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Power REIT Message Board

  • jimgmcc jimgmcc Oct 14, 2011 5:52 PM Flag

    ok-what happened today?

    No news I can find, but up big on heavy volume. Obviously somebody knows something I don't ...

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    • Upon further reflection, I'll admit that last post was cynical as it relates to managements' intentions. I guess I've been burned too many times to stay optimistic when major changes are afoot.
      The only reason I've been posting here, is over the last several weeks I've been looking to get some exposure to either a major rail or a smaller one, and came across what appears to be some unbridled enthusiasm. (but for that matter, many of railraod message boards are quite optimistic, esp. the CSX and UNP boards)

      good luck to all here.

      • 4 Replies to andevenabs
      • Some posters apparently have been looking at PW as a way to get some exposure to the hot railroad industry.

        PW has not been a railroad since 1964. What PW was for years was the corporate shell of the P&WV Railroad. That shell existed solely to collect the lease payments for their property--$915000 a year paid by N&W/NSC---which was almost entirely distributed to the stockholders. In order to do this without taxation at the corporate level, PW changed its corporate structure to a real estate investment trust in 1967.

        With the decline of the steel industry around Pittsburgh and the loss of major interchange partners after Conrail and CSX was formed, NSC was losing it's shirt on the P&WV so it was subleased to the Wheeling & Lake Erie Railroad. W&LE operates the railroad. W&LE is privately held as far as I know. Any increased revenues from Marcellus or anything else accrue to W&LE, not PW or NSC. The lease amount is fixed and still being paid by Norfolk Southern, which has nothing to do with operating or maintaining the physical plant.

        I have owned PW several times over the last decade, for it's rock solid, though unchanging, dividend. As a REIT with only one fixed income source, the stock performed like a bond--going up when interest rates fell, going down when interest rates rose.

        Now things have changed. There are new bosses with a new business plan. Apparently they intend to buy other infrastructure and use the $915000 a year for their own investments in other real estate, instead of passing it through to the stockholders. While it could pay off in future, it's far riskier and still has nothing to do with the railroad business.

        If you want to own a railroad buy an operating company like NSC, UP, KSU or CSX. This company is twice removed from being a railroad and will not share in the traffic and earnings growth from railroading.

    • I forgot to add this, from the 10q
      "All of the Trust's railroad properties are leased to Norfolk and Western Railway Company, now known as Norfolk Southern Corporation (“NSC”), for 99 years, with unlimited renewals on the same terms. Cash rental is a fixed amount of $915,000 per year, with no provision for change during the term of the lease and any renewal periods. This cash rental is the only current source of funds. Although the lease provides for additional rentals to be recorded, these amounts do not increase cash flow or net income as they are charged to NSC's settlement account with no requirement for payment, except at termination or non renewal of the lease. Due to the indeterminate settlement date, these additional rental amounts are not recorded for financial reporting purposes.
      In comparing the third quarter of 2011 with the preceding second quarter of 2011 and the third quarter of 2010, revenues totaled $229,000, $229,000, and $229,000, respectively. Net income and income available for distribution was $174,000, $127,000 and $202,000 respectively."

      so whether they decide to re-incorporate or become part of something else is obviously their perogative. My best guess is, management no longer wants to pay out 90% of thier income to shareholders and wants to keep more for themselves.

    • Reoraganization, to be reincorproated in MD. The PW via WLE RR, is gaining more industrial development and business mainly in relation to Marcellus shale development.

8.65-0.25(-2.81%)Feb 27 4:04 PMEST

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