Postal Realty Trust(PSTL) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an AFFO per share of $1.16 for 2024, marking an increase of 8.4% year over year and exceeding the Street consensus by over 9% at the start of 2024 [7] - Funds from operations (FFO) for Q4 2024 was$ 0.30 per diluted share, while adjusted funds from operations (AFFO) was $0.35 per diluted share [22] - The board approved a quarterly dividend of$ 0.2425 per share, a 1% increase from Q4 2023, marking the seventh consecutive year of dividend increases [23] - The net debt to annualized adjusted EBITDA ratio was 5.2 times at the end of the year, reflecting a deleveraging from the end of 2023 [25] Business Line Data and Key Metrics Changes - In 2024, the company acquired 197 properties for $91 million at a weighted average cap rate of 7.6% [11] - The company updated its same-store cash NOI guidance for 2025 to be between 4% and 6%, up from prior guidance of at least 3% [9] - The total net lump sum catch-up payment received during Q4 was$ 1.5 million, with an additional $400,000 received in 2025 [18] Market Data and Key Metrics Changes - The company maintained a current occupancy rate of 99.8% and has averaged a 99% lease retention rate with the Postal Service over the past ten-plus years [13] - The Postal Service's lease expenses represent only 1.5% of its total operating budget, indicating a stable relationship with the company [13][34] Company Strategy and Development Direction - The company aims to drive internal growth while pursuing an acquisition-driven external growth plan [7] - The focus remains on lease execution for 2025 expirations and negotiating rents for 2026 expirations [19] - The company is well-positioned for future growth due to its strong relationship with postal property owners and the critical role of the Postal Service in the economy [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Postal Service's continued tenancy and the importance of their facilities to the logistics network [13][39] - The company anticipates acquisition volume in 2025 to be between$ 80 million and $90 million, targeting a weighted average cap rate at or above 7.5% [11] - Management highlighted the importance of the Postal Service's infrastructure and its role in driving commerce [14][15] Other Important Information - The company completed its first meaningful dispositions as a public company, selling two properties for total gross proceeds of$ 6.3 million [12] - The company has a $150 million senior unsecured revolving credit facility with$ 136 million undrawn, maintaining low leverage and minimizing exposure to variable rate debt [24] Q&A Session Summary Question: Impact of new postmaster general on lease agreements - Management indicated that the new postmaster general would not change existing lease documents, as lease expenses are a low priority for the Postal Service [33][34] Question: Postal Service's cost-cutting measures and facility eliminations - Management believes there will be no changes to the infrastructure related to the facilities they invest in, as the Postal Service has stated there will be no disruption to their retail network [39] Question: Same-store NOI growth and G&A expenses - Management confirmed that the anticipated same-store NOI growth for 2025 is between 4% and 6%, with G&A expenses expected to rise slightly [46][47] Question: Catch-up rent payments and revenue run rate - Management clarified that they are now caught up on leases, with a clear run rate for the upcoming year based on executed leases [55]