Postal Realty Trust (PSTL) 9 Aug 232023 Q2 Earnings call transcript

Greetings, and welcome to Postal Realty Trust Second Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded.

to conference like host, to now Cooperstein. Jordan would turn over the your I you. Thank

begin. may You

Thank everyone, call. Good second you. morning, quarter Realty the XXXX Trust Postal earnings conference and welcome to

Spodek, On today, President; Klein, Accounting Financial the Chief Chief Officer; and Brandwein, we Andrew Robert Matt call Officer; Officer. Jeremy Chief have Garber, Executive

These risks call. Act Commission control, that the this forward-looking. call on company's Securities use by the of and Securities by statements are latest those Please are will without differ materially made historical Actual forward-looking forward-looking note and the of are and company other the Reform Litigation Exchange by harbor may include affected statements covered limitation, Statements statements the of forward-looking factors on the not beyond from facts statements and those including, Private contained that this company's the statements conference for XX-K provisions are results described may in be contained its considered in safe variety in filings. and XXXX. a forward-looking

specifically does new any or company events information, and result forward-looking disclaims as assume not any future obligation to of otherwise. statements, whether The update a

certain this operations, operations, the may on non-GAAP net funds EBITDA company Additionally, debt. as financial and adjusted refer call, such adjusted to measures, from conference from funds

comparable You can in measures GAAP the currently measures find supplemental company's most materials. a tabular release the reconciliation financial of these to earnings and non-GAAP

call turn will Postal I that, Andrew the Trust. now to Realty Executive Spodek, With of over Chief Officer

joining us today. Good morning, and you for thank

ability by on through the of subsequent showcase our liquidity equity quarter during ongoing and results enhanced all with they pleased second end. issuing loans our our to our demonstrate to exercising model position environments. in success our and total We are business program feature We quarter execute ATM our and accordion QX term as management team's the the in

without for ourselves the the result, a pipeline conservative capital markets, to our on year we having remainder the As up to and maintaining execute of have access while strategically set leverage.

fully a a revolver of $XX rate average previously is million We As to debt. of properties is at midpoint cap acquired stated rate XXX% above cap which fixed also undrawn company and and the weighted the we our rate range. August had approximately of X.X%, accretive Xnd, of

As always, quarter cap are on and given conditions. of rates specific assets, based in mix any market the geography

half half second that the the deal pick we to of optimistic begin Entering first activity remain levels. year, up relative will to

disconnect market, strategy acquisitions continue We still is are a to million and price their maintaining sellers take and sellers $XX prospective there judicious target a between to Within XXXX. and to investment expectations. buyers our in during adjust time continues

in the broader the the is As typically aren't space levels been I've all maturities. commercial owners unique largely Postal economic in our throughout cycles. shared and estate held Transaction real conditions historically long-term past, have pressured debt universe by to correlated has are financing markets assets are estate not real lagged as and

ability leadership value. long-term to While and the of continue lighter history activity our confident of the position transacting space, our and remain source has maximizing with current level been in shareholder in we long deals to

now to over metrics. our I'll turn the Jeremy to call discuss operating

our same activity and a the to acquisition produced growth our prior portfolio. of compared Andrew. we both quarter period in by rental you, XX% increase driven income second Thank XXXX, year, the organic In in the

they retention serve. these which years, past weighted of over rate We importance Postal reflects Service and XX-plus a the the XX% average communities have to the the lease maintained properties historical

and placed XX properties XX,XXX last August and Subsequent feet company the through million totaling mile second XX $X.X properties square the net additional contracts. quarter definitive million end leasable from from acquisitions flex our to feet interior Our an XX,XXX added XX square feet acquired XX,XXX square portfolio, to of X, and properties. for inclusive quarter properties for $X.X under XX

year new annual our shared for rent As X.X% the have that non-binding should escalations to renewals of a for expired internal fixed quarter, last continue to LOI agreed we we Postal strong growth. with support XXXX, incorporated that Service in five which leases

We have reviewed Service, USPS. leases process XXXX with to returned and started all execution Postal the the the having

make We working XXXX are having we the going and discussions more closely forward. the completed far the lease this pleased with and future. in near progress look leases efficient Service are underway, with thus Postal forward to the are to process The

to now the discuss to I'll XXXX our turn over quarter Rob call results. second financial

pleased the for second of or achieved We're to you, today's or funds us quarter. of announce funds adjusted joining operations everyone, growth $X.XX, delivered on from have and per Thank strong diluted used FFO proceeds we remaining from from $X.XX share feature at With respectively million revolver. of to on thank our X% outstanding pipeline. that XX%, call. the XXXX. we term another and $XX quarter and those Jeremy, you, during have AFFO earnings of draw we to on $XX accordion million million $XX to The QX fund feature, our and acquisition plan a was drawn exercised We repay remaining the loans. draw delayed balance closing our and operations

a date delayed Concurrent loan, with February of maturity entirety million X.XXX% of million The have $XX $XXX XXXX. of draw resulting in January term entered completely million million rate will X.XX%, current and our $XX a we an all-in into fixed fixed interest locked undrawn. draw, rate through the weighted the the at is of average loan in swap, term revolver is Inclusive $XX our debt now XXXX. in rate of outstanding

debt and X.X our debt maturities years. of notable the weighted We have is outstanding average maturity XXXX until no

to X.X remain and be of to roughly August offering and of at-the-market the proceeds X. million average through shares gross sales raised through stock August X, gross its Additionally, second company from of settled common quarter at weighted $XX the $XX.XX million million, issued forward totaling XXXX, a of share, $XX during program of close as which per were approximately price agreements

delayed transactions, our will capital with execution We acquisitions. fund loan provide with which draw pipeline combined of to our term of these are pleased the

million. replenishment the of program Directors the program, to ATM With Board the in recent $XXX activity our our approved of

Our net X.Xx of and square second per target was debt of forward. it $X.XX foot, on going Xx. the our our for guidance foot at annualized quarter remains adjusted was QX, and Recurring end above the a per square EBITDA below well CapEx basis ratio quarterly within $X.XX remains to

Turning to cash G&A expense.

cost and this our range are efficiencies by to narrowing $X.X to achieved the We updating given year. and million, $X.X guidance million savings lowering

non-cash A should a continue anticipate the equity compensation when of to higher compared of revenue as total of in to our percentage to annual G&A on We G&A as G&A receive percentage continue XXXX to quarters in be XXXX. an cash of their basis. and majority employees a same decline expense part

approved dividend increase representing of Directors of from Our dividend payment. XXXX quarterly $X.XXXX share, Board a per QX a X.X%

to flow We and from future drive operations additional continue to cash balance our to growth. be look generate sheet prudent with

As will stated the call, on annual the review previous the to increases Board an dividend basis. on

X, is costs issued our G&A, we with announced This within filing, be XXXX. and back On change X-K of will approximately during working that detailing which QX cash auditor for being AFFO Deloitte $XXX,XXX added transition we an July forward. resulted in going

navigate and confident the we value this for Our we deliver all business resiliency, is and cycles one-of-a-kind management continue are necessity economic this network. for our stable balance market-tested team, we're logistics to operational will our tenant and able sheet due to to shareholders. Through unique, strong

our concludes call remarks. to prepared like This Operator, the for open we'd questions.

this will Thank conducting At question-and-answer Instructions]. a time, you. [Operator we be session.

proceed first your Markets. Capital from John Please Kim question question. with Our comes with BMO

at prepared the in is remarks, half mentioned Thank you. between in and deal your bid-ask sellers. time, you same Andrew, there second the picking year. up the discontinued But spread activity buyers of

spill next some year? two conflict to seem to each So activity that over other. those comments Could with of

we've But from we've of seen evolve. been I in typically second the the could. that picks general, current it up. Yes, seeing in conversations the that think historically sellers year And the half environment,

I'm hoping so get to some deals and of And closed end the those convert the to year. of before see

Okay.

timing pipeline on based that's current negotiations? and your just expected of So current

Yes.

it existing some XX-year post have the recent Postal and on or could office something Any provide the press proposed that your portfolio rural acquisition is on opportunities going if thoughts the on impact their and potential on this plan side? impact maybe could Service forward,

Sure.

laid the to the every statement looking on the processing and out to Service seen see to a to today package way distribution them get they're are General network. and we've proposing majority that has specifically are in. delivery business plan retail that in the we've that he's consolidate not say buildings transform that much them functioning current them currently heard changes or Most they of the close into that the related that Postal they're The pretty we the and own level. Postmaster So evolve to of

buildings believe are much they're entire Service Postal operations. standpoint, the delivery a basis. of are points the on I their backbone on to from very still to typically don't touching deliver our estate and we business opine a million that their But the and XXX and address real regular that needed delivery

great you. That's Thank color.

Thank you.

Paolone your JPMorgan. with Please is with Our question from proceed Anthony next questions.

Thanks, good morning.

are The I do look out think for run think ahead? some we rate AFFO do to in one, Or as First there Rob. guess, call and there? $X.XX quarter, you you that's for good the puts takes a

for and you question, forward. don't going asking. give blame now Good right I We guidance don't

position do expect should of answer We're remain but rest have don't a we good some concrete strong. year raise. capital financially. We've good had I So in a for you, that the the

Our cetera. balance operations is sheet shape, in leasing, good in et The shape. are good

of to for So pretty we how confident feel going year turn is the out. the remainder

second last buyer-seller think, were a years. X.X% of rates, there's with a where the the disconnect still the then north to deals, couple guess, I I doing those X.X% said And cap and I regards you maybe quarter, of bit Andrew, over mentioned And think Okay. between for for you expectations. you are first,

is higher cap of think still you number do adjusted? is you market before do Or that for we go should think rates of the right think this even So there's where kind to fully now? room

adjust. to It's cap able that. macro which able that been answer and We rate of more CapEx picture the We change above we to expand. that estate right? able the execute -- expectations haven't of a because to be real a that continue pricing range, made of of definitely difficult continue just waiting going be continuing deals sellers' that we that to our universe, the to standpoint, the statement is arise. in the a about from advantage take the when bigger do we're does opportunity to we to And plan to on we've what on, in we midpoint and to should believe planning been We've targeting really that macro volume on I mix a rates is the of cap Postal statement just depending do, deals are question of do, seen be

then And I Okay. more one sneak if could in.

on 'XX up plan guess, the versus remind Just 'XX of you that how expirations, -- to us much ones can expirations? soon leases just from wrap regular were the the XXX you I the XXXX

Sure. the There are XX leases XXXX of vintage.

Okay, thank you.

you. Thank

Instructions] with next [Operator Petersen question Jonathan from Our Jefferies. is your question. Please proceed with

your a Good talk morning to I little wanted guys. more thanks. Great, just about expenses.

lower quarters. I OpEx was couple think lower. was little a your little than G&A of the also past a

you line the I few a what items take cadence about be talk quarters? you in talked kind measures next the of and the about little those Can should think that you to more costs. for reduce

The we that is in asset, OpEx Warrendale recovered. And particular, have question. asset over one will our the for time. vary larger Thanks do

that's expenses see that QX. saw QX some And the so of that and on And of the fluctuations vary majority variability quarter-to-quarter. you you'll based some between the the of

in in Regarding couple don't consistent and see pretty a I expenses, of years, near-term. that general, reason other change our the been we should why have past margins mean, the for

guess in at just then down. it. loan floating your but I to totally cycle, the is swaps rate interest about go right out. talking we're And don't I rate of if do where question, kind swapped versus you was debt guys now interest about redid you curious, know maybe riding and rates your think Got decision-making and Okay. fair this recently just I a term if

Yes.

quite for And term. the out line. we've live some then And is it our look, savings longer interest believe has prudent swap loan, term an has acquisition now. going become do been to move that, on of that it In debt we over what general, or we revolver as sheet to that been believe cost to debt. fix time balance So done some that as our more we've which on using it's spread. to rate We then our permanent

And we're the doing. lower so rate reason because it accretive, is that things our doing we're is and the it is cap than

debt. sense to makes variable that it believe rate to we so exposure And remove

the is that plan. So

continue to debt. long-term to over the to We expect minimize our rate medium exposure and variable

your which reduced end updated in in did for range question, and the on I size we the year, the the just cash give G&A and the the address G&A both the guidance remember, of range. didn't I range, lower of we

that your on question, for some So million some in cash expenses. to course to been for and some that answer And $X.X some moved G&A the reduction to $X.X of that's the we've to efficiencies based operating million year. year over we've find the of able

Got it.

maybe one And with just questions. Okay. one, then balance last sticking sheet

On you this the was million guys quarter. issued ATM, $XX

of equity So roughly with from Is volume costs that from two-thirds an you acquisition quarter, of equity? two-thirds an a acquisition ATM. like raise -- ideal guess, of issued the your kind capital about I on funding perspective,

and to -- both terms of we're debt tools look, able tools this equity capital vary. side, so in we We we've to that which of our far, using. So will as are the added been the and source in opportunistic as many purposely

though keep below targets, And so keep our which leverage our and we are to mindful, to do. to have low continued it we

a funded could equity with vary yes, time, on the then So just of But with cost time, more is over any capital. capital longer I quarter, over market of will depending given of acquisition what on period opportunity that most our environment, be debt. and think

you All much. very helpful. That's Thank Okay. very great.

in well match is the the frequency in it delayed amount Yes. for you ideal. thing the fact, over a a about us, we the fund it's is mean And acquisitions. acquisitions, deal can thing, of that we And do lot that ideal ATM good particular, of of of long-term. there's don't the source the our one I works believe too. I any and on we last the asked us. was did draw loan But that And think But and companies, volume that really good source for with the for term ATM capital. really I

Got you.

you. Okay, thank

is with Montgomery question. question Janney proceed Please next with your Our from Scott. Rob Stevenson

Good morning guys.

get fund So putting electrical all costs to to as that rolls you and in Postal into And office something Service out the more is the charge related going to CapEx themselves? guys extra easy any to is these future wrap to into buildings power stuff the fund EV will that post how charging these? leases? Or vehicles, your have into

Rob. Hey

Service. be expense that those our something the in be So by as to they -- back the by at it rent. It it general, electrical installing borne and which My our and of of building centers, most first is the like Postal assist pleasure infrastructure would the is larger Postal to processing typically would with at and upgrading the are Postal Service charging stations understanding rollout of stations these charging properties going additional are electrical Service. that their vehicles owned predominantly start

type of and you also that or mean, to facilities fire either to would I to the the future they would wrap that may stuff. sort And Is same also need the have some look and Okay. fund the deal do of into of leases? suppression some other that stuff extent

lease these payments. or it improvements in of the types to Service responsibility general, them have Postal adding the we we're back the Service. past, done be typically In definitely willing work and to of But try them Yes. and assist to would expenses with the to getting Postal in the

the quarter. And so Okay. ATMs. dictating each and within mean Rob, pricing the then Rob. traditional I or forward one $X.XX looked the other of forwards going what's between use for in basically the the

going whether the ATM determining place you just forwards, to business do so whether forward? And to issuance to how are fund do in

is to little about believe more need good capital, that ATM a of Yes. regular really way, is a whereas right? So you use. time just that capital of immediate be needs, the you a source bit if timing an for forward of This capital, would deploy

subsequent position stay so think end markets this draw quarter we but in ourselves because could to to ATM had both loan. forward be and blend the that did term we also opportunistic past out and with to on we of then on capital and put also with a if use, And so, of wanted we a do And quarter chose the our did immediate we delayed we about. I really some the that

today. Appreciate Okay, the guys. time thanks

We the over session. have comments. back call reached the now turn question-and-answer to to the Spodek end I'd of for closing like Andrew

Thank you today. forward us time to very entire much. for day. to I support taking with you and look your We thank a connecting to On team, months. behalf of continued the would the Have the great like coming join over you

today's conference. This concludes

participation. thank You we may you your your and this at for time, disconnect lines