Postal Realty at Nareit REITweek: Strategic Growth and Stability

Postal Realty Trust Inc. (NYSE:PSTL) took center stage at the Nareit REITweek: 2025 Investor Conference on Wednesday, 04 June 2025, presenting a robust strategic outlook. The company highlighted its niche focus on properties leased to the United States Postal Service (USPS), emphasizing stability and growth potential. CEO Andrew Spodek outlined plans for significant acquisitions, while acknowledging market fragmentation as both a challenge and an opportunity.

Key Takeaways

• Postal Realty aims for $80 to $90 million in acquisitions at a 7% to 7.5% cap rate this year.
• The company reports consistent same-store NOI growth, with guidance of 4-6% for 2025.
• Strong leasing strategy includes 3% annual escalations and long-term lease renewals.
• Postal Realty’s stock trades below its NAV, presenting perceived undervaluation.

Financial Results

• Targeting acquisitions of $80-$90 million at cap rates between 7% and 7.5%.
• Same-store NOI has grown consistently, with a 4-6% growth forecast for 2025.
• Dividend yield stands at approximately 7%, with annual increases since the IPO.
• Payout ratio has been reduced to 80% or below of AFFO.

Operational Updates

• Emphasis on properties leased to USPS, a stable tenant with a broad national footprint.
• Focus on last-mile and flex facilities, avoiding larger industrial assets.
• 75% of acquisitions occur off-market, leveraging long-standing relationships.
• Postal Realty has increased property portfolio size sevenfold since its IPO.

Future Outlook

• Management is confident in future prospects, citing USPS stability and market position.
• Plans to capitalize on lease renewals with 45% up for renewal in the next three years.
• Introduction of ten-year leases and pre-expiration agreements for 2025 and 2026.

Q&A Highlights

• CEO Andrew Spodek emphasized the strategic acquisition plan and market positioning.
• Discussions on mark-to-market rent opportunities and annual rent escalations.
• The company believes its stock is undervalued, with room for multiple expansion.

Postal Realty Trust Inc.’s full transcript from the Nareit REITweek: 2025 Investor Conference provides further insights into their strategic direction and market positioning.

Full transcript - Nareit REITweek: 2025 Investor Conference:

Simon Yarmak, Stifel Employee, Stifel: Good morning, everyone. I’d like to thank everyone for joining us this morning for the Postal Realty’s presentation at REIT REIT twenty twenty five. Thank you to Andrew, Robert, Jeremy, you have Jordan in the crowd here for participating in this presentation. My name is Simon Yarmak. I work at Stifel.

It’s been an incredible journey for you guys over the last six years, and Stifel and myself have been happy to be part of your ride here. To provide some context, Postal Realty is a REIT that went public in June of twenty nineteen. Since its IPO, it’s grown to over seventeen fifty properties and it’s grown their earnings by 3%. The dividend today is currently around 7%. They’re trading at implied about 8.5, eight point six cap rate and their liquidity position is quite strong.

With that, I’ll turn it over to Andrew for some opening comments.

Andrew Spodek, CEO, Postal Realty: Appreciate it. Well, you all for joining us here today. I see some familiar faces in the audience, and I see some new ones as well. So for the familiar ones, I’m I’m sorry to repeat my story, and for the new ones, I think it’s important for context. So this business didn’t really start with me.

It started with my father, who started buying postal assets in the early eighties. At the time, like most people didn’t even realize, the Postal Service leased their assets. He bought them and and and learned very early on that they’re very easy assets to own. The Postal Service always pays their rent, a % of your rent, a % of the time that you can own and operate these properties all over the country without the need for any on-site personnel. We own in 49 states.

The largest misconception is that the Postal Service leaves their buildings. We’ve been able to maintain a 99% retention rate over the past ten plus years. He continued to buy these assets. I came to work for him out of college. He semi retired in the early two thousands, and I took over.

Continue to grow the portfolio more aggressively, became one of the largest owners and then the largest owner of assets leased to the Postal Service. My father passed in 2016. I was approached by a banker to create a public company around our port portfolio. I had no dreams or desires to be sitting here with you guys. No interest in being a public company CEO.

Didn’t wear a suit to work. Never had a business card. Just kind of owned and operated our postal assets. Spent about a year or so just researching what the opportunity set was. Let me frame what postal real estate really looks like.

So you got about 32,000 postal facilities throughout the country. Postal service leases about 25,000 of them. They pay approximately $1,600,000,000 in rent for those 25,000 facilities. Interestingly enough, that $1,600,000,000 is only 1.5% of their operating expenses. So it’s a very small line item to operate the backbone of their entire business.

Those 25,000 facilities are owned by about 17,000 owners. So that’s how fragmented the market is. Interesting to note, most of these owners own their properties forty to fifty years. Most of these owners are in their sixties to eighties. You know, even being the largest owner, I hadn’t realized the context of the size of the market.

Right? That 1,600,000,000 any cap rate you put on it, any margin you put on it, it’s got to be a 12 to $15 plus billion market. And so we decided to go public. Seated the company with my personal assets. This was not a monetization for me.

Took back all of my equity and shares and operating partnership units and we were off to the races. We’ve grown the property portfolio by north of seven times square footage rental revenue property count. And honestly, we’ve just gotten started. The company is still smaller than I’d like it to be. We got slowed down with COVID, slowed down the past two plus years with the rise in interest rates.

We’ve we’re currently are articulating doing, you know, 80 to $90,000,000 north of $7.07 and half cap for this year, and we’re well on our way to achieving that. That should give us the backdrop to who we are and how how we got here. I guess, Simon, we can go from there.

Simon Yarmak, Stifel Employee, Stifel: Sure. I’ll start with a couple of questions,

Robert Ivanhoe, Postal Realty: and I’ll open up to the audience.

Simon Yarmak, Stifel Employee, Stifel: And feel free, don’t be bashful, to get your questions in. You guys provided guidance for the first time this year since going public. What’s changed over the last twelve, eighteen months that gave you comfort to finally provide guidance to the Street?

Andrew Spodek, CEO, Postal Realty: The guidance was really built around our leasing. We have the best lens into our releasing that we’ve had in years. We worked with the postal service to create a very efficient programmatic approach at negotiating our leases and processing our documents. And we once we got that security, we were able to feel comfortable to provide our guidance.

Simon Yarmak, Stifel Employee, Stifel: Maybe just want to expand a little bit more what’s changed a couple of years ago when you’re releasing versus the new systems that you put into place.

Andrew Spodek, CEO, Postal Realty: Sure. So we’ve been able to accomplish a lot with the Postal Service. You’ll find in most of our answers that our relationship with the Postal Service and the size and scale that we perform with our platform has given us the benefit of things that most other owners don’t have. Two of the largest things we’re able to accomplish recently is the introduction of an annual escalation. Most post leases don’t have that, most portfolio post owners do not have that.

We are able to achieve 3% or better on our leases from 2022 till the current. We are able to agree to leases for 2025 and 2026 and are executing them before their expiration. What we’re also able to introduce is ten year leases on the majority of leases that we have rolling, also giving us a better lens into our lease roll, into our cash flows and into security of our tenancy.

Simon Yarmak, Stifel Employee, Stifel: As part of your guidance provided same store NOI guidance of four to 6%. For a net lease company that’s incredible and across almost all of REIT land and maybe the exception of the senior housing operators, that’s probably tops in the industry. So maybe you can touch on just the different building blocks and the different components that get you to 4% to 6% number. Sure.

Robert Ivanhoe, Postal Realty: So the largest component of our same store NOI is really the mark to market rent opportunity that we see on our leases and then the inclusion of the 3% annual rent escalations are significant as well. You know, in addition to that, we can see increased tenant reimbursements when we renew leases and we also achieve operating efficiencies as we take on properties from other owners and we put them onto our platform. So each year you’ll see the impact of annual rent escalations become more and more relevant as more of the leases within the portfolio start to turn. And just to give you a stat, we reported 56% of our portfolio had leases that were agreed to or executed with escalators in them.

Simon Yarmak, Stifel Employee, Stifel: So investors will push back and say 4% to 6% is a fluke. Maybe you would just want to touch on what you have in the bag, what the mechanism that’s set up, what you think a normalized same store NOI number can be going forward?

Robert Ivanhoe, Postal Realty: Sure. Not a fluke. So it’s too early to provide guidance beyond 2025. But if you look at our historical growth percentages, you’ll see the internal growth was quite strong. So it wasn’t a one year thing.

So over the past three years, we’ve reported 2.2%, five point five % and then 4.4% last year. And then our guidance this year obviously of 4% to 6%. So you can see the trend and you can see that this is something that is recurring and it is something that’s a fundamental part of our business. So while the escalators have become more meaningful as I mentioned before as same store growth, there will be rent mark to market and you can see a significant portion of our portfolio is expiring over the next few years and that in combination with our new acquisitions should lead to some healthy same store NOI going forward.

Simon Yarmak, Stifel Employee, Stifel: Sure. Any questions from the audience?

Andrew Spodek, CEO, Postal Realty: So in the next three years, we have about 45% of our leases that are coming up for renewal, which gives us this opportunity to mark them to market, add these escalations and extend the lease term to ten years. Just to repeat the question for those of you that didn’t hear, this was a question about the Postal Service being a separate agency, but how I perceive them as it relates to the Trump administration. So I get this question often. From my perspective, even in the prior Trump administration, when they looked into the Postal Service and we met with them, what they discovered and what we know to be true is how critical these properties are to the Postal Services delivery business. They actually found that it was critical American infrastructure.

They’re not just viewing these as post offices. They’re trying to find other government services to use out of these facilities. As I stated earlier, the lease payment for all the 25,000 buildings they lease is only 1.5% of their operating expenses and it controls the virtual monopoly that they have on the delivery business. Postal Service touches 169,000,000 delivery points five to six days a week. They’re basically that’s the target market of every online retailer.

And while mail volume has gone down, package volume has increased significantly. And so these buildings are needed to touch the American people. And and I I think Trump knows that and I I think every every administration recognizes it.

Simon Yarmak, Stifel Employee, Stifel: What’s legally binding or what’s constitutional that the post office has the obligation to deliver mail how many days a week? Is there a difference between the zip codes? Maybe you could just touch on some of the legal ramifications that gives you comfort.

Jeremy Garber, Postal Realty: So there’s this concept of universal service. So whether you live in a rural town somewhere in America or New York, you’re entitled to receive the same type of service no matter where you live. And that universal service is what obligates the Postal Service to touch 169,000,000 delivery points every day. Constitutionally, the Postal Service was set up through the constitution. So when you hear all this noise about privatization and major change within the postal organization, it’s really something that is a very, very big hurdle in terms of change.

We spend a lot of time in Washington, D. C, meeting with congressmen, meeting with senators. The most calls that come into any congressional or senate office are constituents who are asking about mail delivery, why their mail is late. People are very, very passionate about their post offices, the postal service. The postal service has the highest rating of any government agency, and it’s bipartisan.

You know, we went through some postal reform a few years ago, and it was passed through bipartisan partnership around making this a stronger organization. You saw the former postmaster who just stepped down, set out on a ten year plan to make this organization stronger and support the American people. And we have a new postmaster who is expected to start in July. His only public comment so far is his belief in maintaining the Postal Service as an independent executive agency.

Andrew Spodek, CEO, Postal Realty: Sure. That’s a good that’s a very good question. So there are three different types of postal assets as we’ve described them in our investor decks. They’re last mile facilities, which are 2,500 square feet and under. Let’s call them smaller facilities that serve the smaller communities throughout this country.

You have flex facilities, which are, let’s call it, 2,500 to 50,000. And you have industrial facilities, are larger. Think about them as processing centers or carry ons, is that kind of thing. So we don’t focus very much of our time and attention on the industrial assets. We don’t find ourselves to be very competitive in the purchase of those assets.

They trade at much lower cap rates, we don’t see the value add that we can add to the flex and last mile facility. So the majority of the assets that we look at and that we acquire fall into both of those buckets. Typically, the size and nature of those buildings are based on the demographics that they serve. So a larger facility is serving a larger area. The buildings are are are very simple pieces of real estate.

They have a retail component to them. They have a very small office component and a warehouse component. They are typically very good land to building ratios because they have customer parking, employee parking, and postal vehicle parking. And it should be noted that most of these vehicles most of these facilities were built to postal specifications, and they chose the parcel. They chose them because of their access to local roads and highways, good good egress and either on main and main or right off main and main.

That’s that’s typical real estate. We’re buying these on average at or below replacement cost, which is a good value. I think our average is around a hundred and $60 a square foot. If you just provide the pull service with a vanilla box and have them build it out, that’s gonna cost them over $200 a square foot just to build it out. So there’s good value in the real estate in addition to the fact that we’re buying these at, from my perspective, very good competitive cap rates above the 7.5 cap.

So we really go where the deal takes us from a demographic standpoint as well as a geographical standpoint. We pass on deals all the time. And really, what our main criteria that falls into two buckets. Really the first one is from an underwriting standpoint that the Postal Service needs or wants to be in the facility, that it’s critical for them. We’ve been creating and evolving our database for decades with data points, some are public, some aren’t on facilities that we’re buying, facilities around the facilities that we’re looking to acquire, so we can really determine what buildings the pulse service wants to be in.

Once we’re able to determine what those facilities are, then we underwrite the real estate. And unless it it checks both of those boxes, those are not buildings that we’re looking to acquire.

Simon Yarmak, Stifel Employee, Stifel: Do you have a rough number?

Andrew Spodek, CEO, Postal Realty: It’s changing on a daily basis. We’re buying 200 to 300 buildings a year. But they fall very, very closely within the bucket of the size of the Postal Service’s allocation within those buckets also. We move very similar to it.

Simon Yarmak, Stifel Employee, Stifel: In the few cases where the post office doesn’t renew their lease

Andrew Spodek, CEO, Postal Realty: Yes.

Simon Yarmak, Stifel Employee, Stifel: Could you give us an example of what happened to that real estate? Sure.

Andrew Spodek, CEO, Postal Realty: Also a very, very common question. Because of how simple these buildings are, they’re able to be repositioned into many other uses. We’ve seen them turned into bank branches, into pharmacies, into government buildings, into law offices, medical offices. We sold a building that ended up they ended up putting lofts on top of it because it was a housing need. Every market speaks for itself and speaks for what the highest base use for that particular property is.

So you sell the buildings outright?

Simon Yarmak, Stifel Employee, Stifel: You don’t retain them and reposition them?

Andrew Spodek, CEO, Postal Realty: We typically sell them. We don’t mind releasing them if the tenant was, let’s call it, credit worthy or a national or regional tenant in the area. But in general, it’s usually easier for us just to resell the property.

Unidentified speaker, Audience Member: In those cases, what was the reason for I know it’s rare, but in those cases, what was the reason for USPS meeting?

Andrew Spodek, CEO, Postal Realty: The most common reason for the posters to vacate a building is because of the size of the building or the size of the parking, either it’s too big or too small for them. We’ve had two vacancies over the six years being public. One of them we sold at a marginal profit even though it was vacant. One of them we still have vacant and I think it’s like 20 basis points of income or something like that. How

Unidentified speaker, Audience Member: how do you find the post offices to buy?

Andrew Spodek, CEO, Postal Realty: That’s a great question. So I’ve literally been doing this my whole life. My father took me to look at post offices. My father took me to visit postal owners when I was a child. And those relationships have built from there.

I mean, I remember meeting postal owners when I was nine, 10 years old, and we just bought their their facilities. 75% of our deals are done off market. And I mean properly off market, not touching a broker. The 25% that are going through a broker, we’re typically getting a first or last look just because of who we are in the market. That 75% speaks to our relationships, it speaks to our time and the space, speaks to who we are.

Simon Yarmak, Stifel Employee, Stifel: When you went public, there was some family portfolio that you still had and the eventual goal is to roll it into the portfolio. How many of those facilities have you guys already purchased and what’s still outstanding? Sure.

Jeremy Garber, Postal Realty: So as Andrew referenced, the formation transaction for the IPO was Andrew contributing his assets to form the public company. Andrew’s family still retains assets. The public company manages those assets. The public company has a ROFO on a subset of those assets, and last year was the first execution of a purchase of a group of some of those assets.

Unidentified speaker, Audience Member: How is the price set on that?

Andrew Spodek, CEO, Postal Realty: Sure. For

Jeremy Garber, Postal Realty: one, Andrew is not a party to the conversations or the transaction. We form an independent committee with the board and our underwriting characteristics and process is similar to any other asset we’d be purchasing.

Andrew Spodek, CEO, Postal Realty: Can I speak to the makeup of the board and the skills on the board? Sure. Our

Jeremy Garber, Postal Realty: chairman, independent chairman of the board is the former postmaster general, Patrick Donahoe. We have former CFO of MacKali is the head of our audit committee. General counsel of Ares is the head of our corporate governance committee. And the fifth board member is a woman who is very involved with her family in big New York real estate. So we have a nice cross section of all disciplines and experiences.

Simon Yarmak, Stifel Employee, Stifel: Have you seen the transaction market change over the last few months, you know, with the new administration?

Andrew Spodek, CEO, Postal Realty: So I don’t think it’s really changed tremendously. What we have seen is an uptick in sellers having conversations with us about selling since the election. Sellers in general are proud postal owners. Their motivation for selling is usually either a life event or some liquidity or estate planning or a generational shift in the assets. But for some reason, the election increased the conversations that we were having in a relatively significant way.

Yeah, so for the past few years, we’ve done around $100,000,000 of volume. What we found when interest rates went up was that the larger owners, both portfolios and single assets, were less interested in adjusting their cap rate expectation. So we moved towards doing more volume of deals, but smaller portfolios or single assets in order to be able to move our cap rates by about 100 basis points. Right now, we’ve articulated a 7.5% or better. 21%, we were at above a 6.5% cap.

Simon Yarmak, Stifel Employee, Stifel: The dividend is a pretty strong piece of your total return. It’s about sort of hovering around 7% as the last night’s close. Maybe you want to touch on your dividend philosophy and your policy.

Robert Ivanhoe, Postal Realty: Sure. So first and foremost, I think we have a very healthy dividend, which is circa 7%, some days a little above, some days a little below, depending on where the stock price is. We’ve increased that dividend every year since being public. And the intent is to continue that, but it is the board meets and on an annual basis decides how going to handle that. It should be noted as well that while they consider that our payout ratio has been coming down significantly.

So years ago it was a quite high payout ratio and Now we kind of live somewhere around 80% and even below percent of AFFO. So it’s a very healthy dividend and it’s incredibly well covered.

Simon Yarmak, Stifel Employee, Stifel: Following up on that, you have a 7% dividend yield. You have earnings growth also is pretty healthy. So do you have a total double digit return without multiple expansion? What do you think that number should be?

Robert Ivanhoe, Postal Realty: I mean, with your math, your math is spot on for some of the basics. I think that there absolutely should be multiple expansion here when you look at independent reports such as yours. I mean our NAV from Stifel’s calculation is north of $18 We trade around $14 So there’s a lot of room to go here to get to even just the real estate valuation. We’ve been trading somewhere in the nine cap range on the real estate. This real estate is easily worth sub cap rates to where we’re buying, which is north of 7.5%.

And even the applied cap rate we see from your reports and others are in the low seven. So there’s a lot of room here for this stock to increase just to get to real estate value alone and even to get to multiple valuations that are anywhere near the comps, whatever you want to call the still low.

Unidentified speaker, Audience Member: What do you see as comps?

Robert Ivanhoe, Postal Realty: It’s a good question. I mean, don’t think if you have five people in the room, you’d have less than six opinions as to what the comp should be. We’ve been put together with net lease, with standalone, with retail, with industrial. We don’t believe there is a comp and that’s part of the unique opportunity here. We’re a very unique company and a niche business that we dominate.

We’re a large player. There is no other company that has characteristics like ours. No one has a tenant like ours. No one has retention like ours. And we’re starting to prove that we’re at the top of the industry for our same store growth as well.

So I don’t believe there really is a good comp. There are probably pieces of other companies that are good comps, but I don’t think there’s one good comp to point to.

Unidentified speaker, Audience Member: Are there private?

Andrew Spodek, CEO, Postal Realty: Yeah. There are private owners of postal assets. I I don’t know that they would be a good comp to us. What what I’ve what I’ve found and what I believe pre IPO, that was a thesis. Postal owners have changed, and it’s because the Postal Service has changed.

They created a need for an institutional owner and operator. Postal Service historically ran as we would all think about them as an internally managed real estate corporation. Over the past ten years, they’ve let go all their real estate employees and outsourced to used to be CB Richard Ellis, now it’s Jones Lang LaSalle. This has changed drastically the postal owners’ touchpoint to the Postal Service. They don’t speak to the Postal Service anymore.

And so there’s nobody like us in the size and scale from an institutional knowledge standpoint. No one’s really able to accomplish what we’re able to accomplish with the Postal Service. The proof of concept of that really is the annual escalation or the ten year leases. These are proof of concept in really the platform. And I believe that as time goes on, those opportunities will continue to grow with the company and will present themselves over time.

Simon Yarmak, Stifel Employee, Stifel: To follow-up on question here, look, it’s hard to put into a category, but if you look at where the private market is right now, they’re transacting at a mid seven, they’re trading to a private at about mid eight. So just 100 basis points to close that gap without any platform value or anything like that is probably 4 or $5 a share, and that, I think, would go a long way, which dovetails into my next question is you have a very high insider ownership. I think to your point, you don’t take any compensation in cash. It’s all stock. So it gives you the confidence in the stock itself.

Maybe just want to touch on your philosophy in terms of compensation and for the management team overall taking their full bonus in stock.

Andrew Spodek, CEO, Postal Realty: Sure. I think if you look at us against most other public companies, you’ll have a very difficult time finding senior management, myself and people here as well as the entire board as aligned with shareholders as possible. The entire board takes their compensation in equity. I take all of my compensation equity. The majority of the senior management team take a large portion of their compensation in equity.

And that alignment speaks volumes to the business. The overhang of the perception of the Postal Service I think is a big part of this. We touch the Postal Service all day, every day. We touch different aspects of the Postal Service. The Doge privatization, all of this, let’s call them statements or noise, nothing’s really changed.

No shifts have changed in the pulse service. The people that we face off against, whether it’s for lease negotiations or maintenance issues or or documentation are all the same people. It’s business as usual for them. For us, it’s better than business as usual just because the line of sight that we have on our leasing and income and retention, again, has never been better. If if you if you believe any of the noise that the postal service that are surrounding the Postal Service, but then you meet someone like me that tells you that they’re executing a ten year lease on the majority of their facilities, it doesn’t line up.

And so it’s I believe in the Postal Service as a tenant. Again, I’ve been doing this my whole life. I’ve always collected my rent. My 99% retention rate, I’ve I’ve told everybody since since IPO is probably not sustainable. Right?

That’s a very high occupancy rate. But anything close to it is still remarkable. And what we’ve been able to show is not just that we can buy these buildings and buy them accretively, but we’ve been able to show internal growth that arguably there’s not many companies out there that can shut. The fundamentals of the business are very, very strong. The balance sheet is very safe and secure.

We have very little exposed to floating rate debt. We have the ability to continue to acquire. We have the ability to grow our earnings. And all of this we’ve shown. And so the implied cap rate of 8.5 to 9% just feels wrong.

Simon Yarmak, Stifel Employee, Stifel: Thank you, team Postal. Thank you all of you in the audience for participating.

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