Postal Realty Trust(PSTL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2024, the company reported funds from operations (FFO) of $0.24 per diluted share and adjusted funds from operations (AFFO) of$ 0.30 per diluted share [20] - The net debt to annualized adjusted EBITDA ratio improved to 5.6 times, down from 6.1 times in Q2 [22] - The company announced a quarterly dividend of $0.24 per share, reflecting a 1.1% increase from Q3 2023 [24] Business Line Data and Key Metrics Changes - The company achieved same-store cash NOI growth projections of greater than 4% for 2023, at least 3.25% for 2024, and at least 3% for 2025 [10] - 80 fully executed leases accounted for nearly 55% of the aggregate 2023 expired rent, while 106 fully executed leases represented 78% of the aggregate 2024 expired rent [17][18] - The company acquired 35 properties for$ 13.3 million at a weighted average cap rate of 7.5% during Q3, adding 106,000 net leasable square feet to the portfolio [19] Market Data and Key Metrics Changes - The company completed $64 million in acquisitions for the year and placed an additional 29 properties totaling$ 11 million under contract [12] - The company sold two properties for a combined sale price of $6.3 million, achieving a weighted average exit cap rate of 4.9% [13] Company Strategy and Development Direction - The company is focused on expanding its portfolio while exploring asset recycling to redeploy proceeds into accretive acquisitions [15] - A multi-tiered programmatic approach has been developed in collaboration with the Postal Service to streamline the re-leasing process [7][8] - The company aims to maintain a conservative balance sheet while generating value through internal and external growth [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the$ 90 million acquisition target for 2024 despite lighter acquisition volumes in Q3 [12][40] - The company believes that political changes will not impact lease negotiations with the Postal Service [30] - Management highlighted the importance of operational efficiencies and expense management in achieving same-store growth projections [34] Other Important Information - The company amended its credit facility, adding a $50 million commitment to its term loan maturing in 2028, which will lower the weighted average interest rate [21][22] - The company continues to decrease cash G&A as a percentage of revenue on an annual basis [24] Q&A Session Summary Question: Discussion on 10-year lease duration - Management clarified that the 10-year lease term is not a default but a strategic decision based on positive rent growth and the goal of executing leases before expiration [26][27] Question: Cash or GAAP lease spreads - Management did not disclose specific leasing spreads but reiterated strong same-store growth projections of 4% for 2023 and 3.25% for 2024 [31][32] Question: Disposition cap rates and future opportunities - Management explained that the recent dispositions were reverse inquiries and expressed confidence in the potential for future capital recycling opportunities [36][37] Question: Confidence in acquisition target - Management maintained confidence in achieving the$ 90 million acquisition target, citing a strong pipeline and favorable cost of capital [40] Question: Cap rate environment - Management noted that there has not been a significant change in cap rates and that more sellers are considering entering the market [41]