Postal Realty Trust, Inc. Q4 FY2025 earnings call

Andrew Spodek mentioned in 2025 they exceeded expectations across all fronts. Their results stemmed from the stability and growth in the portfolio of critical logistics infrastructure leased to the U.S. Postal Service and their unique operating approach. They grew the asset base by approximately 20% last year, with gross real estate value 10x since IPO. Stephen Bakke reported that in 2025, AFFO per share was $0.33 for the fourth quarter and $1.32 for the full year, which was ahead of guidance. Acquisitions totaled $123.1 million, slightly ahead of December guidance. Cash G&A was $10.9 million, better than the midpoint. Same - store cash NOI was 8.9%. For 2026, AFFO per share guidance is $1.39 to $1.41, with acquisitions expected to be $115 million to $125 million, same - store cash NOI growth of 6.0% to 7.0%, and cash G&A of $11.5 million to $12.5 million. Jeremy Garber talked about re - leasing: all 2025 expired leases except some acquired in 2025 and 2026 holdover are executed. 2026 re - leasing except 4 recently acquired properties have agreed rents, and 2027 leases are being negotiated with 3% escalators and mostly 10 - year terms. In 2025, they acquired 216 properties for $123 million, and in the fourth quarter, they acquired 65 properties for approximately $29.1 million at a 7.5% weighted average initial cash cap rate, adding ~142,000 net leasable interior square feet.

2026 AFFO per share is guided to be between $1.39 and $1.41, representing a 6.1% growth from the 2025 midpoint. Guidance assumptions include acquisitions ranging from $115 million to $125 million, same - store cash NOI growth of 6.0% to 7.0%, and cash G&A of $11.5 million to $12.5 million. The first quarter is expected to have recurring capital expenditures of approximately $125,000 to $200,000. In 2026, the acquisition guidance at the high end is fully funded on a leverage - neutral basis through equity and debt raises and growing retained free cash flow. The leverage target for net debt to adjusted EBITDA has been updated to below 6x from the prior below 7x.

Q: Expand on the color about the transaction market and what's preventing them from ramping up; A: Andrew stated that their pipeline is very strong, they are confident in 2023, their debt and equity are accounted for, and as their cost of capital continues to improve, their ability to grow the pipeline and make acquisitions will improve.

Q: Elaborate on what was meant by the USPS' revenue model evolving and their pursuit of competitive bidding processes; A: Jeremy said the new Postmaster General joined the Postal Service in July and announced last month that they were going to allow access to their last mile. The Postal Service has recognized the value in the last mile and the revenue opportunity, and there is a portal where over 1,200 requests for participation have been made.

Q: Does the improved cost of capital change their investment strategy in terms of targeted yields and portfolio size for acquisitions; A: Andrew said they are happy that their cost of capital has improved, and as their cost of capital gets better, their ability to acquire will improve. Their goal of day 1 accretive acquisitions will continue to be their strategy.

Q: What is the most likely outcome regarding the renewal of '27 lease expirations; A: Steve said they expect all of those leases to be renewed for the next couple of years, and the setup for 2027 is very similar to that of 2026.

Q: Quantify the impact of their lease structure on underwriting in terms of higher IRR and how it makes them more competitive; A: Stephen Bakke said a shortcut to back into an unlevered IRR is that they have been acquiring at a 7.5% cash cap rate initially, and with an average trailing same - store NOI growth of around 6% in recent years, it leads to an 13% to 14% unlevered IRR.

Q: Would they consider purchasing warehouses again; A: Andrew said they are always looking at the industrial market. It's not the bread and butter of their business, but they focus mostly on flex and last mile facilities, and improved cost of capital improves the opportunity to purchase industrial facilities.

Q: What real estate implications should be foreseen with logistics providers entering the USPS' last mile; A: Jeremy said the existing infrastructure's 22,000 delivery units out of the over 30,000 facilities are already built and equipped to handle that type of logistics