SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
POWER REIT
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
000-54560 45-3116572
(Commission File Number) (I.R.S. Employer Identification No.)
301 Winding Road, Old Bethpage, New York 11804
(Address of Principal Executive Offices) (Zip Code)
(212) 750-0373
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligations of the registrant under
any of the following provisions
[ ] Written communications pursuant to Rule 425 under the
Securities Act (17 CFT|R 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
SECTION 5: CORPORATE GOVERNANCE AND MANAGEMENT
Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
On May 21, 2013, the Board of Trustees of Power REIT ("Trust") elevated
Arun Mittal to the role of Executive Vice President. Previously, Mr.
Mittal was Vice President of Business Development. Mr. Mittal continues
to serve as the Trust's Corporate Secretary and Treasurer.
On May 21, 2013 (the Grant Date), the Trust's Compensation Committee
met and decided that in light of the growing complexity of the Trust,
increased burdens being placed on trustees and to better align trustee
compensation with the long-term growth of the Trust, annual trustee
fees of $2,400, should be eliminated and replaced with restricted stock
equity grants under the Trust's 2012 Equity Incentive Plan. These
grants are also designed to reduce the Trust's cash outflow.
On the Grant Date, the Trust awarded each trustee 400 shares of
restricted common shares with a grant date of May 21, 2013 and with
quarterly vesting on June 30, 2013, September 30, 2013, December 31,
2013 and March 31, 2014. During the vesting period, the shares are
eligible for dividends and voting rights. The form of the restricted
stock agreement was previously filed as Exhibit 10.2 to the Trust's
10-Q filed on August 15, 2012.
SECTION 8: OTHER EVENTS
Item 8.01
LITIGATION UPDATE
On May 17, 2013, Power REIT's ("Company") wholly owned subsidiary,
Pittsburgh & West Virginia Railroad ("PWV"), filed a motion to file
supplemental counterclaims against Norfolk Southern Corporation ("NSC")
(and its sub-lessee) to protect its property and its rights under the
lease agreement between PWV and NSC. These counterclaims were filed
after new facts emerged concerning significant and undisclosed
dispositions of PWV's property by Norfolk Southern Corporation and its
sub-lessee, Wheeling and Lake Erie Railroad ("WLE").
There can be no assurance related to the outcome of the litigation.
Shareholders are encouraged to read risk factors disclosed in the
Company's Annual Report filed on Form 10-K and other filings with
the Securities and Exchange Commission.
The Company has made available an overview of the current status
of PWV's litigation and new counterclaims on its website at
www.pwreit.com under Investor Relations > Shareholder Presentations.
The following is a summary of the contents of the presentation
that is posted on the Company's website:
[Slide 1: Cover Page]
[Slide 2: Forward Looking Statements]
Throughout this presentation, we may make "forward-looking statements"
as that term is defined in Section 27A of the Securities Act of 1933,
as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking
statements include the words "may," "would," "could," "likely,"
"estimate," "intend," "plan," "continue," "believe," "expect" or
"anticipate" and similar words, as well as statements relating to
our acquisition, development and expansion plans, objectives and
expectations, our liquidity projections, status and possible outcomes
of litigation and similar topics. Forward-looking statements are not
guarantees of future performance, and a variety of factors could cause
our actual results to differ materially from the anticipated or
expected results expressed in these forward-looking statements. Readers
are cautioned not to put undue reliance on any forward-looking
statements and are advised to consider factors listed under the
headings "Risk Factors" in the Power REIT's ("Company") Annual Report
on Form 10-K, as may be supplemented or amended by the Company's
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other
filings with the SEC. The Company assumes no obligation to update or
supplement forward-looking statements that become untrue because of
subsequent events, new information or otherwise.
Litigation Risk Factor: Litigation is inherently unpredictable and
expensive. There is no certainty with respect to predicting the
outcome and timing of events related to the litigation. All discussions
should be viewed as a description of the current status. Investors are
encouraged to review the case docket which is publicly available on the
Pacer System.
[Slide 3: Introduction]
Power REIT (NYSE MKT: PW) is a Maryland real estate investment trust
focused on the ownership of infrastructure assets within transportation
and energy.
Power REIT's wholly-owned subsidiary, Pittsburgh & West Virginia
Railroad ("PWV"), owns 112 miles of railroad track and related real
estate that is leased to Norfolk Southern Corporation ("NSC")
pursuant to a 99-year lease (the "Lease"). The Lease
went into effect in 1964 and NSC has unlimited renewal options on the same
terms (absent a breach by NSC). NSC has sub-leased PWV's property to
Wheeling & Lake Erie Railway ("WLE"). Pursuant to the Lease, PWV is
entitled to base cash rent of $915,000 plus additional rent, which
historically NSC has paid in the form of debt owed to PWV
[Slide 4: PWV Railroad Property]
PWV's property is attractive for many reasons. It represents a hard to
replace railroad right of way in Western Pennsylvania and Eastern Ohio.
There is significant rail volume growth related to Marcellus and Utica
Shale activity and there is potential oil and gas on PWV property.
[Slide 5: Litigation Background - Initial Complaint]
In early 2011, PWV's new management evaluated NSC's compliance with
the terms of the Lease and raised concerns with NSC. NSC (and its sub-
lessee) commenced litigation in December 2011 seeking, among other things,
declaratory judgment that the 99-year lease between PWV and NSC is not in
default. In response, PWV filed counterclaim alleging among other things,
1. NSC has defaulted on the Lease due to failure to pay legal fees pursuant
to the lease, failure to comply with PWV' rights to inspect book and records
pursuant to the terms of the lease and failure to pay additional rent
pursuant to the terms of the lease; and
2. PWV contends that NSC' indebtedness to PWV is due on demand. The
indebtedness is approximately $16.6 million according to NSC' accounting
or approximately $10.0 per share (not including interest).
During the pendency of the litigation, NSC continues to pay annual base
cash rent of $915,000, quarterly. Failure to pay the base cash rent would
be another default of the Lease.
[Slide 6: Litigation Background - New Facts Emerge]
In January 2013, PWV was contacted by a third-party oil and gas company
that had entered into an oil and gas agreement with respect to PWV's property
with Wheeling and Lake Erie Railway ("WLE), the sub-lessee of NSC. Despite
a request by PWV in 2012 to inspect the books and records of NSC (and WLE as
sub-lessee), NSC and WLE withheld information related to PWV's property.
After receiving the information from the third-party, PWV requested another
inspection of the books and records in March 2013. NSC and WLE ultimately
produced over 23,000 pages of documents. The documents were not produced
as part of the litigation discovery process. Documents provided evidence of
unauthorized deposition of property including oil and gas rights. Documents
include evidence of additional other agreements related to PWV property that
PWV believes were not accounted for pursuant to the terms of the
Lease.
[Slide 7: Litigation Background - Supplemental Counterclaims]
In response to the new facts, PWV filed a motion to supplement its
counterclaims on May 17, 2013, alleging, among other things, that:
1. NSC has committed fraud for concealing information for many years
related to PWV property
2. WLE has committed conversion by selling property owned by PWV (including
oil and gas owned by PWV)
3. NSC is required to pay PWV for numerous transactions that were previously
undisclosed and improperly accounted for
4. NSC is required to pay additional rent for PWV Railroad's litigation
expenses pursuant to the terms of the Lease
5. NSC is required to pay additional cash rent in cash (not in debt)
in the amount of $341,768 for 2012 pursuant to the terms of the Lease
[Slide 8: Litigation Background - Possible Range of Outcomes]
Based on the current status of the litigation, the PWV has multiple claims
against NSC (1):
Win Lose
Indebtedness Owed by NSC (2) $16,600,000
Improper Oil and Gas Transactions ? ?
Interest on Indebtedness ? ?
Additional Rent Corrections ? ?
Litigation Costs (3) ? 0
Higher Lease Rate after Default/Re-lease (4) ? 0
Value of NOL if Indebtedness Written Off (5) ? 5,810,000
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Per Share Value (6) $10.00+ ??
Upside to Current Share Px 96%+ ??
Footnotes to Chart:
(1)This chart is based on management assumptions. There can be no
assurance that PWV will prevail in its counterclaims or achieve the outcomes
presented in this chart. The chart is intended to provide a road map to
understanding elements of PWV's claims. See Power REIT's SEC filings for
additional risks and disclosure related to the litigation.
(2) As reported by NSC at the end of December 31, 2012
(3) PWV Railroad believes expenses are reimbursable under the Lease as
additional rent. Amounts are difficult to project with certainty
(4) If PWV succeeds in declaring a default, the railroad may be re-leased
at higher rates.
(5) Assumed valued at 35% of P&WV Railroad current tax basis of $16.6
million
(6) Based on basic shares outstanding as of December 31, 2012.
[Slide 9: Current Status]
PWV feels strongly about the merits of its case, which is being
pursued to protect PWV's right under the lease and to its property,
and believes that the litigation is in the best interest of PWV. PWV
has spent approximately $940,000 through the first quarter of 2013 on
the litigation; however, management believes PWV's litigation expenses
are reimbursable by NSC pursuant to certain lease provisions.
The litigation is inherently unpredictable, lengthy and expensive.
Shareholders are encouraged to read the case docket. The case is pending
in the Federal District Court in Pittsburgh and the docket is publicly
available on PACER.
[Slide 10: Appendix - Key Dates]
December 2011 NSC/WLE file for declaratory judgment
Q1 - Q2 2012 PWV and NSC/WLE file amended claims
January 2013 Fact Discovery completed
April 2013 Expert witness report exchanged between the parties
May 17, 2013 PWV Railroad files amended counterclaims
July 8, 2013* Deadline for expert witness depositions
July 31, 2013* Deadline to file for Summary Judgment
Early 2014* Trial (if necessary)
* Litigation is inherently unpredictable and the schedule is subject
to change
TEMPORARY SUSPENSION OF DIVIDEND
In light of the continued litigation expenses that are being incurred
by PWV, the Board of Trustees is temporarily suspending the Company's
regular quarterly dividend. It is the Board's intention to reinstate
regular quarterly dividends when the cash flow requirements of the
litigation diminish to a level that allows resumption of the dividend.
In temporarily suspending regular quarterly dividends, the Board determined
that conserving cash is in the best interest of the Company versus the
alternative of borrowing or raising equity to fund dividend payments.
It is the Company's intention to continue to qualify for real estate
investment trust (REIT) status and the temporary suspension of regular
quarterly dividends does not impact the Company's REIT status due to
reduced taxable income as a result of the litigation expenses. The Company
will continue to evaluate its position with respect to dividends and will
publicly announce any changes to its dividend policy as warranted.
UPDATE ON REFINANCING OF BRIDGE LOAN
The Company has entered into a term sheet to refinance the previously
announced bridge loan from Hudson Bay Partners, LP ("HBP"). The Company
currently believes that this refinancing will be completed in the second
quarter of 2013 and prior to the increase in interest rate that was part
of the HBP bridge loan. The Company believes the interest rate on the
refinancing will be at or below the initial rate of the HBP bridge loan.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
Date: May 21, 2013
POWER REIT
By: /s/ David H. Lesser
Name: David H. Lesser
Title: CEO and Chairman