Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Postal Realty Trust Inc (NYSE:PSTL) reported a strong AFFO per share of $1.16 for 2024, marking an 8.4% increase year-over-year and exceeding street consensus by over 9%.
• The company successfully acquired 197 properties in 2024 for $91 million at a weighted average cap rate of 7.6%, demonstrating robust acquisition activity.
• Postal Realty Trust Inc (NYSE:PSTL) maintained a high occupancy rate of 99.8% and a lease retention rate of 99% with the postal service over the past decade.
• The company increased its term loan commitments by $50 million and expanded its term loan accordion by another $50 million, reflecting strong lender support.
• Postal Realty Trust Inc (NYSE:PSTL) announced a quarterly dividend increase to $0.25 per share, marking the seventh consecutive year of dividend growth.

Negative Points

• The company faces potential risks from the postal service's cost-cutting measures, which include eliminating unnecessary facilities, though it currently believes its properties are not affected.
• Postal Realty Trust Inc (NYSE:PSTL) anticipates a slight increase in cash GNA expenses for 2025, which could impact overall profitability.
• The company's debt has a weighted average maturity of three years, with significant maturities beginning in 2027, which may pose refinancing risks.
• Despite a strong acquisition pipeline, the projected acquisition volume for 2025 is slightly lower than 2024, ranging from $80 to $90 million.
• The company has one remaining vacancy across its portfolio, indicating a need for continued focus on maintaining full occupancy.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with PSTL.

Q: With the change in Postmaster General, will there be any changes to the lease agreements for Postal Realty Trust? A: Andrew Spodek, CEO, stated that the change in Postmaster General does not affect the lease documents. The company continues to work effectively with the postal service to stay ahead of lease agreements, and the leases represent only 1.5% of the postal service's total operating expenses, making it a low priority for change.

Q: The postal service plans to save $36 billion over the next decade, partly by eliminating unnecessary facilities. Does this include post offices? A: Andrew Spodek, CEO, clarified that the postal service's cost-cutting measures do not target the facilities Postal Realty Trust invests in. The postal service has indicated no changes to their retail network, which includes the properties owned by Postal Realty Trust.

Q: How does the postal service's regional transportation optimization initiative affect Postal Realty Trust's acquisition strategy? A: Andrew Spodek, CEO, explained that the acquisition strategy considers the critical nature of properties to the postal service's operations. Any shifts in postal service logistics are factored into the decision-making process when acquiring new properties.

Q: What are the main offsets to internal growth and growth through acquisitions for 2025? A: Robert Klein, CFO, mentioned that the primary factors include recurring capital expenditures and adjustments from FFO to AFFO. Acquisitions also impact both the top and bottom lines, but the main drivers have been outlined in their guidance.

Q: How do properties in Postal Realty Trust's portfolio compare to those before acquisition? A: Andrew Spodek, CEO, emphasized that the platform adds value through economies of scale, operational efficiencies, and effective lease negotiations, enhancing the properties' performance once they are part of the portfolio.

Q: What is the impact of catch-up rent payments on the fourth quarter's top-line revenue, and what is the expected run rate for next year? A: Robert Klein, CFO, explained that the company is now caught up with 95% of 2023 and 99% of 2024 leases. The run rate for the year is based on these executed leases, and the contractual rent escalators are outlined in their presentation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.