Power REIT (NYSE-A:PW) (Power REIT (NYSE-A:PW), the specialized real estate investment trust (REIT), reported a 229% increase in net income in its third quarter, as its property acquisitions continue to drive impressive growth.
Net income for the three months to September 30 was around $1.6 million, compared to $506,000 in 3Q, 2020, on revenue of around $2.5 million, up 128% from $1.1 million seen in the year-ago period.
The quarter saw the group make its largest acquisition to date, namely a 556,000 square feet (sq ft) controlled environment agriculture (CEA) facility in Michigan - the largest cannabis cultivation in the state and indeed, in all of the US.
In total, the group's portfolio comprises 21 CEA properties totaling more than 1 million sq ft, seven solar farm ground leases totaling 601 acres, and 112 miles of railroad property.
CEO David Lesser told investors in a statement that Michigan was "quickly becoming one of the largest cannabis markets in the United States".
READ: Power REIT announces amendment of lease to fund phase 2 of greenhouse improvements in Michigan
"Power REIT (NYSE-A:PW)’s total capital commitment to this property is $25.5 million and the lease generates an unleveraged yield of 20% which is highly accretive given the yield and size of the transaction. This is demonstrative of our updated business plan focused on the sustainable cultivation of cannabis in greenhouse properties, which has been driving substantial growth since its commencement in mid-2019," he said.
The company boss noted that a key metric for such companies - the core funds from operations (FFO) per share - in the nine months to September 30 had increased around 94% year-over-year (for the three month period, it rose 77%)
"With the current stock price at 67.00 and a Forward Core FFO run rate of $3.68, Power REIT (NYSE-A:PW) trades at an 18.1x multiple," he added.
"We believe that our potential growth rate driven by acquisitions, combined with a relatively low Forward Core FFO multiple based only on existing assets and no additional acquisition activity, provides a compelling value proposition for investors."
Concurrent with the acquisition of the Michigan facility, Power REIT (NYSE-A:PW) entered into a 20-year, triple-net lease (MI Lease) with Marengo Cannabis LLC, a wholly-owned subsidiary of Millennium Investment and Acquisition Co. Inc, which was subsequently amended to provide funding for additional improvements to the property on the same economic terms as the original lease.
The MI Lease is expected to generate for Power REIT (NYSE-A:PW) straight-line annualized rent of around $5,1 million, which represents an unleveraged core FFO yield on invested capital of around 20%.
Power REIT (NYSE-A:PW) is a specialized real estate investment trust (REIT) that owns sustainable real estate related to infrastructure assets, including properties for controlled environment agriculture (greenhouses for the cultivation of food and cannabis), renewable energy, and transportation.
Contact the author at giles@proactiveinvestors.com