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

Financial Data and Key Metrics Changes - The company reported an AFFO per share of $1.16 for 2024, marking an increase of 8.4% year over year and exceeding the Street consensus by over 9% at the start of 2024 [7] - Funds from operations (FFO) for Q4 was$ 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 $91 million at a weighted average cap rate of 7.6% [11] - The company anticipates acquisition volume in 2025 to be between$ 80 million and $90 million, targeting a weighted average cap rate at or above 7.5% [11] - The total net lump sum catch-up payment received during Q4 was$ 1.5 million, with an additional $400,000 received in 2025 [18] Market Data and Key Metrics Changes - The company reported a current occupancy rate of 99.8% and an average lease retention rate of 99% with the Postal Service over the past ten years [13] - The Postal Service's lease expenses represent only 1.5% of its total operating budget, indicating a stable relationship with the company [13][34] Company Strategy and Development Direction - The company aims to drive internal growth while pursuing an acquisition-driven external growth plan [7] - The management emphasized the importance of maintaining strong relationships with postal property owners to expand the portfolio [16] - The company is focused on executing leases for 2025 expirations and negotiating rents for 2026 expirations [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Postal Service's continued tenancy and the stability of their lease agreements despite changes in leadership [33] - The Postal Service's recent cost-cutting measures are not expected to disrupt the company's operations or the facilities they invest in [39] - The company is optimistic about its acquisition pipeline and internal growth story, projecting AFFO for 2025 to be between$ 1.20 and $1.22 per share [10][27] Other Important Information - The company completed its first meaningful dispositions as a public company, selling two properties for total gross proceeds of$ 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 is not expected to change existing lease documents, as the company has a strong process in place for lease execution [33] Question: Postal Service's cost-cutting measures and facility eliminations - Management believes that the cost-cutting measures will not affect 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 same-store NOI growth for 2025 is projected to be between 4% and 6%, with G&A expenses expected to increase slightly [46] Question: Catch-up rent payments in Q4 - Management clarified that the catch-up rent payments were part of the top-line revenue, and they are now caught up with the expiration schedule for leases [54]