pstl-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-38903

POSTAL REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)


Maryland						83-2586114
(State or other jurisdiction of						(IRS Employer
incorporation or organization)						Identification No.)

75 Columbia Avenue

Cedarhurst, NY 11516

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (516) 295-7820

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Class A Common Stock, par value $0.01 per share

PSTL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 7, 2024, the registrant had 22,664,928 shares of Class A common stock outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Consolidated Balance Sheets (Unaudited) as of March 31, 2024 and December 31, 20 23	1
	Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the Three Months Ended March 31, 2 02 4 and 2023	2
	Consolidated Statements of Changes in Equity (Unaudited) for the Three Months Ended March 31, 202 4 and 2023	3
	Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023	4
	Notes to Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4.	Controls and Procedures	31

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

POSTAL REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except par value and share data)


	March 31, 2024		December 31, 2023

Assets
Investments:
Real estate properties, at cost:
Land	$	112,504	$	106,074
Building and improvements	456,270		443,470
Tenant improvements	7,075		6,977
Total real estate properties, at cost	575,849		556,521
Less: Accumulated depreciation	(47,216)		(43,791)
Total real estate properties, net	528,633		512,730
Investment in financing leases, net	16,018		16,042
Total real estate investments, net	544,651		528,772
Cash	1,898		2,235
Escrow and reserves	791		632
Rent and other receivables	4,527		4,750
Prepaid expenses and other assets, net	14,999		13,369
Goodwill	1,536		1,536
Deferred rent receivable	1,643		1,542
In-place lease intangibles, net	13,701		14,154
Above market leases, net	342		355
Total Assets	$	584,088	$	567,345

Liabilities and Equity
Liabilities:
Term loans, net	$	198,885	$	198,801
Revolving credit facility	16,000		9,000
Secured borrowings, net	32,730		32,823
Accounts payable, accrued expenses and other, net	9,372		11,996
Below market leases, net	13,811		13,100
Total Liabilities	270,798		265,720

Commitments and Contingencies

Equity:
Class A common stock, par value $0.01 per share; 500,000,000 shares authorized; 22,607,251 and 21,933,005 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	226		219
Class B common stock, par value $0.01 per share; 27,206 shares authorized; 27,206 shares issued and outstanding as of March 31, 2024 and December 31, 2023	—		—
Additional paid-in capital	294,878		287,268
Accumulated other comprehensive income	6,888		4,621
Accumulated deficit	(53,860)		(48,546)
Total Stockholders’ Equity	248,132		243,562
Operating partnership unitholders’ non-controlling interests	65,158		58,063
Total Equity	313,290		301,625
Total Liabilities and Equity	$	584,088	$	567,345

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands, except share and per share data)


	For the Three Months Ended March 31,
	2024		2023
Revenues:
Rental income	$	16,604	$	14,499
Fee and other	683		649
Total revenues	17,287		15,148

Operating expenses:
Real estate taxes	2,302		1,983
Property operating expenses	2,353		1,624
General and administrative	4,292		4,159
Depreciation and amortization	5,301		4,837
Total operating expenses	14,248		12,603

Income from operations	3,039		2,545

Other income	50		114

Interest expense, net:
Contractual interest expense	(2,637)		(2,045)
Write-off and amortization of deferred financing fees	(181)		(165)
Interest income	1		—
Total interest expense, net	(2,817)		(2,210)

Income before income tax expense	272		449
Income tax expense	(16)		(16)

Net income	256		433
Net income attributable to operating partnership unitholders’ non-controlling interests	(50)		(85)

Net income attributable to common stockholders	$	206	$	348

Net (loss) income per share:
Basic and Diluted	$	(0.01)	$	0.00
Weighted average common shares outstanding:
Basic and Diluted	22,045,310		19,294,896
Comprehensive income (loss):
Net income	$	256	$	433
Unrealized gain (loss) on derivative instruments	2,819		(2,837)
Comprehensive income (loss)	3,075		(2,404)
Comprehensive (loss) income attributable to operating partnership unitholders’ non-controlling interests	(602)		473
Comprehensive income (loss) attributable to common stockholders	$	2,473	$	(1,931)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

(in thousands, except share data)


	Number of shares of Common Stock	Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ equity		Operating Partnership Unitholders’ Non-controlling Interests		Total Equity


Balance – December 31, 2023	21,960,211	$	219	$	287,268	$	4,621	$	(48,546)	$	243,562	$	58,063	$	301,625
Net proceeds from sale of common stock	576,087	6		7,861		—		—		7,867		—		7,867
Issuance of operating partnership units in connection with acquisition transactions	—	—		—		—		—		—		5,788		5,788
Issuance and amortization of equity-based compensation	120,941	1		1,147		—		—		1,148		965		2,113
Issuance and amortization under the employee stock purchase plan ("ESPP")	5,137	—		77		—		—		77		—		77
Restricted stock withholdings	(27,919)	—		(396)		—		—		(396)		—		(396)
Dividends and distributions	—	—		—		—		(5,520)		(5,520)		(1,339)		(6,859)
Unrealized gain on derivative instrument	—	—		—		2,267		—		2,267		552		2,819
Net income	—	—		—		—		206		206		50		256
Reallocation of non-controlling interest	—	—		(1,079)		—		—		(1,079)		1,079		—
Balance – March 31, 2024	22,634,457	$	226	$	294,878	$	6,888	$	(53,860)	$	248,132	$	65,158	$	313,290

Balance – December 31, 2022	19,555,272	$	195	$	254,107	$	7,486	$	(32,557)	$	229,231	$	54,480	$	283,711
Net proceeds from sale of common stock	55,082	1		709		—		—		710		—		710
Shares issued upon redemption of operating partnership units	22,798	—		409		—		—		409		(409)		—
Issuance and amortization of equity-based compensation	146,627	1		1,376		—		—		1,377		568		1,945
Issuance and amortization under the ESPP	6,446	—		94		—		—		94		—		94
Restricted stock withholdings	(21,310)	—		(327)		—		—		(327)		—		(327)
Dividends and distributions	—	—		—		—		(4,787)		(4,787)		(1,176)		(5,963)
Unrealized loss on derivative instruments	—	—		—		(2,279)		—		(2,279)		(558)		(2,837)
Net income	—	—		—		—		348		348		85		433
Reallocation of non-controlling interest	—	—		(2,338)		—		—		(2,338)		2,338		—
Balance – March 31, 2023	19,764,915	$	197	$	254,030	$	5,207	$	(36,996)	$	222,438	$	55,328	$	277,766

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	For the Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income	$	256	$	433
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,476		3,067
Amortization of in-place intangibles	1,825		1,770
Write-off and amortization of deferred financing costs	181		165
Amortization of above/below market leases	(684)		(578)
Amortization of intangible liability	(59)		(24)

Equity based compensation	2,126		1,960

Deferred rent receivable	(101)		(85)
Deferred rent expense payable	1		2
Other	(4)		12

Changes in assets and liabilities:
Rent and other receivables	247		1,827
Prepaid expenses and other assets	850		696
Accounts payable, accrued expenses and other	(1,713)		(1,530)
Net cash provided by operating activities	6,401		7,715

Cash flows from investing activities:
Acquisition of real estate	(12,967)		(17,389)


Escrows for acquisition and construction deposits	(157)		(223)
Capital improvements	(599)		(393)

Other investing activities	(134)		(11)
Net cash used in investing activities	(13,857)		(18,016)

Cash flows from financing activities:


Repayments of secured borrowings	(98)		(93)

Proceeds from revolving credit facility	16,000		17,000
Repayments of revolving credit facility	(9,000)		—

Net proceeds from issuance of shares	7,821		718
Deferred offering costs	—		(107)

Proceeds from issuance of ESPP shares	64		79
Value of shares withheld for payment of taxes related to employee stock compensation	(513)		(461)
Dividends and distributions	(6,859)		(5,963)
Other financing activities	(137)		(130)
Net cash provided by financing activities	7,278		11,043

Net (decrease) increase in Cash and Escrows and Reserves	(178)		742
Cash and Escrows and Reserves at the beginning of period	2,867		2,042
Cash and Escrow and Reserves at the end of period	$	2,689	$	2,784





Supplemental Disclosure of Non-Cash Investing and Financing Activities

Reallocation of non-controlling interest	1,079		2,338
Operating partnership units issued for property acquisitions	5,788		—
Unrealized gain (loss) on interest rate swaps, net	2,819		(2,837)
Accrued capital expenditures included in accounts payable and accrued expenses	114		123
Reclassification of acquisition deposits included in prepaid expenses and other assets	147		205
Write-off of fixed assets no longer in service	29		139

Accrued costs of capital included in accounts payable and accrued expenses	85		—
Right of use assets	64		—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Organization and Description of Business

Postal Realty Trust, Inc. (the “Company”) was organized in the state of Maryland on November 19, 2018. On May 17, 2019, the Company completed its initial public offering (“IPO”) of the Company’s Class A common stock, par value $0.01 per share (the “Class A common stock”). The Company contributed the net proceeds from the IPO to Postal Realty LP, a Delaware limited partnership (the “Operating Partnership”), in exchange for common units of limited partnership interest in the Operating Partnership (the “OP Units”). Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions. Prior to the completion of the IPO and the formation transactions, the Company had no operations.

The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of OP Units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners. As of March 31, 2024, the Company held an approximately 79.2% interest in the Operating Partnership. As the sole general partner and the majority interest holder, the Company consolidates the financial position and results of operations of the Operating Partnership. The Operating Partnership is considered a variable interest entity (“VIE”) in which the Company is the primary beneficiary.

As of March 31, 2024, the Company owned a portfolio of 1,537 properties located in 49 states and one territory. The Company’s properties are leased primarily to a single tenant, the United States Postal Service (the “USPS”). The Company also owns several, and may in the future further acquire, land parcels that may be added to existing or future leases with the USPS or used for other purposes that are consistent with the Company’s investment strategy.

In addition, through its taxable REIT subsidiary (“TRS”), Real Estate Asset Counseling, LLC (“REAC”), the Company provides fee-based third-party property management services for an additional 397 properties, which are owned by Andrew Spodek, the Company's chief executive officer ("CEO"), and his affiliates, and certain advisory services to third-party owners of postal properties.

Pursuant to the Company’s articles of amendment and restatement, the Company is currently authorized to issue up to 500,000,000 shares of Class A common stock, 27,206 shares of Class B common stock, $0.01 par value per share (the “Voting Equivalency stock”), and up to 100,000,000 shares of preferred stock.

The Company elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the Company's short taxable year ended December 31, 2019, and intends to continue to qualify as a REIT. As a REIT, the Company generally will not be subject to federal income tax to the extent that it distributes its REIT taxable income for each tax year to its stockholders. REITs are subject to a number of organizational and operational requirements. Additionally, any income earned by the TRS and any other TRS the Company may form in the future will be subject to federal, state and local corporate income tax.

Pursuant to the Jumpstart Our Business Startups Act, the Company qualifies as an emerging growth company (“EGC”). An EGC may choose, as the Company has done, to take advantage of the extended private company transition period provided for complying with new or revised accounting standards that may be issued by the Financial Accounting Standards Board (“FASB”) or the Securities and Exchange Commission.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements include the financial position and results of operations of the Company, the Operating Partnership and its wholly owned subsidiaries.

The Company consolidates the Operating Partnership, a VIE in which the Company is considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE

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POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(CONTINUED)

that could be significant to the VIE. Substantially all of the assets and liabilities of the Company relate to the Operating Partnership.

A non-controlling interest is defined as the portion of the equity in an entity not attributable, directly or indirectly, to the Company. Non-controlling interests are required to be presented as a separate component of equity in the Consolidated Balance Sheets. Accordingly, the presentation of net income reflects the income attributed to controlling and non-controlling interests.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

This interim financial information should be read in conjunction with the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2024. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. As discussed in the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, the Company’s most significant assumptions and estimates are related to the valuation of investments in real estate properties and impairment of long-lived assets. Although management believes its estimates are reasonable, actual results could differ from those estimates.

Offering and Other Costs

Offering costs are recorded in “Total Stockholders’ Equity” on the Consolidated Balance Sheets as a reduction of additional paid-in capital.

Deferred Costs

Financing costs related to the issuance of the Company’s long-term debt, including the term loan facility component of the Company's existing credit facilities (the "Credit Facilities"), are deferred and amortized as an increase to interest expense over the term of the related debt instrument using the straight-line method, which approximates the effective-interest rate method, and are reported as a reduction of the related debt balance on the Consolidated Balance Sheets. Deferred financing costs related to the revolving credit facility component (the "Revolving Credit Facility") of the Credit Facilities are deferred and amortized as an increase to interest expense over the terms of the Revolving Credit Facility and are included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

Cash and Escrows and Reserves

Cash includes unrestricted cash with a maturity of three months or less. Escrows and reserves consist of restricted cash. The following table provides a reconciliation of cash and escrows and reserves reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows:

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POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(CONTINUED)


	As of
	March 31, 2024		December 31, 2023
	(in thousands)
Cash	$	1,898	$	2,235
Escrows and reserves:
Maintenance reserve	341		314
Real estate tax reserve

SEC Form 10-Q filed by Postal Realty Trust Inc.