Todd Merkle, Managing Principal of Cascadilla Capital Partners, LLC, and owner of 21,000 shares of Power REIT (the Company) today released a letter to Power REITs Board of Trustees urging the Company to pursue a sale or liquidation of its assets. The letter, which can be found here, also addressed the following:
- Since David Lesser became Chairman of the Board of Power REIT on November 30, 2010:
- The Companys stock price has declined by approximately 45% and its dividend has been eliminated, while the total return on the S&P 500 has been over 162%;
- Power REIT incurred approximately $3.7 million in litigation expenses (over $2.00 per share) related to the reckless and failed Norfolk Southern litigation, the bulk of which was paid to Morrison Cohen, the law firm where Mr. Lessers spouse is a partner and Chair of the Business Litigation Department;
- The Companys share count has increased by approximately 24%, including 189,400 shares of Restricted Stock issued to Mr. Lesser;
- In 2015, in the wake of Power REITs loss in the Norfolk Southern litigation, Mr. Lesser and Power REIT Board member Patrick Haynes launched Intellistay Hospitality. Intellistay Hospitality has acquired four hotels since that time while Power REIT has been totally inactive. Yet Power REIT has compensated Mr. Lesser with approximately $1.5 million worth of Restricted Stock during this period of inactivity;
- Notwithstanding Mr. Lesser and Mr. Haynes relationship as business partners in Intellistay Hospitality, Mr. Haynes has remained one of two members of Power REITs Compensation Committee, raising serious questions about Mr. Haynes independence and material conflicts of interest.
- Power REIT is unlikely to ever trade at, or near, net asset value due to (i) managements track record of value destruction, (ii) the appearance of material conflicts of interest (iii) the Companys small market capitalization and (iv) the exorbitant costs of remaining a public company;
- A sale or liquidation of Power REITs four high quality assets and approximately $2 million cash balance would likely generate proceeds to shareholders of $11.00-$12.00 per share, nearly double recent trading prices, and enable shareholders to recover a significant portion of the losses that have been incurred under Mr. Lessers watch.
For these reasons, the letter strongly encourages Power REITs Board to immediately commence a process to sell or liquidate the Company in order to maximize value for shareholders.
About Cascadilla Capital Partners
Cascadilla Capital Partners is a privately held real estate investment company established to invest opportunistically across all sectors, primarily in the New England area. Its current emphasis is on cash flow oriented transactions up to $10 million, direct or through joint-venture, offering outsized risk-adjusted returns with the use of modest leverage.
Cascadilla Capital Partners, LLC