Postal Realty Trust (PSTL) FY Conference Transcript

Summary of Postal Realty Trust (PSTL) FY Conference Call - June 11, 2025 Company Overview - Company: Postal Realty Trust (PSTL) - Industry: Real Estate Investment Trust (REIT) focused on properties leased to the U.S. Postal Service Key Points and Arguments 1. Business Model: Postal Realty Trust specializes in owning postal facilities, with a historical retention rate of 99% over the past decade, demonstrating strong tenant reliability [4][5][9] 2. Market Size: The postal service pays approximately $1.6 billion in rent, which constitutes only 1.5% of its total expenses, indicating a significant market potential estimated at $12 to $15 billion [7][9] 3. Ownership Structure: Postal Realty is the largest owner of postal service-leased properties, holding 7% of the market, while the next 20 largest owners collectively hold only 11% [9][10] 4. Investment Strategy: The company focuses on acquiring properties through an UPREIT structure, allowing property owners to defer capital gains taxes by exchanging their properties for operating partnership units [11][12] 5. Deal Flow: Approximately 75% of the company's acquisitions are off-market, facilitated by its reputation and the unique currency of operating partnership units [14][15] 6. Growth Metrics: Since going public, the company has increased its portfolio by over seven times, with a current count of nearly 1,800 properties [16] 7. Lease Structure: Postal Realty has been able to negotiate leases with annual escalations of 3%, contrasting with the average five-year fixed leases held by other owners [17][18] 8. Property Types: The company primarily invests in flex and last-mile facilities, which are more affordable compared to other commercial properties, averaging around $160 per square foot [24][25] 9. Market Dynamics: The postal service has a virtual monopoly on last-mile delivery, servicing 169 million delivery points, making it a critical infrastructure investment [28][29] 10. Future Opportunities: There is potential for the postal service to engage in sale-leaseback transactions for its owned properties, which could benefit Postal Realty [44][45] Additional Important Insights 1. Maintenance and Upgrades: Most postal facilities require upgrades, which could become a profit center for Postal Realty as it manages these properties [36] 2. Owner Demographics: Many property owners are older individuals looking to liquidate their assets due to life events or estate planning, creating opportunities for acquisition [39][42] 3. Geographic Focus: The company’s properties are predominantly located east of the Mississippi River, aligning with the historical rollout of the postal service network [44] 4. Financial Management: The company maintains a fixed-rate debt portfolio, with an average debt rate under 5%, while new debt is being taken on at rates between 5.5% and 6% [79] 5. Market Conditions: The company has adapted its acquisition strategy in response to rising interest rates, focusing on smaller portfolios and single buildings to maintain control over cap rates [72][73] This summary encapsulates the key insights and strategic direction of Postal Realty Trust as discussed in the conference call, highlighting its unique position within the postal service real estate market and its growth potential.