Power REIT has put most of its commercial cannabis and other agricultural greenhouses up for sale at a time of declining prices and sales in parts of the cannabis industry.
The real estate investment trust that also owns land leased to solar farms is warning about its financial health. The Old Bethpage, New York-based REIT said in a Securities and Exchange Commission filing substantial doubt exists over its ability to continue as a going concern, citing liabilities far exceeding assets, net losses, expected reduced revenue and increased expenses related to its greenhouse portfolio.
In Colorado, where the company owns most of its greenhouses, the industry has suffered lower demand. Colorado marijuana prices and sales dropped rapidly in the latter half of 2022 and all of 2023, after record-breaking sales during the COVID-19 pandemic, according to the Colorado Department of Revenue. Sales dropped to $1.53 billion last year from $1.77 billion in 2022 and $2.23 billion in 2021.
Power REIT reported revenue last year fell to $2.34 million from $8.52 million the year before. The REIT reported a loss of $6.78 million for 2023 after a profit of $1.83 million in 2022.
Conditions in the state imploded, David Lesser, CEO of Power REIT, said in an interview with CoStar News. About half of its total greenhouse operations serve the cannabis industry.
New Tomato Grower Sought
Power REIT’s largest greenhouse, a 1.1 million-square-foot facility in O’Neill, Nebraska, is used for cultivating tomatoes. During the third quarter of 2022, the tenant defaulted on the lease by not paying rent and has ceased operations at the property.
Unfortunately, the market for tomatoes shrank, and the tenant was unable to meet its financial obligations, according to the company.
The REIT has been actively exploring alternatives to secure a new tenant to put the facility back into operation, Lesser said. The company could also sell the property.
At the end of 2023, Power REIT had about $4.1 million in cash and loan liabilities totaling $15.5 million. The company’s debt includes a $14.4 million bank loan secured by the majority of its greenhouses.
“The greenhouse loan is in default, and we continue to try to work with the lender to establish a path forward,” the company said it in its filing.
Last month, the loan’s lender filed litigation seeking foreclosure and appointment of a receiver among other things, according to the filing.
“Unfortunately, this may lead to distressed sales, which would have a negative impact on our prospects,” the filing said. “However, the greenhouse loan is non-recourse to Power REIT, which means that in the event it cannot resolve issues with the lender, and they foreclose on the properties, Power REIT should be able to continue as a going concern albeit with a smaller portfolio of assets.”
At year-end 2023, Power REIT’s portfolio consisted of 112 miles of railroad infrastructure plus branch lines and related real estate, about 501 acres of land leased to a number of utility-scale solar power-generating projects, and 256 acres of land with about 2.16 million square feet of greenhouse space for processing cannabis.
It has listed cannabis greenhouse properties for sale in Desert Hot Springs, California; and in Walsenburg and Ordway, Colorado. It also owns a small greenhouse in Vinita, Oklahoma, that it's looking to sell, according to Lesser.
Earlier this year, the REIT sold a ground lease on which a solar farm operated in Salisbury, Massachusetts, for $1.2 million.