Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Postal Realty Trust Inc (PSTL, Financial) added 70 properties for $28 million at a weighted average cap rate of 7.6% in Q2 2024.
- The company successfully executed a $12.5 million ROFO transaction, positioning it to acquire $90 million at or above a 7.5% weighted average cap rate for 2024.
- Postal Realty Trust Inc (PSTL) completed a five-year lease renewal with a significant non-postal tenant, achieving a 19% base rent increase and a 2.5% annual escalation.
- The company maintained a 99% historical weighted average lease retention rate over the past 10-plus years.
- Postal Realty Trust Inc (PSTL) issued approximately 365,000 shares of common stock and 62,000 common units, raising $6.1 million in gross proceeds.
Negative Points
- The company's debt outstanding had a weighted average interest rate of 4.48% and a weighted average maturity of three years, with no significant near-term debt maturities.
- Recurring CapEx was $135,000, slightly below the anticipated range due to timing of some projects.
- The company's net debt to annualized adjusted EBITDA was 6.1x, which is close to their target of below 7x.
- The leasing process with the Postal Service is described as fluid and not entirely within the company's control, causing potential delays.
- The 2023 leases include 3% annual escalations, which is lower than the 3.5% achieved in previous years, reflecting changes in the inflationary environment.
Q & A Highlights
Q: Can you remind us how much of your ABR will be tied to 3% annual bumps going forward?
A: Jeremy Garber, President, Treasurer, & Secretary: Of total rent, 13% of our total rent is tied to 2022 and 2023 leases received with escalations.
Q: With leverage at 6.1x, how high are you letting leverage drift before you potentially take it out with equity or pay it down with cash?
A: Robert Klein, CFO: We are making sure that we're raising capital in an accretive manner to the acquisitions that we're doing. We are well below our target of staying below 7x leverage, and we will monitor the equity markets and access them as it makes sense.
Q: For the 2023 leases that include the 3% annual escalator, is there any difference between those and the 2022 vintage that got renewed at the 3.5% clip?
A: Andrew Spodek, CEO & Director: The inflationary environment has changed since the 3.5% escalations were executed. The 3% is a very good outcome, especially since lease escalations were not part of the picture before 2022.
Q: What can we expect with regards to timing for the leases that are set to expire in '24?
A: Andrew Spodek, CEO & Director: We hope they get done relatively quickly. This is mostly on the postal service, but we are optimistic that the '23 leases will be completed shortly and the '24 leases shortly thereafter.
Q: Can you provide more insight on your projected CapEx spend for the year? Would this figure consist of TI that can be potentially passed through to the USPS?
A: Robert Klein, CFO: Our recurring CapEx for next quarter will be $250,000 to $350,000. There is no TI associated with the leases, so there is nothing to pass through or for us to incur upon renewals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
