Recently, I came across Power REIT (NYSE:PW), a small cap diversified REIT that focuses on growing markets. Although the company's share price has risen significantly over the past year, I think that the company is making moves into the right markets. However, there are some risks regarding legalization and competition to take into account. Nonetheless, in my opinion the shares are undervalued by around 6%.
Source: Company website
Company description
As most readers will probably be unfamiliar with PW, I will start with giving some background of the company and its markets. PW is a holding company and has several wholly-owned subsidiaries. PW's history starts with the Pittsburgh & West Virginia Railroad. The P&WV Railroad was qualified as the first infrastructure REIT in the late 1960's. In the early 10's the company also decided to buy some land for solar panels. The company owns around 600 acres of land that is leased to solar projects with 107MW of utility scale. However, since 2019 the company has a new investment focus: agricultural real estate. The company is not focused on just any agricultural real estate, the company is focusing on Controlled Environment Agriculture (CEA). CEA is a method of growing plants by creating an optimized environment. The company owns CEAs that are focused on food or cannabis.
Railroads
Currently the smallest market of the company, with around 12% of gross rent (of the properties owned at the end of the third quarter). The company has a total of 112 miles of railroad, which is leased to a subsidiary of Norfolk Southern Railway (NSC). The lease is for a term of 99 years and started in 1964. The tracks are leased on a triple net basis which means that all the costs are for the renter and that PW does not have
