Postal Realty Trust, Inc. Q2 FY2025 earnings call

• The second quarter was strong due to efficient programmatic re-leasing with the Postal Service, now over a year in place, enabling annual AFFO per share guidance. • 31% of portfolio leases are 10-year terms and 55% have annual rent escalations. 2025 and 2026 expirations agreed, with discussions ongoing for 2027. • Acquired $60 million YTD, with $36 million in Q2, and aim to meet/exceed $90 million for the year. • David Steiner appointed Postmaster General, with positive outlook on working closely with Postal Service. • Thanked Rob Klein for his efforts in building a strong balance sheet and team.

In the second quarter, AFFO per share was $0.33. The full year 2025 AFFO per share guidance was updated to $1.24 to $1.26. For acquisitions, 127 properties were closed YTD for over $60 million, with $36 million in Q2 at a 7.8% weighted average cap rate. Net debt to annualized adjusted EBITDA is now 5.1x. Same-store cash NOI guidance was updated to between 7% and 9%, up from prior guidance of 4% to 6%. Revenue contribution from efficient programmatic re-leasing with the Postal Service and lower expenses contributed to the performance.

• Updated full year 2025 AFFO per share guidance to $1.24 to $1.26. • Same-store cash NOI guidance revised to 7% to 9%. • Anticipated lump sum catch-up payment of ~$300,000 in Q3. • Full year 2025 cash G&A expense expected between $10.5 million and $11.5 million. • Quarterly dividend of $0.2425 per share, a 1% increase from Q2 2024.

• Actual results may differ materially from forward-looking statements due to various factors beyond the company's control, as outlined in the 10-K and other regulatory filings. The company is not obligated to update forward-looking statements.

Q: Can you just walk us through the pickup in the same-store NOI guidance and what's ahead of pace relative to prior expectations?

A: Same-store NOI has revenue from re-leasing efforts and lower expenses than projections, combining to increase same-store NOI. Expenses were down in the first couple of quarters versus projections, leading to the increase in addition to revenue exceeding expectations.

Q: In terms of the guidance, it seems like there's a fairly steep step down from the $0.33 in the second quarter. And it looks like there's going to be some higher CapEx and also offset by some catch-up payments in the third quarter. So just curious what's driving the step down in the run rate?

A: OpEx is variable depending on the scope and timing of projects. The company is vigilant in managing properties cost-effectively. Annual budgeting and forecasting is informed by historical expenses and NOI margins, which have trended in the 77% to 82% range, and NOI margins are expected to remain within that range for the remainder of the year.

Q: On the acquisition front, you guys mentioned you've been capturing yields in the high 7s, but it sounds like from Andrew's comments that the sort of stabilized yield, I guess, once you guys get in the property is a little higher than that. Could you guys talk about, I guess, the efficiencies you guys are putting into these properties and I guess, where that sort of stable yield is?

A: We've been acquiring at or above a 7.5% cap rate. These properties are accretive out of the gate, and efficiencies from the management platform and programmatic leasing process boost stabilized yields. The programmatic leasing process has yielded success in terms of efficiency and same-store performance, contributing to the updated guidance for same-store cash NOI.