Postal Realty Trust(PSTL) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported funds from operations (FFO) of $0.28 and adjusted funds from operations (AFFO) of$ 0.32 per diluted share for Q1 2025 [12] - The annual AFFO guidance remains on track to achieve between $1.20 and$ 1.22 per share [6] - The weighted average interest rate on outstanding debt is 4.4% with a weighted average maturity of three years [13] Business Line Data and Key Metrics Changes - Occupancy rate is at 99.8%, with significant visibility into future leasing [4] - 32% of the portfolio will have ten-year lease durations, and 56% will contain annual rent escalations once all leases for 2025 and 2026 are executed [10] - In Q1 2025, the company acquired 36 properties for approximately $16 million at a 7.6% weighted average cap rate [11] Market Data and Key Metrics Changes - The company anticipates acquisition volume for the year to be between$ 80 million and $90 million, maintaining a targeted cap rate of 7.5% or above [6] - Cap rates have remained stable, with Q1 closing at 7.6% [28] Company Strategy and Development Direction - The company is focused on a multi-tiered programmatic approach with the Postal Service to enhance leasing efficiency and drive internal growth [5] - The strategy includes acquiring properties using operating partnership units, which has resulted in 11% of acquisitions since IPO being completed with these units [8] - The company aims to strengthen its position as a market leader in postal real estate by acquiring new assets and improving cash flow [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the value of their properties to the Postal Service's mission and the visibility of cash flows [9] - There is ongoing dialogue with Congress regarding the Postal Service, but no material updates have been shared [18][20] - The company remains optimistic about future opportunities arising from potential changes in the Postal Service's budget and efficiency [20] Other Important Information - The company raised approximately$ 3 million in equity through an ATM offering program [14] - The Board of Directors approved a quarterly dividend of $0.02 per share, representing a 1% increase from the previous year [15] Q&A Session Summary Question: Can you provide the gap in cash leasing spreads on the '25 lease renewals? - Management stated they historically do not provide leasing spreads but have been sharing same-store numbers [17] Question: Can you elaborate on the productive conversations in Washington DC regarding DOGE and USPS? - Management indicated that they are monitoring developments but noted that there have been no significant updates [18][19] Question: What is the potential figure for the overall portfolio to have annual increases by year-end? - Management clarified that 56% of the portfolio will contain rent escalations once all leases are executed [24] Question: What cap rates are being observed in the marketplace currently? - Management noted that cap rates have remained stable, with expectations to close the year at or above 7.5% [28] Question: How is the company underwriting properties in light of potential government reductions in real estate footprint? - Management emphasized the importance of acquiring properties that are critical to the Postal Service's operations [32] Question: What percentage of acquisitions were funded with OP units in 2024? - Management indicated that on average, 10-15% of deal flow involves OP units, depending on various factors [40]