As
filed with the Securities and Exchange Commission on June 4, 2021
Registration
No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Power
REIT
(Exact
Name of Registrant as Specified in Its Charter)
Maryland
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|
45-3116572
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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|
(I.R.S.
Employer
Identification
Number)
|
301
Winding Road
Old
Bethpage, New York 11804
(212)
750-0371
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
David
H. Lesser
Chairman
and Chief Executive Officer
Power
REIT
301
Winding Road
Old
Bethpage, New York 11804
(212)
750-0371
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code of Agent for Service)
With
copies to:
Leslie
Marlow, Esq.
Hank
Gracin, Esq.
Patrick
J. Egan, Esq.
Gracin
& Marlow, LLP
The
Chrysler Building
405
Lexington Avenue, 26th Floor
New
York, New York 10174
(212)
907-6457
Approximate
date of commencement of proposed sale to the public: From time to time after the effective date of this registration statement.
If
the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check
the following box. [ ]
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following
box.[X]
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering.[ ]
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]
If
this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective
upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.[ ]
If
this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective
upon filing with the Commission pursuant to Rule 413(b) under the Securities Act, check the following box. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer [ ]
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|
Accelerated
filer [ ]
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|
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|
Non-accelerated
filer [X]
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|
Smaller
reporting company [X]
Emerging
growth company [ ]
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [ ]
CALCULATION
OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
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|
Amount
to be
Registered
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|
|
Proposed Maximum
Offering Price
Per Unit
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|
|
Proposed Maximum
Aggregate Offering
Price
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|
|
Amount of
Registration
Fee (1)
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|
Common shares, $0.001 par value
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|
|
(2
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)
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|
|
(3
|
)
|
|
|
(3
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)
|
|
|
—
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|
Preferred shares, $0.001 par value
|
|
|
(2
|
)
|
|
|
(3
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)
|
|
|
(3
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)
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|
|
—
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|
Rights
|
|
|
(2
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)
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|
|
(3
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)
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|
|
(3
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)
|
|
|
—
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|
Warrants
|
|
|
(2
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)
|
|
|
(3
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)
|
|
|
(3
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)
|
|
|
—
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|
Units
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|
|
|
|
|
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|
|
|
|
|
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|
|
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Total
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(2
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)
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$
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100,000,000
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$
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10,910
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|
(1)
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Calculated
pursuant to Rule 457(o) under the Securities Act of 1933, as amended, or the Securities Act.
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|
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(2)
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We
are registering hereunder such currently undetermined amounts of Common Shares, $0.001 par value, Preferred Shares, Rights, Warrants
and/or Units of Power REIT (the “Registrant”) as may from time to time be offered or sold at currently undetermined prices
in offerings permitted under, among other applicable provisions, Form S-3 and Rule 415(a)(1) under the Securities Act, including
without limitation securities to be offered or sold in eligible secondary offerings by or on behalf of persons other than the Registrant
and, subject to any applicable aggregate market value caps, securities to be issued upon the exercise or conversion of other securities
(including securities registered hereunder) that provide for such exercise or conversion and Common Shares to be offered and sold
on an immediate, continued or delayed basis by or on behalf of the Registrant. The maximum aggregate offering price of all securities
registered hereunder shall not exceed $100,000,000. Any securities registered hereunder may be sold either separately or in combination
with one or more of the other securities registered hereunder, in the form of Units or otherwise. Pursuant to Rule 416(a) promulgated
under the Securities Act, this registration statement also covers an indeterminate number of securities that may become issuable
as a result of stock splits, stock dividends or similar transactions relating to the securities registered hereunder.
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(3)
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The
proposed maximum aggregate offering price per class of security will be determined from time to time by the Registrant in connection
with the issuance by the Registrant of the securities registered hereunder and is not specified as to each class of security pursuant
to General Instruction II.D. of Form S-3 under the Securities Act.
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The
Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject
to completion, dated June 4, 2021
PROSPECTUS
POWER
REIT
$100,000,000
Common
Shares
Preferred
Shares
Rights
Warrants
Units
We
may from time to time offer one or more of our common shares, preferred shares, rights and warrants, either separately or in combination
with one or more of the other securities, in the form of units or otherwise, up to an aggregate of $100,000,000. We may offer one or
more of these securities at a time, in one or more series or classes, and in amounts, at prices and on terms that will be determined
prior to the offering of the securities.
We
will provide specific terms of these securities in one or more supplements to this prospectus. The prospectus supplements will also describe
the specific manner in which we will offer these securities and may also supplement, update or amend information contained in this prospectus.
You should read this prospectus and any related prospectus supplement carefully before you invest in our securities. This prospectus
may not be used to offer and sell our securities unless accompanied by a prospectus supplement describing the method and terms of the
offering of those securities being offered.
We
may sell the securities directly, through underwriters, dealers or agents as designated from time to time, or through a combination of
these methods. We reserve the sole right to accept, and together with any underwriters, dealers and agents, reserve the right to reject,
in whole or in part, any proposed purchase of securities. The names of any underwriters, dealers or agents that are included in a sale
of securities to you, and any applicable commissions or discounts, will be stated in the accompanying prospectus supplement. In addition,
the underwriters, if any, may over-allot a portion of the securities.
Our
common shares are listed on the NYSE American under the symbol “PW.” On June 3, 2021, the last reported sale price of our
common shares on the NYSE American was $44.49. Our 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series
A Preferred Stock”) is listed on the NYSE American under the symbol “PW PRA.” On June 3, 2021, the last reported sale
price of our Series Preferred Stock on the NYSE American was $27.1699.
Before
you make your investment decision, we urge you to carefully read this prospectus, the accompanying prospectus supplement and any documents
we incorporate by reference in this prospectus or in the prospectus supplement, all of which may contain information material to your
decision.
BECAUSE
WE ARE A REAL ESTATE INVESTMENT TRUST, THERE ARE RESTRICTIONS ON THE TOTAL AMOUNT OF OUR CAPITAL STOCK THAT YOU MAY OWN AND ON TRANSFERS
OF OUR CAPITAL STOCK THAT MAY IMPLICATE THESE RESTRICTIONS. SEE “DESCRIPTION OF THE SECURITIES WE MAY OFFER.”
Investing
in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the
heading “Risk Factors” contained in this prospectus, the applicable prospectus supplement and in
any free writing prospectuses we have authorized for use in connection with a specific offering, and under similar headings in the
other documents that are incorporated by reference into this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is , 2021
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 (the “registration statement”) filed with the Securities and Exchange
Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, any combination
of the securities described in this prospectus may be offered and sold from time to time in one or more offerings. This prospectus provides
you with a general description of the securities that may be offered. Each time securities are offered, we will provide a prospectus
supplement that will contain specific information about the terms of that offering and those securities. The prospectus supplement and
information incorporated by reference in the prospectus supplement may also add, update or change information contained in this prospectus
or incorporated by reference in this prospectus and, accordingly, to the extent inconsistent, information in the prospectus supplement
or incorporated by reference in the prospectus supplement will supersede information in this prospectus or incorporated by reference
in this prospectus. You should read this prospectus, the applicable prospectus supplement and the information incorporated by reference
in this prospectus and the prospectus supplement before making an investment decision. See “Documents Incorporated by Reference”
and “Where You Can Find More Information.”
THIS
PROSPECTUS MAY NOT BE USED TO CONSUMMATE A SALE OF SECURITIES UNLESS IT IS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
Neither
we, nor any agent, underwriter or dealer has authorized any person to give any information or to make any representation other than those
contained or incorporated by reference in this prospectus, any applicable prospectus supplement or any related free writing prospectus
prepared by or on behalf of us or to which we have referred you. This prospectus, any applicable supplement to this prospectus or any
related free writing prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities other than
the registered securities to which they relate, nor does this prospectus, any applicable supplement to this prospectus or any related
free writing prospectus constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person
to whom it is unlawful to make such offer or solicitation in such jurisdiction.
You
should not assume that the information contained in this prospectus, any applicable prospectus supplement or any related free writing
prospectus is accurate on any date subsequent to the date set forth on the front of the document or that any information we have incorporated
by reference is correct on any date subsequent to the date of the document incorporated by reference, even though this prospectus, any
applicable prospectus supplement or any related free writing prospectus is delivered, or securities are sold, on a later date.
You
should not consider any information in this prospectus or the accompanying prospectus supplement, or incorporated by reference in either
of them, to be investment, legal or tax advice. We encourage you to consult your own legal counsel, accountant and other advisors for
investment, legal, tax and related advice regarding an investment in our securities.
Unless
stated otherwise or unless the context requires otherwise, “Power REIT,” “Company,” “Trust,” “we,”
“our” and “us” refer to Power REIT, a Maryland real estate investment trust, and its consolidated subsidiaries,
including our operating partnership, if any.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Throughout
this prospectus, the accompanying prospectus supplement and the documents incorporated by reference in them, we 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
and similar topics. These forward-looking statements generally relate to our plans, objectives, prospects and expectations for future
operations and results and are based upon what we consider to be reasonable future estimates. Although we believe that our plans, objectives,
prospects and expectations reflected in, or suggested by, such forward-looking statements are reasonable at the present time, we may
not achieve them or we may modify them from time to time. Furthermore, there is no assurance that any positive trends suggested or referred
to in such statements will continue. 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.
Many of these factors are beyond our ability to control or predict, and readers are cautioned not to put undue reliance on any forward-looking
statements. You should read this prospectus, the accompanying prospectus supplement and the information incorporated into them by reference
thoroughly with the understanding that actual future results may be materially different from what we expect. In particular, you should
read the “Risk Factors” section of this prospectus for information regarding risk factors that could affect our results.
The
following list, which is not intended to be an all-encompassing list of risks and uncertainties affecting us, summarizes several factors
that could cause our actual results to differ materially from those anticipated or expected in these forward-looking statements:
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general
economic conditions in markets in which we conduct business;
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business
conditions in the energy and transportation industries;
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the
regulatory environment;
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fluctuations
in interest rates;
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exposure
to state regulation of cannabis companies acting in the capacity as tenants;
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the
performance of existing investments or new investments that we may make;
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our
ability to source acquisitions at valuations favorable to us;
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our
ability to maintain our REIT status; and
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other
material items.
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We
undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise,
except as may be required by law. You are advised to consult any further disclosures we make on related subjects in our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the SEC. Also note that we
provide cautionary discussion of risks, uncertainties and assumptions relevant to our business in our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those incorporated by reference in this prospectus
and the accompanying prospectus supplement.
The
risks and uncertainties referred to above are factors that, individually or in the aggregate, management believes could cause our actual
results to differ materially from expected or historical results. We note these factors for investors as permitted by the Private Securities
Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you
should not consider such disclosures to be a complete discussion of all potential risks or uncertainties.
PROSPECTUS
SUMMARY
The
following summary provides an overview of certain information about Power REIT and its securities and may not contain all the information
important to you. This summary is qualified in its entirety by, and should be read together with, the information contained in other
parts of this prospectus, the accompanying prospectus supplement and the information we incorporate by reference. You should read this
entire prospectus, the accompanying prospectus supplement and the information we incorporate by reference carefully before making a decision
about whether to invest in our securities.
Overview
We
are a publicly traded Maryland-domiciled real estate investment trust (a “REIT”) that owns a portfolio of real estate assets
related to transportation, energy infrastructure and Controlled Environment Agriculture (CEA) in the United States. In 2019, we expanded
the focus of our real estate acquisitions to include CEA properties in the United States. CEA is an innovative method of growing plants
that involves creating optimized growing environments for a given crop indoors. CEA in the form of a greenhouse uses approximately 70%
less energy than indoor growing, 95% less water usage than outdoor growing, and does not have any agricultural runoff of fertilizers
or pesticides. We typically enter into long-term triple net leases where our tenants are responsible for all costs related to the property,
including insurance, taxes and maintenance.
Our
growth strategy focuses on identifying attractive real estate opportunities that exhibit attractive risk adjusted yields on investment
relative to traditional real estate sectors. We are currently focused on making new acquisitions of real estate within the CEA sector
related to cannabis cultivation. We believe there will be continued strong demand for cannabis related CEA in the form of greenhouses
which we believe is the sustainable business model that can produce plants at a lower cost in an environmentally friendly way. We believe
a convergence of changing public attitudes and increased cannabis legalization momentum in certain states creates an attractive opportunity
to invest in cannabis related real estate. We expect that acquisition opportunities will continue to expand as additional states legalize
the use of cannabis.
We
believe there is strong demand for capital from licensed cannabis cultivators that currently do not have access to traditional financing
sources such as bank debt. Our construction financing and sale leaseback solutions provide attractive financing that allows cannabis
operators to add additional growing capacity and/or invest in the growth of their business. Our tenants that are cannabis operators are
able to achieve strong rent coverage based on the growing capacity of their facilities and the current wholesale price of cannabis. In
addition, we believe our unique and flexible lease structure for cannabis operators, which typically includes a period of higher rent
in the initial years of the lease and a reset to a lower rent for the remainder of the lease term provides strong protection to our investment
basis while setting the tenant up for long-term success in the event cannabis prices decrease or federal legalization of cannabis is
enacted.
Currently,
the Trust is structured as a holding company and owns its assets through fourteen wholly-owned, special purpose subsidiaries that have
been formed in order to hold real estate assets, obtain financing and generate lease revenue.
Restrictions
on Ownership and Transfer
In
order to assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue
Code of 1986, as amended (the “Code”), among other purposes, our amended and restated Declaration of Trust (“Declaration
of Trust”) provides that no person or entity, may own, directly or indirectly, more than 9.9% in economic value of the aggregate
of the outstanding common shares of Power REIT. However, our Declaration of Trust authorizes our Board of Trustees to exempt from time
to time, the ownership limits applicable to certain individuals or entities.
Our
Declaration of Trust also prohibits any person from (1) beneficially or constructively owning shares of our capital stock that would
result in our being “closely held” under Section 856(h) of the Code at any time during the taxable year, (2) transferring
shares of our capital stock if such transfer would result in our stock being beneficially or constructively owned by fewer than 100 persons,
and (3) beneficially or constructively owning shares of our capital stock if such ownership would cause us otherwise to fail to qualify
as a REIT.
This
provision or other provisions in our governing documents or provisions that we may adopt in the future, may limit the ability of our
shareholders to sell their shares at a premium over then-current market prices by discouraging a third party from seeking to obtain control
of us. See “Risk Factors” and “Description of the Securities That We May Offer.”
Distribution
Policy
Any
distributions that we make will be at the discretion of our Board of Trustees, and there can be no assurance that dividends will be paid
in any particular period or at any particular level, or sustained in future periods based on past timing of payments and payments levels.
Dividends on our Series A Preferred Stock are cumulative and must be paid in full and on a current basis in order for the Trust to pay
dividends on its common shares. During the year ended December 31, 2020, we paid dividends of approximately $280,000 (or $0.484375 per
share per quarter for a total of $1.9375 per share total) on our 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.
We
currently do not make regular quarterly distributions to holders of our common shares, but may elect to do so in the future. Distributions
declared by us will be authorized by our Board of Trustees in its sole discretion out of funds legally available therefor and will be
dependent upon a number of factors, including the capital requirements of our trust and meeting the distribution requirements necessary
to maintain our qualification as a REIT. We cannot assure that our intended distributions will be made or sustained or that our Board
of Trustees will not change our distribution policy in the future. Under some circumstances, we may be required to fund distributions
from working capital, liquidate assets at prices or times that we regard as unfavorable or borrow to provide funds for distributions,
or we may make distributions in the form of a taxable stock dividend. However, we have no current intention to use the net proceeds from
this offering to make distributions nor do we intend to make distributions using shares of our common stock. We do not intend to reduce
the expected distribution per share if we issue the securities contemplated in this prospectus.
Summary
Risk Factors
An
investment in our securities involves significant risks. The following is a summary of the risks relating to the Trust. A more detailed
description of each of the risks can be found below under the section captioned “Risk Factors.” Before purchasing any securities,
you should consider carefully the risks and uncertainties described under the heading “Risk Factors” beginning on page 6
of this prospectus, the applicable prospectus supplement, in any free writing prospectuses we have authorized for use in connection with
a specific offering, and under similar headings in the other documents that are incorporated by reference into this prospectus.
Risks
Related to our Operations
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Our
business activities, and the business activities of our cannabis tenant, while believed to be compliant with applicable U.S. state
and local laws, are currently illegal under U.S. federal law.
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Our
business strategy includes growth plans. Our financial condition and results of operations could be negatively affected if we fail
to grow or fail to manage our growth or investments effectively.
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Even
if we are able to execute our business strategy, that strategy may not be successful.
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We
operate in a highly competitive market for investment opportunities and we may be unable to identify and complete acquisitions of
real property assets.
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Because
we may distribute a significant portion of our income to our stockholders or lenders, we will continue to need additional capital
to make new investments. If additional funds are unavailable or not available on favorable terms, our ability to make new investments
will be impaired.
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The
investment portfolio is, and in the future may continue to be, concentrated in its exposure to a relatively few number of investments,
industries and lessees.
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Our
property portfolio has a high concentration of properties located in certain states.
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If
our acquisitions or our overall business performance fail to meet expectations, the amount of cash available to us to pay dividends
may decrease and we could default on our loans, which are secured by collateral in our properties and assets.
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Our
operating results may be negatively affected by potential development and construction delays and resultant increased costs and risks.
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The
issuance of securities with claims that are senior to those of our common shares, including our Series A Preferred Stock, may limit
or prevent us from paying dividends on its common shares. There is no limitation on our ability to issue securities senior to the
Trust’s common shares or incur indebtedness.
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The
ability of the Trust to service its obligations and pay dividends depends on the ability of its wholly-owned subsidiaries to make
distributions to it.
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We
are dependent upon Mr. David H. Lesser for our success. On occasion, his interests may conflict with ours.
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From
time to time, our management team may own interests in our lessees or other counterparties, and may thereby have interests that conflict
or appear to conflict with the Trust’s interests.
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Our
lessees and many future lessees will likely be structured as special purpose vehicles (“SPVs”), and therefore their ability
to pay us is expected to be dependent solely on the revenues of a specific project, without additional credit support.
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Some
losses related to our real property assets may not be covered by insurance or indemnified by our lessees, and so could adversely
affect us.
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Discovery
of previously undetected environmentally hazardous conditions may adversely affect our operating results.
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Legislative,
regulatory, accounting or tax rules, and any changes to them or actions brought to enforce them, could adversely affect us.
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Changes
in interest rates may negatively affect the value of our assets, our access to debt financing and the trading price of our securities.
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Our
quarterly results may fluctuate.
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We
may not be able to sell our real property assets when we desire. In particular, in order to maintain our status as a REIT, we may
be forced to borrow funds or sell assets during unfavorable market conditions.
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We
may fail to remain qualified as a REIT, which would reduce the cash available for distribution to our shareholders and may have other
adverse consequences.
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If
an investment that was initially believed to be a real property asset is later deemed not to have been a real property asset at the
time of investment, we could lose our status as a REIT or be precluded from investing according to our current business plan.
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If
we were deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could make it impractical
for us to continue our business as contemplated and could have a material adverse effect on the price of our securities.
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Net
leases may not result in fair market lease rates over time.
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If
a sale-leaseback transaction is recharacterized in a lessee’s bankruptcy proceeding, our financial condition could be adversely
affected.
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Provisions
of the Maryland General Corporation Law and our Declaration of Trust and Bylaws could deter takeover attempts and have an adverse
impact on the price of our common shares.
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Risks
Related to Our Investment Strategy
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Our
focus on non-traditional real estate asset classes including CEA, alternative energy and transportation infrastructure sectors will
subject us to more risks than if we were broadly diversified to include other asset classes.
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Renewable
energy resources are complex, and our investments in them rely on long-term projections of resource and equipment availability and
capital and operating costs; if our or our lessees’ projections are incorrect, we may suffer losses.
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Infrastructure
assets may be subject to the risk of fluctuations in commodity prices and in the supply of and demand for infrastructure consumption.
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Infrastructure
investments are subject to obsolescence risks.
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Renewable
energy investments may be adversely affected by variations in weather patterns.
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If
the development of renewable energy projects slows, we may have a harder time sourcing investments.
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Investments
in renewable energy may be dependent on equipment or manufacturers that have limited operating histories or financial or other challenges.
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Risks
Related to our Securities
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There
is a 9.9% limit on the amount of our equity securities that any one person or entity may own.
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Factors
could lead to the Trust losing one or both of its NYSE listings.
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Low
trading volumes in the Trust’s listed securities may adversely affect holders’ ability to resell their securities at
prices that are attractive, or at all.
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Our
stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors
in our common stock could incur substantial losses.
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Our
ability to issue preferred stock in the future could adversely affect the rights of existing holders of our equity securities.
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The
issuance of additional equity securities may dilute existing equity holders.
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Our
equity securities is subject to interest rate risk.
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Inflation
may negatively affect the value of our equity securities and the dividends we pay.
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Our
Series A Preferred Stock has not been rated and is junior to our existing and future debt, and the interests of holders of Series
A Preferred Stock could be diluted by the issuance of additional parity-preferred securities and by other transactions.
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Holders
of Series A Preferred Stock have limited voting rights.
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The
change of control conversion and delisting conversion features of our Series A Preferred Stock may not adequately compensate a holder
of such securities upon a Change of Control or Delisting Event (as such terms as defined in regard to our Series A Preferred Stock),
and the change of control conversion, delisting conversion and redemption features of our Series A Preferred Stock may make it more
difficult for a party to take over our trust or may discourage a party from taking over our trust.
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We
may issue additional Series A Preferred Stock at a discount to liquidation value or at a discount to the issuance value of shares
of Series A Preferred Stock already issued.
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Risks
Related to Regulation
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We
cannot assure you that our equity securities will remain listed on the NYSE American.
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The
U.S. federal government’s approach towards cannabis laws may be subject to change or may not proceed as previously outlined.
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Laws,
regulations and the policies with respect to the enforcement of such laws and regulations affecting the cannabis industry in the
United States are constantly changing, and we cannot predict the impact that future regulations may have on us.
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We
may be subject to anti-money laundering laws and regulations in the United States.
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Litigation,
complaints, enforcement actions and governmental inquiries could have a material adverse effect on our business, financial condition
and results of operations.
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We
and our cannabis tenant may have difficulty accessing the service of banks, which may make it difficult for us and for them to operate.
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Tax
Status
As
a real estate investment trust, we are not subject to state or federal income taxes. However, in order to maintain our REIT status, we
are required to make distributions, other than capital gain distributions, to our shareholders each year in the amount of at least 90%
of our “REIT taxable income.” Dividends that are paid from earnings and profits will be treated as ordinary income and generally
will not qualify as qualified dividend income. In addition to the aforementioned distribution requirement, we must meet numerous other
asset and income tests and other requirements of the Code; failure to meet any of these requirements or tests may result in us losing
our REIT status.
See
“Material United States Federal Income Tax Considerations.”
Exchange
Listing
Our
common shares are listed on the NYSE American under the symbol “PW” and our Series A Preferred Stock is listed on the NYSE
American under the symbol “PW PRA.” Any preferred shares, rights, warrants or units that we may offer may or may not be listed,
as shall be disclosed in the supplements to this prospectus relating to the offering of such securities.
General
Corporate Information
Power
REIT is incorporated in the State of Maryland as a real estate investment trust. Power REIT was formed in August 2011 to effect a triangular
merger of the Pittsburgh & West Virginia Railroad (“Reorganization”). Pittsburgh & West Virginia Railroad was a publicly
traded REIT prior to the Reorganization and was listed on the American Stock Exchange in 1967. Concurrent with the Reorganization, which
was completed on December 2, 2011, Power REIT became listed on the NYSE American under the ticker symbol “PW” and Pittsburgh
& West Virginia Railroad survived the Reorganization as a wholly-owned, special purpose subsidiary of Power REIT with a sole purpose
of owning and managing its railroad property. Power REIT is an internally managed REIT.
Our
principal executive offices are located at 301 Winding Road, Old Bethpage, NY 11804 and our offices can be reached by telephone
at (212) 750-0373. Our website address is http://www.pwreit.com. The information on, or otherwise accessible through, our website
does not constitute a part of this prospectus. We make our periodic and current reports that are filed with the Securities and Exchange
Commission (the “SEC”) available, free of charge, on our website as soon as reasonably practicable after such material is
electronically filed with, or furnished to, the SEC. The information contained in, and that can be accessed through, our website is not
incorporated into and is not a part of this prospectus.
The
Offering
Securities
to be Offered
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We
may from time to time offer and sell one or more of our common shares, preferred shares,
rights and warrants, either separately or in various combinations in the form of units or
otherwise, in one or more series or classes, and in amounts, at prices and on terms that
will be determined prior to the offering of the securities. In addition, certain of our security
holders may offer and sell such securities on a secondary basis. We will describe the particulars
of each securities offering, and of the securities offered, including among other things
the expected trading market, if any, for the securities, in a supplement to this prospectus
that we will distribute in connection with the offering.
The
amount of securities we may issue pursuant to the registration statement is limited to $100,000,000 of our securities. Our Board
of Trustees may, without any action by our shareholders, increase or decrease the aggregate number of securities of any class or
series that we are authorized to issue pursuant to this registration statement or any future registration statements.
We,
or certain of our security holders, may offer securities directly to one or more purchasers, through agents that we or they designate
from time to time, or to or through underwriters or dealers. The prospectus supplement relating to the offering will identify any
agents, underwriters or dealers involved in the offering, and will set forth any applicable purchase price, fee, commission or discount
arrangement with such agents, underwriters or dealers and among such agents, underwriters or dealers or the basis upon which such
amounts may be calculated. See “Plan of Distribution.” Securities so offered by us or by selling security holders may
not be sold through agents, underwriters or dealers without delivery of a prospectus supplement describing the methods and terms
of the offering.
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Use
of Proceeds
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Unless
otherwise specified in a prospectus supplement, we intend to use the net proceeds from our sale of securities to acquire real property
assets with a particular focus on real estate within the CEA sector, and to fund our subsidiaries and to fund our subsidiaries.
We may also use sale proceeds to retire all or a portion of any debt we incur, to redeem any outstanding preferred stock, or for
working capital purposes, including the payment of distributions, interest and operating expenses, although there is currently no
intent to issue securities primarily for this purpose. We will not receive proceeds from any sales of securities by selling security
holders. See “Use of Proceeds.”
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Dividends
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We
currently do not make regular quarterly distributions to holders of our common shares, but
may elect to do so in the future. Distributions declared by us will be authorized by our
Board of Trustees in its sole discretion out of funds legally available therefor and will
be dependent upon a number of factors, including the capital requirements of our trust and
meeting the distribution requirements necessary to maintain our qualification as a REIT.
We have historically paid regular distributions to the holders our Series A Preferred Stock,
and intend to continue to pay, subject to adjustment at the discretion of our Board of Trustees,
quarterly distributions to the holders of our Series A Preferred Stock.
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Available
Information
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We
have filed with the SEC a registration statement under the Securities Act with respect to
the securities offered by this prospectus. This prospectus does not contain all of the information
set forth in the registration statement, its exhibits and the exhibits incorporated by reference
therein. Statements contained in this prospectus regarding the contents of any contract or
other document are not necessarily complete and, in each instance, we refer you to the copy
of the contract or other document filed as an exhibit to the registration statement or incorporated
by reference therein. Each of these statements is qualified in its entirety by this reference.
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. These SEC filings, as well as the
registration statement referred to above and the exhibits to each of the foregoing documents, are available to the public at the
SEC’s website at http://www.sec.gov.
We
will provide to each person to whom this prospectus or a related prospectus supplement is delivered, at no cost to the requester, a copy
of any or all of the documents we have incorporated by reference but not delivered with the prospectus or prospectus supplement, or a
copy of any of the exhibits to or incorporated by reference in the registration statement to which this prospectus relates. To receive
any such copies, please write us at Power REIT, 301 Winding Road, Old Bethpage, NY 11804 or call us at (212) 750-0373. The documents
may also be accessed through our website at http://www.pwreit.com. Other than the information specifically incorporated by reference,
the information on, or otherwise accessible through, our website does not constitute a part of this prospectus. See “Documents
Incorporated By Reference” and “Where You Can Find More Information.”
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RISK
FACTORS
An
investment in Power REIT’s securities involves significant risks. Anyone who is making an investment decision regarding Power REIT’s
securities should carefully consider the risks and uncertainties described in the section captioned “Risk Factors” contained
in our most recent Annual Report on Form 10-K, as may be updated by subsequent annual, quarterly and other filings we make with the SEC
from time to time, which are incorporated by reference herein in their entirety, together with other information in this prospectus and
the information incorporated by reference herein. For a description of these reports and documents, and information about where you can
find them, see “Where You Can Find More Information” and “Documents Incorporated By Reference.” Additional risks
not presently known or that we presently consider to be immaterial could subsequently materially and adversely affect our and the information
incorporated by reference herein. If any of these risks actually occurs, our business, financial condition, results of operations or
cash flow could suffer materially. In such event, the trading price of our common stock could decline, and you might lose all or part
of your investment.
USE
OF PROCEEDS
Unless
otherwise specified in a prospectus supplement, we intend to use the net proceeds from the sale of securities by us to acquire real property
assets with a particular focus real estate within the CEA sector and to fund our subsidiaries. We may also use sale proceeds to
retire all or a portion of any debt we incur, to redeem any outstanding preferred stock, or for working capital purposes, including the
payment of distributions, interest and operating expenses, although there is currently no intent to issue securities primarily for this
purpose. We will not receive proceeds from any sales of securities by selling security holders.
Any
allocation of the net proceeds of an offering of securities to a specific purpose will be determined at the time of such offering and
will be described in an accompanying prospectus supplement. The precise amount and timing of the application of these proceeds will depend
on our funding requirements and the availability and costs of other funds.
Pending
application of cash proceeds, we will invest the net proceeds in interest-bearing accounts, money market accounts and interest-bearing
securities in a manner that is consistent with our intention to maintain our qualification for taxation as a REIT. Such investments may
include, for example, government and government agency certificates, government bonds, certificates of deposit, interest-bearing bank
deposits, money market accounts and mortgage loan participations. Further details regarding the use of the net proceeds from the sale
of a specific series or class of the securities will be set forth in the applicable prospectus supplement.
Distribution
Policy
Any
distributions that we make will be at the discretion of our Board of Trustees, and there can be no assurance that dividends will be paid
in any particular period or at any particular level, or sustained in future periods based on past timing of payments and payments levels.
Dividends on our Series A Preferred Stock are cumulative and must be paid in full and on a current basis in order for the Trust to pay
dividends on its common shares. During the year ended December 31, 2020, we paid dividends of approximately $280,000 (or $0.484375 per
share per quarter for a total of $1.9375 per share total) on our 7.75% Series A Cumulative Redeemable Perpetual Preferred Stock.
We
currently do not make regular quarterly distributions to holders of our common shares, but may elect to do so in the future. Distributions
declared by us will be authorized by our Board of Trustees in its sole discretion out of funds legally available therefor and will be
dependent upon a number of factors, including the capital requirements of our trust and meeting the distribution requirements necessary
to maintain our qualification as a REIT. We cannot assure that our intended distributions will be made or sustained or that our Board
of Trustees will not change our distribution policy in the future. Under some circumstances, we may be required to fund distributions
from working capital, liquidate assets at prices or times that we regard as unfavorable or borrow to provide funds for distributions,
or we may make distributions in the form of a taxable stock dividend. However, we have no current intention to use the net proceeds from
this offering to make distributions nor do we intend to make distributions using shares of our common stock. We do not intend to reduce
the expected distribution per share if we issue the securities contemplated in this prospectus.
DESCRIPTION
OF THE SECURITIES WE MAY OFFER
The
following description of our securities is a summary of the detailed provisions of our Declaration of Trust and By-laws governing the
terms of our securities. These statements do not purport to be complete, or to give full effect to the provisions of applicable statutory
and common law, and are subject to, and qualified in their entirety by reference to, the terms of our Declaration of Trust and By-Laws.
Pursuant
to our Declaration of Trust, we are currently authorized to issue 98,325,000 common shares of beneficial interest, $0.001 par value,
and 1,675,000 shares of Series A Preferred Stock, or such other class of shares as may be determined by the Board of Trustees. Our Board
of Trustees, without any action by our shareholders, may amend our Declaration of Trust from time to time to issue securities of any
type, class or series and increase or decrease the aggregate number of authorized common shares or other securities of any type, including
without limitation any class or series of securities. Other than our common shares, we do not currently have any other class of stock
issued and outstanding.
Pursuant
to our Declaration of Trust, the Board of Trustees may authorize, without approval of any shareholder, the issuance from time to time
of shares of any class or series or securities or rights convertible into shares of any class or series for such consideration (whether
in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable (or
without consideration in the case of a share dividend or share split).
Except
as may be provided by the Board of Trustees in setting the terms of any particular securities that we may issue, no holder of shares
of our stock or other securities has any preemptive right to purchase or subscribe for any additional shares of our stock or other securities.
Common
Shares
General
As
of June 1, 2021, 3,322,433 of our common shares were issued and outstanding. The outstanding shares are, and the common shares offered
hereby upon delivery and payment will be, fully paid and non-assessable.
Voting
Rights
Each
holder of common shares is entitled to one vote for each share registered in such holder’s name on our books on all matters submitted
to a vote of shareholders. The holders of our common shares do not have cumulative voting rights. As a result, the holders of common
shares entitled to exercise more than 50% of the voting rights in an election of trustees can elect 100% of the trustees to be elected
if they choose to do so. In such event, the holders of the remaining common shares voting for the election of trustees will not be able
to elect any persons to our board of trustees. The trust’s quorum requirements for the election of trustees and for other general
matters submitted to a vote of shareholders, is 33% unless otherwise specified by statute or in our Governing Documents. Our trustees
are elected to serve for one-year terms and are re-elected annually at the annual shareholders’ meeting.
Dividend
Rights
Holders
of common shares are entitled to such dividends as our board of trustees may declare out of funds legally available therefore. Debt agreements
or preferred stock agreements that we enter into may contain restrictions on certain payments by us, including dividends.
Liquidation
Rights and Other Preferences
Subject
to the prior rights of creditors and any preferred shares outstanding, the holders of the common shares are entitled in the event of
liquidation, dissolution or winding up to share pro rata in the distribution of all remaining assets. There are no preemptive or conversion
rights or redemption or sinking fund provisions in respect of the common shares.
Maryland
Law permits a Maryland real estate investment trust to include in its declaration of trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages except for liability resulting from (a) actual receipt of an
improper benefit or profit in money, property or services or (b) active or deliberate dishonesty established in a judgment or other final
adjudication to be material to the cause of action. Our Declaration of Trust contains a provision that limits the liability of our trustees
and officers to the maximum extent permitted by Maryland law.
Transfer
Agent and Registrar
The
Transfer Agent and Registrar for our common shares is Broadridge Corporate Issuer Solutions, Inc.
Preferred
Shares
General
Our
board of trustees has the power under our charter to classify and reclassify any unissued common shares into one or more classes or series
of preferred stock, set the terms of each such class or series and authorize us to issue the newly classified or reclassified shares.
Each such class or series of preferred stock will have such designations, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or conditions of redemption as shall be determined by our
board of trustees.
As
of June 1, 2021, the authorized capital stock of the Trust consists of 100,000,000 shares, classified as 98,325,000 shares of common
stock, par value $0.001 per share, and 1,675,000 shares of Series A Preferred Stock, par value $0.001 with a total of 336,944 shares
of our Series A Preferred Stock issued and outstanding.
The
outstanding shares of Series A Preferred Stock are fully paid and non-assessable. Additional shares of preferred stock may be issued
in one or more series from time to time by our Board of Trustees, and the Board of Trustees is expressly authorized to fix the designations
and the powers, preferences and rights, and the qualifications, limitations and restrictions of each series. Subject to the determination
of our Board of Trustees, any shares of preferred stock that may be issued in the future would generally have preferences over our common
stock with respect to the payment of dividends and the distribution of assets in the event of any liquidation, dissolution or winding
up of Power REIT.
Preferred
stock may be issued independently or together with any other securities and may be attached to or separate from the securities. The following
description of the preferred stock sets forth general terms and provisions of the preferred stock to which any prospectus supplement
may relate. The statements below describing the preferred stock are in all respects subject to and qualified in their entirety by reference
to the applicable provisions of our charter and bylaws setting forth the terms of a class or series of preferred stock. The issuance
of preferred stock could adversely affect the voting power, dividend rights and other rights of holders of common stock. Although our
board of directors does not have this intention at the present time, it or a duly authorized committee could establish another class
or series of preferred stock, that could, depending on the terms of the series, delay, defer or prevent a transaction or a change in
control of our trust that might involve a premium price for the common stock or otherwise be in the best interest of the holders thereof.
Below
is a description of preferred shares that we may issue under this prospectus followed by a description of our Series A Preferred Stock
Terms
Subject
to the limitations prescribed by our charter, our Board of Trustees is authorized to classify any unissued shares of preferred stock
and to reclassify any previously classified but unissued shares of preferred stock into other classes or series of stock. Our Board of
Trustees may fix the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption for each class or series.
Reference
is made to the applicable prospectus supplement relating to the class or series of preferred stock offered thereby for the specific terms
thereof, including:
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the
designation of the class or series of preferred stock;
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the
number of shares of preferred stock of the class or series, the liquidation preference of the shares of preferred stock and the offering
price of the shares of preferred stock;
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the
dividend rate(s), period(s) and/or payment day(s) or method(s) of calculation thereof applicable to the class or series of preferred
stock;
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the
date from which dividends on the class or series of preferred stock shall accumulate, if applicable;
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the
procedures for any auction and remarketing, if any, for the class or series of preferred stock;
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the
provision for a sinking fund, if any, for the class or series of preferred stock;
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the
provisions for redemption, if applicable, of the class or series of preferred stock;
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any
listing of the preferred stock on any securities exchange;
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the
terms and conditions, if applicable, upon which the class or series of preferred stock may or will be convertible into our common
stock or other securities, including the conversion price or manner of calculation thereof;
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the
relative ranking and preferences of the class or series of preferred stock as to dividend rights and rights upon liquidation, dissolution
or winding up of our affairs;
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whether
interests in the preferred stock will be represented by depositary shares;
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any
additional limitations on ownership and restrictions on transfer of the class or series of preferred stock;
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any
limitations on the issuance of any class or series of preferred stock ranking senior or equal to the class or series of preferred
stock being offered as to dividend rights and rights upon liquidation, dissolution or the winding up of our affairs;
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a
discussion of U.S. federal income tax considerations applicable to the preferred stock; and
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any
other specific terms, preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of the preferred stock.
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The
terms of each class or series of preferred stock will be described in any prospectus supplement related to such class or series of preferred
stock and will contain a discussion of any material Maryland law or material U.S. federal income tax considerations applicable to the
preferred stock.
Transfer
Agent and Registrar
We
will name the registrar and transfer agent for the preferred stock in the applicable prospectus supplement.
Series
A Preferred Stock
Ranking
The
Series A Preferred Stock, as to dividend rights and rights upon our liquidation, dissolution or winding-up, rank:
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senior
to all classes or series of our common stock and to all other equity securities ranking junior to the Series A Preferred Stock with
respect to dividend rights and rights upon our liquidation, dissolution or winding up;
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equal
to any class or series of equity securities ranking equal to the Series A Preferred Stock with respect to dividend rights or rights
upon our liquidation, dissolution or winding up; and
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junior
to any class or series of equity securities ranking senior to the Series A Preferred Stock with respect to dividend rights or rights
upon our liquidation, dissolution or winding up.
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The
term “equity securities” does not include convertible debt securities, which would rank senior to the Series A Preferred
Stock prior to conversion (and whose ranking after conversion would depend on the specific terms of the post-conversion securities).
In addition, the Series A Preferred Stock ranks junior to all our current and future indebtedness and the indebtedness of our subsidiaries.
Dividends
Holders
of outstanding shares of the Series A Preferred Stock are entitled to receive, out of funds legally available for the payment of dividends,
cumulative cash dividends in the amount of $1.9375 per share each year, which is equivalent to the rate of 7.75% of the $25.00 liquidation
preference per share of Series A Preferred Stock per annum. Dividends are payable quarterly in arrears for the preceding Dividend Period
(as defined below) on the 15th day of March, June, September and December of each year or, if not a business day, the next succeeding
business day, to all holders of record on the applicable record date. We refer to each such payment date as a “Dividend Payment
Date,” and “Dividend Period” means, with respect to a given Dividend Payment Date, the nearest preceding period among
the following: March 1 to May 31, June 1 to August 31, September 1 to November 30 and December 1 to the last day of the next following
February.
Any
dividend payable on Series A Preferred Stock, including any dividend payable for any partial dividend period (for example, any dividend
payable in respect of shares that have been outstanding for only part of a dividend period), will be computed on the basis of a 360-day
year consisting of twelve 30-day months. Dividends are payable to holders of record of Series A Preferred Stock as they appear in the
transfer agent’s records at the close of business on the applicable record date, which will be the date that our board of trustees
designates as the record date for the payment of a dividend that is not more than 30 nor fewer than 10 days prior to the Dividend Payment
Date, which date we refer to as a “Dividend Payment Record Date.”
Our
Board of Trustees will not authorize, pay or set apart for payment by us any dividend on the Series A Preferred Stock at any time that:
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the
terms and conditions of any of our agreements, including any agreement relating to our indebtedness, prohibits such authorization,
payment or setting apart for payment;
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the
terms and conditions of any of our agreements, including any agreement relating to our indebtedness, provides that such authorization,
payment or setting apart for payment would constitute a breach of, or a default under, such agreement; or
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the
law restricts or prohibits such authorization, payment or setting apart for payment.
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Notwithstanding
the foregoing, dividends on the Series A Preferred Stock will accrue whether or not:
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any
of the agreements or laws referred to above are applicable;
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we
have earnings;
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there
are funds legally available for the payment of such dividends; or
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such
dividends are declared by us.
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Accrued
but unpaid dividends on the Series A Preferred Stock will not bear additional interest.
We
will not declare or pay or set aside for payment any dividends (other than a dividend paid in common stock or other shares ranking junior
to the Series A Preferred Stock as to dividends and upon liquidation) or declare or make any distribution of cash or other property on
common stock or other shares that rank junior or equal to the Series A Preferred Stock as to dividends and upon liquidation or redeem
or otherwise acquire common stock or other shares that rank junior or equal to the Series A Preferred Stock as to dividends and upon
liquidation (except by conversion into or exchange for common stock or other shares ranking junior to the Series A Preferred Stock as
to dividends and upon liquidation and except for the redemption of shares of our stock pursuant to the provisions of our charter relating
to ownership limits and restrictions on transfer of our equity securities), unless we also have declared and either paid or set aside
for payment full cumulative dividends on the Series A Preferred Stock for all past Dividend Periods.
If
we do not declare and either pay or set aside for payment full cumulative dividends on the Series A Preferred Stock and all shares that
rank equal, as to dividends, to the Series A Preferred Stock, the amount that we have declared will be allocated pro rata to the holders
of Series A Preferred Stock and such other shares, so that the amount declared for each share of Series A Preferred Stock and for each
such other share is proportionate to the accrued and unpaid dividends on such security. Any dividend payment made on the Series A Preferred
Stock will first be credited against the earliest accrued but unpaid dividend due with respect to such securities that remains payable.
If,
for any taxable year, we elect to designate as “capital gain dividends” (as defined in Section 857 of the Code) a portion,
which we refer to as the Capital Gains Amount, of the dividends not in excess of our earnings and profits that are paid or made available
for the year to the holders of all classes of shares, or the “Total Dividends”, then the portion of the Capital Gains Amount
that will be allocable to the holders of Series A Preferred Stock will be the Capital Gains Amount multiplied by a fraction, the numerator
of which will be the total dividends (within the meaning of the Code) paid or made available to the holders of Series A Preferred Stock
for the year and the denominator of which will be the Total Dividends.
Liquidation
Preference
Upon
any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of Series A Preferred Stock will be entitled
to be paid out of our assets legally available for distribution to our stockholders a liquidation preference of $25.00 per share, plus
an amount equal to any accrued and unpaid dividends (whether or not declared) to, but not including, the date of payment, before any
distribution or payment may be made to holders of common stock or any other class or series of our equity stock ranking, as to liquidation
rights, junior to the Series A Preferred Stock. If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available
assets are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series A Preferred Stock
and the corresponding amounts payable on all shares of each other class or series of stock ranking, as to liquidation rights, equal to
the Series A Preferred Stock, then the holders of the Series A Preferred Stock and the shares of each such other class or series of stock
ranking, as to liquidation rights, equal to the Series A Preferred Stock will share ratably in any distribution of assets in proportion
to the full liquidating distributions to which they would otherwise be respectively entitled. Holders of Series A Preferred Stock will
be entitled to written notice of any voluntary or involuntary liquidation, dissolution or winding up at least 15 days before the payment
date of such liquidating distribution. After payment to them of the full amount of the liquidating distributions to which they are entitled,
the holders of Series A Preferred Stock will have no right or claim to any of our remaining assets.
In
determining whether any distribution (other than upon voluntary or involuntary dissolution), by dividend, redemption or other acquisition
of shares of stock of the Trust or otherwise, is permitted under applicable Maryland law, amounts that would be needed, if the Trust
were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of the holders of the Series
A Preferred Stock will not be added to the Trust’s total liabilities.
Our
consolidation or merger with or into any other person or entity or the sale, lease, transfer or conveyance of all or substantially all
of our property or business will not be deemed to constitute our liquidation, dissolution or winding up.
Optional
Redemption
Notwithstanding
any other provision relating to redemption or repurchase of the Series A Preferred Stock, we currently may redeem any or all of the Series
A Preferred Stock at any time at a redemption price of $25.00 per share plus all dividends accrued and unpaid (whether or not declared),
if our board of trustees determines that such redemption is necessary to preserve our status as a REIT for federal income tax purposes.
On
and after February 28, 2019, the Series A Preferred Stock may be redeemed at our option, in whole or in part, at any time and from time
to time, for cash, at a redemption price of $25.00 per share plus all dividends accrued and unpaid (whether or not declared) on the Series
A Preferred Stock to, but not including, the date of such redemption (unless the redemption date is after a record date for a Series
A Preferred Stock declared dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case
no additional amount for such accrued and unpaid dividend will be included in the redemption price), without interest, upon the giving
of notice, as provided below.
If
less than all of the outstanding Series A Preferred Stock is to be redeemed, the shares to be redeemed will be determined pro rata, by
lot or in such other equitable manner as prescribed by our board of trustees that will not result in a violation of the ownership limits
and restrictions on transfer of our stock contained in our charter. If the redemption is to be by lot, and if as a result of the redemption
any holder of Series A Preferred Stock would own, or be deemed by virtue of certain attribution provisions of the Code to own, in excess
of 9.9% in value or in number of shares (whichever is more restrictive) of our issued and outstanding equity securities (including the
Series A Preferred Stock), then, except in certain instances, we will redeem the requisite number of shares of Series A Preferred Stock
of that holder such that the holder will not own or be deemed by virtue of such attribution provisions of the Code to own, subsequent
to the redemption, in excess of 9.9% in value or in number of shares (whichever is more restrictive) of our issued and outstanding equity
securities.
We
will mail to the record holders of Series A Preferred Stock, a notice of optional redemption no less than 30 days nor more than 60 days
prior to the redemption date to the address, as shown on our share transfer books. A failure to give notice of redemption or any defect
in the notice or in its mailing will not affect the validity of the redemption of any Series A Preferred Stock except as to the holder
to whom notice was defective or not given. Each notice will state the following:
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the
date fixed for redemption thereof, which we refer to as the redemption date;
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the
redemption price;
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the
total number of shares of Series A Preferred Stock to be redeemed (and, if less than all the shares held by any holder are to be
redeemed, the number of shares to be redeemed from such holder);
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the
place or places where the shares of Series A Preferred Stock are to be surrendered for payment, together with the certificates, if
any, representing such shares (duly endorsed for transfer) and any other documents we require in connection with such redemption;
and
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that
dividends on the Series A Preferred Stock to be redeemed will cease to accrue on the redemption date.
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The
redemption price of the shares of Series A Preferred Stock to be redeemed will then be paid to or on the order of the person whose name
appears in our stock ledger as the owner of such shares.
From
and after the redemption date (unless we fail to pay or set aside the redemption price):
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all
dividends on the Series A Preferred Stock designated for redemption will cease to accrue;
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all
rights of the holders of the Series A Preferred Stock designated for redemption, except the right to receive the redemption price,
will cease and terminate;
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the
Series A Preferred Stock designated for redemption may not thereafter be transferred except with our consent; and
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the
Series A Preferred Stock designated for redemption will not be deemed to be outstanding for any purpose whatsoever.
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Notwithstanding
the foregoing, unless full cumulative dividends on all outstanding Series A Preferred Stock have been or contemporaneously are declared
and paid in cash or declared and a sum sufficient for the cash payment of the dividends has been set apart for payment for all past dividend
periods, no shares of Series A Preferred Stock may be redeemed unless all outstanding shares of Series A Preferred Stock are simultaneously
redeemed. Unless full cumulative dividends on all outstanding Series A Preferred Stock have been paid or declared and a sum sufficient
for the cash payment of the dividends has been set apart for payment for all past dividend periods, we will not purchase or otherwise
acquire directly or indirectly any Series A Preferred Stock (except by exchange for our equity securities ranking as to dividend rights
and liquidation preference junior to the Series A Preferred Stock or except pursuant to the provisions of our charter relating to ownership
limits and restrictions on transfer of our stock). So long as no dividends on Series A Preferred Stock for any past dividend period are
in arrears, we shall, subject to the foregoing, be entitled at any time and from time to time to repurchase Series A Preferred Stock
in open-market transactions duly authorized by our board of trustees and effected in compliance with applicable laws. However, these
requirements will not prevent our purchase or acquisition of Series A Preferred Stock pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Series A Preferred Stock or our redemption of Series A Preferred Stock pursuant to the provisions
of our charter relating to ownership limits and restrictions on transfer of our stock.
All
shares of the Series A Preferred Stock that we redeem or repurchase will be retired and restored to the status of authorized but unissued
shares of common stock, without designation as to series or class.
Special
Optional Redemption
During
any period of time that both (i) the Series A Preferred Stock is not listed on the NYSE AMERICAN, the NYSE, NASDAQ or an exchange or
quotation system that is a successor to the NYSE MKT, the NYSE or NASDAQ and (ii) we are not subject to the reporting requirements of
the Exchange Act, but any Series A Preferred Stock is outstanding (such combination of circumstances a “Delisting Event”),
we will have the option to redeem the outstanding Series A Preferred Stock, in whole and not in part, within 90 days after any such Delisting
Event, for a redemption price of $25.00 per share plus all dividends accrued and unpaid (whether or not declared) to, but not including,
the redemption date (unless the redemption date is after a record date for a Series A Preferred Stock declared dividend payment and prior
to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend
will be included in the redemption price), upon the giving of notice, as provided below.
In
addition, upon the occurrence of a Change of Control (as defined below), we may, at our option, redeem the Series A Preferred Stock,
in whole and not in part, and within 120 days after any such Change of Control occurred, by paying $25.00 per share plus all dividends
accrued and unpaid (whether or not declared) on the Series A Preferred Stock to, but not including, the date of redemption (unless the
redemption date is after a record date for a Series A Preferred Stock declared dividend payment and prior to the corresponding Series
A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in
the redemption price). If, prior to the Delisting Event Conversion Date or Change of Control Conversion Date (each as defined below),
as applicable, we provide notice of redemption with respect to the Series A Preferred Stock (whether pursuant to our optional redemption
right or our special optional redemption right), holders of Series A Preferred Stock will not have the conversion right described below
under “—Conversion Rights.”
Notwithstanding
the foregoing, we shall not have the right to redeem the Series A Preferred Stock (x) upon any Delisting Event occurring in connection
with a transaction set forth in the first bullet point of the definition of Change of Control unless such Delisting Event also constitutes
a Change of Control or (y) with respect to any Delisting Event or Change of Control occurring in connection with a transaction (an “Affiliate
Transaction”) with, or by, any person (as defined below) who prior to such transaction is an affiliate of the Trust.
We
will mail to the record holder of the Series A Preferred Stock, a notice of redemption no less than 30 days nor more than 60 days prior
to the redemption date. We will send the notice to the address, as shown on our share transfer books. A failure to give notice of redemption
or any defect in the notice or in its mailing will not affect the validity of the redemption of any Series A Preferred Stock except as
to the holder to whom notice was defective or not given. Each notice will state the following:
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the
redemption date;
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the
redemption price;
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the
total number of shares of Series A Preferred Stock to be redeemed;
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the
place or places where the shares of Series A Preferred Stock are to be surrendered for payment, together with the certificates, if
any, representing such shares (duly endorsed for transfer) and any other documents we require in connection with such redemption;
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that
the Series A Preferred Stock is being redeemed pursuant to our special optional redemption right, and, as applicable, if in connection
with the occurrence of a Change of Control, a brief description of the transaction or transactions constituting such Change of Control;
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that
holders of the Series A Preferred Stock to be redeemed will not be able to tender such Series A Preferred Stock for conversion in
connection with the Delisting Event or Change of Control, as applicable, and each Series A Preferred Stock tendered for conversion
that is selected, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, for redemption
will be redeemed on the related date of redemption instead of converted on the Delisting Event Conversion Date or Change of Control
Conversion Date, as applicable; and
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that
dividends on the Series A Preferred Stock to be redeemed will cease to accrue on the redemption date.
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If
we redeem fewer than all of the outstanding shares of Series A Preferred Stock we will determine the number of outstanding shares of
Series A Preferred Stock to be redeemed on a pro rata basis, by lot or by any other equitable method we may choose that will not result
in a violation of the ownership limits and restrictions on transfer of our stock contained in our charter.
If
(i) we have given a notice of redemption, (ii) we have set aside sufficient funds for the redemption of the shares of Series A Preferred
Stock called for redemption and (iii) irrevocable instructions have been given to pay the redemption price and all applicable accrued
and unpaid dividends, then from and after the redemption date, those shares of Series A Preferred Stock will no longer be outstanding,
no further dividends will accrue on them and all other rights of the holders of those shares of Series A Preferred Stock will terminate,
except the right to receive the redemption price, without interest.
A
“Change of Control” occurs when, after the original issuance of the Series A Preferred Stock, the following have occurred
and are continuing:
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the
acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange
Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases,
mergers or other acquisition transactions of shares of our stock entitling that person to exercise more than 50% of the total voting
power of all outstanding shares of our stock entitled to vote generally in the election of trustees (except that such person will
be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent condition); and
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following
the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity has a class
of common securities (or ADRs representing such securities) listed on the NYSE AMERICAN, the NYSE, NASDAQ or an exchange or quotation
system that is a successor to the NYSE AMERICAN, the NYSE or NASDAQ.
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All
shares of the Series A Preferred Stock that we redeem or repurchase will be retired and restored to the status of authorized but unissued
shares of common stock, without designation as to series or class.
Conversion
Rights
Upon
the occurrence of a Delisting Event or a Change of Control, as applicable, each holder of Series A Preferred Stock will have the right,
unless prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we provide notice of our election
to redeem such shares of Series A Preferred Stock as described under “— Optional Redemption” or “—Special
Optional Redemption,” to convert all or part of the shares of Series A Preferred Stock held by such holder (the “Delisting
Event Conversion Right” or “Change of Control Conversion Right”, as applicable) on the Delisting Event Conversion Date
or Change of Control Conversion Date, as applicable, into a number of shares of common stock per share of Series A Preferred Stock (the
“Common Stock Conversion Consideration”) equal to the lesser of:
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the
quotient obtained by dividing (i) the sum of the $25.00 liquidation preference per share of Series A Preferred Stock to be converted
plus the amount of any accrued and unpaid dividends (whether or not declared) to, but not including, the Delisting Event Conversion
Date or Change of Control Conversion Date, as applicable (unless the Delisting Event Conversion Date or Change of Control Conversion
Date, as applicable, is after a record date for a Series A Preferred Stock declared dividend payment and prior to the corresponding
Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend to be paid
on such dividend payment date will be included in this sum), by (ii) the Common Stock Price, as defined below (such quotient, the
“Conversion Rate”); and
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5,
which we refer to as the “Share Cap.”
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The
Share Cap will be subject to pro rata adjustments for any share splits (including those effected pursuant to a common stock dividend),
subdivisions or combinations (in each case, a “Share Split”) with respect to shares of our common stock as follows: the adjusted
Share Cap as the result of a Share Split will be the number of shares of our common stock that is equivalent to the product of (i) the
Share Cap in effect immediately prior to such Share Split multiplied by (ii) a fraction, the numerator of which is the number of shares
of our common stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of our common
stock outstanding immediately prior to such Share Split.
In
the case of a Delisting Event or Change of Control pursuant to, or in connection with, which shares of our common stock will be
converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Form Consideration”),
a holder of shares of Series A Preferred Stock will receive upon conversion of such Series A Preferred Stock the kind and amount of Alternative
Form Consideration which such holder would have owned or been entitled to receive had such holder held a number of shares of our common
stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Delisting Event or Change of
Control (the “Alternative Conversion Consideration”; and the Common Stock Conversion Consideration or the Alternative Conversion
Consideration, as may be applicable to a Delisting Event or Change of Control, is referred to as the “Conversion Consideration”).
If
the holders of shares of our common shares have the opportunity to elect the form of consideration to be received in connection
with the Delisting Event or Change of Control, the Conversion Consideration that holders of the Series A Preferred Stock will receive
will be the form of consideration elected by the holders of a plurality of the shares of common shares held by stockholders who participate
in the election and will be subject to any limitations to which all holders of shares of common stock are subject, including, without
limitation, pro rata reductions applicable to any portion of the consideration payable in connection with the Delisting Event or
Change of Control.
We
will not issue fractional common shares upon the conversion of our Series A Preferred Stock. Instead, we will pay the cash value of such
fractional shares.
Within
15 days following the occurrence of a Delisting Event or Change of Control, we will provide to holders of record of outstanding shares
of Series A Preferred Stock a notice of occurrence of the Delisting Event or Change of Control that describes the resulting Delisting
Event Conversion Right or Change of Control Conversion Right, as applicable. This notice will state the following:
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the
events constituting the Delisting Event or Change of Control;
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the
date of the Delisting Event or Change of Control;
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the
last date on which the holders of shares of Series A Preferred Stock may exercise their Delisting Event Conversion Right or Change
of Control Conversion Right, as applicable;
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the
method and period for calculating the Common Stock Price;
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the
“Delisting Event Conversion Date” or “Change of Control Conversion Date,” as applicable, which will be a
business day fixed by our board of trustees that is not fewer than 20 or more than 35 days following the date of the notice;
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that
if, prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable, we provide notice of our election
to redeem all or any portion of the shares of Series A Preferred Stock, whether pursuant to our special optional redemption right
or our optional redemption right, you will not have any right to convert the shares of Series A Preferred Stock so called for redemption
and such shares of Series A Preferred Stock will be redeemed on the related redemption date, even if they have already been tendered
for conversion pursuant to the Delisting Event Conversion Right or Change of Control Conversion Right, as applicable;
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the
type and amount of Alternative Conversion Consideration entitled to be received per share of Series A Preferred Stock;
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the
name and address of the paying agent and the conversion agent; and
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the
procedures that the holders of shares of Series A Preferred Stock must follow to exercise the Delisting Event Conversion Right or
Change of Control Conversion Right, as applicable.
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We
will issue a press release for publication on or by Dow Jones & Company, Business Wire, PR Newswire or Bloomberg Business News (or,
if these organizations are not in existence at the time of issuance of the press release, such other news or press organization
as is reasonably calculated to broadly disseminate the relevant information to the public) containing the information stated in such
a notice, and post such a notice on our website, in any event prior to the opening of business on the first business day following any
date on which we provide the notice described above to the holders of record of Series A Preferred Stock.
To
exercise the Delisting Event Conversion Right or Change of Control Conversion Right, as applicable, a holder of record of Series A Preferred
Stock will be required to deliver, on or before the close of business on the Delisting Event Conversion Date or Change of Control Conversion
Date, as applicable, the certificates, if any, representing any certificated shares of Series A Preferred Stock to be converted, duly
endorsed for transfer, together with a completed written conversion notice and any other documents we reasonably require in connection
with such conversion, to our conversion agent. The conversion notice must state:
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the
relevant Delisting Event Conversion Date or Change of Control Conversion Date, as applicable; and
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the
number of shares of Series A Preferred Stock to be converted.
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The
“Common Stock Price” for any Change of Control will be (i) if the consideration to be received in the Change of Control by
holders of shares of our common stock is solely cash, the amount of cash consideration per share of common stock, and (ii) if the consideration
to be received in the Change of Control by holders of shares of our common stock is other than solely cash, the average of the closing
price per share of our common stock on the 10 consecutive trading days immediately preceding, but not including, the effective date of
the Change of Control. The “Common Stock Price” for any Delisting Event will be the average of the closing price per share
of our common stock on the 10 consecutive trading days immediately preceding, but not including, the effective date of the Delisting
Event.
Holders
of Series A Preferred Stock may withdraw any notice of exercise of a Delisting Event Conversion Right or Change of Control Conversion
Right, as applicable, in whole or in part, by a written notice of withdrawal delivered to our conversion agent prior to the close of
business on the business day prior to the Delisting Event Conversion Date or Change of Control Conversion Date, as applicable. The notice
of withdrawal must state:
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the
number of withdrawn shares of Series A Preferred Stock;
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if
certificated shares of Series A Preferred Stock have been tendered for conversion and are being withdrawn, the certificate numbers
of such certificated shares of Series A Preferred Stock; and
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the
number of shares of Series A Preferred Stock, if any, which are still to be converted.
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Notwithstanding
the foregoing, if the Series A Preferred Stock are held in global form, the conversion notice and the notice of withdrawal, as applicable,
must comply with applicable procedures of The Depository Trust Company (DTC).
Shares
of Series A Preferred Stock as to which the Delisting Event Conversion Right or Change of Control Conversion Right, as applicable, has
been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion
Consideration in accordance with the Delisting Event Conversion Right or Change of Control Conversion Right on the applicable Delisting
Event Conversion Date or Change of Control Conversion Date, unless prior to the applicable Delisting Event Conversion Date or Change
of Control Conversion Date we provide notice of our election to redeem such shares of Series A Preferred Stock, whether pursuant to our
optional redemption right or our special optional redemption right. If we elect to redeem shares of Series A Preferred Stock that would
otherwise be converted into the applicable Conversion Consideration on a Delisting Event Conversion Date or Change of Control Conversion
Date, as applicable, such shares of Series A Preferred Stock will not be so converted, the holders of such shares will not have any right
to convert such shares and the holders of such shares will be entitled to receive on the applicable redemption date the redemption price
for such shares.
We
will deliver amounts owing upon conversion no later than the third business day following the Delisting Event Conversion Date or Change
of Control Conversion Date, as applicable.
In
connection with the exercise of any Delisting Event Conversion Right or Change of Control Conversion Right, as applicable, we will comply
with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of shares of Series A Preferred
Stock into shares of common stock.
These
Change of Control and Delisting Event conversion and redemption features may not adequately compensate a holder of such securities upon
a Change of Control or Delisting Event and may make it more difficult for or discourage a party from taking over our trust. See the section
entitled “Risk Factors” with respect to the risks of an investment in our Series A Preferred Stock included in any applicable
prospectus supplement and under similar headings in the other documents that are incorporated by reference into this prospectus. Specifically,
see the following risk factor in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (as it may be amended from
time to time) filed with the SEC on March 24, 2021: “Risk Factors—The change of control conversion and delisting conversion
features of our Series A Preferred Stock may not adequately compensate a holder of such securities upon a Change of Control or Delisting
Event (as such terms as defined in regard to our Series A Preferred Stock), and the change of control conversion, delisting conversion
and redemption features of our Series A Preferred Stock may make it more difficult for a party to take over our trust or may discourage
a party from taking over our trust.
Except
as provided above in connection with a Delisting Event or Change of Control, the Series A Preferred Stock is not convertible into or
exchangeable for any other property or securities. Notwithstanding any other provision of our Series A Preferred Stock, no holder of
our Series A Preferred Stock will be entitled to convert such Series A Preferred Stock into shares of our common stock to the extent
that receipt of such shares of common stock would cause such holder (or any other person) to exceed the ownership limits and restrictions
on transfer of our stock contained in our charter. For further information regarding the limits on ownership and transfer restrictions
applicable to our stock, see “–Ownership Limits and Restrictions on Transfer.”
Voting
Rights
Except
as described below, holders of Series A Preferred Stock have no voting rights. On any matter in which the Series A Preferred Stock may
vote (as expressly provided in our charter), each share of Series A Preferred Stock shall entitle the holder thereof to cast one vote.
If
dividends on the Series A Preferred Stock are not paid, whether or not declared, for six or more quarterly periods, whether or not these
quarterly periods are consecutive, holders of Series A Preferred Stock (voting separately as a class with any other series of preferred
stock ranking equal to the Series A Preferred Stock as to dividends and upon liquidation and upon which like voting rights have been
conferred and are exercisable, which we refer to as “voting preferred stock”) will be entitled to vote, at any special meeting
called by our secretary at the request of holders of record of at least 10% of the outstanding shares of Series A Preferred Stock and
any such series of voting preferred stock (unless such request is received fewer than 90 days before our next annual meeting of stockholders
at which such vote shall occur) and at each annual meeting of stockholders, for the election of two additional trustees to serve on our
board of trustees. The right of holders of Series A Preferred Stock to vote in the election of such trustees will terminate when all
dividends accumulated on the outstanding shares of Series A Preferred Stock for all past dividend periods shall have been fully paid
or declared and a sum sufficient for the cash payment thereof set aside for payment. Unless the number of our trustees has previously
been increased pursuant to the terms of any series of voting preferred stock with which the holders of Series A Preferred Stock are entitled
to vote together as a single class in the election of such trustees, the number of our trustees will automatically increase by two at
such time as holders of Series A Preferred Stock become entitled to vote in the election of two additional trustees. Unless shares of
voting preferred stock remain outstanding and entitled to vote in the election of such trustees, the term of office of such trustees
will terminate, and the number of our trustees will automatically decrease by two, when all dividends accumulated for past dividend periods
on the Series A Preferred Stock have been fully paid or declared and a sum sufficient for the cash payment thereof set aside for payment.
If the rights of holders of Series A Preferred Stock to elect the two additional trustees terminate after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to vote in any election of such trustees but before the closing of the polls
in such election, holders of Series A Preferred Stock outstanding as of such record date will not be entitled to vote in such election
of trustees. The right of the holders of Series A Preferred Stock to elect the additional trustees will again vest if and whenever dividends
are not paid for six quarterly periods, as described above. In no event will the holders of Series A Preferred Stock be entitled to nominate
or elect an individual as a trustee, and no individual shall be qualified to be so nominated for election or to so serve as a trustee,
if the individual’s service as a trustee would cause us to fail to satisfy a requirement relating to director independence of any
national securities exchange on which any class or series of our stock is listed. In class votes with shares of other series of voting
preferred stock, shares of different classes or series shall vote in proportion to the liquidation preference of the shares.
The
additional trustees will be elected by a plurality of the votes cast in the election of such trustees, and each such trustee will serve
until the next annual meeting of our stockholders and until his or her successor is duly elected and qualifies, or until such trustee’s
term of office terminates as described above. Any trustee elected by the holders of Series A Preferred Stock and any series of voting
preferred stock may be removed only by a vote of the holders of a majority of the outstanding shares of Series A Preferred Stock and
all series of voting preferred stock with which the holders of Series A Preferred Stock are entitled to vote together as a single class
in the election of such trustees. At any time that the holders of Series A Preferred Stock are entitled to vote in the election of the
two additional trustees, holders of Series A Preferred Stock will be entitled to vote in the election of a successor to fill any vacancy
on our board of trustees that results from the removal of such a trustee.
At
any time that holders of Series A Preferred Stock have the right to elect two additional trustees as described above but such trustees
have not been elected, our secretary must call a special meeting for the purpose of electing the additional trustees upon the written
request of the holders of record of 10% of the outstanding shares of Series A Preferred Stock and all series of voting preferred stock
with which the holders of Series A Preferred Stock are entitled to vote together as a single class with respect to the election of such
trustees, unless such a request is received less than 90 days before the date fixed for the next annual meeting of our stockholders,
in which case, the additional trustees may be elected at such annual meeting.
Any
amendment, alteration, repeal or other change to any provision of our charter, including the supplementary articles setting forth the
terms of the Series A Preferred Stock (whether by merger, consolidation, transfer or conveyance of all or substantially all of our assets
or otherwise) that would materially and adversely affect the rights, preferences, privileges or voting powers of the Series A Preferred
Stock must be approved by the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of Series A Preferred
Stock and any other series of voting preferred stock entitled to vote together with the holders of Series A Preferred Stock on the matter,
voting together as a single class. In addition, the creation, issuance or increase in the authorized number of shares of any class or
series of stock having a preference as to dividends or other distributions, whether upon liquidation, dissolution or otherwise, that
is senior to the Series A Preferred Stock (or any equity securities convertible or exchangeable into any such shares) requires approval
by the affirmative vote of at least 66 2/3% of the votes entitled to be cast by the holders of Series A Preferred Stock and any other
series of voting preferred stock entitled to vote together with the holders of Series A Preferred Stock on the matter, voting together
as a single class.
The
following actions will not be deemed to materially and adversely affect the rights, preferences, privileges or voting powers of the Series
A Preferred Stock:
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any
increase or decrease in the number of authorized shares of common stock or preferred stock of any series or the classification or
reclassification of any unissued shares, or the creation or issuance of equity securities, of any class or series ranking, as to
dividends or liquidation preference, equal to, or junior to, the Series A Preferred Stock; or
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any
amendment, alteration or repeal or other change to any provision of our charter, including the supplementary articles setting forth
the terms of the Series A Preferred Stock, as a result of a merger, consolidation, transfer or conveyance of all or substantially
all of our assets or other business combination, if the Series A Preferred Stock (or stock into which the Series A Preferred Stock
has been converted in any successor person or entity to us) remain outstanding with the terms thereof unchanged in all material respects
or are exchanged for stock of the successor person or entity with substantially identical rights, taking into account that, upon
the occurrence of an event described in this bullet point, we may not be the surviving entity. Furthermore, if the holders of the
Series A Preferred Stock receive the greater of the full trading price of the Series A Preferred Stock on the last date prior to
the first public announcement of an event described in this bullet point or the $25.00 liquidation preference per share of Series
A Preferred Stock plus accrued and unpaid dividends (whether or not declared) to, but not including, the date of such event, pursuant
to the occurrence of any of the events described in this bullet point (other than an Affiliate Transaction), then such holders will
not have any voting rights with respect to the events described in this bullet point.
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The
voting provisions above will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required
would occur, we have redeemed or called for redemption upon proper procedures all outstanding shares of Series A Preferred Stock.
No
Maturity, No Sinking Fund
The
Series A Preferred Stock has no stated maturity date and will not be subject to any sinking fund.
Ownership
Limits and Restrictions on Transfer
In
order to allow us to maintain our qualification as a REIT for federal income tax purposes, ownership and transfer by any person of our
outstanding equity securities is restricted in our charter. All certificates representing shares of Series A Preferred Stock will include
a legend regarding such restrictions.
To
qualify as a REIT under the Code, we must satisfy a number of statutory requirements as outlined in this prospectus supplement and the
accompanying prospectus, including a requirement that no more than 50% in value of our outstanding shares of stock may be owned, actually
or constructively, by five or fewer individuals (as defined by the Code to include certain entities) during the last half of a taxable
year. Our capital stock must also be beneficially owned by 100 or more persons during at least 335 days of a taxable year of twelve months
or during a proportionate part of a shorter taxable year.
Under
our charter, the trustees may redeem shares or restrict transfers of shares when the trustees, in good faith, believe that such redemption
or restriction is necessary to prevent disqualification of REIT status. Additionally, our charter prohibits any transfer of shares of
our stock or any other change in our capital structure that would result in:
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any
person directly or indirectly acquiring beneficial or constructive ownership of more than 9.9% (in value or number of shares, whichever
is more restrictive) of the outstanding shares of our stock;
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outstanding
shares of our stock being beneficially owned by fewer than 100 persons;
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us
being “closely held” within the meaning of Section 856 of the Code; or
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us
otherwise failing to qualify as a REIT under the Code.
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Our
charter requires that any person who acquires or attempts to acquire shares of our stock, in violation of these restrictions, which we
refer to as the ownership limits, give at least 15 days’ prior written notice to us. If any person attempts to effect a transfer
of shares of our stock, or attempts to cause any other event to occur, that would result in a violation of the ownership limits, then:
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(i)
that number of shares the beneficial ownership or constructive ownership of which otherwise would cause such person to violate the
ownership limits shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described
in our charter, effective as of the close of business on the business day prior to the date of such transfer, and such person shall
acquire no rights in such shares; or (ii) if the transfer to the Charitable Trust described in clause (i) of this sentence would
not be effective for any reason to prevent the violation of the ownership limits, then the transfer of that number of shares that
otherwise would cause a violation of the ownership limits shall be void ab initio, and the intended transferee shall acquire
no rights in such shares.
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our
board of trustees may take any action it deems advisable to refuse to give effect to, or to prevent, any such attempted transfer
or other event, including, without limitation, causing us to redeem the shares, refusing to give effect to such transfer on our books
or instituting proceedings to enjoin such transfer or other event; provided however, than any transfer or attempted transfer in violation
of the ownership limits shall automatically result in the transfer to the Charitable Trust described above and, where applicable,
such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the
board of trustees or a committee thereof.
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Shares
held by the Charitable Trustee shall be issued and outstanding shares of ours. The violating transferee shall have no rights in the shares
held by the Charitable Trustee. The violating transferee shall not benefit economically from ownership of any shares held in trust by
the Charitable Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights
attributable to the shares held in the Charitable Trust. The violating transferee shall have no claim, cause of action, or any other
recourse whatsoever against the purported transferor of such shares.
Every
holder of more than 2% of the number or value of outstanding shares of our Series A Preferred Stock must give written notice to us stating
the name and address of such owner, the number of shares of stock beneficially or constructively owned and a description of the manner
in which the shares are owned. Our board of trustees may, in its sole and absolute discretion, exempt certain persons from the ownership
limitations contained in our charter if ownership of shares of capital stock by such persons would not disqualify us as a REIT under
the Code.
Further
Issuances
We
may create and issue additional shares of Series A Preferred Stock ranking equally with the Series A Preferred Stock offered by this
prospectus supplement in all respects, so that such additional shares of Series A Preferred Stock will form a single series with the
Series A Preferred Stock offered under this prospectus supplement and will have the same terms.
Conversion
The
Series A Preferred Stock will not be convertible into or exchangeable for any other property or securities, except as provided under
“—Conversion Rights.”
Information
Rights
During
any period in which we are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and any shares of Series
A Preferred Stock are outstanding, we will (i) transmit by mail or other permissible means under the Exchange Act to all holders of Series
A Preferred Stock as their names and addresses appear in our record books and without cost to such holders, copies of the Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we would have been required to file with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) within
15 business days after the respective dates by which we would have been required to file such reports with the SEC if we were subject
to Section 13 or 15(d) of the Exchange Act and (ii) within 15 business days following written request, supply copies of such reports
to any prospective holder of the Series A Preferred Stock.
Listing
Our
Series A Preferred Stock is traded on the NYSE American under the ticker “PW PRA.” See “Risk Factors” with respect
to the risks of an investment in our Series A Preferred Stock included in any applicable prospectus supplement and under similar headings
in the other documents that are incorporated by reference into this prospectus.
Registrar,
Transfer Agent and Disbursing Agent
The
registrar, transfer agent and disbursing agent for dividends and other distributions in respect of our Series A Preferred Stock is Broadridge
Corporate Issuer Solutions, Inc.
Rights
We
may issue rights to our shareholders to purchase more of our securities (including, but not limited to, rights to purchase our common
stock) or other rights, including rights to receive payment in cash or securities based on the value, rate or price of one or more specified
commodities, currencies, securities or indices, or any combination of the foregoing. Rights may be issued independently or together with
any other securities and may be attached to, or separate from, such securities. The terms of any rights to be issued will be set forth
in the applicable prospectus supplement.
Warrants
We
may issue warrants to purchase our securities (including, but not limited to, warrants to purchase our common shares and preferred shares)
or other warrants or rights, including rights to receive payment in cash or securities based on the value, rate or price of one or more
specified commodities, currencies, securities or indices, or any combination of the foregoing. Warrants may be issued independently or
together with any other securities and may be attached to, or separate from, such securities. Each series of warrants will be issued
under a separate warrant agreement to be entered into between us and a warrant agent. The terms of any warrants to be issued and a description
of the material provisions of the applicable warrant agreement will be set forth in the applicable prospectus supplement.
Any
warrants issued under this prospectus may be evidenced by warrant certificates. Warrants also may be issued under an applicable warrant
agreement that we enter into with a warrant agent. We will indicate the name and address of the warrant agent, if applicable, in the
prospectus supplement relating to the particular series of warrants being offered.
The
following description, together with the additional information that we include in any applicable prospectus supplement and in any related
free writing prospectus that we may authorize to be distributed to you, summarizes the material terms and provisions of the warrants
that we may offer under this prospectus, which may be issued in one or more series. While the terms we have summarized below will apply
generally to any warrants that we may offer under this prospectus, we will describe the particular terms of any series of warrants in
more detail in the applicable prospectus supplement and in any related free writing prospectus that we may authorize to be distributed
to you. The following description of warrants will apply to the warrants offered by this prospectus unless we provide otherwise in the
applicable prospectus supplement. The applicable prospectus supplement for a particular series of warrants may specify different or additional
terms.
We
will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports
that we file with the SEC, the form of warrant and/or the warrant agreement and warrant certificate, as applicable, that contain the
terms of the particular series of warrants we are offering, and any supplemental agreements, before the issuance of such warrants.
The
summary below and that contained in any prospectus supplement is qualified in its entirety by reference to all of the provisions of the
warrant and/or the warrant agreement and warrant certificate, as applicable, applicable to a particular series of debt securities. We
urge you to read the applicable prospectus supplements and any related free writing prospectuses related to the warrants that we may
offer under this prospectus, as well as the complete warrant and/or the warrant agreement and warrant certificate, as applicable, that
contains the terms of the warrants.
General
We
will describe in the applicable prospectus supplement the terms of the series of warrants being offered, including:
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the
offering price and aggregate number of warrants offered;
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the
currency for which the warrants may be purchased;
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if
applicable, the number of warrants issued with each such security;
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the
number of shares of common stock and/or preferred stock, as the case may be, purchasable upon the exercise of one warrant and the
price at which these shares may be purchased upon such exercise;
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the
effect of any merger, consolidation, sale or other disposition of our business on the warrant agreements and the warrants;
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the
terms of any rights to redeem or call the warrants;
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any
provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the
dates on which the right to exercise the warrants will commence and expire;
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the
manner in which the warrant agreements and warrants may be modified;
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a
discussion of any material or special U.S. federal income tax considerations of holding or exercising the warrants;
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the
terms of the securities issuable upon exercise of the warrants; and
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any
other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before
exercising their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise,
including the right to receive dividends, if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting
rights, if any:
Exercise
of Warrants
Each
warrant will entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price
that we describe in the applicable prospectus supplement. The warrants may be exercised as set forth in the prospectus supplement relating
to the warrants offered. Unless we otherwise specify in the applicable prospectus supplement, warrants may be exercised at any time up
to the close of business on the expiration date set forth in the prospectus supplement relating to the warrants offered thereby. After
the close of business on the expiration date, unexercised warrants will become void.
Upon
receipt of payment and the warrant or warrant certificate, as applicable, properly completed and duly executed at the corporate trust
office of the warrant agent, if any, or any other office, including ours, indicated in the prospectus supplement, we will, as soon as
practicable, issue and deliver the securities purchasable upon such exercise. If less than all of the warrants (or the warrants represented
by such warrant certificate) are exercised, a new warrant or a new warrant certificate, as applicable, will be issued for the remaining
warrants.
Enforceability
of Rights by Holders of Warrants
Each
warrant agent, if any, will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship
of agency or trust with any holder of any warrant. A warrant agent may act as warrant agent for more than one issue of warrants. A warrant
agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant, including any
duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant may, without
the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action its right to exercise,
and receive the securities purchasable upon exercise of, its warrants.
Governing
Law
Unless
we otherwise specify in the applicable prospectus supplement, the warrants and any warrant agreements will be governed by and construed
in accordance with the laws of the State of New York.
Units
As
specified in the applicable prospectus supplement (if any), we may issue units consisting of one or more shares of common stock, shares
of preferred stock, rights or warrants, or any combination of such securities. Such combinations may include, without limitation, units
consisting of common stock and warrants or preferred stock and warrants.
The
summary below and that contained in any prospectus supplement is qualified in its entirety by reference to all of the provisions of the
unit agreement and/or unit certificate, and depositary arrangements, if applicable. We urge you to read the applicable prospectus supplements
and any related free writing prospectuses related to the units that we may offer under this prospectus, as well as the complete unit
agreement and/or unit certificate, and depositary arrangements, as applicable, that contain the terms of the units.
We
will file as exhibits to the registration statement of which this prospectus is a part, or will incorporate by reference from reports
that we file with the SEC, the form of unit agreement and/or unit certificate, and depositary arrangements, as applicable, that contain
the terms of the particular series of units we are offering, and any supplemental agreements, before the issuance of such units.
The
applicable prospectus supplement, information incorporated by reference or free writing prospectus may describe:
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the
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances those
securities may be held or transferred separately;
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any
provisions for the issuance, payment, settlement, transfer, or exchange of the units or of the securities composing the units;
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whether
the units will be issued in fully registered or global form; and
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any
other terms of the units.
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Certain
Restrictions on Size of Holdings and Transferability
In
order to assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Code, among other
purposes, our Declaration of Trust provides that no person or entity may own, directly or indirectly, more than 9.9% in economic value
of the aggregate of the outstanding common shares of Power REIT. However, our charter authorizes our board of trustees to exempt from
time to time the ownership limits applicable to certain named individuals or entities. This provision or other provisions in our Declaration
of Trust or By-laws, or provisions that we may adopt in the future, may limit the ability of our shareholders to sell their shares at
a premium over then-current market prices by discouraging a third party from seeking to obtain control of us.
Our
charter also prohibits any person from (1) beneficially or constructively owning shares of our capital stock that would result in our
being “closely held” under Section 856(h) of the Code at any time during the taxable year, (2) transferring shares of our
capital stock if such transfer would result in our stock being beneficially or constructively owned by fewer than 100 persons and (3)
beneficially or constructively owning shares of our capital stock if such ownership would cause us otherwise to fail to qualify as a
REIT.
Listing
Our
common shares are currently traded on the NYSE American under the symbol “PW” and shares of our Series A Preferred Stock
are currently traded on the NYSE American under the symbol “PW PRA.” There can be no assurance that any of our other shares
of preferred stock, rights, warrants or units will be listed on any securities exchange. Our plans as to whether or not to list any such
securities shall be disclosed in the supplements to this prospectus relating to the offering of such securities.
PLAN
OF DISTRIBUTION
The
securities to which this prospectus relates may be offered and sold from time to time pursuant to underwritten public offerings, negotiated
transactions, block trades or other transactions or offerings, or a combination of these methods. The terms of any securities offered
and the terms and conditions of any offering, including the terms and conditions of the particular plan of distribution, will be determined
prior to the time of sale of the securities and disclosed in supplements to this prospectus.
We,
or holders of our securities that are offering and selling the securities, may offer and sell:
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through
one or more underwriters or dealers in a public offering; and/or
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through
agents, including in connection with a distribution to our security holders of rights to purchase such securities; and/or
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directly
to one or more purchasers, including through the exercise of warrants or rights or the conversion or exchange of any security; and/or
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in
any other manner permitted by applicable law and rules.
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Underwriters
or agents could make sales in privately negotiated transactions and any other method permitted by law. Securities may be sold in one
or more of the following transactions: (a) block transactions (which may involve crosses) in which a broker-dealer may sell all
or a portion of the securities as agent but may position and resell all or a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker-dealer as principal and resale by the broker-dealer for its own account pursuant to a prospectus supplement;
(c) a special offering, an exchange distribution or a secondary distribution in accordance with the applicable rules of the NYSE,
Nasdaq or other stock exchange; (d) ordinary brokerage transactions and transactions in which a broker-dealer solicits purchasers;
(e) “at the market offerings” or sales “at the market,” within the meaning of Rule 415(a)(4) of the Securities
Act, to or through a market maker or into an existing trading market on an exchange or otherwise; (f) sales in other ways not involving
market makers or established trading markets, including direct sales to purchasers; or (g) through a combination of any of these
methods. Broker-dealers may also receive compensation from purchasers of these securities which is not expected to exceed those customary
in the types of transactions involved.
The
prospectus supplement relating to the particular offering will identify any underwriters, dealers or agents involved in the offering,
and will set forth any applicable purchase price, fee, commission or discount arrangement with such underwriters, dealers or agents,
and among such underwriters, dealers or agents, or the basis upon which such amounts may be calculated. Securities so offered by us or
by selling security holders may not be sold through agents, underwriters or dealers without delivery of a prospectus supplement describing
the methods and terms of the offering.
Only
underwriters named in the prospectus supplement are underwriters of the securities offered by the prospectus supplement.
If
underwriters are used in the sale, they will acquire the securities for their own account and may resell the securities from time to
time in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations
of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement.
We may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters without
a syndicate. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered by the prospectus
supplement. Any public offering price and any discounts or concessions allowed or reallowed or paid to dealers may change from time to
time. We may use underwriters with whom we have a material relationship. We will describe in the prospectus supplement, naming the underwriter,
the nature of any such relationship.
We
may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale
of securities, and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement
states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We
may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at
the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery
on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation
of these contracts in the prospectus supplement.
Our
common shares are listed on the NYSE American under the symbol “PW” and our Series A Preferred Stock are listed on the NYSE
American under the symbol “PW.PRA.” Any securities that we issue, other than our common shares and Series A Preferred Stock,
will be new issues of securities with no established trading market and may or may not be listed on a national securities exchange, quotation
system or over-the-counter market. Any underwriters or agents to or through which securities are sold by us may make a market in such
securities, but such underwriters or agents will not be obligated to do so and any of them may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of or trading market for any securities sold by us.
In
connection with an offering of our securities, underwriters may engage in transactions that stabilize, maintain or otherwise affect the
price of our securities. Specifically, underwriters may over-allot in connection with the offering, creating a syndicate short position
in our securities for their own account. In addition, underwriters may bid for, and purchase, our securities in the open market to cover
short positions or to stabilize the price of our securities. Any underwriters who are qualified market makers may engage in passive market
making transactions in the securities in accordance with Rule 103 of Regulation M, during the business day prior to the pricing of the
offering, before the commencement of offers or sales of the securities. Passive market makers must comply with applicable volume and
price limitations and must be identified as passive market makers. In general, a passive market maker must display its bid at a price
not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive market maker’s
bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded. Passive market making
may stabilize the market price of the securities at a level above that which might otherwise prevail in the open market and, if commenced,
may be discontinued at any time. Finally, underwriters may reclaim selling concessions allowed for distributing our securities in
the offering if the underwriters repurchase previously distributed securities in transactions to cover short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the market price of our securities above independent market
levels. Underwriters are not required to engage in any of these activities and may end any of these activities at any time. Agents and
underwriters may engage in transactions with, or perform services for, us and our affiliates in the ordinary course of business.
We
may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties. If the
applicable prospectus supplement relating to this prospectus so indicates, in connection with any derivative transaction, the third parties
may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so,
the third party may use securities pledged or borrowed from us or others to settle those sales or to close out any related open borrowings
of stock, and may use securities received from us in settlement of those derivatives to close out any related open borrowings of stock.
The third party in such sale transactions will be an underwriter and, if not identified in this prospectus, will be identified in the
applicable prospectus supplement or in a post-effective amendment to the registration statement of which this prospectus is a part. In
addition, we may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities
short using this prospectus. Such financial institution or other third party may transfer its economic short position to investors in
our securities or in connection with a concurrent offering of other securities.
Any
underwriters, dealers or agents that may be engaged in any of the transactions described above may perform separate services for us in
the ordinary course of business. We may have agreements with the underwriters, dealers or agents, to indemnify them against specified
civil liabilities, including liabilities under the Securities Act or to contribute with respect to payments that the underwriters, dealers
or agents may be required to make. Underwriters, dealers or agents may be customers of, engage in transactions with or perform services
for us in the ordinary course of their businesses.
LEGAL
OWNERSHIP OF SECURITIES
We
can issue securities in registered form or in the form of one or more global securities. We describe global securities in greater detail
below. We refer to those persons who have securities registered in their own names on the books that we or any applicable trustee or
depositary maintain for this purpose as the “holders” of those securities. These persons are the legal holders of the securities.
We refer to those persons who, indirectly through others, own beneficial interests in securities that are not registered in their own
names, as “indirect holders” of those securities. As we discuss below, indirect holders are not legal holders, and investors
in securities issued in book-entry form or in street name will be indirect holders.
Book-Entry
Holders
We
may issue securities in book-entry form only, as we will specify in the applicable prospectus supplement. This means securities may be
represented by one or more global securities registered in the name of a financial institution that holds them as depositary on behalf
of other financial institutions that participate in the depositary’s book-entry system. These participating institutions, which
are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their customers.
Only
the person in whose name a security is registered is recognized as the holder of that security. Global securities will be registered
in the name of the depositary or its participants. Consequently, for global securities, we will recognize only the depositary as the
holder of the securities, and we will make all payments on the securities to the depositary. The depositary passes along the payments
it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary
and its participants do so under agreements they have made with one another or with their customers; they are not obligated to do so
under the terms of the securities.
As
a result, investors in a global security will not own securities directly. Instead, they will own beneficial interests in a global security,
through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest
through a participant. As long as the securities are issued in global form, investors will be indirect holders, and not legal holders,
of the securities.
Street
Name Holders
We
may terminate a global security or issue securities that are not issued in global form. In these cases, investors may choose to hold
their securities in their own names or in “street name.” Securities held by an investor in street name would be registered
in the name of a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial
interest in those securities through an account he or she maintains at that institution.
For
securities held in street name, we or any applicable trustee or depositary will recognize only the intermediary banks, brokers and other
financial institutions in whose names the securities are registered as the holders of those securities, and we or any such trustee or
depositary will make all payments on those securities to them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal
Holders
Our
obligations, as well as the obligations of any applicable trustee or third party employed by us or a trustee, run only to the legal holders
of the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by any
other indirect means. This will be the case whether an investor chooses to be an indirect holder of a security or has no choice because
we are issuing the securities only in global form.
For
example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that
holder is required, under agreements with its participants or customers or by law, to pass it along to the indirect holders but does
not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to relieve us of the consequences of a
default or of our obligation to comply with a particular provision of an indenture, or for other purposes. In such an event, we would
seek approval only from the holders, and not the indirect holders, of the securities. Whether and how the legal holders contact the indirect
holders is up to the legal holders.
Special
Considerations for Indirect Holders
If
you hold securities through a bank, broker or other financial institution, either in book-entry form because the securities are represented
by one or more global securities or in street name, you should check with your own institution to find out:
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how
it handles securities payments and notices;
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whether
it imposes fees or charges;
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how
it would handle a request for the holders’ consent, if ever required;
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whether
and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the
future;
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how
it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect
their interests; and
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if
the securities are in book-entry form, how the depositary’s rules and procedures will affect these matters.
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Global
Securities
A
global security is a security that represents one or any other number of individual securities held by a depositary. Generally, all securities
represented by the same global securities will have the same terms.
Each
security issued in book-entry form will be represented by a global security that we issue to, deposit with and register in the name of
a financial institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary.
Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as DTC,
will be the depositary for all securities issued in book-entry form.
A
global security may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary,
unless special termination situations arise. We describe those situations below under “—Special Situations When a Global
Security Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner
and legal holder of all securities represented by a global security, and investors will be permitted to own only beneficial interests
in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that
in turn has an account with the depositary or with another institution that does. Thus, an investor whose security is represented by
a global security will not be a legal holder of the security, but only an indirect holder of a beneficial interest in the global security.
If
the prospectus supplement for a particular security indicates that the security will be issued as a global security, then the security
will be represented by a global security at all times unless and until the global security is terminated. If termination occurs, we may
issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any book-entry
clearing system.
Special
Considerations for Global Securities
As
an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the investor’s
financial institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect
holder as a holder of securities and instead deal only with the depositary that holds the global security.
If
securities are issued only as global securities, an investor should be aware of the following:
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an
investor cannot cause the securities to be registered in his or her name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we describe below;
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an
investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection
of his or her legal rights relating to the securities, as we describe above;
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an
investor may not be able to sell interests in the securities to some insurance companies and to other institutions that are required
by law to own their securities in non-book-entry form;
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an
investor may not be able to pledge his or her interest in the global security in circumstances where certificates representing the
securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective;
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the
depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating
to an investor’s interest in the global security;
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we
and any applicable trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership
interests in the global security, nor will we or any applicable trustee supervise the depositary in any way;
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the
depositary may, and we understand that DTC will, require that those who purchase and sell interests in the global security within
its book-entry system use immediately available funds, and your broker or bank may require you to do so as well; and
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financial
institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in the
global security, may also have their own policies affecting payments, notices and other matters relating to the securities.
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There
may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for
the actions of any of those intermediaries.
Special
Situations When a Global Security Will Be Terminated
In
a few special situations described below, a global security will terminate and interests in it will be exchanged for physical certificates
representing those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to
the investor. Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to
their own names, so that they will be direct holders. We have described the rights of holders and street name investors above.
A
global security will terminate when the following special situations occur:
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if
the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security
and we do not appoint another institution to act as depositary within 90 days;
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if
we notify any applicable trustee that we wish to terminate that global security; or
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if
an event of default has occurred with regard to securities represented by that global security and has not been cured or waived.
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The
applicable prospectus supplement may also list additional situations for terminating a global security that would apply only to the particular
series of securities covered by the prospectus supplement. When a global security terminates, the depositary, and neither we nor any
applicable trustee, is responsible for deciding the names of the institutions that will be the initial direct holders.
MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Tax
Considerations
The
following is a summary of the material U.S. federal income tax consequences of the purchase, ownership and disposition of the securities
in this offering as applied to U.S. holders (as defined below) that hold such shares as a capital asset for federal income tax purposes.
Neuberger Quinn Gielen Rubin Gibber P.A. has acted as our counsel, has reviewed this summary, and is of the opinion that the summary
of the material U.S. Federal income tax considerations contained herein is accurate in all material respects. This summary is based upon
existing U.S. federal income tax law, which is subject to differing interpretations or change (possibly with retroactive effect). The
effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non- U.S. tax laws are not
discussed. Furthermore, this summary is for informational purposes only and is not intended as tax advice. We therefore recommend that
each holder of our securities consult its own tax advisor with respect to the particular tax consequences of this offering or the related
share issuance to such holder.
This
discussion is based upon the U.S. Internal Revenue Code of 1986, as amended, or Code, Treasury Regulations promulgated thereunder, judicial
decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (“IRS”), in each
case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing
interpretation may be applied retroactively in a manner that could adversely affect a holder of the Rights or shares of our Common Shares
acquired pursuant to exercise of the Rights.
This
summary does not address all aspects of federal income taxation that may be important or consequential to various holders responsive
to specific facts or circumstances or to holders who may be subject to special tax rules, including, without limitation, the following,
all of whom may be subject to tax rules that differ significantly from those summarized in this discussion:
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U.S. expatriates and former citizens or long-term residents of the United States;
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persons holding the Rights or shares of our Common Shares as part of a hedge, straddle or other risk reduction strategy or as part of
a conversion transaction or other integrated investment;
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banks, insurance companies, and other financial institutions;
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brokers, dealers or traders in securities;
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“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings
to avoid U.S. federal income tax;
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partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
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tax-exempt organizations or governmental organizations;
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persons deemed to sell the Rights, shares of Common Shares under the constructive sale provisions of the Code;
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persons for whom our stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code;
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persons who hold or receive the Rights, shares of our Common Shares pursuant to the exercise of any employee stock option or otherwise
as compensation; and
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tax-qualified retirement plans.
We
have not sought, and we will not seek, any rulings from the IRS regarding the federal income tax consequences of this offering or the
related share issuances.
For
purposes of this summary, a “U.S. holder” is a holder that is for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the U.S.;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of
the United States, any state thereof, or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more United States persons (within the
meaning of Section 7701(a)(30) of the Code), or (2) has made a valid election under applicable Treasury Regulations to continue to be
treated as a United States person.
THE
FOLLOWING IS A DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE RECEIPT OF SECURITIES IN THIS OFFERING AND OF
THE EXERCISE, SALE OR OTHER DISPOSITION AND EXPIRATION OF THOSE SECURITIES. EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF THE RECEIPT OF RIGHTS IN THIS OFFERING AND OF THE EXERCISE, SALE OR OTHER DISPOSITION AND EXPIRATION OF THOSE
RIGHTS, INCLUDING THE APPLICABILITY AND EFFECTS OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.
Tax
Considerations of our status as a Real Estate Investment Trust
The
following is a summary of the material U.S. federal income tax considerations associated with our qualification and taxation as a real
estate investment trust, or REIT, and the acquisition, ownership and disposition of our Common Shares and of our preferred stock, including
our Series A Preferred Stock. Supplemental U.S. federal income tax considerations relevant to the acquisition, ownership and disposition
of the other securities offered by this prospectus may be provided in the additional prospectus or prospectus supplement that relates
to those securities. For purposes of this summary, references to “the company,” “we,” “our” and “us”
mean only Power REIT and do not include any of its subsidiaries, except as otherwise indicated. This summary is based upon the Internal
Revenue Code of 1986 (the “Code”), Department of Treasury (“Treasury”) regulations promulgated under the Code
(the “Treasury Regulations”), and reported judicial and administrative rulings and decisions in effect as of the date of
this prospectus, all of which are subject to change, retroactively or prospectively, and to possibly differing interpretations. Any such
change could affect the validity of this summary.
This
summary does not address (i) U.S. federal taxes other than income taxes or (ii) state, local or non-U.S. taxes. In addition, this summary
does not purport to address the U.S. federal income or other tax considerations applicable to holders of shares of our stock that are
subject to special treatment under U.S. federal income tax law, including, for example:
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financial institutions;
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partnerships or entities treated as partnerships, S corporations or other pass-through entities for U.S. federal income tax purposes;
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insurance companies;
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pension plans or other tax-exempt organizations, except to the extent summarized below;
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“qualified foreign pension funds” or entities wholly owned by a qualified foreign pension fund;
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dealers in securities or currencies;
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traders in securities that elect to use a mark to market method of accounting;
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persons that hold their shares as part of a straddle, hedge, constructive sale or conversion transaction;
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persons subject to special tax accounting rules under Section 451(b) of the Code;
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regulated investment companies;
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REITs;
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certain U.S. expatriates;
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persons whose “functional currency” is not the U.S. dollar; and
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persons who acquired shares of our stock through the exercise of an employee stock option or otherwise as compensation.
No
ruling on the U.S. federal, state, or local tax considerations relevant to our operation or to the purchase, ownership or disposition
of shares of our stock, has been requested from the Internal Revenue Service (the “IRS”) or other tax authority. No assurance
can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described
below.
This
summary is also based upon the assumption that our operation, and the operation of our subsidiaries and other lower-tier and affiliated
entities, will in each case be in accordance with its applicable organizational documents or partnership agreements. This summary does
not discuss the impact that U.S. state and local taxes and taxes imposed by non-U.S. jurisdictions could have on the matters summarized
in this summary. In addition, this summary assumes that shareholders hold shares of our stock as a capital asset, which generally means
as property held for investment.
Prospective
investors are urged to consult their tax advisors to determine the U.S. federal, state, local, foreign and other tax consequences to
them of the purchase, ownership and disposition of shares of our stock, the tax treatment of a REIT and the effect of potential changes
in the applicable tax laws.
We
have elected to be taxed as a REIT under the applicable provisions of the Code and the Treasury Regulations, commencing with our taxable
year ended on December 31, 2011. We intend to continue operating as a REIT so long as our Board determines that REIT qualification remains
in our best interest. However, we cannot assure you that we will meet the applicable requirements under U.S. federal income tax laws,
which are highly technical and complex.
In
brief, a corporation that complies with the provisions in Code Sections 856 through 860 and qualifies as a REIT generally is not taxed
on its net taxable income to the extent such income is currently distributed to shareholders, thereby completely or substantially eliminating
the “double taxation” that a corporation and its shareholders generally bear together. However, as summarized in greater
detail below, a corporation could be subject to U.S. federal income tax in some circumstances even if it qualifies as a REIT and would
likely suffer adverse consequences, including reduced cash available for distribution to its shareholders, if it failed to qualify as
a REIT.
Neuberger
Quinn Gielen Rubin Gibber P.A. has acted as our tax counsel in connection with this registration statement. Neuberger Quinn Gielen Rubin
Gibber P.A. is of the opinion that commencing with our taxable year ended on December 31, 2011, we have been organized in conformity
with the requirements for qualification as a REIT under the Code, and our actual method of operation through the date hereof has enabled
us to meet and, assuming that our election to be treated as a REIT is not either revoked or intentionally terminated, our proposed method
of operation will enable us to continue to meet, the requirements for qualification and taxation as a REIT under the Code This opinion
is based and conditioned, in part, on various assumptions and representations as to factual matters and covenants made to Neuberger Quinn
Gielen Rubin Gibber P.A. by us and based upon certain terms and conditions set forth in the opinion. Our qualification as a REIT depends
upon our ability to meet, through operation of the properties we own and our investment in other assets, the applicable requirements
under U.S. federal income tax laws, which are discussed below. Neuberger Quinn Gielen Rubin Gibber P.A. has not reviewed these operating
results for compliance with the applicable requirements under U.S. federal income tax laws. Therefore, we cannot assure you that our
actual operating results allow us to satisfy the applicable requirements to qualify as a REIT under U.S. federal income tax laws in any
taxable year. Further, the anticipated U.S. federal income tax treatment summarized below may change, perhaps retroactively, by legislative,
administrative, or judicial action. Neuberger Quinn Gielen Rubin Gibber P.A. has no obligation to update its opinion subsequent to the
date of the opinion.
General
The
term “REIT taxable income” means the taxable income as computed for a corporation that is not a REIT:
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without
the deductions allowed by Code Sections 241 through 247, and 249 (relating generally to the deduction for dividends received);
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excluding
amounts equal to the net income from foreclosure property and the net income derived from prohibited transactions;
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deducting
amounts equal to: the net loss from foreclosure property, the net loss derived from prohibited transactions, the tax imposed by Code
Section 857(b)(5) upon a failure to meet the 95% or the 75% Gross Income Tests (as defined below), the tax imposed by Code Section
856(c)(7)(C) upon a failure to meet the Asset Tests (as defined below), the tax imposed by Code Section 856(g)(5) for otherwise avoiding
REIT disqualification, and the tax imposed by Code Section 857(b)(7) on redetermined rents, redetermined deductions and excess interest;
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deducting
the amount of dividends paid under Code Section 561, computed without regard to the amount of the net income from foreclosure property
(which is excluded from REIT taxable income); and without regard to any change of annual accounting period pursuant to Code Section 443(b).
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In
any year in which we qualify as a REIT and have a valid election in place, we will claim deductions for the dividends we pay to the shareholders,
and therefore will not be subject to U.S. federal income tax on that portion of our taxable income or capital gain that is distributed
to our shareholders.
Although
we can eliminate or substantially reduce our U.S. federal income tax liability by maintaining our REIT qualification and paying sufficient
dividends, we will be subject to U.S. federal tax in the following circumstances:
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We
will be taxed at normal corporate rates on any undistributed REIT taxable income or net capital gain.
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If
we fail to satisfy either the 95% Gross Income Test or the 75% Gross Income Test (each of which is described below), but our failure
is due to reasonable cause and not willful neglect, and we therefore maintain our REIT qualification, we will be subject to a tax
equal to the product of (a) the amount by which we failed the 75% or 95% Gross Income Test (whichever amount is greater) multiplied
by (b) a fraction intended to reflect our profitability.
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We
will be subject to an excise tax if we fail to currently distribute sufficient income. In order to make the “required distribution”
with respect to a calendar year, we must distribute the sum of (1) 85% of our REIT ordinary income for the calendar year, (2) 95%
of our REIT capital gain net income for the calendar year, and (3) the excess, if any, of the grossed up required distribution (as
defined in the Code) for the preceding calendar year over the distributed amount for that preceding calendar year. Any excise tax
liability would be equal to 4% of the difference between the amount required to be distributed under this formula and the amount
actually distributed and would not be deductible by us.
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If
we have net income from prohibited transactions such income would be subject to a 100% tax. See “— REIT Qualification
Requirements — Prohibited Transactions.”
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We
will be subject to U.S. federal income tax at the corporate rate on any non-qualifying income from foreclosure property. We will
not own any foreclosure property unless we make loans or accept purchase money notes secured by interests in real property and foreclose
on the property following a default on the loan, or foreclose on property pursuant to a default on a lease.
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If
we fail to satisfy any of the REIT Asset Tests (summarized below), other than a failure of the 5% or 10% REIT assets tests that does
not exceed a statutory de minimis amount as described more fully below, but our failure is due to reasonable cause and not
due to willful neglect and we nonetheless maintain our REIT qualification because of specified cure provisions, we will be required
to pay a tax equal to the greater of $50,000 or the amount determined by multiplying the corporate tax rate (currently 21%)
by the net income generated by the non-qualifying assets during the period in which we failed to satisfy the Asset Tests.
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If
we fail to satisfy any other provision of the Code that would result in our failure to continue to qualify as a REIT (other than
a requirement of the Gross Income Tests or the Asset Tests) and that violation is due to reasonable cause, we may retain our REIT
qualification, but we will be required to pay a penalty of $50,000 for each such failure.
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We
may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements
intended to monitor our compliance with rules relating to the composition of our shareholders. Such penalties generally would not
be deductible by us.
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If
we acquire any asset from a corporation that is subject to full corporate-level U.S. federal income tax in a transaction in which
our basis in the asset is determined by reference to the transferor corporation’s basis in the asset, and we recognize gain
on the disposition of such an asset during the five-year period beginning on the date we acquired such asset, then the excess of
the fair market value as of the beginning of the applicable recognition period over our adjusted basis in such asset at the beginning
of such recognition period will be subject to U.S. federal income tax at the corporate U.S. federal income tax rate. The results
described in this paragraph assume that the non-REIT corporation will not elect, in lieu of this treatment, to be subject to an immediate
tax when the asset is acquired by us.
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A
100% tax may be imposed on transactions between us and a taxable REIT subsidiary (a “TRS”) that do not reflect arm’s-length
terms.
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The
earnings of our subsidiaries that are C corporations, other than a subsidiary that is a qualified REIT subsidiary (a “QRS”),
including any subsidiary we may elect to treat as a TRS, will generally be subject to U.S. federal corporate income tax.
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We
may elect to retain and pay income tax on our net capital gain. In that case, a shareholder would include his, her or its proportionate
share of our undistributed net capital gain (to the extent we make a timely designation of such gain to the shareholder) in his,
her or its income as long-term capital gain, would be deemed to have paid the tax that we paid on such gain, and would be allowed
a credit for his, her or its proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase
the shareholder’s basis in our shares. Shareholders that are U.S. corporations will also appropriately adjust their earnings
and profits for the retained capital gain in accordance with Treasury Regulations to be promulgated.
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In
addition, notwithstanding our qualification as a REIT, we and our subsidiaries may be subject to a variety of taxes, including state
and local and foreign income, property, payroll and other taxes on our assets and operations. We could also be subject to tax in situations
and on transactions not presently contemplated.
REIT
Qualification Requirements
Organizational
Requirements
The
Code defines a REIT as a corporation, trust or association:
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that
is managed by one or more trustees;
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the
beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;
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that
would be taxable as a domestic corporation but for its qualification as a REIT;
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that
is neither a financial institution nor an insurance company;
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that
meets the gross income, asset and annual distribution requirements;
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the
beneficial ownership of which is held by 100 or more persons on at least 335 days in each full taxable year, proportionately adjusted
for a short taxable year;
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generally
in which, at any time during the last half of each taxable year, no more than 50% in value of the outstanding shares are owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include specified entities);
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that
makes an election to be taxable as a REIT for the current taxable year, or has made this election for a previous taxable year, which
election has not been revoked or terminated, and satisfies all relevant filing and other administrative requirements established
by the IRS that must be met to maintain qualification as a REIT; and
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that
uses a calendar year for U.S. federal income tax purposes.
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Organizational
requirements (1) through (5) must be met during each taxable year for which REIT qualification is sought, while requirements (6) and
(7) do not have to be met until after the first taxable year for which a REIT election is made. We have adopted December 31 as our year
end, thereby satisfying requirement (9).
Ownership
of Interests in Partnerships, Limited Liability Companies and QRSs
A
REIT that is a partner in a partnership or a member in a limited liability company treated as a partnership for U.S. federal income tax
purposes, will be deemed to own its proportionate share of the assets of the partnership or limited liability company, as the case may
be, based on its interest in partnership capital, subject to the special rules relating to the 10% asset test described below, and will
be deemed to be entitled to its proportionate share of the income of that entity. The assets and gross income of the partnership or limited
liability company retain the same character in the hands of the REIT. Thus, our pro rata share of the assets and items of income of any
partnership or limited liability company treated as a partnership or disregarded entity for U.S. federal income tax purposes in which
we own an interest, is treated as our assets and items of income for purposes of the Asset Tests and Gross Income Tests (each as defined
below).
We
expect to control our subsidiary partnerships, and limited liability companies and intend to operate them in a manner consistent with
the requirements for our qualification as a REIT. If we become a limited partner or non-managing member in any partnership or limited
liability company and such entity takes or expects to take actions that could jeopardize our qualification as a REIT or require us to
pay tax, we may be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability
company could take an action that could cause us to fail a Gross Income Test or Asset Test (each as defined below), and that we would
not become aware of such action in time to dispose of our interest in the partnership or limited liability company or take other corrective
action on a timely basis. In that case, we could fail to qualify as a REIT unless we were entitled to relief, as described below.
We
may from time to time own certain assets through subsidiaries that we intend to be treated as QRSs. A corporation will qualify as our
QRS if we own 100% of the corporation’s outstanding stock and do not elect with the subsidiary to treat it as a TRS, as described
below. A QRS is not treated as a separate corporation, and all assets, liabilities and items of income, gain, loss, deduction and credit
of a QRS are treated as assets, liabilities and items of income, gain, loss, deduction and credit of the parent REIT for purposes of
the Asset Tests and Gross Income Tests (each as defined below). A QRS is not subject to U.S. federal income tax, but may be subject to
state or local tax, and our ownership of the stock of a QRS will not violate the restrictions on ownership of securities, as described
below under “Asset Tests.”
We
may from time to time own certain assets through entities that we wholly own and that are disregarded as separate from us. If a disregarded
subsidiary ceases to be wholly owned by us (for example, if any equity interest in the subsidiary is acquired by a person other than
us or another one of our disregarded subsidiaries), the subsidiary’s separate existence would no longer be disregarded for U.S.
federal income tax purposes. Instead, it would have multiple owners and would be treated as either a partnership or a taxable corporation.
Such an event could, depending on the circumstances, adversely affect our ability to satisfy the Asset Tests and Gross Income Tests,
including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the value or voting power of the
outstanding securities of another corporation. See “— Asset Tests” and “— Gross Income Tests.”
Ownership
of Interests in TRSs
We
currently do not currently own an interest in a TRS but may acquire securities in one or more TRSs in the future. A TRS is a corporation
other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated
as a TRS. If a TRS owns more than 35% of the total voting power or value of the outstanding securities of another corporation, that other
corporation also will be treated as a TRS. Other than some activities relating to lodging and health care facilities, a TRS generally
may engage in any business, including investing in assets and engaging in activities that could not be held or conducted directly by
us without jeopardizing our qualification as a REIT.
A
TRS is subject to U.S. federal income tax as a regular C corporation. A REIT’s ownership of securities of a TRS is not subject
to the 5% or 10% asset tests described below. However, no more than 20% of the gross value of a REIT’s assets may be comprised
of securities of one or more TRSs. See “— Asset Tests.”
Share
Ownership Requirements
The
shares that we issue must be held by a minimum of 100 persons (determined without attribution to the owners of any entity owning our
stock) for at least 335 days in each full taxable year, proportionately adjusted for partial taxable years. In addition, we cannot be
“closely-held,” which means that at all times during the second half of each taxable year, no more than 50% in value of our
stock may be owned, directly or indirectly, by five or fewer individuals (determined by applying certain attribution rules under the
Code to the owners of any entity owning our stock) as specifically defined for this purpose.
Our
charter contains certain provisions intended, among other purposes, to enable us to meet requirements (6) and (7) above. First, subject
to certain exceptions, our charter provides that no person may beneficially or constructively own (applying certain attribution rules
under the Code) more than 9.9% in value of the aggregate of our outstanding shares of capital stock and not more than 9.9% (in value
or in number of shares, whichever is more restrictive) of any class or series of our shares of capital stock without the approval of
our Board. See the section entitled “Description of Capital Stock — Restrictions on Transfer and Ownership
of Stock” in this prospectus. Additionally, our charter contains provisions requiring each holder of shares of our stock to disclose,
upon demand, constructive or beneficial ownership of shares as deemed necessary to comply with the requirements of the Code. Furthermore,
shareholders failing or refusing to comply with our disclosure request will be required, under Treasury Regulations, to submit a statement
of such information to the IRS at the time of filing their annual income tax returns for the year in which the request was made.
Asset
Tests
At
the close of each calendar quarter of the taxable year, we must satisfy a number of tests, summarized below, based on the composition
of our assets (the “Asset Tests”). After initially meeting the Asset Tests at the close of any quarter, we will not lose
our qualification as a REIT for failure to satisfy the Asset Tests at the end of a later quarter solely due to changes in value of our
assets. In addition, if the failure to satisfy the Asset Tests results from an acquisition during a quarter, the failure generally can
be cured by disposing of non-qualifying assets within 30 days after the close of that quarter. We will continue to maintain adequate
records of the value of our assets to ensure compliance with these tests and will act within 30 days after the close of any quarter as
may be required to cure any noncompliance.
75%
Asset Test. At least 75% of the value of our assets must be represented by “real estate assets,” cash, cash items (including
receivables) and government securities, which we refer to as the 75% Asset Test. Real estate assets include (1) real property (including
interests in real property and interests in mortgages on real property or on interests in real property), (2) shares in other qualifying
REITs, (3) debt instruments issued by publicly offered REITs and (4) any property (not otherwise a real estate asset) attributable to
the temporary investment of “new capital” in stock or a debt instrument, but only for the one-year period beginning
on the date we received the new capital. Property will qualify as being attributable to the temporary investment of new capital if the
money used to purchase the stock or debt instrument is received by us in exchange for our stock (other than amounts received pursuant
to the DRIP) or in a public offering of debt obligations that have a maturity of at least five years. Assets that do not qualify for
purposes of the 75% test are subject to the additional asset tests described below under “— Additional Asset Tests.”
We
are currently invested in the real properties described in our filings with the SEC. In addition, we have invested and intend to invest
funds not used to acquire properties in cash sources, “new capital” investments or other liquid investments which allow us
to continue to qualify under the 75% Asset Test. Therefore, our investment in real properties should constitute “real estate assets”
and should allow us to meet the 75% Asset Test.
Additional
Asset Tests. Our assets that do not qualify for the 75% Asset Test are subject to the following additional asset tests. Not more
than 25% of the value of those assets may consist of securities, other than securities that qualify for the 75% Asset Test. Not more
than 20% (25% for taxable years beginning prior to January 1, 2018) of the value of those assets may consist of securities of one or
more TRSs. Not more than 25% of the value of those assets may be invested in publicly offered REIT debt instruments that do not otherwise
qualify as real estate assets under the 75% Asset Test (e.g., a debt instrument issued by a publicly offered REIT that is not secured
by a mortgage on real property). In addition, if we invest in any securities that do not otherwise qualify under the 75% Asset Test,
other than equity investments in QRSs and TRSs, those securities may not exceed (i) 5% of the value of our assets as to any one issuer
and (ii) 10% of the outstanding securities by vote and value of any one issuer. The 10% value test does not apply to certain “straight
debt” and other excluded securities, as described in the Code, such as any loan to an individual or estate, any obligation to pay
rents from real property and any security issued by a REIT. In addition, a partnership interest held by a REIT is not considered a “security”
for purposes of the 10% value test; instead, the REIT is treated as owning directly its proportionate share of the partnership’s
assets, which is based on the REIT’s proportionate interest in any securities issued by the partnership (disregarding for this
purpose the general rule that a partnership interest is not a security), but excluding certain securities described in the Code.
For
purposes of the 10% value test, “straight debt” means a written unconditional promise to pay on demand or on a specified
date a sum certain in money if (i) the debt is not convertible, directly or indirectly, into stock, (ii) the interest rate and
interest payment dates are not contingent on profits, the borrower’s discretion, or similar factors other than certain contingencies
relating to the timing and amount of principal and interest payments, as described in the Code and (iii) in the case of an issuer that
is a corporation or a partnership, securities that otherwise would be considered straight debt will not be so considered if we, and any
of our “controlled taxable REIT subsidiaries” as defined in the Code, hold any securities of the corporate or partnership
issuer that (a) are not straight debt or other excluded securities (prior to the application of this rule), and (b) have an aggregate
value greater than 1% of the issuer’s outstanding securities (including, for the purposes of a partnership issuer, our interest
as a partner in the partnership).
We
may make real estate related debt investments if the underlying real estate meets our criteria for direct investment. A real estate mortgage
loan that we own generally will be treated as a real estate asset for purposes of the 75% Asset Test if, on the date that we acquire
or originate the mortgage loan, the value of the real property securing the loan is equal to or greater than the principal amount of
the loan. Certain mezzanine loans we make or acquire may qualify for the safe harbor in Revenue Procedure 2003-65, 2003-2 C.B. 336, pursuant
to which certain loans secured by a first priority security interest in ownership interests in a partnership or limited liability company
will be treated as qualifying assets for purposes of the 75% Asset Test and the 10% vote or value test. We may hold some mezzanine loans
that do not qualify for that safe harbor. Furthermore, we may acquire distressed debt investments that require subsequent modification
by agreement with the borrower. If the outstanding principal balance of a mortgage loan exceeds the fair market value of the real property
securing the loan at the time we commit to acquire the loan, or agree to modify the loan in a manner that is treated as an acquisition
of a new loan for U.S. federal income tax purposes, then a portion of that loan may not be a qualifying real estate asset. Under current
law, it is unclear how to determine the portion of such loan that would be treated as a qualifying real estate asset. However, IRS guidance
provides that the IRS will not challenge a REIT’s treatment of a loan as being, in part, a real estate asset if the REIT treats
the loan as being a real estate asset in an amount that is equal to the lesser of (i) the fair market value of the real property
securing the loan, as of the date the REIT committed to acquire or modify the loan, and (ii) the fair market value of the loan. Nevertheless,
the application of this guidance is uncertain, particularly with respect to the proper treatment under the Asset Tests of mortgage loans
acquired at a discount that later increase in value. Accordingly, no assurance can be given that the IRS would not challenge our treatment
of such assets. Moreover, although we intend to make these investments in a manner so as not to fail the asset tests described above,
no assurance can be given that any such investments would not disqualify us as a REIT.
We
believe that our holdings of real estate assets and other securities comply with the foregoing REIT asset requirements, and we intend
to monitor compliance on an ongoing basis. There can be no assurance, however, that we will be successful in this effort. In this regard,
to determine compliance with these requirements, we will need to estimate the value of our assets, and we do not expect to obtain independent
appraisals to support our conclusions as to the total value of our assets or the value of any particular security or other asset. Moreover,
values of some assets, including our interests in TRSs, may not be susceptible to a precise determination and are subject to change in
the future. Although we are and will continue to be prudent in making these estimates, there can be no assurance that the IRS will agree
with these determinations and may assert that a different value is applicable, in which case we might not satisfy the Asset Tests, and
we could fail to qualify as a REIT.
A
REIT is able to cure certain asset test violations. As noted above, a REIT cannot own securities of any one issuer (other than those
qualifying under the 75% Asset Test or securities of one or more QRS or TRS) representing more than 5% of the total value of the REIT’s
assets or more than 10% of the outstanding securities, by vote or value, of any one issuer. However, a REIT would not lose its REIT qualification
for failing to satisfy these 5% or 10% asset tests in a quarter if the failure is due to the ownership of assets the total value of which
does not exceed the lesser of (1) 1% of the total value of the REIT’s assets at the end of the quarter for which the measurement
is done, and (2) $10 million; provided, that in either case the REIT either disposes of the assets within six months after the
last day of the quarter in which the REIT identifies the failure (or such other time period prescribed by the Treasury), or otherwise
meets the requirements of those rules by the end of that period.
If
a REIT fails to meet any of the asset test requirements for a quarter and the failure exceeds the de minimis threshold described above,
then the REIT still would be deemed to have satisfied the requirements if (1) following the REIT’s identification of the
failure, the REIT files a schedule with a description of each asset that caused the failure, in accordance with Treasury Regulations;
(2) the failure was due to reasonable cause and not to willful neglect; (3) the REIT disposes of the assets within six months after the
last day of the quarter in which the identification occurred or such other time period as is prescribed by the Treasury (or the requirements
of the rules are otherwise met within that period); and (4) the REIT pays a tax on the failure equal to the greater of (a) $50,000,
or (b) an amount determined (under Treasury Regulations) by multiplying (I) the highest rate of tax for corporations under Code Section
11, by (II) the net income generated by the assets that caused the failure for the period beginning on the first date of the failure
and ending on the date the REIT has disposed of the assets (or otherwise satisfies the requirements).
Gross
Income Tests
For
each calendar year, we must satisfy two separate tests based on the composition of our gross income, as defined under our method of accounting
(the “Gross Income Tests.”)
75%
Gross Income Test. At least 75% of our gross income for the taxable year (excluding gross income from prohibited transactions and
certain hedging and foreign currency transactions) must result from (1) rents from real property, (2) interest on obligations secured
by mortgages on real property or on interests in real property, (3) gains from the sale or other disposition of real property (including
interests in real property and interests in mortgages on real property) other than property held primarily for sale to customers in the
ordinary course of our trade or business, (4) dividends from other qualifying REITs and gain (other than gain from prohibited transactions)
from the sale of shares of other qualifying REITs, (5) income from other specified investments relating to real property or mortgages
thereon (which does not include gains from the sale of a non-qualified publicly offered REIT debt instrument), and (6) for a limited
time, temporary investment income (as described under the 75% Asset Test above). We refer to this requirement as the 75% Gross Income
Test. We intend to invest funds not otherwise invested in real properties in cash sources or other liquid investments, which will allow
us to realize income that satisfies the 75% Gross Income Test.
95%
Gross Income Test. At least 95% of our gross income (excluding gross income from prohibited transactions and certain hedging and
foreign currency transactions) for the taxable year must be derived from (1) sources that satisfy the 75% Gross Income Test, (2) dividends,
(3) interest, or (4) gain from the sale or disposition of stock or other securities that are not assets held primarily for sale to customers
in the ordinary course of our trade or business. We refer to this requirement as the 95% Gross Income Test. It is important to note that
dividends and interest on obligations not collateralized by an interest in real property qualify under the 95% Gross Income Test, but
not under the 75% Gross Income Test. We intend to invest funds not otherwise invested in properties in cash sources or other liquid investments,
which will allow us to realize income that satisfies the 95% Gross Income Test.
Rents
from Real Property. Income attributable to a lease of real property generally will qualify as “rents from real property”
under the 75% Gross Income Test and the 95% Gross Income Test if such lease is respected as a true lease for U.S. federal income tax
purposes and subject to the rules summarized below.
Rent
from a particular tenant will not qualify if we, or an owner of 10% or more of our stock, directly or indirectly, owns 10% or more of
the voting stock or the total number of shares of all classes of stock in, or 10% or more of the assets or net profits of, the tenant
(subject to certain exceptions). However, as described below, we expect that amounts received from TRSs we have formed and may form to
facilitate our acquisition of “qualified health care properties” will satisfy the conditions of the exception for
rents received from a TRS, with the result that such amounts will be treated as rents from real property. The portion of rent attributable
to personal property rented in connection with real property will not qualify, unless the portion attributable to personal property is
15% or less of the total rent received under, or in connection with, the lease.
Generally,
rent will not qualify if it is based in whole, or in part, on the income or profits of any person from the underlying property. However,
rent will not fail to qualify if it is based on a fixed percentage (or designated varying percentages) of receipts or sales, including
amounts above a base amount so long as the base amount is fixed at the time the lease is entered into, the provisions are in accordance
with normal business practice and the arrangement is not an indirect method for basing rent on income or profits.
If
a REIT operates or manages a property or furnishes or renders certain “impermissible services” to the tenants at the property,
and the income derived from the services exceeds 1% of the total amount received by that REIT with respect to the property, then no amount
received by the REIT with respect to the property will qualify as “rents from real property.” Impermissible services are
services other than services “usually or customarily rendered” in connection with the rental of real property and not otherwise
considered “rendered to the occupant.” For these purposes, the income that a REIT is considered to receive from the provision
of “impermissible services” will not be less than 150% of the cost of providing the service. If the amount so received is
1% or less of the total amount received by us with respect to the property, then only the income from the impermissible services will
not qualify as “rents from real property.” However, this rule generally will not apply if such services are provided to tenants
through an independent contractor from whom we derive no revenue, or through a TRS. With respect to this rule, tenants may receive some
services in connection with their leases of the real properties. Our intent is that the services we provide are those usually or customarily
rendered in connection with the rental of space in the geographic location in which the property is located, and therefore, providing
these services will not cause the rents received with respect to the properties to fail to qualify as rents from real property for purposes
of the 75% Gross Income Test and the 95% Gross Income Test described above. Our Board intends to hire qualifying independent contractors
or to utilize TRSs to render services which it believes, after consultation with our tax advisors, are not usually or customarily rendered
in connection with the rental of space.
In
addition, we have represented that, with respect to our leasing activities, we will not (1) charge rent for any property that is based
in whole or in part on the income or profits of any person (excluding rent based on a percentage of receipts or sales, as described above),
(2) charge rent that will be attributable to personal property in an amount greater than 15% of the total rent received under the applicable
lease, or (3) enter into any lease with a related party tenant.
Amounts
received as rent from a TRS are not excluded from rents from real property by reason of the related party rules described above if the
activities of the TRS and the nature of the properties it leases meet certain requirements.
Interest
Income. It is possible that we will be paid interest on loans secured by real property. All interest income qualifies under the 95%
Gross Income Test, and interest on loans secured by real property or an interest in real property qualifies under the 75% Gross Income
Test; provided, that in both cases, the interest does not depend, in whole or in part, on the income or profits of any person
(excluding amounts based on a fixed percentage of receipts or sales). If a loan is secured by both real property and other property,
the interest on it may nevertheless qualify under the 75% Gross Income Test. Interest income constitutes qualifying mortgage interest
for purposes of the 75% Gross Income Test to the extent that the obligation upon which the interest is paid is secured by a mortgage
on real property. If we receive interest income with respect to a mortgage loan that is secured by both real property and other property,
and the highest principal amount of the loan outstanding during a taxable year exceeds the fair market value of the real property on
the date that we committed to acquire the loan, or agreed to modify the loan in a manner that is treated as an acquisition of a new loan
for U.S. federal income tax purposes, then the interest income will be apportioned between the real property and the other collateral,
and our income from the loan will qualify for purposes of the 75% Gross Income Test only to the extent that the interest is allocable
to the real property. For purposes of the preceding sentence, however, pursuant to IRS guidance, we do not need to re-determine the fair
market value of real property in connection with a loan modification that is occasioned by a default or made at a time when we reasonably
believe the modification to the loan will substantially reduce a significant risk of default on the original loan, and any such modification
will not be treated as a prohibited transaction. We intend to structure our loans secured by real property so that the amount of the
loan does not exceed the fair market value of the real property at the time of the loan commitment so that income generated through any
investments in loans secured by real property should be treated as qualifying income under the 75% Gross Income Test.
Dividend
Income. We may receive distributions from TRSs or other corporations that are not REITs or QRSs. These distributions are generally
classified as dividends to the extent of the earnings and profits of the distributing corporation. Such distributions generally constitute
qualifying income for purposes of the 95% Gross Income Test, but not the 75% Gross Income Test. Any dividends received by us from a REIT
will be qualifying income for purposes of both the 95% and 75% Gross Income Tests.
We
will monitor the amount of the dividend and other income from our TRSs and will take actions intended to keep this income, and any other
non-qualifying income, within the limitations of the Gross Income Tests. Although we intend to take these actions to prevent a violation
of the Gross Income Tests, we cannot guarantee that such actions will in all cases prevent such a violation.
Prohibited
Transaction Income. Any gain that we realize on the sale of an asset (other than foreclosure property) held as inventory or otherwise
held primarily for sale to customers in the ordinary course of business, either directly or through any subsidiary partnership or by
a borrower that has issued a shared appreciation mortgage or similar debt instrument to us, will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax, unless certain safe harbor exceptions apply. Whether an asset is held as inventory
or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts
and circumstances surrounding the particular transaction. We intend to continue to conduct our operations so that no asset owned by us
is held as inventory or primarily for sale to customers, and that a sale of any asset owned by us will not be in the ordinary course
of business. However, the IRS may successfully contend that some or all of the sales made by us, our subsidiary partnerships, or by a
borrower that has issued a shared appreciation mortgage or similar debt instrument to us are prohibited transactions. In such case, we
would be required to pay the 100% penalty tax on our allocable share of the gains resulting from any such sales. The 100% tax will not
apply to gains from the sale of assets that are held through a TRS, although the gains of any TRS will be subject to tax at the regular
U.S. federal corporate income tax rate.
Foreclosure
Property. Foreclosure property is real property and any personal property incident to such real property (1) that is acquired by
a REIT as a result of the REIT having bid on the property at foreclosure or having otherwise reduced the property to ownership or possession
by agreement or process of law after there was a default (or default was imminent) on a lease of the property or a mortgage loan held
by the REIT and secured by the property, (2) for which the related loan or lease was acquired by the REIT at a time when default was
not imminent or anticipated and (3) for which such REIT makes a proper election to treat the property as foreclosure property. REITs
generally are subject to regular U.S. federal corporate income tax on any net income from foreclosure property, including any gain from
the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% Gross
Income Test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100%
tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property
in the hands of the selling REIT. If we believe we will receive any income from foreclosure property that is not qualifying income for
purposes of the 75% Gross Income Test, we intend to elect to treat the related property as foreclosure property.
Satisfaction
of the Gross Income Tests. Our share of income from the properties primarily will give rise to rental income and gains on sales of
the properties, substantially all of which generally will qualify under the 75% Gross Income and 95% Gross Income Tests. Based on our
historic and anticipated operations, it is likely that we will have little or no non-qualifying income for U.S. federal income tax purposes.
Moreover, as described above, we have established and may establish one or more TRSs with which we could enter into leases for any properties
in which we may invest. The gross income generated by our TRSs would not be included in our gross income. However, we would realize gross
income from the TRSs in the form of rents. In addition, any dividends from our TRS to us would be included in our gross income and qualify
for the 95% Gross Income Test, but not the 75% Gross Income Test.
If
we fail to satisfy either the 75% Gross Income or 95% Gross Income Tests for any taxable year, we may retain our qualification as a REIT
for such year if we (1) satisfy the IRS that the failure was due to reasonable cause and not due to willful neglect, (2) attach to our
U.S. federal income tax return a schedule describing the nature and amount of each item of our gross income, and (3) satisfy the IRS
that any incorrect information on such schedule was not due to fraud with intent to evade U.S. federal income tax. If this relief provision
is available, we would remain subject to tax equal to the greater of the amount by which we failed the 75% Gross Income Test or the 95%
Gross Income Test, as applicable, multiplied by a fraction meant to reflect our profitability.
Annual
Distribution Requirements
In
addition to the other tests described above, we are required to distribute dividends (other than capital gain dividends) to our shareholders
each year in an amount at least equal to the excess of: (1) the sum of: (a) 90% of our REIT taxable income (determined without regard
to the deduction for dividends paid and by excluding any net capital gain); and (b) 90% of the net income (after tax) from foreclosure
property; less (2) the sum of some types of items of non-cash income. Determining whether sufficient amounts have been distributed is
based on amounts paid in the taxable year to which they relate, or in the following taxable year if we: (1) declared a dividend before
the due date of our tax return (including extensions); (2) distribute the dividend within the 12-month period following the close of
the taxable year (and not later than the date of the first regular dividend payment made after such declaration); and (3) file an election
with our tax return. Additionally, dividends that we declare in October, November or December in a given year payable to shareholders
of record in any such month will be treated as having been paid on December 31st of that year so long as the dividends are actually paid
during January of the following year.
For
our taxable years commencing prior to January 1, 2015, for distributions to have been counted towards satisfying the annual distribution
requirements for REITs, and to provide us with a REIT-level tax deduction, the distributions must not have been “preferential dividends.”
A dividend was not a preferential dividend if the distribution was (1) pro rata among all outstanding shares of stock within a particular
class, and (2) in accordance with the preferences among different classes of stock as set forth in our organizational documents.
If
we do not distribute 100% of our REIT taxable income, we will be subject to U.S. federal income tax on the undistributed portion. We
also will be subject to an excise tax if we fail to currently distribute sufficient income. In order to make the “required distribution”
with respect to a calendar year and avoid the excise tax, we must distribute the sum of (1) 85% of our REIT ordinary income for
the calendar year, (2) 95% of our REIT capital gain net income for the calendar year, and (3) the excess, if any, of the grossed up required
distribution (as defined in the Code) for the preceding calendar year over the distributed amount for that preceding calendar year. Any
excise tax liability would be equal to 4% of the difference between the amount required to be distributed and the amount actually distributed
and would not be deductible by us.
We
intend to pay sufficient dividends each year to satisfy the annual distribution requirements and avoid U.S. federal income and excise
taxes on our earnings; however, it may not always be possible to do so. We may not have sufficient cash or other liquid assets to meet
the annual distribution requirements due to tax accounting rules and other timing differences. Other potential sources of non-cash taxable
income include:
●
“residual interests” in REMICs or taxable mortgage pools;
●
loans or mortgage-backed securities held as assets that are issued at a discount and require the accrual of taxable economic interest
in advance of receipt in cash; and
●
loans on which the borrower is permitted to defer cash payments of interest, distressed loans on which we may be required to accrue taxable
interest income even though the borrower is unable to make current servicing payments in cash, and debt securities purchased at a discount.
For
taxable years beginning after December 31, 2017, and except as provided below, our deduction (and the deduction of any of our subsidiary
partnerships) for net business interest expense generally will be limited to 30% of taxable income, as adjusted for certain items of
income, gain, deduction or loss. Any business interest deduction that is disallowed due to this limitation may be carried forward to
future taxable years. If we or any of our subsidiary partnerships are subject to this interest expense limitation, our REIT taxable income
(and, in turn, our distribution requirements) for a taxable year may be increased. Taxpayers that conduct certain real estate businesses
may elect not to have this interest expense limitation apply to them, provided that they use an alternative depreciation system to depreciate
certain property. We believe that we and our subsidiary partnerships that are subject to this interest expense limitation will be eligible
to make this election. If this election is made, although we or such subsidiary partnership, as applicable, would not be subject to the
interest expense limitation described above, depreciation deductions may be reduced and, as a result, our REIT taxable income (and, in
turn, our distribution requirements) for a taxable year may be increased.
We
will closely monitor the relationship between our REIT taxable income and cash flow, and if necessary to comply with the annual distribution
requirements, will attempt to borrow funds to fully provide the necessary cash flow or to pay dividends in the form of taxable in-kind
distributions of property, including taxable stock dividends. If we fail to meet the annual distribution requirements as a result of
an adjustment to our U.S. federal income tax return by the IRS, or under certain other circumstances, we may cure the failure by paying
a “deficiency dividend” (plus penalties and interest to the IRS) within a specified period.
Failure
to Qualify
If
we fail to continue to qualify as a REIT in any taxable year, we may be eligible for relief provisions if the failures are due to reasonable
cause and are not due to willful neglect, and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements.
If the applicable relief provisions are not available or cannot be met, we will not be able to deduct our dividends and will be subject
to U.S. federal income tax on our taxable income at the regular corporate rate, thereby reducing cash available for distributions. In
such event, all distributions to shareholders (to the extent of our current and accumulated earnings and profits) will be taxable as
ordinary dividend income. This “double taxation” results from our failure to continue to qualify as a REIT. Unless entitled
to relief under specific statutory provisions, we will not be eligible to elect REIT qualification for the four taxable years following
the year during which qualification was lost.
Recordkeeping
Requirements
We
are required to maintain records and request on an annual basis information from specified shareholders. These requirements are designed
to assist us in determining the actual ownership of our outstanding shares and maintaining our qualification as a REIT.
Prohibited
Transactions
As
mentioned above, we will be subject to a 100% U.S. federal income tax on any net income derived from “prohibited transactions.”
Net income derived from prohibited transactions arises from the sale or exchange of property held for sale to customers in the ordinary
course of our business which is not foreclosure property. There is an exception to this rule for the sale of property that:
●
is a real estate asset under the 75% Asset Test;
●
generally has been held for at least two years;
●
has aggregate expenditures that are includable in the basis of the property not in excess of 30% of the net selling price;
●
in some cases, was held for production of rental income for at least two years;
●
in some cases, substantially all of the marketing and development expenditures were made through an independent contractor; and
●
when combined with other sales in the year, either does not cause us to have made more than seven sales of property during the taxable
year (excluding sales of foreclosure property or in connection with an involuntary conversion), occurs in a year when we dispose of less
than 10% of our assets (measured by U.S. federal income tax basis or fair market value, and ignoring involuntary dispositions and sales
of foreclosure property), or occurs in a year when we dispose of less than 20% of our assets as well as 10% or less of our assets based
on a three-year average (measured by U.S. federal income tax basis or fair market value, and ignoring involuntary dispositions and sales
of foreclosure property).
Although
we may eventually sell each of the properties, our primary intention in acquiring and operating the properties is the production of rental
income and we do not expect to hold any property for sale to customers in the ordinary course of our business. The 100% tax will not
apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject
to tax in the hands of the corporation at regular corporate income tax rates. As a general matter, any condominium conversions we might
undertake must satisfy these restrictions to avoid being “prohibited transactions,” which will limit the annual number of
transactions. See “REIT Qualification Requirements — Ownership of Interests in TRSs,” above.
Characterization
of Property Leases
We
have acquired and intend to acquire and own commercial properties subject to net leases. We have structured and currently intend to structure
our leases so that they qualify as true leases for U.S. federal income tax purposes. For example, with respect to each lease, we generally
expect that:
●
our property owning subsidiary and the lessee will intend for their relationship to be that of a lessor and lessee, and such relationship
will be documented by a lease agreement;
●
the lessee will have the right to exclusive possession and use and quiet enjoyment of the properties covered by the lease during the
term of the lease;
●
the lessee will bear the cost of, and will be responsible for, day-to-day maintenance and repair of the properties other than the cost
of certain capital expenditures, and will dictate through the property managers, who will work for the lessee during the terms of the
leases, and how the properties will be operated and maintained;
●
the lessee will bear all of the costs and expenses of operating the properties, including the cost of any inventory used in their operation,
during the term of the lease, other than the cost of certain furniture, fixtures and equipment, and certain capital expenditures;
●
the lessee will benefit from any savings and will bear the burdens of any increases in the costs of operating the properties during the
term of the lease;
●
in the event of damage or destruction to a property, the lessee will be at economic risk because it will bear the economic burden of
the loss in income from operation of the properties subject to the right, in certain circumstances, to terminate the lease if the lessor
does not restore the property to its prior condition;
●
the lessee will indemnify the lessor against all liabilities imposed on the lessor during the term of the lease by reason of
(A) injury to persons or damage to property occurring at the properties or (B) the lessee’s use, management, maintenance or repair
of the properties;
●
the lessee will be obligated to pay, at a minimum, substantial base rent for the period of use of the properties under the lease;
●
the lessee will stand to incur substantial losses or reap substantial gains depending on how successfully it, through the property managers,
who work for the lessees during the terms of the leases, operates the properties;
●
we expect that each lease that we enter into, at the time we enter into it (or at any time that any such lease is subsequently renewed
or extended) will enable the tenant to derive a meaningful profit, after expenses and taking into account the risks associated with the
lease, from the operation of the properties during the term of its leases; and
●
upon termination of each lease, the applicable property will be expected to have a remaining useful life equal to at least 20% of its
expected useful life on the date the lease is entered into, and a fair market value equal to at least 20% of its fair market value on
the date the lease was entered into.
If,
however, the IRS were to recharacterize our leases as service contracts, partnership agreements or otherwise, rather than true leases,
or disregard the leases altogether for tax purposes, all or part of the payments that we receive from the lessees would not be considered
rent and might not otherwise satisfy the various requirements for qualification as “rents from real property.” In that case,
we would not be able to satisfy either the 75% or 95% Gross Income Tests and, as a result, could lose our REIT qualification.
Hedging
Transactions
We
and our subsidiaries have, in the past, entered and may continue to enter into hedging transactions with respect to interest rate exposure
or currency rate fluctuations on one or more of our assets or liabilities that qualify as “hedging transactions” under the
Code and Treasury Regulations. These hedging transactions can take a variety of forms, including the use of derivative instruments such
as interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts and options. Income from a hedging
transaction, including gain from the sale or disposition of the financial instrument or any periodic income from the instrument, that
is clearly identified as a hedging transaction as specified in the Code, will not constitute gross income for purposes of the 95% Gross
Income Test or 75% Gross Income Test. The term “hedging transaction” for these purposes generally means (1) any transaction
we enter into in the normal course of our business primarily to manage risk of (a) interest rate changes or fluctuation on indebtedness
incurred or to be incurred by us to acquire or carry real estate assets or (b) currency fluctuations with respect to any item of income
that would qualify under the 75% Gross Income Test or the 95% Gross Income Test or any property which generates such income and (2) new
transactions entered into to hedge the income or loss from prior hedging transactions, where the property or indebtedness which was the
subject of the prior hedging transaction was extinguished or disposed of. We intend to structure any hedging transactions in a manner
that does not jeopardize our status as a REIT. We may conduct some or all of our hedging activities through a TRS or other corporate
entity, the income from which may be subject to U.S. federal income tax, rather than participating in the arrangements directly or through
pass-through subsidiaries to the extent such income would jeopardize our REIT status. However, it is possible that our hedging activities
may give rise to income that does not qualify for purposes of either or both of the Gross Income Tests, and may adversely affect our
ability to satisfy the REIT qualification requirements.
Tax
Aspects of Investments in Partnerships
General.
We may hold direct or indirect interests in one or more partnerships (and limited liability companies that may be treated as partnerships
for U.S. federal income tax purposes), which, in turn, own properties and may possibly own interests in other non-corporate entities
that own properties. Such non-corporate entities would generally be organized as limited liability companies, partnerships or trusts
and would either be disregarded for U.S. federal income tax purposes (if such entity were the sole owner) or treated as partnerships
for U.S. federal income tax purposes.
The
following is a summary of the U.S. federal income tax consequences if our investments are held via partnerships (or limited liability
companies treated as partnerships for U.S. federal income tax purposes). This summary should also generally apply to any investment by
us in other entities taxable as partnerships for such purposes, including multi-member limited liability companies.
A
partnership (that is not a publicly traded partnership taxed as a corporation) is not subject to tax as an entity for U.S. federal income
tax purposes. Rather, partners are allocated their allocable share of the items of income, gain, loss, deduction and credit of the partnership,
and are potentially subject to tax thereon, without regard to whether the partners receive any distributions from the partnership. We
are required to take into account our allocable share of the foregoing items for purposes of the Gross Income Tests and Asset Tests,
and in the computation of our REIT taxable income and U.S. federal income tax liability. Further, there can be no assurance that distributions
from a partnership will be sufficient to pay the tax liabilities resulting from an investment in such partnership.
Generally,
an entity with two or more members formed as a partnership or limited liability company under state law will be taxed as a partnership
for U.S. federal income tax purposes unless it specifically elects otherwise. We intend that interests in any of our partnerships will
fall within one of the “safe harbors” for the partnership to avoid being classified as a publicly traded partnership. However,
our ability to satisfy the requirements of some of these safe harbors depends on the results of actual operations and accordingly no
assurance can be given that any such partnership will at all times satisfy one of such safe harbors. We reserve the right to not satisfy
any safe harbor. Even if a partnership is a publicly traded partnership, it generally will not be treated as a corporation if at least
90% of its gross income in each taxable year is from certain sources, which generally include rents from real property and other types
of passive income. We believe that the partnerships in which we currently hold interests have and will continue to have sufficient qualifying
income so that such entities would be taxed as a partnership, even if it were treated as a publicly traded partnership.
If
for any reason any partnership in which we hold equity interests is taxable as a corporation for U.S. federal income tax purposes, the
character of our assets and items of gross income would change, and as a result, we would most likely be unable to satisfy the applicable
REIT requirements under U.S. federal income tax laws summarized above. In addition, any change in the status of any partnership may be
treated as a taxable event, in which case we could incur a tax liability without a related cash distribution. Further, if any partnership
were treated as a corporation, items of income, gain, loss, deduction and credit of such partnership would be subject to corporate income
tax, and the partners of any such partnership would be treated as shareholders, with distributions to such partners being treated as
dividends.
Anti-abuse
Treasury Regulations have been issued under the partnership provisions of the Code that authorize the IRS, in some abusive transactions
involving partnerships, to disregard the form of a transaction and recast it as it deems appropriate. The anti-abuse regulations apply
where a partnership is utilized in connection with a transaction (or series of related transactions) with a principal purpose of substantially
reducing the present value of the partners’ aggregate U.S. federal tax liability in a manner inconsistent with the intent of the
partnership provisions. The anti-abuse regulations contain an example in which a REIT contributes the proceeds of a public offering to
a partnership in exchange for a general partnership interest. The limited partners contribute real property assets to the partnership,
subject to liabilities that exceed their respective aggregate bases in such property. The example concludes that the use of the partnership
is not inconsistent with the intent of the partnership provisions, and thus, cannot be recast by the IRS. However, the anti-abuse regulations
are extraordinarily broad in scope and are applied based on an analysis of all the facts and circumstances. As a result, we cannot assure
you that the IRS will not attempt to apply the anti-abuse regulations to us. Any such action could potentially jeopardize our qualification
as a REIT and materially affect the tax consequences and economic return resulting from an investment in us.
Income
Taxation of Partnerships and their Partners. Although a partnership agreement generally will determine the allocation of a partnership’s
income and losses among the partners, such allocations may be disregarded for U.S. federal income tax purposes under Code Section 704(b)
and the Treasury Regulations promulgated thereunder. If any allocation is not recognized for U.S. federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners’ economic interests in the partnership.
In
some cases, special allocations of net profits or net losses will be required to comply with the U.S. federal income tax principles governing
partnership tax allocations. Additionally, pursuant to Code Section 704(c), income, gain, loss and deduction attributable to property
contributed to a partnership in exchange for units must be allocated in a manner so that the contributing partner is charged with, or
benefits from, the unrealized gain or loss attributable to the property at the time of contribution. The amount of such unrealized gain
or loss is generally equal to the difference between the fair market value and the adjusted basis of the property at the time of contribution.
These allocations are designed to eliminate book-tax differences by allocating to contributing partners lower amounts of depreciation
deductions and increased taxable income and gain attributable to the contributed property than would ordinarily be the case for economic
or book purposes. With respect to any property purchased by a partnership, such property generally will have an initial tax basis equal
to its fair market value, and accordingly, Code Section 704(c) will not apply, except as described further below in this paragraph. The
application of the principles of Code Section 704(c) in tiered partnership arrangements is not entirely clear. Accordingly, the IRS may
assert a different allocation method than the one selected by any such partnership to cure any book-tax differences. In certain circumstances,
we create book-tax differences by adjusting the values of properties for economic or book purposes and generally the rules of Code Section
704(c) would apply to such differences as well.
For
properties contributed to a partnership, depreciation deductions are calculated based on the transferor’s basis and depreciation
method. Because depreciation deductions are based on the transferor’s basis in the contributed property, such partnership generally
would be entitled to less depreciation than if the properties were purchased in a taxable transaction. The burden of lower depreciation
generally will fall first on the contributing partner, but also may reduce the depreciation allocated to other partners.
Gain
on the sale or other disposition of depreciable property is characterized as ordinary income (rather than capital gain) to the extent
of any depreciation recapture. Buildings and improvements depreciated under the straight-line method of depreciation are generally not
subject to depreciation recapture unless the property was held for less than one year. However, individuals, trusts and estates that
hold shares either directly or through a pass-through entity may be subject to tax on the disposition of depreciable property at a rate
of 25% rather than at the normal capital gains rate, to the extent that such assets have been depreciated.
Some
expenses incurred in the conduct of a partnership’s activities may not be deducted in the year they were paid. To the extent this
occurs, the taxable income of such partnership may exceed its cash receipts for the year in which the expense is paid. As summarized
above, the costs of acquiring properties must generally be recovered through depreciation deductions over a number of years. Prepaid
interest and loan fees, and prepaid management fees are other examples of expenses that may not be deducted in the year they were paid.
Partnership
Audit Rules. Any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner’s
distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto are assessed and collected, at the
partnership level. These rules could result in partnerships in which we directly or indirectly invest being required to pay additional
taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could
be required to bear the economic burden of those taxes, interest, and penalties even though we, as a REIT, may not otherwise have been
required to pay additional corporate-level taxes as a result of the related audit adjustment. Investors are urged to consult their tax
advisors with respect to these changes and their potential impact on their investment in shares of our stock.
Tax
Consequences of Exercise of Exchange Rights. One or more of the partnership agreements may give holders of limited partnership units
the right to exchange their units into cash, subject to our right to pay for the units with shares of Common Shares rather than with
cash. The exchange of units into shares would be treated as a taxable sale of the units to us on which the unit owners would generally
recognize gain in an amount equal to the value of the shares of Common Shares received plus the amount of liabilities of the applicable
partnership allocable to the units being exchanged, less the unit holder’s tax basis in those units. To the extent that the unit
holder’s amount realized on the transaction is attributable to the unit holder’s share of inventory or unrealized receivables
of such partnership, that portion may be recharacterized as ordinary income. No gain or loss would be recognized by us in such event.
Our basis in such units would be increased by the amount of cash and the market price of the shares used to acquire the units, and adjusted
to reflect changes in the liabilities of such partnership allocated to us as a result of acquiring such units.
Taxation
of U.S. Shareholders
Taxation
of Taxable U.S. Shareholders
The
following section applies to you only if you are a U.S. Shareholder. Generally, for purposes of this summary, a “U.S. Shareholder”
is a person (other than a partnership or entity treated as a partnership for U.S. federal income tax purposes) that is, for U.S. federal
income tax purposes:
●
an individual citizen or resident of the United States for U.S. federal income tax purposes;
●
a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof
or the District of Columbia;
●
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
●
a trust if (1) a court within the United States is able to exercise primary supervision over its administration and one or more
U.S. persons have the authority to control all substantial decisions of the trust or (2) the trust has a valid election in effect under
current Treasury Regulations to be treated as a U.S. person.
If
a partnership or entity treated as a partnership for U.S. federal income tax purposes holds shares of our stock, the U.S. federal income
tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a
partnership holding shares of our stock should consult his, her or its own tax advisor regarding the U.S. federal income tax consequences
to the partner of the acquisition, ownership and disposition of such shares of our stock by the partnership.
Distributions.
Distributions (including any deemed distributions) that we make to our U.S. Shareholders and that we do not designate as “capital
gain dividends” or “qualified dividend income” (as described below) will be treated as dividends of ordinary income
to the extent they are made out of our current or accumulated earnings and profits. Our earnings and profits generally will be allocated
first to distributions on shares of our preferred stock and then to distributions on our shares of Common Shares. In addition, for taxable
years beginning before January 1, 2026, individuals, trusts and estates generally are entitled to up to a 20% pass-through deduction
with respect to that ordinary dividend income for purposes of determining their U.S. federal income tax (but not for purposes of the
3.8% Medicare tax), so long as certain holding period requirements have been met. Corporate shareholders are not entitled to the pass-through
deduction or the dividends-received deduction with respect to our distributions. A noncorporate U.S. Shareholder’s ability to claim
the deduction equal to 20% of qualifying dividends received may be limited by the U.S. Shareholder’s particular circumstances.
In addition, for any noncorporate U.S. Shareholder that claims a deduction in respect of qualifying dividends, the maximum threshold
for the accuracy-related penalty with respect to substantial understatements of income tax could be reduced from 10% to 5%. Distributions
in excess of our current and accumulated earnings and profits are treated first as a tax-deferred return of capital to the U.S. Shareholder,
reducing the U.S. Shareholder’s tax basis in his, her or its shares of our stock by the amount of such distribution, but not below
zero, and then as capital gain. Because our earnings and profits are reduced for depreciation and other non-cash items, it is possible
that a portion of each distribution will constitute a tax-deferred return of capital. Additionally, because distributions in excess of
our earnings and profits reduce the U.S. Shareholder’s tax basis in shares of our stock, this will increase the U.S. Shareholder’s
gain, or reduce the U.S. Shareholder’s loss, on any subsequent sale of shares of our stock.
Distributions
that are designated as capital gain dividends will be taxed as long-term capital gain to the extent they do not exceed our actual net
capital gain for the taxable year, without regard to the period for which the U.S. Shareholder that receives such distribution has held
its shares of our stock. However, corporate shareholders may be required to treat up to 20% of some types of capital gain dividends as
ordinary income. We also may decide to retain, rather than distribute, our net capital gain and pay any tax thereon. In such instances,
U.S. Shareholders would include their proportionate shares of such gain in income as long-term capital gain, receive a credit on their
returns for their proportionate share of our tax payments, and increase the tax basis of their shares of our stock by the after-tax amount
of such gain. Capital gains that we distribute, or are treated as distributing, to our shareholders must be allocated between shares
of our preferred stock and our Common Shares. We intend to allocate capital gains dividends based on the relative amount of total dividends
paid or deemed paid for U.S. federal income tax purposes to holders of all classes of our stock for the year.
With
respect to U.S. Shareholders who are taxed at the rates applicable to individuals, we may elect to designate a portion of our distributions
(including any deemed distributions) paid to such U.S. Shareholders as qualified dividend income. A portion of a distribution that is
properly designated as qualified dividend income is taxable to non-corporate U.S. Shareholders as capital gain; provided, that
the U.S. Shareholder has held the shares of our stock with respect to which the distribution is made for more than 60 days during the
121-day period beginning on the date that is 60 days before the date on which such shares of our stock became ex-dividend with respect
to the relevant distribution. The maximum amount of our distributions eligible to be designated as qualified dividend income for a taxable
year is equal to the sum of:
the
qualified dividend income received by us during such taxable year from C corporations (including any TRSs);
the
excess of any “undistributed” REIT taxable income recognized during the immediately preceding year over the U.S. federal
income tax paid by us with respect to such undistributed REIT taxable income; and
the
excess of any income recognized during the immediately preceding year attributable to the sale of a built-in-gain asset that was acquired
in a carry-over basis transaction from a non-REIT corporation or had appreciated at the time our REIT election became effective over
the U.S. federal income tax paid by us with respect to such built-in gain.
Although
U.S. Shareholders generally will recognize taxable income in the year that a distribution is received, any distribution that we declare
in October, November or December of any year that is payable to a U.S. Shareholder of record on a specific date in any such month will
be treated as both paid by us and received by the U.S. Shareholder on December 31 of the year it was declared even if paid by us during
January of the following calendar year.
We
have the ability to declare and pay a large portion of a distribution on our Common Shares in shares of our Common Shares. As long as
a portion of such distribution is paid in cash (which portion can be as low as 20%) and certain requirements are met, the entire distribution
(to the extent of our current or accumulated earnings and profits) will be treated as a dividend for U.S. federal income tax purposes.
As a result, U.S. Shareholders will be taxed on 100% of the dividend in the same manner as a cash dividend, even though most of the dividend
was paid in shares of our stock. In general, any distribution on shares of our stock will be taxable as a dividend, unless the entire
distribution is paid in shares of our Common Shares, which would be treated as a non-taxable distribution.
Distributions
that we make and gains arising from the sale or exchange by a U.S. Shareholder of our stock will not be treated as passive activity income.
As a result, U.S. Shareholders will not be able to apply any “passive losses” against income or gain relating to our stock.
To the extent that distributions we make do not constitute a return of capital, they will be treated as investment income for purposes
of computing the investment interest limitation.
Any
net operating losses or capital losses we have that are carried forward to future tax years may be used in those later years, subject
to limitations, to reduce the amount of distributions required to satisfy the REIT distribution requirements. However, because we are
not a pass-through entity for U.S. federal income tax purposes, U.S. Shareholders may not use any of our operating or capital losses
to reduce their tax liabilities.
Sales
of Shares. The amount of net capital gain or loss recognized upon the sale or other disposition of shares of our stock by a U.S.
Shareholder generally would equal the difference between (x) the amount of cash and fair market value of any property received in the
sale and (y) the U.S. Stockholder’s tax basis in the shares sold. Gain on a sale of shares of our stock by a U.S. non-corporate
investor generally will qualify for reduced U.S. federal income tax rates applicable to long-term net capital gain, provided that the
investor held the shares of our stock for longer than one year prior to the sale. However, any loss from a sale or exchange of shares
of our stock by a U.S. Shareholder who has held the shares of our stock for six months or less generally will be treated as a long-term
capital loss to the extent that the U.S. Shareholder treated our distributions as long-term capital gain. The use of capital losses is
subject to limitations. Gains recognized by U.S. Shareholders that are corporations are subject to U.S. federal income tax at the corporate
tax rate. Except in limited circumstances, as summarized above with respect to capital gains dividends or qualified dividend income,
the reduced tax rate for long-term net capital gains will not apply to dividends paid by us.
Redemption
of Shares of Our Preferred Stock. A redemption of shares of our preferred stock will be treated under Code Section 302 as a distribution
that is taxable as dividend income (to the extent of our current or accumulated earnings and profits), unless the redemption satisfies
one or more of certain tests set forth in Code Section 302(b) enabling the redemption to be treated as a sale or exchange of the redeemed
shares. The redemption will satisfy one of these tests if it (i) is “substantially disproportionate” with respect to the
U.S. Shareholder’s interest in shares of our capital stock, (ii) results in a “complete termination” of the U.S. Shareholder’s
interest in all shares of our classes or series of capital stock, or (iii) is “not essentially equivalent to a dividend”
with respect to the U.S. Shareholder, all within the meaning of Code Section 302(b). In determining whether one of these tests has been
met, a U.S. Shareholder generally must include shares of our capital stock considered to be owned by the U.S. Shareholder by reason of
certain constructive ownership rules set forth in the Code, as well as shares of our capital stock actually owned by the U.S. Shareholder.
If a U.S. Shareholder actually or constructively owns no shares of our Common Shares, a redemption of the U.S. Stockholder’s preferred
stock will qualify for sale or exchange treatment because the redemption would not be “essentially equivalent to a dividend”
as defined by the Code. Because the determination as to whether any of the three alternative tests of Code Section 302(b) described above
will be satisfied with respect to any particular U.S. Shareholder of shares of our preferred stock depends upon the facts and circumstances
at the time that the determination must be made, prospective investors are urged to consult their tax advisors to determine the tax treatment
to the prospective investor of a redemption of shares of our preferred stock.
If
a redemption of shares of our preferred stock does not meet any of the three tests described above, the redemption proceeds will be treated
as a taxable distribution, as described above. In that case, a U.S. Shareholder’s adjusted tax basis in the redeemed shares of
our preferred stock will be transferred to the remaining shares of our capital stock held by the U.S. Shareholder. If the U.S. Shareholder
does not retain any shares of our capital stock, the tax basis could be transferred to a related person that holds shares of our capital
stock or the tax basis may be lost.
Conversion
of Shares of Our Preferred Stock. Upon the occurrence of a Change of Control during a continuing Delisting Event, unless we have
elected to exercise our redemption right, each holder of preferred stock will, under certain circumstances, have the right to convert
some of or all the shares of the Series A Preferred Stock held by the holder into shares of our Common Shares. Except as provided below,
(i) a U.S. Shareholder generally will not recognize gain or loss upon the conversion of shares of our preferred stock into shares of
our Common Shares, and (ii) a U.S. Shareholder’s tax basis and holding period in our Common Shares received upon conversion generally
will be the same as those of the converted shares of our preferred stock (but the tax basis will be reduced by the portion of adjusted
tax basis allocated to any fractional share exchanged for cash). Any of our Common Shares received in a conversion that are attributable
to accumulated and unpaid dividends on the converted shares of our preferred stock will be treated as a distribution that is potentially
taxable as a dividend. Cash received upon conversion in lieu of a fractional share generally will be treated as a payment in a taxable
exchange for the fractional share, and gain or loss will be recognized on the receipt of cash in an amount equal to the difference between
the amount of cash received and the adjusted tax basis allocable to the fractional share deemed exchanged. This gain or loss will be
long-term capital gain or loss if the U.S. Shareholder has held the shares of our preferred stock for more than one year at the time
of conversion. U.S. Shareholders are urged to consult with their tax advisors regarding the U.S. federal income tax consequences of any
transaction by which the holder exchanges of our Common Shares received on a conversion of shares of our preferred stock for cash or
other property.
Taxation
of Tax-Exempt U.S. Shareholders
U.S.
tax-exempt entities, including qualified employee pension and profit-sharing trusts and individual retirement accounts, generally are
exempt from U.S. federal income tax except with respect to their unrelated business taxable income (“UBTI”). While many investments
in real estate may generate UBTI, distributions paid on shares of our stock should not constitute UBTI unless the tax-exempt entity (i)
has borrowed funds or otherwise incurred acquisition indebtedness to acquire its shares of stock, or (ii) otherwise uses the shares of
stock in an unrelated trade or business.
In
certain circumstances, a pension trust that owns more than 10% of our stock could be required to treat a percentage of the dividends
it receives from us as UBTI, if we are a “pension-held REIT.” We will not be a pension-held REIT unless either (1) one pension
trust owns more than 25% of the value of our stock, or (2) a group of pension trusts, each individually holding more than 10% of the
value of our stock, collectively owns more than 50% of our stock. Certain restrictions on ownership and transfer of our stock generally
should prevent a tax-exempt entity from owning more than 10% of the value of our stock and, in turn, should prevent us from becoming
a pension-held REIT.
Prospective
tax-exempt purchasers should consult their own tax advisors and financial planners as to the applicability of these rules and consequences
to their particular circumstances.
Backup
Withholding and Information Reporting
We
will report to our U.S. Shareholders and the IRS the amount of dividends (including deemed dividends) paid during each calendar year
and the amount (if any) of any tax withheld. Under the backup withholding rules, a U.S. Shareholder may be subject to backup withholding
at the current rate of 24% until December 31, 2025 and 28% thereafter with respect to dividends (including any deemed dividends) paid
unless the U.S. Shareholder (1) is a corporation or comes within other exempt categories and, when required, demonstrates this fact or
(2) provides a taxpayer identification number or social security number, certifies under penalties of perjury that such number is correct
and that such U.S. Shareholder is not subject to backup withholding and otherwise complies with applicable requirements of the backup
withholding rules. A U.S. Shareholder that does not provide his, her or its correct taxpayer identification number or social security
number also may be subject to penalties imposed by the IRS. In addition, we may be required to withhold a portion of capital gain distribution
to any U.S. Shareholder who fails to certify their non-foreign status or with respect to which the IRS notifies us that such U.S. Shareholder
is subject to backup withholding. See the “— Taxation of Non-U.S. Shareholders” portion of this section.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit
against such U.S. Stockholder’s U.S. federal income tax liability, provided the required information is timely furnished to the
IRS.
Taxation
of Non-U.S. Shareholders
Generally,
for purposes of this summary, a “Non-U.S. Stockholder” means a person (other than a partnership or entity treated as a partnership
for U.S. federal income tax purposes) that is not a U.S. Stockholder.
Distributions — In
General. Distributions that we make to our Non-U.S. Shareholders that are not attributable to gain from our sales or exchanges of
United States real property interests (“USRPIs”), and that are not designated by us as capital gain dividends will be treated
as dividends of ordinary income to the extent that they are made out of our current or accumulated earnings and profits. Our earnings
and profits generally will be allocated first to distributions on shares of our preferred stock before being allocated to distributions
on our shares of Common Shares. Such ordinary dividends to Non-U.S. Shareholders generally are subject to a 30% withholding tax at the
time of distribution, unless this dividend is effectively connected with a U.S. trade or business of the Non-U.S. Shareholder or an applicable
tax treaty reduces or eliminates that tax. Under some treaties, however, lower rates generally applicable to dividends do not apply to
dividends from REITs. Any constructive dividends on the preferred stock also would be subject to U.S. federal withholding tax to the
same extent as an actual distribution. Because constructive dividends would not give rise to any cash from which any applicable withholding
tax could be satisfied, we may withhold the U.S. federal tax on such dividend from cash proceeds otherwise payable to a Non-U.S. Shareholder.
If
income from the investment in shares of our stock is treated as effectively connected with the Non-U.S. Shareholder’s conduct of
a U.S. trade or business, the Non-U.S. Shareholder generally will be subject to a tax at the graduated rates applicable to ordinary income,
in the same manner as U.S. Shareholders are taxed with respect to such dividends (and also may be subject to the 30% branch profits tax
in the case of a Non-U.S. Shareholder that is a foreign corporation that is not entitled to any treaty exemption). In general, Non-U.S.
Shareholders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of shares of our
stock.
Distributions
in excess of our current and accumulated earnings and profits will not be taxable to a Non-U.S. Shareholder to the extent they do not
exceed the adjusted tax basis of the Non-U.S. Shareholder’s shares of our stock. Instead, they will reduce the adjusted tax basis
of such shares of our stock. To the extent that such distributions exceed the adjusted tax basis of a Non-U.S. Shareholder’s shares
of our stock, they will give rise to tax liability if the Non-U.S. Shareholder would otherwise be subject to tax on any gain from the
sale or disposition of its shares of our stock, as described in the “Sales of Shares” portion of this Section below.
Distributions
Attributable to Sale or Exchange of Real Property. Pursuant to the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”),
distributions that are attributable to gain from our sales or exchanges of USRPIs (“USRPI capital gain”) will, except as
described below, be taxed to a Non-U.S. Shareholder as if such gain were effectively connected with a U.S. trade or business. Non-U.S.
Shareholders therefore would be taxed at the normal capital gain rates applicable to U.S. Shareholders (without regard to whether we
designate the distribution as a capital gain dividend), and would be subject to a special alternative minimum tax in the case of nonresident
alien individuals. Also, such distributions may be subject to a 30% branch profits tax in the hands of a corporate Non-U.S. Shareholder
not entitled to any treaty exemption. We (or applicable withholding agent) are required by the Treasury Regulations to withhold 21% of
any distribution that we could designate as a capital gain dividend. However, if we designate as a capital gain dividend a distribution
made before the day we actually effect the designation, then although the distribution may be taxable to a Non-U.S. Shareholder, withholding
would not apply to the distribution under FIRPTA. Rather, we must effect the withholding from distributions made on and after the date
of the designation, until the distributions so withheld equal the amount of the prior distribution designated as a capital gain dividend.
The Non-U.S. Shareholder may credit the amount withheld against the Non-U.S. Shareholder’s U.S. tax liability. Such withheld amounts
do not represent actual tax liabilities and are creditable by the Non-U.S. Shareholder against its actual U.S. federal income tax liabilities.
The Non-U.S. Shareholder would be entitled to a refund of any amounts withheld in excess of such Non-U.S.
Shareholder’s
actual U.S. federal income tax liabilities, provided that the Non-U.S. Shareholder files applicable returns or refund claims with the
IRS. We anticipate that distributions in respect of our Common Shares will be subject to the rules set forth in this paragraph.
However,
generally, pursuant to FIRPTA, distributions of USRPI capital gains are not treated as effectively connected income for a Non-U.S. Shareholder
and instead are treated and taxed as ordinary dividends if (a) the distribution is received with respect to a class of stock
that is regularly traded on an established securities market located in the United States; and (b) the Non-U.S. Shareholder does not
own more than 10% of that class of stock at any time during the one-year period ending on the date of such distribution. Distributions
that qualify for this exception are subject to withholding tax in the manner described above as dividends of ordinary income. We anticipate
that shares of our Series A Preferred Stock will be “regularly traded” on an established securities market for the foreseeable
future, although, no assurance can be given that this will be the case.
In
addition, distributions to certain non-U.S. publicly traded shareholders that meet certain record-keeping and other requirements (“qualified
shareholders”) are exempt from FIRPTA, except to the extent owners of those qualified shareholders that are not also qualified
shareholders own, actually or constructively, more than 10% of our capital stock. Furthermore, distributions to “qualified foreign
pension funds” or entities all of the interests of which are held by “qualified foreign pension funds” are exempt from
FIRPTA. Non-U.S. Shareholders should consult their tax advisors regarding the application of these rules.
A
distribution is not attributable to USRPI capital gain if we held an interest in the underlying asset solely as a creditor. Capital gain
dividends received by a Non-U.S. Shareholder that are attributable to dispositions of our assets other than USRPIs are not subject to
U.S. income or withholding tax, unless (1) the gain is effectively connected with the Non-U.S. Shareholder’s U.S. trade or business,
in which case the Non-U.S. Shareholder would be subject to the same treatment as U.S. Shareholders with respect to such gain, or (2)
the Non-U.S. Shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable
year and has a “tax home” in the United States, in which case the Non-U.S. Shareholder will incur tax on his or her capital
gains.
Sales
of Shares. Gain recognized by a Non-U.S. Shareholder upon a sale of shares of our stock generally will not be subject to U.S. federal
income taxation; provided, that: (1) such gain is not effectively connected with the conduct by such Non-U.S. Shareholder of a
trade or business within the U.S.; (2) the Non-U.S. Shareholder is an individual and is not present in the U.S. for 183 days or more
during the taxable year and certain other conditions apply; and (3)(A) our REIT is “domestically controlled,” which generally
means that less than 50% in value of our stock continues to be held directly or indirectly by foreign persons during a continuous five-year
period ending on the date of disposition or, if shorter, during the entire period of our existence, or (B) the shares sold are of a class
of our stock that is “regularly traded” on an established securities market and the selling Non-U.S. Shareholder has not
held more than 10% of our outstanding shares of that class of stock at any time during the five-year period ending on the date of the
sale.
We
believe that we qualify as “domestically controlled.” However, even if we were not domestically controlled, we anticipate
that shares of our Series A Preferred Stock (but not our Common Shares) will be “regularly traded” on an established securities
market for the foreseeable future, although no assurance can be given that this will be the case. If the gain on the sale of shares of
our stock were to be subject to U.S. federal income taxation, the Non-U.S. Shareholder would be subject to the same treatment as U.S.
Shareholders with respect to such gain, and the purchaser of such shares of our stock may be required to withhold a portion of the gross
purchase price.
In
addition, dispositions of our capital stock by qualified shareholders are exempt from FIRPTA, except to the extent owners of those qualified
shareholders that are not also qualified shareholders own, actually or constructively, more than 10% of our capital stock. Furthermore,
dispositions of our capital stock by “qualified foreign pension funds” or entities all of the interests of which are held
by “qualified foreign pension funds” are exempt from FIRPTA. Non-U.S. Shareholders should consult their tax advisors regarding
the application of these rules.
Medicare
Tax
Certain
net investment income earned by U.S. citizens and resident aliens and certain estates and trusts is subject to a 3.8% Medicare tax. Net
investment income includes, among other things, dividends on and capital gains from the sale or other disposition of shares of our stock.
Holders of shares of our stock should consult their tax advisors regarding the effect, if any, of this tax on their ownership and disposition
of such shares.
Foreign
Account Tax Compliance Act (“FATCA”)
Withholding
taxes may apply to certain types of payments made to “foreign financial institutions” (including investment entities) and
certain other non-U.S. entities as designated in the Code, the Treasury Regulations, or applicable intergovernmental agreement between
the United States and a foreign country. A withholding tax of 30% generally will be imposed on dividends on, and gross proceeds from
the sale or other disposition of, shares of our stock paid to (a) a foreign financial institution (as the beneficial owner or as an intermediary
for the beneficial owners) unless such foreign financial institution agrees to verify, report and disclose its U.S. accountholders and
meets certain other specified requirements or (b) a non-financial foreign entity that is the beneficial owner of the payment unless such
entity certifies that it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S.
owner and such entity meets certain other specified requirements. The Treasury Regulations provide that these rules generally apply to
payments of dividends on shares of our stock. We will not pay any additional amounts in respect of any amounts withheld. U.S. Shareholders
and Non-U.S. Shareholders are encouraged to consult their tax advisors regarding the particular consequences to them of this legislation
and guidance.
Other
Tax Considerations
State,
Local and Foreign Taxes. We and you may be subject to state, local or foreign taxation in various jurisdictions, including those
in which we transact business or reside. Our and your state, local and foreign tax treatment may not conform to the U.S. federal income
tax consequences summarized above. Any foreign taxes incurred by us would not pass through to U.S. Shareholders as a credit against their
U.S. federal income tax liability. You should consult your own tax advisors and financial planners regarding the effect of state, local
and foreign tax laws on an investment in shares of our stock.
Legislative
Proposals. You should recognize that our and your present U.S. federal income tax treatment may be modified by legislative, judicial
or administrative actions at any time, which may be retroactive in effect. The rules dealing with U.S. federal income taxation are constantly
under review by Congress, the IRS and the Treasury, and statutory changes as well as promulgation of new regulations, revisions to existing
statutes, and revised interpretations of established concepts occur frequently. We are not aware of any pending legislation that would
materially affect our or your taxation as described in this prospectus. You should, however, consult your advisors concerning the status
of legislative proposals that may pertain to a purchase of our securities.
EXPERTS
The
consolidated financial statements as of December 31, 2020 and 2019, and for the years then ended, incorporated by reference in this prospectus
and the registration statement have been so incorporated in reliance on the report of MaloneBailey, LLP, an independent registered public
accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.
LEGAL
MATTERS
Gracin
& Marlow, LLP has acted as our securities counsel. Certain matters of Maryland law and certain tax matters will be passed upon for
us by Neuberger Quinn Gielen Rubin Gibber P.A. In addition, counsel that will be named in the applicable prospectus supplement will pass
upon the validity of any securities offered under the applicable prospectus supplement for any underwriters or agents.
DOCUMENTS
INCORPORATED BY REFERENCE
The
SEC allows us to incorporate by reference certain documents that we file with it, which means that we can disclose important information
to you by referring you to those documents. The information in those documents is considered part of this prospectus, except for information
incorporated by reference that is superseded by information contained in this prospectus. The SEC file number for the documents incorporated
by reference in this prospectus is 001-36312. The following documents filed with the SEC are incorporated by reference into this prospectus:
|
●
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our
Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 24, 2021;
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|
|
|
|
●
|
Our
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021 filed with the SEC on May 7, 2021;
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|
|
|
|
●
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our
Current Reports on Form 8-K filed with the SEC on January 4, 2021, January 14, 2021, January 21, 2021 (other than as indicated therein),
January 28, 2021, January 29, 2021 (other than as indicated therein), February 4, 2021 (other than as indicated therein), February
10, 2021 (other than as indicated therein), February 23, 2021 (other than as indicated therein), March 12, 2021 (other than as indicated
therein), March 24, 2021 (other than as indicated therein), April 20, 2021(first filing), April 20, 2021(second filing) (other than
as indicated therein), April 21, 2021 (Form 8-K/A), April 30, 2021, May 7, 2021 (other than as indicated therein), May 24, 2021 (other
than as indicated therein), May 25, 2021 (other than as indicated therein), May 27, 2021 and June 4, 2021 (Form 8-K/A);
and
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|
|
|
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●
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the
description of our Series A Preferred Stock in our Registration Statement on Form 8-A filed with the SEC on February 11, 2014, including
any amendment or reports filed for the purpose of updating such description and the description of our common shares and our Series
A Preferred Stock set forth in Exhibit 4.1 to our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the
SEC on March 24, 2021.
|
We
also incorporate by reference into this prospectus all documents (other than current reports furnished under Item 2.02 or Item 7.01 of
Form 8-K and exhibits filed on such form that are related to such items) that are filed by us with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act (i) after the date of the initial filing of the registration statement of which this prospectus
forms a part and prior to effectiveness of the registration statement, or (ii) after the date of this prospectus but prior to the termination
of the offering. These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
We
will provide to each person, including any beneficial owner, to whom this prospectus or a related prospectus supplement is delivered,
at no cost to the requester, a copy of any or all of the information we have incorporated by reference but not delivered with the prospectus
or prospectus supplement, including any exhibits that are specifically incorporated by reference in that information. To receive any
such copies, please write us at Power REIT, 301 Winding Road, Old Bethpage, New York 11804 or call us at (212) 750-0373. The documents
may also be accessed through our website at http://www.pwreit.com. Other than the information specifically incorporated by reference
above, the information on, or otherwise accessible through, our website does not constitute a part of this prospectus.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus is part of a registration statement we filed with the SEC. This prospectus does not contain all of the information set forth
in the registration statement and the exhibits to the registration statement. For further information with respect to us and the securities
we are offering under this prospectus, we refer you to the registration statement and the exhibits and schedules filed as a part of the
registration statement. Neither we nor any agent, underwriter or dealer has authorized any person to provide you with different information.
We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information
in this prospectus is accurate as of any date other than the date on the front page of this prospectus, regardless of the time of delivery
of this prospectus or any sale of the securities offered by this prospectus.
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the
public at the SEC’s website at www.sec.gov. Additional information about Power REIT is contained at our website, www.pwreit.com.
Information on our website is not incorporated by reference into this prospectus. We make available on our website our SEC filings as
soon as reasonably practicable after those reports are filed with the SEC.
POWER
REIT
$100,000,000
Common
Shares
Preferred
Shares
Rights
Warrants
Units
PROSPECTUS
,
2021
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
following sets forth the estimated costs and expenses, all of which shall be borne by the Registrant, in connection with the offering
of the securities pursuant to this Registration Statement:
|
|
Amount
|
|
SEC
registration fee
|
|
$
|
10,910
|
|
FINRA
filing fee
|
|
|
15,500
|
|
Printing
and engraving expenses
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|
|
(1
|
)
|
Legal
fees and expenses
|
|
|
(1
|
)
|
Accountant’s
fees and expenses
|
|
|
(1
|
)
|
Trustees
fees and expenses
|
|
|
(1
|
)
|
Miscellaneous
|
|
|
(1
|
)
|
Total
|
|
$
|
(1
|
)
|
(1)
|
These
fees are calculated based on the securities offered and the number of issuances and, accordingly,
cannot be estimated at this time.
|
Item
15. Indemnification of Trustees and Officers
The
Maryland REIT Law permits a Maryland real estate investment trust to include in its declaration of trust a provision limiting the liability
of its trustees, officers to the trust and its shareholders for money damages except for liability resulting from (a) actual receipt
of an improper benefit or profit in money, property or services or (b) active or deliberate dishonesty established in a judgment or other
final adjudication to be material to the cause of action. Our declaration of trust contains a provision that limits the liability of
our trustees and officers to the maximum extent permitted by Maryland law.
The
Maryland REIT Law permits a Maryland real estate investment trust to indemnify and advance expenses to its trustees, officers, employees
and agents to the same extent as permitted by the Maryland General Corporation Law (the “MGCL”) for directors and officers
of Maryland corporations. The MGCL permits a corporation to indemnify its present and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which
they may be a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of
the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was a result
of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission
was unlawful. However, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation
or if the director or officer is adjudged to be liable to the corporation nor may a director be indemnified in circumstances in which
the director is found liable for an improper personal benefit. In accordance with the MGCL and our By-laws, our By-laws require us, as
a condition to the advancement of expenses, to obtain (a) a written affirmation by the trustee or officer of his good-faith belief that
he has met the standard of conduct necessary for indemnification and (b) a written statement by or on his behalf to repay the amount
paid or reimbursed by us if it shall ultimately be determined that the standard of conduct was not met.
Power
REIT’s declaration of trust provides that it shall indemnify, to the maximum extent permitted by Maryland law in effect from time
to time, any individual who is a present or former trustee or officer (including any individual who, at our request, serves or has served
as an officer, partner, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or any other
enterprise) from and against any claim or liability to which such person may become subject by reason of service in such capacity. Power
REIT has the authority, with the approval of its Board of Trustees, to provide indemnification and advancement of expenses to a present
or former trustee or officer who served a predecessor of Power REIT in any of the capacities described above and to any employee or agent
of Power REIT or a predecessor of Power REIT. Maryland law requires Power REIT to indemnify a trustee or officer who has been successful,
on the merits or otherwise, in the defense of any proceeding to which he or she is made a party by reason of his or her service in that
capacity.
Power
REIT maintains a directors’ and officers’ liability insurance policy which provides for the payment of certain losses of
the trustees and officers of Power REIT and its subsidiaries (other than in the case of matters uninsurable under law) arising from claims,
including claims arising under the Securities Act, for acts or omissions by such persons while acting as trustees or officers of Power
REIT and/or its subsidiaries, as the case may be.
Item
16. Exhibits
The
Exhibit Index included below is incorporated herein by reference.
Item
17. Undertakings
(a)
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The
undersigned registrant hereby undertakes:
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|
(1)
|
To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”);
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|
|
|
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(ii)
|
To
reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table in the effective registration statement;
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|
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(iii)
|
To
include any material information with respect to the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement;
|
provided,
however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are incorporated
by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of this
registration statement.
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(2)
|
That,
for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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(3)
|
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
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|
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(4)
|
That,
for the purpose of determining liability under the Securities Act to any purchaser:
|
|
(i)
|
Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of this registration statement as of the
date the filed prospectus was deemed part of and included in this registration statement; and
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|
|
|
|
(ii)
|
Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by Section 10(a) of the Securities Act shall be deemed to be part of and included in this registration statement as of the
earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities
in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is
at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities
in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus
that is part of this registration statement or made in a document incorporated or deemed incorporated by reference into this registration
statement or prospectus that is part of this registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in this registration statement or prospectus that was part
of this registration statement or made in any such document immediately prior to such effective date.
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|
(5)
|
That,
for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution
of the securities: the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such purchaser:
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|
(i)
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any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;
|
|
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|
|
(ii)
|
any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
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|
|
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|
(iii)
|
the
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
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|
|
|
|
(iv)
|
any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
|
(6)
|
The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of
the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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|
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(7)
|
The
undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth
the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed
securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the
underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment
will be filed to set forth the terms of such offering.
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|
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(8)
|
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such
issue.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Old Bethpage, State of New York, on June 4, 2021.
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POWER
REIT
|
|
|
|
|
/s/
David H. Lesser
|
|
By:
|
David
H. Lesser
|
|
Title:
|
CEO
and Chairman of the Board
|
POWER
OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints David Lesser, as his or
her true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any
and all amendments (including post-effective amendments) to this registration statement together with all schedules and exhibits thereto
and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all
schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary
or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement
or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and (iv) take any and all actions which may be necessary or appropriate to be done, as fully for all intents and purposes as he or she
might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his
or her substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons on
behalf of the registrant in the capacities and on the date indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
David H. Lesser
|
|
Trustee
and Chairman of the Board of Trustees,
|
|
June
4, 2021
|
|
David
H. Lesser
|
|
CEO,
Secretary and Treasurer
(Principal
Executive Officer and Principal Financial)
|
|
|
|
|
|
|
|
/s/
Susan Hollander
|
|
Chief
Accounting Officer
|
|
June
4, 2021
|
Susan
Hollander
|
|
(Principal
Accounting Officer)
|
|
|
|
|
|
|
|
/s/
Virgil E. Wenger
|
|
Trustee
|
|
June
4, 2021
|
Virgil
E. Wenger
|
|
|
|
|
|
|
|
|
|
/s/
William S. Susman
|
|
Trustee
|
|
June
4, 2021
|
William
S. Susman
|
|
|
|
|
|
|
|
|
|
/s/
Patrick R. Haynes, III
|
|
Trustee
|
|
June
4, 2021
|
Patrick
R. Haynes, III
|
|
|
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|
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|
|
|
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/s/
Paula Poskon
|
|
Trustee
|
|
June
4, 2021
|
Paula
Poskon
|
|
|
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Exhibit
Index
The
following exhibits are filed herewith or incorporated by reference herein:
Exhibit
|
|
|
Number
|
|
Description
|
|
|
|
1.1#
|
|
Form
of Underwriting Agreement
|
|
|
|
2.1
|
|
Agreement and Plan of Merger by and among Pittsburgh & West Virginia Railroad, Power REIT and Power REIT PA, LLC, dated December 1, 2011 (incorporated herein by reference to such exhibit to the Registrant’s Current Report on Form 8-K filed with the Commission on December 5, 2011).
|
|
|
|
3.1
|
|
Declaration of Trust of Power REIT, dated August 25, 2011, as amended and restated November 28, 2011 and as supplemented effective February 12, 2014 (incorporated herein by reference to such exhibit to the Registrant’s Annual Report on Form 10-K filed with the Commission as of April 1, 2014).
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|
|
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3.2
|
|
Bylaws of Power REIT, dated October 20, 2011 (incorporated herein by reference to the Registrant’s Registration Statement on Form S-4 filed with the Commission on November 8, 2011).
|
|
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|
4.1#
|
|
Form
of Designation of Preferred Shares
|
|
|
|
4.2#
|
|
Form
of Certificate for Preferred Shares
|
|
|
|
4.3#
|
|
Form
of Rights Certificate
|
|
|
|
4.4#
|
|
Form
of Rights Agreement
|
|
|
|
4.5#
|
|
Form
of Warrant Certificate
|
4.6#
|
|
Form
of Warrant Agency Agreement
|
|
|
|
4.7#
|
|
Form
of Unit Agreement, including form of Unit
|
|
|
|
5.1(a)*
|
|
Legal opinion of Neuberger Quinn Gielen Rubin Gibber P.A.
|
|
|
|
5.1(b)*
|
|
Legal opinion of Gracin & Marlow, LLP
|
|
|
|
8.1*
|
|
Tax Opinion of Neuberger Quinn Gielen Rubin Gibber P.A.
|
|
|
|
23.1*
|
|
Consent of Neuberger Quinn Gielen Rubin Gibber P.A. (included in Exhibit 5.1(a))
|
|
|
|
23.2*
|
|
Consent of Neuberger Quinn Gielen Rubin Gibber P.A. (included in Exhibit 8.1)
|
|
|
|
23.3*
|
|
Consent of Gracin & Marlow, LLP (included in Exhibit 5.1(b))
|
|
|
|
23.4*
|
|
Consent of MaloneBailey, LLP, Independent Auditor
|
|
|
|
24.1*
|
|
Power of Attorney (included on the signature page of this Registration Statement)
|
*
|
Filed
herewith.
|
#
|
To
be filed, if applicable, by amendment or after effectiveness of this registration statement by a report filed under the Exchange
Act and incorporated herein by reference.
|
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