Postal Realty Trust, Inc. Q2 FY2026 earnings call

• Acquisition Activity

  • Q2 2026 closed $45 million in acquisitions, the highest quarterly volume since June 2022, with a 7.3% weighted average cash cap rate
  • Improved access to capital has expanded the universe of eligible acquisition targets to include larger assets and portfolios, while maintaining attractive investment spreads and day-one accretive growth
  • Year-to-date through July 2026, $88 million in acquisitions have been completed at a 7.4% cap rate, with a large visible pipeline of additional opportunities
  • $110 million in equity sold through July fully funds the current acquisition pipeline, and the company recently expanded its credit facility while reducing borrowing costs

• Leasing & Portfolio Profile

  • 90% of 2026 new leases by rent have been executed, with the remaining 10% expected to close in the second half of 2026; substantially all 2027 lease rents are already agreed, with execution underway
  • All 2026 and 2027 new leases include 3% annual rent escalators, and the vast majority have 10-year terms (excluding leases with existing renewal options)
  • 59% of all portfolio leases now include annual escalators, 54% have 10-year terms, and weighted average lease term reached 6.4 years as of quarter-end (more than double the term reported a few years prior)
  • The portfolio has delivered 5.5% average same-store cash NOI growth over the past five years, and 2026 is tracking to 6% to 7% same-store cash NOI growth; 2027 same-store cash revenue growth is projected at approximately 6.5%

• Balance Sheet Strategy

  • Ended Q2 2026 with net debt to pro forma annualized adjusted EBITDA of 4.6x, down from 5.2x last quarter; including unsettled forward equity sales, pro forma leverage falls to 4.0x
  • In July 2026, the credit facility was recast: size increased by $60 million, maturity schedule was extended (weighted average maturity increased from 2.8 years to 3.5 years, targeting 5+ years long-term), interest rate margin was reduced by 30 basis points, and all new term borrowings are fully hedged to fixed rates, leaving floating rate exposure at less than 10% of total debt
  • The firm will maintain a target maximum leverage of 5.5x net debt to pro forma annualized adjusted EBITDA, consistent with its approach over the past three years

• Growth Pillars

  1. Significant embedded upside from lease mark-to-market: 28% of current rental income will expire between 2027 and 2030 with no remaining renewal options, allowing re-marketing of rents
  2. Compounding growth from annual rent escalators: 52% of 2027 rent will include an escalation, up from 5% in 2023 and 37% in 2026, driven by replacing legacy flat leases with structured new leases
  3. Growing retained cash flow: AFFO available after dividends is expected to reach $16 million in 2026, up from $3 million three years prior, providing flexible internal capital for debt repayment or acquisitions
  4. Day-one accretion from acquisitions: Improved cost of capital has increased the contribution of acquisitions to overall AFFO per share growth, complementing the firm's core internally driven growth

Postal Realty Trust is a single-segment real estate investment trust focused on U.S. postal-related properties. There are no separate product segments reported. In Q2 2026, the firm acquired 37 total properties adding 237,000 square feet to the portfolio: 20 last-mile post offices contributed 29,600 square feet, 16 flex properties contributed 141,500 square feet, and 1 industrial property contributed 62,000 square feet. Year-to-date through July 2026, total acquisitions reached $88 million at a 7.4% weighted average cash cap rate, with the Q2 2026 acquisitions alone totaling $45 million at a 7.3% weighted average cash cap rate. Reported Q2 2026 AFFO per share was $0.36, up $0.03 quarter-over-quarter and $0.03 year-over-year. Portfolio occupancy and retention rates exceed 99%.

• Full year 2026 AFFO per share guidance was raised by $0.01, to a range of $1.41 to $1.43, representing 7.6% growth at the midpoint, driven by higher acquisition volume, lower borrowing costs, and G&A efficiencies
• 2026 total acquisition guidance was increased to $150 to $160 million, a 30% increase from prior guidance earlier this year
• Cash G&A for 2026 is tracking below the midpoint of the previous guidance range, and is projected to be 10% to 10.9% of revenue for the full year
• Same-store cash NOI for 2026 remains in line with prior forecasts
• Recurring capital expenditure for Q3 2026 is projected to be between $250,000 and $350,000
• The Board of Directors approved a 1% increase in the quarterly dividend to 24.5 cents per share; the Q2 payout ratio was approximately 68%, and the dividend yield was 4.3% as of the call date

The company's standard Safe Harbor disclosure notes that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections, including risks outlined in the firm's regulatory filings with the SEC. No new material operational risks or failures were discussed during the call.

Q: How is the investment team being adjusted to support higher acquisition volumes, and what is the outlook for G&A as a percentage of NOI? / A: Management states no significant changes to the existing strong investment team are needed to scale to projected volumes. Cash G&A as a percentage of revenue has declined by ~150 basis points annually on average over the past five years, and the firm continues to pursue operational and technology-driven efficiencies to keep G&A low.

Q: Will industrial assets and larger portfolios become a more meaningful contribution to future acquisitions following improved cost of capital? / A: Industrial assets are not core to the business, but the firm will underwrite and acquire them if they meet its longstanding criteria: day-one accretion, critical importance to USPS, and embedded long-term growth. Lower cost of capital has expanded the number of assets meeting these criteria, increasing the available acquisition pool.

Q: What is the outlook for leverage after reaching 4x pro forma net debt to EBITDA – will you further reduce leverage to optimize cost of capital? / A: Management is comfortable with current leverage levels. The intentional decision to reduce leverage via equity financing for recent acquisitions enhances cash flow stability, creates optionality to acquire when other market participants are sidelined during economic stress, and lowers the firm's overall blended cost of capital for both debt and equity.

Q: What drives the recent decline in acquisition cap rates, and how is pricing trending in the transaction market? / A: Lower cap rates are not tied specifically to the single industrial asset acquired this quarter. The firm prioritizes overall AFFO per share growth over targeting high cap rates; slightly compressed cap rates for higher volume acquisitions still deliver greater total earnings accretion than lower volume at higher cap rates, which aligns with the firm's core growth strategy.