Postal Realty Trust, Inc. Reports First Quarter 2023 Results

- Acquired 39 USPS Properties for $17.2 Million During the First Quarter -

- Executed Non-Binding LOI with the USPS for the Renewal of Leases Expired in 2022 -

- Collected 100% of Contractual Rents -

Postal Realty Trust, Inc. (NYSE: PSTL) (the “Company”), an internally managed real estate investment trust that owns and manages over 1,700 properties leased primarily to the United States Postal Service (the “USPS”), ranging from last-mile post offices to larger industrial facilities, today announced results for the quarter ended March 31, 2023.

Highlights for the Quarter Ended March 31, 2023

  • Acquired 39 USPS properties for approximately $17.2 million, excluding closing costs
  • 27% growth in revenues from first quarter 2022 to first quarter 2023
  • Net income attributable to common shareholders was $0.3 million, or $0.00 per diluted share
  • Funds from Operations ("FFO") was $5.2 million, or $0.21 per diluted share
  • Adjusted Funds from Operations ("AFFO") was $6.6 million, or $0.27 per diluted share
  • Subsequent to quarter end, we announced a quarterly dividend of $0.2375 per share

“We are pleased with our results in the first quarter as we added 39 new properties and executed a non-binding letter of intent with the USPS for the renewal of leases that expired in 2022. We anticipate overall acquisition activity to be lower in 2023 than last year, as market participants continue to take time to adjust their price expectations. While this process is ongoing, we remain patient with our deal activity and focused on managing our balance sheet, enhancing our liquidity, reinvesting in the growth of the company, and maintaining our financial strength. I am proud of our execution to date, and I am confident Postal Realty is well positioned for future growth,” stated Andrew Spodek, Chief Executive Officer.

Property Portfolio & Acquisitions

The Company’s owned portfolio was 99.7% occupied, comprised of 1,325 properties across 49 states and one territory with approximately 5.5 million net leasable interior square feet and a weighted average rental rate of $9.01 per leasable square foot based on rents in place as of March 31, 2023. The weighted average rental rate consisted of $11.24 per leasable square foot on last-mile and flex properties, and $3.55 on industrial properties.

During the first quarter, the Company acquired 39 last-mile and flex properties leased to the USPS for approximately $17.2 million, excluding closing costs, comprising approximately 121,000 net leasable interior square feet at a weighted average rental rate of $12.03 per leasable square foot based on rents in place as of March 31, 2023.

Balance Sheet & Capital Markets Activity

As of March 31, 2023, the Company had approximately $3 million of cash and property-related reserves on the balance sheet, and approximately $212 million of net debt with a weighted average interest rate of 3.93%. At the end of the first quarter, 92.1% of the Company's total debt was set to fixed rates (when taking into account interest rate hedges), and $17 million was outstanding on the Company's $150 million revolving credit facility.

In the first quarter and through April 26, 2023, the Company issued 227,812 shares of common stock through its at-the-market offering program for total gross proceeds of approximately $3.4 million at an average gross price per share of $15.08.

Dividend

On April 24, 2023, the Company declared a quarterly dividend of $0.2375 per share of Class A common stock. The dividend equates to $0.95 per share on an annualized basis. The dividend will be paid on May 31, 2023 to stockholders of record as of the close of business on May 5, 2023.

Subsequent Events

Subsequent to quarter end and through April 26, 2023, the Company acquired seven properties comprising approximately 22,000 net leasable interior square feet for approximately $4.5 million, excluding closing costs. The Company had another 12 properties totaling approximately $3.9 million under definitive contracts.

On April 4, 2023, the Company executed a non-binding letter of intent with the USPS for the renewal of leases that expired in 2022, excluding leases for three properties that were acquired in December 2022 and February 2023. The non-binding letter of intent covers renewals for 86 properties comprising approximately 285,000 net leasable interior square feet. In addition to an increase to the annual rents, the renewals incorporate 3.5% fixed annual rent escalations.

Webcast and Conference Call Details

The Company will host a webcast and conference call to discuss the first quarter 2023 financial results on Wednesday, May 3, 2023, at 8:30 A.M. Eastern Time. A live audio webcast of the conference call will be available on the Company’s investor website at https://investor.postalrealtytrust.com/Investors/events-and-presentations/default.aspx. To participate in the conference call, callers from the United States and Canada should dial-in ten minutes prior to the scheduled call time at 1-877-407-9208. International callers should dial 1-201-493-6784.

Replay

A telephonic replay of the call will be available starting at 11:30 A.M. Eastern Time on Wednesday, May 3, 2023, through 11:59 P.M. Eastern Time on Wednesday, May 17, 2023, by dialing 1-844-512-2921 in the United States and Canada or 1-412-317-6671 internationally. The passcode for the replay is 13734922.

Non-GAAP Supplemental Financial Information

An explanation of certain non-GAAP financial measures used in this press release, including, FFO, AFFO and net debt, as well as reconciliations of those non-GAAP financial measures, to the most directly comparable GAAP financial measure, is included below.

The Company calculates FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as follows: net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than the Company does and therefore the Company’s computation of FFO may not be comparable to such other REITs.

The Company calculates AFFO by starting with FFO and adjusting for recurring capital expenditures (defined as all capital expenditures and leasing costs that are recurring in nature, excluding expenditures that (i) are for items identified or existing at the time a property was acquired or contributed (including through the Company’s formation transactions), (ii) are part of a strategic plan intended to increase the value or revenue-generating ability of a property, (iii) are considered infrequent or extraordinary in nature, or (iv) for casualty damage) and acquisition-related and other non-recurring expenses (including acquisition-related expenses that are incurred for investment purposes and business acquisitions and do not correlate with the ongoing operations of the Company’s existing portfolio, including due diligence costs for acquisitions not consummated and certain professional fees incurred that were directly related to completed acquisitions or dispositions and integration of acquired business) that are not capitalized and then adding back non-cash items including: write-off and amortization of deferred financing fees, straight-line rent and other adjustments (including lump sum catch up payments for increased rents), fair value lease adjustments, income on insurance recoveries from casualties, non-real estate depreciation and amortization and non-cash components of compensation expense. AFFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that AFFO is widely used by other REITs and is helpful to investors as a meaningful additional measure of the Company’s ability to make capital investments. Other REITs may not define AFFO in the same manner as the Company does and therefore the Company’s calculation of AFFO may not be comparable to such other REITs.

The Company calculates its net debt as total debt less cash and property-related reserves. Net debt as of March 31, 2023 is calculated as total debt of approximately $215 million less cash and property-related reserves of approximately $3 million.

These metrics are non-GAAP financial measures and should not be viewed as an alternative measurement of the Company’s operating performance to net income. Management believes that accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, the Company believes that the additive use of FFO and AFFO, together with the required GAAP presentation, is widely-used by the Company’s competitors and other REITs and provides a more complete understanding of the Company’s performance and a more informed and appropriate basis on which to make investment decisions.

Forward-Looking and Cautionary Statements

This press release contains “forward-looking statements.” Forward-looking statements include statements identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections. Forward-looking statements, including, among others, statements regarding the Company’s anticipated growth and ability to obtain financing, renew or replace expiring leases on favorable terms, or at all, and close on pending transactions on the terms or timing it expects, if at all, are based on the Company’s current expectations and assumptions regarding capital market conditions, the Company’s business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the USPS’s terminations or non-renewals of leases, changes in demand for postal services delivered by the USPS, the solvency and financial health of the USPS, competitive, financial market and regulatory conditions, disruption in market, economic and financial conditions as a result of the COVID-19 pandemic, general real estate market conditions, the Company’s competitive environment and other factors set forth under “Risk Factors” in the Company’s filings with the Securities and Exchange Commission. Any forward-looking statement made in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

About Postal Realty Trust, Inc.

Postal Realty Trust, Inc. is an internally managed real estate investment trust that owns and manages over 1,700 properties leased primarily to the USPS. More information is available at postalrealtytrust.com.

Postal Realty Trust, Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share data)

 

 

For the Three Months Ended

March 31,

 

 

2023

 

 

 

2022

 

Revenues:

 

Rental income

$

14,499

 

 

$

11,349

 

Fee and other

 

649

 

 

 

582

 

Total revenues

 

15,148

 

 

 

11,931

 

 

 

 

 

Operating expenses:

 

 

 

Real estate taxes

 

1,983

 

 

 

1,590

 

Property operating expenses

 

1,624

 

 

 

1,530

 

General and administrative

 

4,159

 

 

 

3,642

 

Depreciation and amortization

 

4,837

 

 

 

4,110

 

Total operating expenses

 

12,603

 

 

 

10,872

 

 

 

 

 

Income from operations

 

2,545

 

 

 

1,059

 

 

 

 

 

Other income

 

114

 

 

 

487

 

 

 

 

 

Interest expense, net:

 

 

 

Contractual interest expense

 

(2,045

)

 

 

(686

)

Write-off and amortization of deferred financing fees

 

(165

)

 

 

(129

)

Interest income

 

 

 

 

1

 

Total interest expense, net

 

(2,210

)

 

 

(814

)

 

 

 

 

Income before income tax expense

 

449

 

 

 

732

 

Income tax expense

 

(16

)

 

 

(11

)

 

 

 

 

Net income

 

433

 

 

 

721

 

Net income attributable to Operating Partnership unitholders’ non-controlling interests

 

(85

)

 

 

(126

)

 

 

 

 

Net income attributable to common stockholders

$

348

 

 

$

595

 

 

 

 

 

Net income per share:

 

 

 

Basic and Diluted

$

0.00

 

 

$

0.02

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

Basic and Diluted

 

19,294,896

 

 

 

18,368,130

 

 

 

 

 

Postal Realty Trust, Inc.

Consolidated Balance Sheets

(In thousands, except par value and share data)

 

 

March 31, 2023

 

December 31, 2022

 

(Unaudited)

 

 

Assets

 

 

 

Investments:

 

 

 

Real estate properties, at cost:

 

 

 

Land

$

92,822

 

 

$

90,020

 

Building and improvements

 

393,143

 

 

 

378,596

 

Tenant improvements

 

6,526

 

 

 

6,375

 

Total real estate properties, at cost

 

492,491

 

 

 

474,991

 

Less: Accumulated depreciation

 

(34,210

)

 

 

(31,257

)

Total real estate properties, net

 

458,281

 

 

 

443,734

 

Investment in financing leases, net

 

16,105

 

 

 

16,130

 

Total real estate investments, net

 

474,386

 

 

 

459,864

 

Cash

 

2,112

 

 

 

1,495

 

Escrow and reserves

 

672

 

 

 

547

 

Rent and other receivables

 

2,861

 

 

 

4,613

 

Prepaid expenses and other assets, net

 

12,566

 

 

 

15,968

 

Goodwill

 

1,536

 

 

 

1,536

 

Deferred rent receivable

 

1,279

 

 

 

1,194

 

In-place lease intangibles, net

 

15,051

 

 

 

15,687

 

Above market leases, net

 

403

 

 

 

399

 

Total Assets

$

510,866

 

 

$

501,303

 

 

 

 

 

Liabilities and Equity

 

 

 

Liabilities:

 

 

 

Term loans, net

$

163,820

 

 

$

163,753

 

Revolving credit facility

 

17,000

 

 

 

 

Secured borrowings, net

 

32,821

 

 

 

32,909

 

Accounts payable, accrued expenses and other, net

 

7,429

 

 

 

9,109

 

Below market leases, net

 

12,030

 

 

 

11,821

 

Total Liabilities

 

233,100

 

 

 

217,592

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

Class A common stock, par value $0.01 per share; 500,000,000 shares authorized; 19,737,709 and 19,528,066 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

 

197

 

 

 

195

 

Class B common stock, par value $0.01 per share; 27,206 shares authorized: 27,206 shares issued and outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

Additional paid-in capital

 

254,030

 

 

 

254,107

 

Accumulated other comprehensive income

 

5,207

 

 

 

7,486

 

Accumulated deficit

 

(36,996

)

 

 

(32,557

)

Total Stockholders’ Equity

 

222,438

 

 

 

229,231

 

Operating Partnership unitholders’ non-controlling interests

 

55,328

 

 

 

54,480

 

Total Equity

 

277,766

 

 

 

283,711

 

Total Liabilities and Equity

$

510,866

 

 

$

501,303

 

Postal Realty Trust, Inc.

Reconciliation of Net Income to FFO and AFFO

(Unaudited)

(In thousands, except share data)

 

 

 

For the Three

Months Ended


March 31, 2023

Net income

 

$

433

 

Depreciation and amortization of real estate assets

 

 

4,811

 

FFO

 

$

5,244

 

Recurring capital expenditures

 

 

(106

)

Write-off and amortization of deferred financing fees

 

 

165

 

Straight-line rent and other adjustments

 

 

(107

)

Fair value lease adjustments

 

 

(601

)

Acquisition-related and other expenses

 

 

137

 

Income on insurance recoveries from casualties

 

 

(114

)

Non-real estate depreciation and amortization

 

 

26

 

Non-cash components of compensation expense

 

 

1,960

 

AFFO

 

$

6,604

 

FFO per common share and common unit outstanding

 

$

0.21

 

AFFO per common share and common unit outstanding

 

$

0.27

 

Weighted average common shares and common units outstanding, basic and diluted

 

 

24,658,698

 

 

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