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Date
Tuesday, Aug. 5, 2025 at 1:00 p.m. ET
Call participants
Chief Executive Officer — Andrew Spodek
Chief Operating Officer — Jordan Cooperstein
Chief Financial Officer — Robert Klein
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Takeaways
AFFO per share-- AFFO was $0.33 per diluted share in Q2 2025; Full-year 2025 AFFO per share guidance was raised by $0.04 to $1.24–$1.26. This reflects a projected midpoint year-over-year growth of nearly 8% in full-year 2025 AFFO per share guidance compared to the prior year.
Dividend-- The quarterly dividend of $0.2425 per share represents an increase from Q2 2024 and remains covered by AFFO.
Acquisitions-- 127 properties acquired year-to-date through Q2 2025, totaling over $60 million, including $36 million acquired in Q2 2025 at a 7.8% weighted average cap rate.
Leverage-- Net debt to annualized adjusted EBITDA decreased to 5.1 times from 5.2 times at year-end 2024.
Same-store cash NOI guidance-- Updated same-store cash NOI guidance to 79% for 2025, up from prior guidance of 46% for 2025.
Lease structure-- 31% of the portfolio is under ten-year leases, including agreements executed or agreed to through 2026, and 55% of leases executed or agreed to through 2026 include annual rent escalations; all 2025 and 2026 expirations agreed to and 2027 negotiations underway.
Equity issuance-- Nearly $18 million was raised during and after Q2 2025 through ATM and OP units, with over 867,000 shares issued at an average price of $14.79 per share during Q2 2025 and after quarter end.
Operating expenses-- Lower than expected operating expenses (OpEx) and recurring capital expenditures (CapEx) in the first half of 2025 enabled the guidance increase. Recurring CapEx in Q2 2025 was $127,000 and full-year 2025 cash G&A expense is projected at $10.5–$11.5 million.
Lump sum catch-up payment-- A total lump sum catch-up payment of approximately $300,000 is expected in Q3 2025. This is already included in the updated AFFO (non-GAAP) per share guidance for full-year 2025.
Portfolio metrics-- Including 43,000 square feet from last-mile post offices and 197,000 square feet from flex properties acquired in the quarter.
Summary
Postal Realty Trust(PSTL 0.64%) reported Q2 2025 results featuring an increased full-year 2025 AFFO (adjusted funds from operations, non-GAAP) guidance and continued portfolio expansion. Management emphasized programmatic re-leasing success, projecting that over 60% of the portfolio will include annual rent escalations if current negotiation trends persist, based on management's outlook as of Q2 2025. The company further reduced leverage through property acquisitions and equity issuance, while maintaining NOI margins in the 77%–82% range, consistent with historical annual margins. Capital expenditures and general and administrative expenses were highlighted as areas of near-term variability, balanced by effective cost controls and anticipation of higher project completion in Q3.
Management stated all leases expiring in 2025 and 2026 have been agreed to ahead of expiration, with no leases in holdover status.
Andrew Spodek noted that thirty-one percent of leases in the portfolio are subject to ten-year terms, including executed leases and those agreed to through 2026.
The CFO transition drove some one-time costs, which are reflected in the updated annual G&A expense outlook.
The board’s dividend increase is supported by improved AFFO (non-GAAP) coverage for Q2 2025.
Stabilized yields on property acquisitions are expected to rise above initial cap rates through operational efficiencies and re-leasing efforts, as discussed by management in reference to cap rates in the high 7% range and higher stabilized yields.
Industry glossary
Cap rate: The ratio of a property’s net operating income to its purchase price, indicating investment yield.
ATM (At-the-Market) Program: A mechanism allowing a company to issue shares to the market over time at prevailing prices.
OP units (Operating Partnership Units): Equity interests in a property-owning partnership, exchangeable for common stock in the REIT.
NOI (Net Operating Income): Income from property operations, excluding depreciation and financing costs.
AFFO (Adjusted Funds from Operations): A REIT performance measure representing cash available for distribution to shareholders, adjusted for recurring capital expenditures and other items.
Full Conference Call Transcript
Andrew Spodek: Maintaining a strong balance sheet, and enhancing investor visibility. We started executing ten-year leases in 2024. And inclusive of executed leases and those agreed to through 2026, thirty-one percent of leases in the portfolio are subject to ten-year terms and 55% 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 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 2025. We delivered AFFO per share of $0.33 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¢ 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 annualized 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. Continue to have success marking rents to market, incorporating annual rent escalations and new leases, and achieving operating efficiencies. As a result, we are updating our 2025 same-store cash NOI guidance to be between 79%. Up from our prior guidance of between 46%. Our robust re-leasing 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 encourage, buy, and align 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.
Jordan Cooperstein: Thank you, Andrew. As we shared in prior calls,
Andrew Spodek: Rents for all leases set to expire in 2025 and 2026 have been agreed upon, and our releasing tempo from last quarter has not slowed down.
Jordan Cooperstein: As we are executing 2025 leases prior to expiration.
Andrew Spodek: We are actively negotiating 2027 rents with the postal service and have agreed to similar terms for expiration from 2023 through 2026 with the inclusion of 3% annual rent escalations, and a mix of ten-year leases.
Jordan Cooperstein: For illustration,
Andrew Spodek: If the 2027 leases were all executed today, we project that north of 60% of the portfolio would contain annual rent escalations.
Jordan Cooperstein: As of last week,
Andrew Spodek: We are caught up on all of our leases in the portfolio. And have no leases in holdover. Due to the execution of new leases during the second quarter, the company received a total lump sum. We are expecting to receive a total lump sum catch-up payment for around $300,000 in the third quarter.
Jordan Cooperstein: This anticipated payment was factored into our AFFO per share guidance. Aside from prospective acquisitions, our acquired and holdover status, lump sum catch-up payments should continue to diminish in frequency and value as we sign leases ahead of their expiration date. As Andrew mentioned, in 2025, we acquired 68 properties
Andrew Spodek: For approximately $36 million at a 7.8% weighted average cap rate.
Jordan Cooperstein: Which added approximately
Andrew Spodek: 240,000 net leasable interior square feet to our portfolio
Jordan Cooperstein: Inclusive of
Andrew Spodek: 43,000 square feet from 32 last-mile post offices and 197,000 square feet
Jordan Cooperstein: From 36 flex properties. Subsequent to quarter end and through July 18, acquired 23 properties for approximately $8 million and placed an additional 24 properties
Andrew Spodek: Totaling $7 million under definitive contracts.
Jordan Cooperstein: I'll now turn the call over to Rob to discuss our second quarter financial results.
Robert Klein: Thank you, Jeremy, and thank you, everyone, for joining us for today's call. During the second quarter, we delivered funds from operations, or FFO, of $0.35 and adjusted funds from operations, or AFFO, of $0.33 per diluted share.
Andrew Spodek: Thanks to our re-leasing successes over the past years, the bottom line impact from contractual rent escalations projected to result in $0.2 of AFFO per share in 2025. As Andrew stated, we are updating our 2025 AFFO guidance range to $1.24 to $1.26 per share due to outperforming our initial expectations for the first half of the year. The increased guidance range is due to lower than anticipated operating expenses in the first half of 2025 due to quarterly variability related to the scope and timing of projects and lower recurring CapEx from completing jobs more cost-effectively. We have maintained low leverage and minimized our exposure to variable rate debt.
At the end of the second quarter, our debt outstanding had a Net debt to annualized adjusted EBITDA decreased quarter over quarter to 5.1 times. Well within our target of below seven times. During the second quarter, and subsequent to quarter end, we raised nearly $18 million of equity, issuing over 867,000 shares of common stock through our ATM offering program at an average price of $14.79 per share and approximately 392,000 common units in our operating partnership as part of consideration for property acquisition. Recurring CapEx in Q2 was $127,000 slightly lower than our guidance range for the quarter due to the timing of projects.
Looking forward to Q3, we anticipate some projects that carried over from Q2 to complete and the figure to be between $175,000 and $325,000. Based on one-time costs associated with the CFO transition, we now expect total cash G&A expense to be between $10.5 million and $11.5 million for the full year 2025. We continue to prioritize decreasing cash G&A as a percent of revenue on an annual basis. Our Board of Directors has approved a quarterly dividend of 24.25¢ per share, representing a one increase from Q2 2024's dividend and remains well covered by AFFO.
Postal Realty continued to strengthen its position as the market leader in the postal real estate space executing its business plan of acquiring new assets and improving the cash flow. On a personal note, I'm grateful for the past four and a half years at Postal Realty. We have achieved tremendous growth, built an amazingly capable team, and continuously enhanced our transparency to the market. It has been a pleasure working with the folks at Postal Realty, the research analysts, investors, and everyone else who supports us as well. I look forward to staying in touch. Thank you. This concludes our prepared remarks. Operator, we'd like to open the call for questions.
Andrew Spodek: Thank you.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. First question comes from Kyle Bonchie from Curist. Please go ahead.
Robert Klein: Thanks. Good morning. Can you just walk us through the pickup in the same-store NOI guidance? And what's ahead of base, relative to prior expectations? Yeah. So same-store NOI has a few components to it. You know, there's the revenue component, which we've talked about pretty extensively, which has been some of our releasing efforts and our successes along those lines. And then the other component, obviously, is the expense. Right? The two together combining to create NOI. As we showed in our earnings and we talked about a bit, you know, expenses were down the first couple quarters of the year versus our projections.
And that's led to an increase in same-store NOI in addition to some revenue exceeding expectations. So I think it's really the combination of the two, and that's why we revised the guidance to give you a better flavor of how the remainder of the year may look. Gotcha.
Jordan Cooperstein: And in terms of
Robert Klein: The guidance, it seems like there's a fairly steep step down from the $0.33 in the second quarter. And it looks like there's gonna be some higher CapEx and, also offset by some catch-up payments in the third quarter. So just curious what's driving the step down in the run rate.
Andrew Spodek: Our OpEx
Robert Klein: Sure. You know, as we shared on the call, is gonna be variable depending on the scope and timing of projects. You know, we're vigilant in managing these properties as cost-effective and efficiently as possible. We have a network of national vendors and manufacturers that we've been engaged with over the past twenty-plus years. Think it's important to note that this is not a quarterly business.
Jordan Cooperstein: So our annual budgeting and forecasting is informed by historical expenses and historical NOI margins
Andrew Spodek: Which have trended in the
Robert Klein: 77 to 82% range.
Jordan Cooperstein: And we expect our NOI margins to remain within that range for the remainder of the year. Understood. Thank you, guys. Thank you.
Operator: The next question comes from Nehum Tasvarski from JPMorgan. Please go ahead. Good morning, guys. I just have one question for me today. I guess, on the acquisition front,
Robert Klein: You guys mentioned you've been capturing yields in the high sevens, but it sounds like from Andrew's comments, that the sort of stabilized yield, I guess, once you guys get in the property is a little higher than that. Could you guys talk about, the efficiencies you guys are putting into these properties and, I guess, where that sort of stable yield is?
Andrew Spodek: Sure. I appreciate the question. So, yeah, as we stated, we've been actively acquiring at or below at or above a seven and a half percent cap rate, which we've shown, and we will continue to do that. And while these properties are accretive, out of the gate, we're gaining a lot of efficiencies just in our management platform. And then as we bring it into our platform through the economies of scale that we're getting through the management of, you know, 2,000 buildings. Then we have the opportunity when the leases roll to mark them to market and put them through our programmatic leasing process, which we've shown has yielded great success.
Both from an efficiency standpoint as well as, from a same store. That's why we've adjusted our guidance and we are, you know, we're now in the seven to 9% for the same store cash NOI.
Robert Klein: Got it. Okay. Thank you. Thank you. Thank you.
Operator: To ask a question, you may press star then 1 on your touch-tone phone.
Robert Klein: Again,
Operator: If you have a question, please press star and 1. This concludes our question and answer session. I would like to turn the conference back to Andrew Spodek for closing remarks.
Andrew Spodek: On behalf of the entire team, we thank you all for your continued support and for taking the time to join us today. Have a great day.
Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.