability and capital and operating costs; if projections are incorrect, losses may be suffered.
• Infrastructure assets may be subject to the risk of fluctuations in commodity prices and in the supply of and demand for infrastructure consumption.
• Infrastructure investments are subject to obsolescence risks.
• Renewable energy investments may be adversely affected by variations in weather patterns.
• Investments in renewable energy may be dependent on equipment or manufacturers that have limited operating histories or financial or other challenges.
• Portfolio of marketable securities is subject to market, interest and credit risk that may reduce its value.
• There is a 9.9% limit on the amount of equity securities that any one person or entity may own.
• Cannot assure that common shares and Series A Preferred Stock will remain listed on the NYSE American.
• Low trading volumes in listed securities may adversely affect holders' ability to resell their securities at prices that are attractive, or at all.
• Stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in common shares could incur substantial losses.
• Ability to issue preferred stock in the future could adversely affect the rights of existing holders of equity securities.
• The issuance of additional equity securities may dilute existing equity holders.
• Series A Preferred Stock has not been rated and is junior to 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.
• Holders of Series A Preferred Stock have limited voting rights.
• Dividends on Series A Preferred Stock can be suspended and not paid on a current basis.
• 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.
• The change of control conversion and delisting conversion features of Series A Preferred Stock may not adequately compensate a holder upon a Change of Control or Delisting Event.
• Ownership limitations may restrict change in control or business combination opportunities in which stockholders might receive a premium for their shares.
• Series A Preferred Stock is subject to interest rate risk.
• Inflation may negatively affect the value of Series A Preferred Stock and the dividends paid.
• The U.S. federal government's approach towards cannabis laws may be subject to change or may not proceed as previously outlined.
• Laws, 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 cannot predict the impact that future regulations may have on the company.
• May be subject to anti-money laundering laws and regulations in the United States.
• Litigation, complaints, enforcement actions and governmental inquiries could have a material adverse effect on business, financial condition and results of operations.

Future Outlook

The company intends to focus on maximizing the value of its remaining Greenhouse Portfolio properties by entering into new leases and selling properties based on market conditions. It is also exploring strategic alternatives that may not include real estate investments to increase shareholder value, and is looking to selectively raise capital through debt or equity to provide liquidity. The company believes the current environment of distressed properties due to economic downturns, shifting demand, and rising interest rates can create potential opportunities.

Management Comments

• "We are currently focused on monetizing the Greenhouse Portfolio, including focusing on selling and or re-leasing the vacant properties and increasing cash flow from the occupied properties."
• "We intend to continue to focus on maximizing the value of the remaining Greenhouse Portfolio properties. This will include entering into new leases and selling properties based on market conditions."
• "We believe the current environment can create potential opportunities for Power REIT."
• "We are focused on special opportunities in the form of investing in distressed situations including debt and other types of secured interests in real estate, distressed properties and real estate related companies."
• "In addition, the Trust is exploring strategic alternatives that may not include real estate investments in an effort to increase shareholder value."
• "As part of moving Power REIT forward, we are looking to selectively raise capital in the form of debt or equity to provide liquidity. However, the Trust cannot predict, with certainty, the outcome of these actions to generate liquidity."
• "Our primary objective is to maximize the long-term value for our shareholders."
• "We believe that our existing properties have, and other properties that we acquire in the future will have, sources of water, including wells and/or surface water that provide sufficient amounts of water necessary for the current operations at each location."
• "We believe that our success depends on our ability to retain our key personnel, primarily David Lesser, our Chairman and Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer."

Industry Context

StockSavvy.ai notes that Power REIT's challenges in its Greenhouse Portfolio reflect broader headwinds in the regulated cannabis industry during 2023 and 2024, characterized by dramatic price compression and cultivation company shutdowns. The company's shift towards monetizing these distressed assets and exploring broader distressed real estate opportunities aligns with a market experiencing a wave of distressed properties due to economic downturns, shifting post-COVID demand, and rising interest rates. The federal government's evolving stance on cannabis, including the Trump Executive Order directing reclassification to Schedule III, introduces significant regulatory uncertainty that could impact tenant operations, demand for cannabis properties, and the creditworthiness of tenants, potentially accelerating the entry of larger, well-capitalized players. The company's core railroad and solar assets provide a more stable revenue base, but the cannabis segment's volatility remains a significant drag.

Comparison to Industry Standards

• The company's focus on CEA greenhouses for cannabis cultivation, while initially seen as a competitive advantage due to lower energy and water usage compared to industrial facilities, has underperformed significantly. This contrasts with the growth seen in more established, well-capitalized cannabis REITs like Innovative Industrial Properties, Inc. (IIPR), which has historically maintained higher occupancy and rent collection rates, though it too has faced some tenant challenges.
• The railroad property leased to Norfolk Southern Railway (NSC), an investment-grade rated entity (BBB+ by S&P Global Ratings), provides a stable, long-term revenue stream, which is a standard characteristic of high-quality infrastructure REITs.
• The solar farm land lease, with annual rent growth, is also typical of stable renewable energy infrastructure investments, though the company's overall exposure to this segment is limited compared to specialized renewable energy REITs.
• The significant vacancy and default rates in Power REIT's cannabis portfolio are considerably worse than industry averages for diversified REITs and even for many cannabis-focused REITs, indicating severe operational and market-specific challenges.

Management Changes

Corporate Governance

Legal Proceedings

• On August 5, 2025, Ten Tree Properties, LLC initiated a complaint in the Superior Court of California for the County of Riverside against Power REIT for Equitable Indemnity, Unjust Enrichment, Declaratory Relief, Constructive Trust/Equitable Lien, and Quantum Meruit, related to purported utility charges. This case was dismissed on November 17, 2025.
• On February 6, 2025, PW CO CanRE JKL LLC received a Final Order and Entry of Judgement in its favor against a former tenant and guarantors for $10,988,749.
• On September 11, 2024, PW CO CanRE Cloud Nine LLC received a Final Order and Entry of Judgement in its favor for approximately $10.9 million.

Related Party Transactions

• Power REIT had a relationship with subsidiaries of Millennium Sustainable Ventures Corp. (MILC), where David H. Lesser (Power REIT's Chairman and CEO) is also Chairman and CEO of MILC.
• MILC affiliates established cannabis and food crop cultivation projects and entered into leases related to Power REIT's Oklahoma, Michigan, and Nebraska properties.
• MILC was also a lender to a tenant of one of Power REIT's Colorado properties.
• As of December 31, 2025, these properties are not operational, and tenants have defaulted and vacated.
• Total rental income from MILC-affiliated tenants was $0 for FY2025 and $785,000 for FY2024 (from Michigan property, based on security deposit recognition).
• The independent trustees approved these arrangements, determining them to be fair and reasonable and in the interest of the Trust.

Stakeholder Impact

• Shareholders face significant risks due to the "going concern" warning, recurring net losses, and suspension of preferred stock dividends, potentially leading to further erosion of value and dilution from future capital raises.
• Creditors are exposed to elevated risk given the substantial debt, preferred share liquidation preference, and property tax arrears, as evidenced by past foreclosure actions.
• Tenants, particularly in the cannabis sector, are experiencing severe financial distress, leading to widespread defaults, vacancies, and potential evictions, impacting their business continuity.
• Employees (limited to CEO and CAO) are subject to the company's overall financial health and strategic shifts, with a high reliance on key personnel.
• Regulatory authorities maintain oversight, especially concerning cannabis-related activities and the identified material weaknesses in internal controls, which could lead to further scrutiny or penalties.

Next Steps

• Focus on maximizing value from the remaining Greenhouse Portfolio properties by entering into new leases and selling properties.
• Improve cash collections from existing tenants.
• Explore strategic alternatives, potentially including non-real estate investments, to increase shareholder value.
• Selectively raise capital through debt or equity to provide liquidity.
• Remediate the identified material weakness in internal controls related to accounting for complex transactions.
• Address property tax arrears to avoid foreclosure actions in Q1 2026.
• Evaluate potential to collect against defendants in litigation where judgments have been received.

Key Dates

Recommendation

The "going concern" warning, coupled with recurring net losses, a significant decline in revenue, and the severe underperformance of the core cannabis portfolio, indicates substantial financial distress and operational challenges. The suspension of preferred stock dividends, property tax arrears, and identified material weaknesses in internal controls further highlight the company's precarious position. While asset sales and debt extinguishment have provided some relief, the long-term viability remains highly uncertain, making the stock a high-risk investment with significant downside potential.

Keywords

REIT, Real Estate Investment Trust, Cannabis Real Estate, Greenhouse Properties, Solar Farm, Railroad Infrastructure, Distressed Assets, Asset Monetization, SEC Filing, 10-K, Financial Performance, Liquidity, Going Concern, Preferred Stock, Debt Default, Property Taxes, Internal Controls, Corporate Governance, David H. Lesser, NYSE American