Postal Realty Trust, Inc.

Greetings and welcome to Postural Reality Trust Second Quarter 2025 Earnings Call. At this time, all participants are in listen-only mode. A question and answer session will follow the prepared remarks. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jordan Cooperstein, Vice President of FP&A Capital Markets. Welcome, Jordan.

Thank you and good morning, everyone. Welcome to Postal Realty Trust's second quarter 2025 earnings conference call. On the call today, we have Andrew Spodek, Chief Executive Officer, Jeremy Garber, President and Interim Chief Financial Officer, Robert Klein, and Matt Brandwein, Chief Accounting Officer. Please note the company may use forward-looking statements on this conference call, which are statements that are not historical facts and are considered forward-looking. These forward-looking statements are covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, but not limited to, those contained in the company's latest NK and its other regulatory filings. The company does not assume and specifically disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, on this conference call, the company may refer to certain non-GAAP financial measures, such as funds from operations, adjusted funds from operations, adjusted EBITDA, and net debt. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP measures in the company's earnings release and supplemental materials. With that, I will now turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust.

Good morning, and thank you for joining us today. The second quarter was one of our strongest quarters in large part due to the more efficient programmatic releasing effort with the Postal Service, which has now been in place for over a year. This refined approach provides enhanced visibility across our business and has enabled us to issue annual AFFO per share guidance for the first time, which we are updating today. I think it's important for our shareholders to take stock of all that we have achieved since the start of 2024 in releasing, maintaining a strong balance sheet, and enhancing investor visibility. We started executing 10-year leases in 2024, and inclusive of executed leases and those agreed to through 2026, 31% of leases in the portfolio are subject to 10-year terms, and 55% have annual rent escalations. As stated in our last call, 2025 expirations have all been agreed upon and are being executed prior to lease expiration. We have agreed to rent with the Postal Service on the new leases for the 2026 expirations, and we are in discussions on the 2027 expirations as well. We have continued to grow while always being mindful of our balance sheet. We have displayed we can prudently and opportunistically source equity, having issued over $50 million through our ATM and operating partnership units. since the beginning of 2024. Additionally, we sold two assets in 2024 at a sub 5% cap rate for over $6 million in order to redeploy the proceeds into higher yielding assets. All of these efforts have allowed us to provide further clarity to the investor community about our earnings power through AFFO and same store NOI guidance. We have certainly accomplished quite a lot over the last year and a half and continue to make improvements to the business and provide our investors with a clear picture of where Postal Realty is going over the next few years. Now shifting back to the second quarter of 2025, we delivered AFFO per share of 33 cents, coming in ahead of our expectations for the first half of the year. This has enabled us to increase our full year 2025 AFFO guidance range by 4 cents to $1.24 to $1.26 per share. The midpoint of our updated guidance range now implies nearly 8% year-over-year growth, in line with the 6% to 8.5% AFFO per share growth Postal Realty has delivered over the past few years. This updated guidance takes into account any costs related to the CFO transition. Turning to acquisitions, we have closed on 127 properties year-to-date for over $60 million, inclusive of $6 million of transactions completed with operating partnership units. We are pleased with the opportunities we are seeing and our progress to date, which has us trending towards meeting or exceeding $90 million for the year. In Q2, we completed $36 million of acquisitions at a 7.8% weighted average cap rate, all while being able to decrease leverage with net debt to annualize adjusted EBITDA now at 5.1 times, down from 5.2 times at the end of 2024. We will remain focused on these key metrics as we acquire additional properties throughout the rest of the year. Our acquisitions have and will continue to be a critical part of long-term value creation. Our purchases are accretive at the going-in cap rate, and they stabilize at significantly higher yields as we operate them more efficiently and run through our programmatic releasing approach. We continue to have success marking rents to market, incorporating annual rent escalations in new leases, and achieving operating efficiencies. As a result, we are updating our 2025 same-store cash NOI guidance to be between 7% and 9%, up from our prior guidance of between 4% and 6%. Our robust releasing program continues to be a significant driver of the high single-digit earnings growth and visibility at the company. Since our last earnings call, David Steiner was appointed and has now begun his tenure as the new Postmaster General of the Postal Service. Mr. Steiner joins with a background in Logistics. serving as President and CEO of Waste Management for numerous years and on the Board of Directors at FedEx Corporation. In a recent letter to employees, he assured all stakeholders that the strength of the Postal Service resides in their structure as a self-financing, independent entity, and he stated that he believes the Postal Service is a crucial component of American democracy and infrastructure, providing essential services to every business and home with its primary mission to bind the nation together. We encouraged, by, and aligned with his statements and look forward to continuing to work closely and efficiently with the Postal Service under the new Postmaster General. We remain confident in the value of our portfolio to the Postal Service's mission, the security and visibility of our cash flows, and our ability to generate strong internal growth and to source and acquire new assets accretively as we consolidate this highly fragmented market. Before passing off to Jeremy, I'd like to take some time to thank Rob Klein for all his efforts during his tenure, including positioning us with a strong balance sheet for growth and assembling a high-performing accounting and finance team. We wish him the best of luck in his new role.