Postal Realty Trust, Inc. Reports Second Quarter 2019 Results

Published

-    Company Enters into Agreements to Acquire an Additional 128 Postal Properties -

-    Signs Term Sheet for $100 Million Credit Facility -

CEDARHURST, N.Y.--(BUSINESS WIRE)-- Postal Realty Trust, Inc. (NYSE:PSTL) (the “Company”), an internally managed real estate investment trust that owns and manages properties leased to the United States Postal Service (“USPS”), today announced its results for the quarter ended June 30, 2019. Postal Realty Trust commenced its operations on May 17, 2019 upon completion of its initial public offering (“IPO”). The financial results for the second quarter represent the Company’s financial results for the 45-day period from May 17, 2019 through June 30, 2019 and the financial results for the Company’s financial predecessor (the “Predecessor”) for the period from April 1, 2019 through May 16, 2019.

“We are pleased that our inaugural quarter as a public company demonstrates the stability and consistency of our 100.0% occupied postal properties,” stated Andrew Spodek, Postal Realty Trust, Inc.’s Chief Executive Officer. “We believe our position as the only internally managed public REIT that focuses primarily on the ownership of postal properties provides us with a competitive advantage. We continue to build our pipeline of potential properties for acquisition in our efforts to build scale and execute our growth strategy to create value for our shareholders.”

Highlights for Period Ended June 30, 2019

  • Net loss to common stockholders was $391,796 or $0.08 per diluted share as compared to Predecessor net income of $318,278 in the prior-year period.
  • Funds from Operations (FFO)* for the quarter was $479,978, or $0.07 per diluted share. For the period from May 17, 2019 to June 30, 2019, FFO was $23,991 or $0.00 per diluted share.
  • Adjusted Funds from Operations (AFFO)* for the quarter was $689,509, or $0.10 per diluted share. For the period from May 17, 2019 to June 30, 2019, AFFO was $337,022 or $0.05 per diluted share.
  • Rental revenue increased 32.2% year-over-year to $1.86 million primarily as a result of the Company’s formation transactions.
 *

Represents Non-GAAP financial measures. Please refer to the “Non-GAAP Supplemental Financial Information” section below for additional information.

Highlights Subsequent to Quarter End**

  • In July 2019, the Company closed on the acquisition of three properties leased to the USPS for $4.4 million. The properties comprise 36,495 square feet with an average rental rate of $11.66 per square foot, and a weighted average lease term of 4.2 years. The expected weighted average cap rate is between 7% to 9%.
  • In August 2019, the Company entered into definitive agreements to acquire 14 properties leased to the USPS for approximately $5.4 million. The properties comprise 60,865 square feet with an average rental rate of $8.58 per square foot and a weighted average remaining lease term of 2.4 years. Formal due diligence has been completed and the transactions are expected to close by the end of the year, subject to the satisfaction of customary closing conditions.
  • In August 2019, the Company entered into non-binding agreements to acquire 154 properties currently leased to the USPS for an aggregate purchase price of $43.7 million, including $14.0 million of common units of the Company’s operating partnership valued at $17.00 per unit. It is anticipated the transactions will close by the end of the year. The Company is currently performing formal due diligence procedures customary for these types of transactions and cannot provide assurance as to the timing of when, or on what terms, the transactions will close, if at all.
  • The Company has signed a non-binding term sheet with People’s United Bank as lead arranger, lender, administrative agent and bookrunner for a $100 million credit facility.
 **

The Company believes results for subsequent quarters will provide more meaningful insight into the financial and operational activities of the Company as the second quarter does not reflect a full quarter of operations for Postal Realty Trust, Inc.

Property Portfolio

The Company owns and manages 271 postal properties in 41 states comprising 871,843 square feet, as of June 30, 2019. In addition, the Company provides fee-based third party property management services for an additional 404 postal properties leased to the USPS. The portfolio was 100.0% occupied with a weighted average lease term of 3.0 years and a weighted average rental rate of $9.70 per square foot at June 30, 2019.

Balance Sheet and Capital Markets Activity

On May 17, 2019, the Company completed its initial public offering of 4.5 million shares of Class A common stock at $17.00 per share. Net proceeds from the offering of $71.1 million, before giving effect to offering expenses, were used to acquire $29.0 million of properties in the Company’s formation transactions and to pay down $31.7 million of debt.

The Company ended the second quarter with $11.7 million of cash on hand and total indebtedness of $2.9 million. The weighted average interest rate of outstanding indebtedness was 4.4%.

Dividend

On June 26, 2019, the Company’s board of directors approved an initial pro-rated cash dividend of $0.063 per share of Class A common stock for the period from May 17, 2019 to June 30, 2019. The dividend was paid on July 31, 2019 to stockholders of record as of July 9, 2019.

Non-GAAP Supplemental Financial Information

An explanation of certain non-GAAP financial measures used in this press release, including, FFO and AFFO, 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 we do and therefore our 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 that are recurring in nature, excluding capital improvements that are incurred in connection with the acquisition of a property or obtaining a lease or lease renewal) and then adding back non-cash items including: non-real estate depreciation, loss on extinguishment of debt, straight-lined rents and fair value lease adjustments 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 our operating performance. We believe that AFFO is widely-used by other REITs and is helpful to investors as a meaningful additional measure of our ability to make capital investments. Other REITs may not define AFFO in the same manner as we do and therefore our calculation of AFFO may not be comparable to such other REITs.

These metrics are non-GAAP financial measures and should not be viewed as an alternative measurement of our 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, we believe that the additive use of FFO and AFFO, together with the required GAAP presentation, is widely-used by our competitors and other REITs and provides a more complete understanding of our performance and a more informed and appropriate basis on which to make investment decisions.

Webcast and Conference Call Details

Postal Realty Trust will host a webcast and conference call to discuss the second quarter fiscal year 2019 financial results on August 14, 2019 at 5:00 p.m. Eastern Time. A live audio webcast of the conference call will be available on the Company’s investor website at https://www.postalrealtytrust.com/QuarterlyResults. 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.

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from 8:00 p.m. Eastern Time on Wednesday, August 14, 2019, through 11:59 p.m. eastern time on Wednesday, August 28, 2019, by dialing 1-844-512-2921 in the United States and Canada or 1-412-317-6617 internationally and entering passcode 13693655.

About Postal Realty Trust, Inc.

Postal Realty Trust, Inc. is an internally managed real estate investment trust that owns and manages properties leased to the USPS. The Company believes it is one of the largest owners and managers measured by net leasable square footage of properties that are leased to the USPS.

Forward-Looking and Cautionary Statements

This press release contains “forward-looking statements.” Forward-looking statements include statements regarding the proposed public offering and other 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 ability to obtain financing, the Company’s expected capitalization rates and the Company’s ability to 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, 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.

 

Postal Realty Trust, Inc. Consolidated and Combined Consolidated Balance Sheets (Unaudited)

 

 

June 30, 2019

 

December 31, 2018

 

 

 

 

 

(Unaudited)

 

(Predecessor)

ASSETS

 

 

 

 

 

 

Real estate

 

 

 

 

 

 

Land

 

$

14,208,005

 

 

$

7,239,213

 

Buildings and improvements

 

 

48,796,854

 

 

 

29,550,076

 

Tenant improvements

 

 

1,924,021

 

 

 

1,646,215

 

 

 

 

64,928,880

 

 

 

38,435,504

 

Less: accumulated depreciation

 

 

(7,723,284

)

 

 

(7,121,532

)

Total real estate, net

 

 

57,205,596

 

 

 

31,313,972

 

 

 

 

 

 

 

 

 

 

Cash

 

 

11,744,971

 

 

 

262,926

 

Escrows and reserves

 

 

601,173

 

 

 

598,949

 

Rent and other receivables

 

 

855,506

 

 

 

601,670

 

Prepaid expenses and other assets

 

 

1,354,525

 

 

 

146,014

 

Deferred rent receivable

 

 

23,864

 

 

 

14,060

 

In-place lease intangibles (net of accumulated amortization of $5,024,779 and $4,388,699, respectively)

 

 

4,397,221

 

 

 

2,735,927

 

Above market leases (net of accumulated amortization of $13,674 and $8,688, respectively)

 

 

12,265

 

 

 

10,914

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

76,195,121

 

 

$

35,684,432

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Mortgage loans payable, net

 

$

2,817,545

 

 

$

34,792,419

 

Accounts payable, accrued expenses and other

 

 

4,224,011

 

 

 

1,869,084

 

Below market leases (net of accumulated amortization of $1,721,354 and $1,525,540, respectively)

 

 

4,479,286

 

 

 

3,842,495

 

Deferred tax liability, net

 

 

-

 

 

 

793,847

 

Due to affiliates

 

 

6,687,587

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

$

18,208,429

 

 

$

41,297,845

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity (deficit)

 

 

 

 

 

 

 

 

Common stock,

 

 

 

 

 

 

 

 

PSTL - $.01 par value per share

 

 

 

 

 

 

 

 

Class A, 500,000,000 shares authorized: 5,285,587 shares issued and outstanding

 

 

52,856

 

 

 

-

 

Class B, 27,206 shares authorized: 27,206 shares issued and outstanding

 

 

272

 

 

 

-

 

UPH - no par, 1,000 shares authorized: 1,000 shares issued and outstanding

 

 

-

 

 

 

4,000,000

 

NPM - no par, 200 shares authorized: 200 shares issued and outstanding

 

 

-

 

 

 

200

 

Additional paid-in capital

 

 

46,250,914

 

 

 

3,441,493

 

Accumulated deficit

 

 

(726,502

)

 

 

(11,003,876

)

Member’s deficit

 

 

-

 

 

 

(2,095,823

)

Total Stockholders’ and Predecessor Equity

 

 

45,577,540

 

 

 

(5,658,006

)

Operating Partnership unitholders’ noncontrolling interests

 

 

12,409,152

 

 

 

 

 

Noncontrolling interest in properties

 

 

-

 

 

 

44,593

 

Total equity (deficit)

 

 

57,986,692

 

 

 

(5,613,413

)

 

 

 

 

 

 

 

 

 

Total liabilities and equity (deficit)

 

$

76,195,121

 

 

$

35,684,432

 

 

Postal Realty Trust, Inc. Consolidated and Combined Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)

 

 

 

 

 

Predecessor

 

 

 

 

Predecessor

 

 

Three months ended June 30, 2019

 

Three months ended June 30, 2018

 

Six months ended June 30, 2019

 

Six months ended June 30, 2018

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Rent income

 

$

1,856,428

 

 

$

1,404,123

 

 

$

3,348,814

 

 

$

2,782,233

 

Tenant reimbursements

 

 

273,229

 

 

 

232,569

 

 

 

510,085

 

 

 

447,826

 

Fee and other income

 

 

276,325

 

 

 

286,443

 

 

 

563,251

 

 

 

606,346

 

Total revenues

 

 

2,405,982

 

 

 

1,923,135

 

 

 

4,422,150

 

 

 

3,836,405

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate taxes

 

 

288,771

 

 

 

239,442

 

 

 

538,560

 

 

 

461,580

 

Property operating expenses

 

 

248,586

 

 

 

215,346

 

 

 

500,292

 

 

 

441,659

 

General and administrative

 

 

777,689

 

 

 

292,809

 

 

 

1,154,580

 

 

 

797,659

 

Equity-based compensation

 

 

190,343

 

 

 

-

 

 

 

190,343

 

 

 

-

 

Depreciation and amortization

 

 

767,772

 

 

 

449,362

 

 

 

1,248,215

 

 

 

905,668

 

Total operating expenses

 

 

2,273,161

 

 

 

1,196,959

 

 

 

3,631,990

 

 

 

2,606,566

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

132,821

 

 

 

726,176

 

 

 

790,160

 

 

 

1,229,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractual interest expense

 

 

(228,040

)

 

 

(367,953

)

 

 

(586,507

)

 

 

(750,610

)

Amortization of deferred financing costs

 

 

(1,854

)

 

 

(3,125

)

 

 

(5,035

)

 

 

(6,249

)

Loss on early extinguishment of Predecessor debt

 

 

(185,586

)

 

 

-

 

 

 

(185,586

)

 

 

-

 

Interest income

 

 

1,124

 

 

 

1,117

 

 

 

2,258

 

 

 

2,212

 

Total interest expense, net

 

 

(414,356

)

 

 

(369,961

)

 

 

(774,870

)

 

 

(754,647

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

 

(281,535

)

 

 

356,215

 

 

 

15,290

 

 

 

475,192

 

Income tax expense

 

 

(6,259

)

 

 

(35,126

)

 

 

(46,008

)

 

 

(59,640

)

Net income (loss)

 

 

(287,794

)

 

 

321,089

 

 

 

(30,718

)

 

 

415,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interest in properties

 

 

(1,493

)

 

 

(2,811

)

 

 

(4,336

)

 

 

(6,633

)

Net (income) loss attributable to Predecessor

 

$

(209,181

)

 

$

318,278

 

 

$

(463,414

)

 

$

408,919

 

Net loss attributable to Operating Partnership unitholders’ noncontrolling interests

 

$

106,672

 

 

 

 

 

 

$

106,672

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

(391,796

)

 

 

 

 

 

$

(391,796

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share (basic and diluted)

 

$

(0.08

)

 

 

 

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding (basic and diluted)

 

 

5,164,264

 

 

 

 

 

 

 

5,164,264

 

 

 

 

 

 

Postal Realty Trust, Inc. Consolidated and Combined Consolidated Statements of Operations For the Periods Ended June 30, 2019 and May 16, 2019 (Unaudited)

 

 

Predecessor

 

Postal Realty Trust, Inc.

 

 

April 1, 2019 through May 16, 2019

 

January 1, 2019 through May 16, 2019

 

May 17, 2019 through June 30, 2019

Revenues:

 

 

 

 

 

 

 

 

 

Rent income

 

$

756,969

 

 

$

2,249,355

 

 

$

1,099,459

 

Tenant reimbursements

 

 

111,219

 

 

 

348,075

 

 

 

162,010

 

Fee and other income

 

 

141,033

 

 

 

427,959

 

 

 

135,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

1,009,221

 

 

$

3,025,389

 

 

$

1,396,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate taxes

 

 

117,723

 

 

 

367,512

 

 

 

171,048

 

Property operating expenses

 

 

115,010

 

 

 

366,716

 

 

 

133,576

 

General and administrative

 

 

106,557

 

 

 

483,448

 

 

 

671,132

 

Equity-based compensation

 

 

-

 

 

 

-

 

 

 

190,343

 

Depreciation and amortization

 

 

245,313

 

 

 

725,756

 

 

 

522,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

$

584,603

 

 

$

1,943,432

 

 

$

1,688,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

424,618

 

 

 

1,081,957

 

 

 

(291,797

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

Contractual interest expense

 

 

(212,352

)

 

 

(570,819

)

 

 

(15,688

)

Amortization of deferred financing costs

 

 

(1,592

)

 

 

(4,773

)

 

 

(262

)

Loss on early extinguishment of Predecessor debt

 

 

-

 

 

 

-

 

 

 

(185,586

)

Interest income

 

 

-

 

 

 

1,134

 

 

 

1,124

 

Total interest expense, net

 

 

(213,944

)

 

 

(574,458

)

 

 

(200,412

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

 

210,674

 

 

 

507,499

 

 

 

(492,209

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

-

 

 

 

(39,749

)

 

 

(6,259

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

210,674

 

 

$

467,750

 

 

$

(498,468

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interest in properties

 

 

(1,493

)

 

 

(4,336

)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Predecessor

 

$

209,181

 

 

$

463,414

 

 

 

-

 

Net loss attributable to Operating Partnership unitholders’ noncontrolling interests

 

 

 

 

 

 

 

 

 

 

106,672

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

 

 

 

 

 

 

 

 

$

(391,796

)

 

Postal Realty Trust, Inc. Reconciliation of Net Income (Loss) Attributable to Common Stockholders to FFO and AFFO For the Periods Ended June 30, 2019 and May 16, 2019 (Unaudited)

 

Postal Realty Trust, Inc.

Less: Predecessor

Postal Realty Trust, Inc.

Three months ended June 30, 2019

April 1, 2019 through May 16, 2019

May 17, 2019 through June 30, 2019

Net (loss) income attributable to common stockholders

 

$

(391,796

)

$

209,181

 

 

$

(391,796

)

 

Income (loss) attributable to Operating Partnership unitholders’ noncontrolling interests

 

 

(106,672

)

 

 

-

 

 

 

(106,672

)

 

Net income attributable to noncontrolling interest in properties

 

 

1,493

 

 

 

1,493

 

 

 

-

 

 

Net income attributable to Predecessor

 

 

209,181

 

 

 

-

 

 

 

-

 

 

Depreciation and amortization

 

 

767,772

 

 

 

245,313

 

 

 

522,459

 

 

FFO

 

$

479,978

 

 

$

455,987

 

 

$

23,991

 

 

 

 

 

 

 

 

 

 

Recurring capital expenditures

 

 

(13,855

)

 

 

(13,855

)

 

 

-

 

 

Amortization of debt issuances costs

 

 

1,854

 

 

 

1,591

 

 

 

263

 

 

Loss on extinguishment of debt

 

 

185,586

 

 

 

-

 

 

 

185,586

 

 

Straight-line effects of lease revenue

 

 

(4,639

)

 

 

(1,640

)

 

 

(2,999

)

 

Straight-line effects of lease expense

 

 

(44,688

)

 

 

(46,064

)

 

 

1,376

 

 

Amortization and accretion of above and below market leases

 

 

(105,070

)

 

 

(43,532

)

 

 

(61,538

)

 

Non-cash stock compensation expense

 

 

190,343

 

 

 

-

 

 

 

190,343

 

 

AFFO

 

$

689,509

 

 

$

352,487

 

 

$

337,022

 

 

FFO per share

 

$

0.071

 

 

 

 

$

0.004

 

 

AFFO per share

 

$

0.102

 

 

 

 

$

0.050

 

 

 

 

 

 

 

 

 

 

Common shares and common units outstanding at June 30, 2019

 

6,760,612

 

 

 

 

6,760,612

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190814005716/en/

Investor Relations and Media Relations Email: Investorrelations@postalrealtytrust.com Phone: 516-232-8900

Source: Postal Realty Trust, Inc.

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