Power REIT (NYSE-A:PW) revealed that it has struck a debt financing facility with a commercial bank for an initial $20 million amount, and it said it plans to use the proceeds as a “growth vehicle” to acquire new greenhouse cultivation properties, as well as fund improvements at its existing ones.
"We are excited to enter into this financing arrangement," Power REIT (NYSE-A:PW) CEO David H Lesser said in a statement. "This debt facility culminates months of effort and reflects the close working relationship and trust that we have developed with the bank. This transaction allows us to continue our growth trajectory by deploying non-dilutive capital at a significant investment yield spread to the borrowing cost.”
Lesser said he believes the debt facility could be expanded as the company added “additional unencumbered assets to the borrowing base used to calculate the amount of funding the bank is prepared to advance."
The interest rate on the debt facility is fixed at 5.52% and has a 12-month draw period after which it converts to a five-year fully amortizing term loan. As consideration for the debt facility, Power REIT contributed a portion of its greenhouse real estate portfolio to a newly formed wholly-owned subsidiary that will serve as the borrower with the assets serving as collateral for the bank, said the company.
Power REIT’s remaining unencumbered greenhouse portfolio can be added to the collateral pool for the debt facility at a later date, which could allow for the expansion of the size of the debt facility, the firm noted.
Power REIT said its near-term financial strategy focuses on non-dilutive capital to fund its acquisition pipeline and property improvements within its existing portfolio.
“These attractive capital sources, combined with strategic portfolio expansions and improvements, should continue to drive earnings growth as it accretively deploys capital through its debt facility, and potential equity offerings through preferred stock issuance that would also have a significant investment yield spread relative to the cost of capital associated with issuing preferred stock,” said the company.
Portfolio update
Power REIT said its portfolio has 21 Controlled Environment Agriculture (CEA) properties totaling over 1 million square feet; 7 solar farm ground leases totaling 601 acres; and 112 miles of railroad property.
The Old Bethpage, New York-based specialized real estate investment trust owns real estate related to infrastructure assets for CEA facilities with a focus on greenhouses, renewable energy, and transportation.
Power REIT noted that greenhouses, provide “an extremely environmentally friendly solution,” consuming 70% less energy than indoor growing operations that don’t get sunlight. Greenhouses also use 90% less water than field grown plants, and Power REIT’s greenhouse properties operate without pesticides, said the company. The facilities cultivate medical cannabis.
The trust’s renewable energy assets consist of land and infrastructure associated with utility-scale solar farms, which produce nearly 50,000,000 kWh of electricity annually, which is enough to power nearly 4,600 homes on a carbon-free basis.
“Our transportation assets are comprised of land associated with a railroad, an environmentally friendly mode of bulk transportation,” added Power REIT.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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