Postal Realty Trust, Inc. Reports Fourth Quarter and Year End 2023 Results
- Acquisition of 75 USPS properties for $20.7 million in Q4 2023
- Net income of $0.12 per diluted share and Adjusted Funds from Operations of $1.07 per diluted share for 2023
- Raised dividend to $0.24 per share for the fifth consecutive year
- Collected 100% of contractual rents
- Acquired 223 properties for $78 million in 2023, with a 20% increase in rental income
- Weighted average cap rate increased by close to 100 basis points compared to 2022
- 99.7% portfolio occupancy with 1,509 properties across 49 states and one territory
- Weighted average rental rate of $9.37 per leasable square foot
- Amended credit facilities and exercised term loan accordion
- Issued shares of common stock through at-the-market offering program
- Declared quarterly dividend of $0.24 per share of Class A common stock
- Acquired eight properties post-quarter end for $4.5 million and had 20 properties under definitive contracts
- Hosted webcast and conference call to discuss financial results
- None.
Insights
The acquisition of 75 USPS properties by Postal Realty Trust, Inc. represents a strategic expansion of their real estate portfolio, which is noteworthy for investors considering the company's growth trajectory. The $20.7 million investment, excluding closing costs, enhances the company's asset base and is likely to contribute to its revenue stream, given the 100% collection of contractual rents. The increase in rental income by 20% from 2022 to 2023 is a strong indicator of the company's ability to scale its operations effectively.
Furthermore, the consistent raise in dividends for the fifth consecutive year signals a confidence in the company's financial health and a commitment to delivering shareholder value. The raised dividend, coupled with a net income of $3.7 million, or $0.12 per diluted share and an AFFO of $27.3 million, or $1.07 per diluted share, may attract income-focused investors looking for stability in their investments. However, it is crucial to consider the company's debt position, with approximately $239 million of net debt at a weighted average interest rate of 4.14% and assess the sustainability of these dividend increases in the context of their long-term debt obligations.
The operational metrics provided by Postal Realty Trust, Inc., such as the 99.7% occupancy rate and the acquisition of properties with a weighted average rental rate of $12.27 per leasable square foot, are strong indicators of the company's portfolio quality and management's effectiveness. The differentiation in rental rates between last-mile, flex and industrial properties reflects a strategic positioning that caters to different segments of the USPS's operational needs.
Investors should note the company's proactive capital markets activity, including the issuance of shares and the amendment of credit facilities to add a SOFR-based option, which demonstrates an agile approach to financing and interest rate management. The use of interest rate swaps to fix rates on term loans is a prudent move to hedge against potential interest rate volatility. This financial maneuvering is essential for maintaining a healthy balance sheet and ensuring the company's ability to continue its growth without undue financial strain.
The broader implications of Postal Realty Trust, Inc.'s results and activities within the market context are multifaceted. On one hand, their targeted investment in properties leased to the USPS leverages the stability of a government tenant, which could be seen as a defensive play in a volatile market. On the other hand, the company's exposure to the USPS comes with inherent risks, such as changes in government funding or postal service operations that could impact the demand for such properties.
The real estate investment market is highly competitive and Postal Realty Trust's focus on USPS properties differentiates it from other REITs that have a more diversified tenant base. As e-commerce continues to grow, the demand for last-mile delivery centers is likely to increase, potentially benefiting Postal Realty Trust. However, investors should also be mindful of the macroeconomic environment, including interest rates and real estate market trends, which can significantly impact REIT valuations and performance.
- Acquired 75 USPS Properties for
- Net Income Attributable to Common Shareholders of
- Raised Dividend Per Share for Fifth Consecutive Year -
- Collected
CEDARHURST, N.Y., Feb. 26, 2024 (GLOBE NEWSWIRE) -- Postal Realty Trust, Inc. (NYSE: PSTL) (the “Company”), an internally managed real estate investment trust that owns and manages over 1,900 properties leased primarily to the United States Postal Service (the “USPS”), ranging from last-mile post offices to industrial facilities, today announced results for the quarter and year ended December 31, 2023.
Highlights for the Quarter Ended December 31, 2023
- Acquired 75 USPS properties for approximately
$20.7 million , excluding closing costs - Net income attributable to common shareholders was
$1.2 million , or$0.04 per diluted share - Funds from Operations ("FFO") was
$6.6 million , or$0.24 per diluted share - Adjusted Funds from Operations ("AFFO") was
$7.0 million , or$0.26 per diluted share - Subsequent to quarter end, the Company raised the quarterly dividend to
$0.24 per share, a1.1% increase over the fourth quarter 2022 dividend
Highlights for the Year Ended December 31, 2023
- Acquired 223 properties for approximately
$78 million in 2023, excluding closing costs - Rental income increased
20% from 2022 to 2023, reflecting internal growth and properties acquired - Net income attributable to common shareholders was
$3.7 million , or$0.12 per diluted share - FFO was
$24.2 million , or$0.95 per diluted share - AFFO was
$27.3 million , or$1.07 per diluted share - Paid aggregate dividends of
$0.95 per share for calendar year 2023 - Amended credit facilities to, among other things, add a daily simple SOFR-based option as a benchmark rate
- Exercised
$35.0 million of term loan accordion and entered into corresponding interest rate swaps - Achieved sustainability target in 2023 to decrease the applicable margin on the credit facilities by
0.02% for 2024
“2023 was another solid year for Postal Realty, as we added 223 properties to our portfolio and increased our weighted average cap rate close to 100 basis points compared to 2022," stated Andrew Spodek, Chief Executive Officer. "In 2024, we will continue to be prudent with our deployment of capital given the volatile interest rate environment. We are positioned well heading into the year with high portfolio occupancy and tenant retention, a solid balance sheet with no significant near-term debt maturities and
Property Portfolio & Acquisitions
The Company’s owned portfolio was
During the fourth quarter, the Company acquired 75 last-mile and flex properties leased to the USPS for approximately
Balance Sheet & Capital Markets Activity
As of December 31, 2023, the Company had approximately
As previously disclosed, on July 24, 2023, the Company amended its credit facilities to, among other things, add a daily simple SOFR-based option as a benchmark rate. The Company further exercised
During the year, the Company issued through its at-the-market offering program 1,861,407 shares of common stock at an average gross sales price of
Dividend
On February 2, 2024, the Company declared a quarterly dividend of
Subsequent Events
Subsequent to quarter end and through February 23, 2024, the Company acquired eight properties comprising approximately 33,000 net leasable interior square feet for approximately
During the same period, the Company issued 483,341 shares of common stock through its at-the-market equity offering program for total gross proceeds of approximately
Webcast and Conference Call Details
The Company will host a webcast and conference call to discuss the fourth quarter 2023 financial results on Tuesday, February 27, 2024, at 9:00 A.M. Eastern Time. A live audio webcast of the conference call will be available on the Company’s investor website at https://investor.postalrealtytrust.com/Investors/events-and-presentations/default.aspx. To participate in the conference call, callers from the United States and Canada should dial-in ten minutes prior to the scheduled call time at 1-877-407-9208. International callers should dial 1-201-493-6784.
Replay
A telephonic replay of the call will be available starting at 1:00 P.M. Eastern Time on Tuesday, February 27, 2024, through 11:59 P.M. Eastern Time on Tuesday, March 12, 2024, by dialing 1-844-512-2921 in the United States and Canada or 1-412-317-6671 internationally. The passcode for the replay is 13742002.
Non-GAAP Supplemental Financial Information
An explanation of certain non-GAAP financial measures used in this press release, including, FFO, AFFO and net debt, as well as reconciliations of those non-GAAP financial measures, to the most directly comparable GAAP financial measure, is included below.
The Company calculates FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as follows: net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than the Company does and therefore the Company’s computation of FFO may not be comparable to such other REITs.
The Company calculates AFFO by starting with FFO and adjusting for recurring capital expenditures (defined as all capital expenditures and leasing costs that are recurring in nature, excluding expenditures that (i) are for items identified or existing at the time a property was acquired or contributed (including through the Company’s formation transactions), (ii) are part of a strategic plan intended to increase the value or revenue-generating ability of a property, (iii) are considered infrequent or extraordinary in nature, or (iv) for casualty damage), acquisition-related expenses (defined as expenses that are incurred for investment purposes and business acquisitions and do not correlate with the ongoing operations of the Company’s existing portfolio, including due diligence costs for acquisitions not consummated and certain professional fees incurred that were directly related to completed acquisitions or dispositions and integration of acquired business) that are not capitalized, and certain other non-recurring expenses and then adding back non-cash items including: write-off and amortization of deferred financing fees, straight-line rent and other adjustments (including lump sum catch up amounts for increased rents, net of any lease incentives), fair value lease adjustments, income on insurance recoveries from casualties, non-real estate depreciation and amortization and non-cash components of compensation expense. AFFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that AFFO is widely used by other REITs and is helpful to investors as a meaningful additional measure of the Company’s ability to make capital investments. Other REITs may not define AFFO in the same manner as the Company does and therefore the Company’s calculation of AFFO may not be comparable to such other REITs.
The Company calculates its net debt as total debt less cash and property-related reserves. Net debt as of December 31, 2023 is calculated as total debt of approximately
These metrics are non-GAAP financial measures and should not be viewed as an alternative measurement of the Company’s operating performance to net income. Management believes that accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, the Company believes that the additive use of FFO and AFFO, together with the required GAAP presentation, is widely-used by the Company’s competitors and other REITs and provides a more complete understanding of the Company’s performance and a more informed and appropriate basis on which to make investment decisions.
Forward-Looking and Cautionary Statements
This press release contains “forward-looking statements.” Forward-looking statements include statements identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections. Forward-looking statements, including, among others, statements regarding the Company’s anticipated growth and ability to obtain financing and close on pending transactions on the terms or timing it expects, if at all, are based on the Company’s current expectations and assumptions regarding capital market conditions, the Company’s business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the USPS’s terminations or non-renewals of leases, changes in demand for postal services delivered by the USPS, the solvency and financial health of the USPS, competitive, financial market and regulatory conditions, disruption in market, general real estate market conditions, the Company’s competitive environment and other factors set forth under “Risk Factors” in the Company’s filings with the Securities and Exchange Commission. Any forward-looking statement made in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
About Postal Realty Trust, Inc.
Postal Realty Trust, Inc. is an internally managed real estate investment trust that owns and manages over 1,900 properties leased primarily to the USPS. More information is available at postalrealtytrust.com.
| Postal Realty Trust, Inc. Consolidated Statements of Operations (in thousands, except per share data) | |||||||||||||||
| For the Three Months Ended December 31, | For the Twelve Months Ended December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues: | |||||||||||||||
| Rental income | $ | 16,271 | $ | 14,211 | $ | 60,970 | $ | 50,876 | |||||||
| Fee and other | 730 | 689 | 2,742 | 2,454 | |||||||||||
| Total revenues | 17,001 | 14,900 | 63,712 | 53,330 | |||||||||||
| Operating expenses: | |||||||||||||||
| Real estate taxes | 2,448 | 2,037 | 8,549 | 7,168 | |||||||||||
| Property operating expenses | 1,870 | 1,519 | 6,825 | 5,625 | |||||||||||
| General and administrative | 3,533 | 3,119 | 14,654 | 13,110 | |||||||||||
| Depreciation and amortization | 5,151 | 4,761 | 19,688 | 17,727 | |||||||||||
| Total operating expenses | 13,002 | 11,436 | 49,716 | 43,630 | |||||||||||
| Income from operations | 3,999 | 3,464 | 13,996 | 9,700 | |||||||||||
| Other income | 195 | 311 | 679 | 1,029 | |||||||||||
| Interest expense, net: | |||||||||||||||
| Contractual interest expense | (2,546 | ) | (1,913 | ) | (9,339 | ) | (5,378 | ) | |||||||
| Write-off and amortization of deferred financing fees | (182 | ) | (156 | ) | (686 | ) | (596 | ) | |||||||
| Interest income | 4 | 1 | 5 | 1 | |||||||||||
| Total interest expense, net | (2,724 | ) | (2,068 | ) | (10,020 | ) | (5,973 | ) | |||||||
| Income before income tax (expense) benefit | 1,470 | 1,707 | 4,655 | 4,756 | |||||||||||
| Income tax (expense) benefit | (16 | ) | 1 | (72 | ) | (12 | ) | ||||||||
| Net income | 1,454 | 1,708 | 4,583 | 4,744 | |||||||||||
| Net income attributable to operating partnership unitholders’ non-controlling interests | (270 | ) | (333 | ) | (874 | ) | (890 | ) | |||||||
| Net income attributable to common stockholders | $ | 1,184 | $ | 1,375 | $ | 3,709 | $ | 3,854 | |||||||
| Net income per share: | |||||||||||||||
| Basic and Diluted | $ | 0.04 | $ | 0.06 | $ | 0.12 | $ | 0.15 | |||||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic and Diluted | 21,396,955 | 18,857,445 | 20,145,151 | 18,545,494 | |||||||||||
| Postal Realty Trust, Inc. Consolidated Balance Sheets (In thousands, except par value and share data) | |||||||
| December 31, 2023 | December 31, 2022 | ||||||
| Assets | |||||||
| Investments: | |||||||
| Real estate properties, at cost: | |||||||
| Land | $ | 106,074 | $ | 90,020 | |||
| Building and improvements | 443,470 | 378,596 | |||||
| Tenant improvements | 6,977 | 6,375 | |||||
| Total real estate properties, at cost | 556,521 | 474,991 | |||||
| Less: Accumulated depreciation | (43,791 | ) | (31,257 | ) | |||
| Total real estate properties, net | 512,730 | 443,734 | |||||
| Investment in financing leases, net | 16,042 | 16,130 | |||||
| Total real estate investments, net | 528,772 | 459,864 | |||||
| Cash | 2,235 | 1,495 | |||||
| Escrow and reserves | 632 | 547 | |||||
| Rent and other receivables | 4,750 | 4,613 | |||||
| Prepaid expenses and other assets, net | 13,369 | 15,968 | |||||
| Goodwill | 1,536 | 1,536 | |||||
| Deferred rent receivable | 1,542 | 1,194 | |||||
| In-place lease intangibles, net | 14,154 | 15,687 | |||||
| Above market leases, net | 355 | 399 | |||||
| Total Assets | $ | 567,345 | $ | 501,303 | |||
| Liabilities and Equity | |||||||
| Liabilities: | |||||||
| Term loans, net | $ | 198,801 | $ | 163,753 | |||
| Revolving credit facility | 9,000 | — | |||||
| Secured borrowings, net | 32,823 | 32,909 | |||||
| Accounts payable, accrued expenses and other, net | 11,996 | 9,109 | |||||
| Below market leases, net | 13,100 | 11,821 | |||||
| Total Liabilities | 265,720 | 217,592 | |||||
| Commitments and Contingencies | |||||||
| Equity: | |||||||
| Class A common stock, par value | 219 | 195 | |||||
| Class B common stock, par value | — | — | |||||
| Additional paid-in capital | 287,268 | 254,107 | |||||
| Accumulated other comprehensive income | 4,621 | 7,486 | |||||
| Accumulated deficit | (48,546 | ) | (32,557 | ) | |||
| Total Stockholders’ Equity | 243,562 | 229,231 | |||||
| Operating partnership unitholders’ non-controlling interests | 58,063 | 54,480 | |||||
| Total Equity | 301,625 | 283,711 | |||||
| Total Liabilities and Equity | $ | 567,345 | $ | 501,303 | |||
| Postal Realty Trust, Inc. Reconciliation of Net Income to FFO and AFFO (Unaudited) (In thousands, except share data) | ||||||||
| For the Three Months Ended December 31, 2023 | For the Twelve Months Ended December 31, 2023 | |||||||
| Net income | $ | 1,454 | $ | 4,583 | ||||
| Depreciation and amortization of real estate assets | 5,125 | 19,584 | ||||||
| FFO | $ | 6,579 | $ | 24,167 | ||||
| Recurring capital expenditures | (211 | ) | (508 | ) | ||||
| Write-off and amortization of deferred financing fees | 182 | 686 | ||||||
| Straight-line rent and other adjustments | (125 | ) | (374 | ) | ||||
| Fair value lease adjustments | (695 | ) | (2,551 | ) | ||||
| Acquisition-related and other expenses | 105 | 624 | ||||||
| Income on insurance recoveries from casualties | (195 | ) | (679 | ) | ||||
| Non-real estate depreciation and amortization | 26 | 104 | ||||||
| Non-cash components of compensation expense | 1,305 | 5,833 | ||||||
| AFFO | $ | 6,971 | $ | 27,302 | ||||
| FFO per common share and common unit outstanding | $ | 0.24 | $ | 0.95 | ||||
| AFFO per common share and common unit outstanding | $ | 0.26 | $ | 1.07 | ||||
| Weighted average common shares and common units outstanding, basic and diluted | 26,903,777 | 25,542,680 | ||||||
FAQ
How many USPS properties did Postal Realty Trust (PSTL) acquire in Q4 2023?
What was the net income per diluted share for Postal Realty Trust (PSTL) in 2023?
How much did Postal Realty Trust (PSTL) raise its dividend by for the fifth consecutive year?
How many properties did Postal Realty Trust (PSTL) acquire in 2023?
What was the increase in rental income for Postal Realty Trust (PSTL) from 2022 to 2023?
What was the weighted average cap rate increase for Postal Realty Trust (PSTL) compared to 2022?
What was the portfolio occupancy percentage for Postal Realty Trust (PSTL)?
What was the weighted average rental rate for Postal Realty Trust (PSTL) per leasable square foot?
What was the declared quarterly dividend for Postal Realty Trust (PSTL) in February 2024?
How many properties did Postal Realty Trust (PSTL) acquire post-quarter end through February 23, 2024?
