Release Date: November 05, 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) achieved strong same-store cash NOI growth projections, with expectations of over 4% for 2023, at least 3.25% for 2024, and at least 3% for 2025.
- The company successfully executed 2023 and 2024 leases with 3% annual rent escalations, increasing the percentage of leases with escalations to 21% of their portfolio.
- Postal Realty Trust Inc (PSTL) completed $64 million in acquisitions for the year and has additional properties under contract, targeting $90 million in acquisitions at a 7.5% weighted average cap rate for 2024.
- The company announced an amendment to its credit facility, adding $50 million to its term loan maturing in 2028, which helps reduce exposure to floating rate debt and provides capacity for future growth.
- Postal Realty Trust Inc (PSTL) reported a quarterly dividend increase of 1.1% from Q3 2023, reflecting confidence in their financial stability and growth prospects.
Negative Points
- Acquisition volume was lighter during the third quarter, which may indicate challenges in maintaining the pace of growth.
- The company did not disclose specific leasing spreads, which may limit transparency for investors seeking detailed financial metrics.
- There is a reliance on a single tenant, the Postal Service, which could pose risks if there are changes in their leasing strategy or financial stability.
- The company faces potential challenges in maintaining its projected growth rates, as these are influenced by various factors including operating efficiencies and market conditions.
- Despite positive developments, the company’s stock issuance through the ATM offering program and operating partnership units could lead to shareholder dilution.
Q & A Highlights
Q: Can you discuss the 10-year lease duration deals and whether they will become a standard duration?
A: Andrew Spodek, CEO, explained that the 10-year term is not a default but a strategic decision made with the Postal Service. The goal is to secure leases before expiration, and extending the term to 10 years is beneficial given the rent growth and escalations achieved.
Q: Is there any risk that the new lease negotiation process could change with a new administration?
A: Andrew Spodek, CEO, stated that politics or elections do not influence lease negotiations. The Postmaster General's position has remained stable across administrations, so there is no concern about changes affecting negotiations.
Q: Can you provide details on lease spreads achieved?
A: Andrew Spodek, CEO, mentioned that they do not disclose leasing spreads but highlighted strong same-store growth projections: 4% for 2023, 3.25% for 2024, and over 3% for 2025.
Q: Why were the two property dispositions transacted at a low cap rate, and are there more opportunities for capital recycling?
A: Andrew Spodek, CEO, explained that the sales were reverse inquiries, not marketed deals. The properties were sold at a good return, and the company will continue to recycle capital when opportunities arise, focusing on growth.
Q: What gives you confidence in achieving the $90 million acquisition target despite lighter Q3 volumes?
A: Andrew Spodek, CEO, expressed confidence in meeting the target due to a strong pipeline and timing of transactions. He emphasized that the business is not quarterly and expects to achieve the annual target.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
