What changed in this filing

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Item 1. Financial Statements

2020-11-13 compared with 2020-08-14 · 987 added, 816 removed, 927 unchanged (66% of the section changed)

Financial Statements

REALTY TRUST, INC.

BALANCE SHEETS

Real estate properties

POSTAL REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

September 30,

Real estate properties, at cost:

Building and improvements

Tenant improvements

Total real estate properties

Total real estate properties, at cost

Accumulated depreciation

1 unchanged sentence

Total real estate properties, net

Investment in financing lease, net

Total investments

Rent and other receivables

14 unchanged sentences

Class A common stock, par value $0.01 per share;

500,000,000 shares authorized, 5,423,861 and 5,285,904 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

500,000,000 shares authorized, 9,449,352 and 5,285,904 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Class B common stock, par value $0.01 per share;

27,206 shares authorized:

27,206 shares issued and outstanding as of June 30, 2020 and December 31, 2019

27,206 shares issued and outstanding as of September 30, 2020 and December 31, 2019

Additional paid-in capital

6 unchanged sentences

$ 136,788,197

accompanying notes are an integral part of these unaudited consolidated financial statements.

REALTY TRUST, INC.

AND COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral

part of these unaudited consolidated financial statements.

POSTAL REALTY TRUST, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED

STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Rental income

8 unchanged sentences

Total operating expenses

Income from operations

Income (loss) from operations

Interest expense, net:

4 unchanged sentences

Total interest expense, net

(Loss) income before income tax expense

Income tax expense

Income (loss) before income tax expense

Income tax (expense) benefit

Net income attributable to non-controlling interest in properties

Net income attributable to Predecessor

Net loss attributable to Operating Partnership unitholders’

Net (income) loss attributable to Operating Partnership unitholders’

non-controlling interests

4 unchanged sentences

Basic and Diluted

accompanying notes are an integral part of these unaudited consolidated and combined consolidated financial statements.

REALTY TRUST, INC.

AND COMBINED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

The accompanying notes are an integral

part of these unaudited consolidated and combined consolidated financial statements.

POSTAL REALTY TRUST, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

shares of Common

37 unchanged sentences

June 30, 2019

Issuance and amortization of equity-based compensation

Net income (loss)

Reallocation of non-controlling interest

Balance - September 30, 2019

$ (1,034,471 )

Balance - December 31, 2019

16 unchanged sentences

$ (5,416,113 )

accompanying notes are an integral part of these unaudited consolidated and combined consolidated financial statements.

REALTY TRUST, INC.

AND COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

Net proceeds from sale of common stock

Amortization of equity-based compensation

Issuance and amortization under ESPP

Dividends declared ($0.205 per share)

Reallocation of non-controlling interest

Balance –

September 30, 2020

$ 101,303,229

$ (8,246,422 )

$ 121,147,119

The accompanying notes are an integral

part of these unaudited consolidated and combined consolidated financial statements.

POSTAL REALTY TRUST, INC.

CONSOLIDATED AND COMBINED CONSOLIDATED

STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

Cash flows from operating activities:

20 unchanged sentences

(38,925,771 )

Acquisition and other deposits

Investment in financing lease, net

Escrows for acquisition and construction deposits

Capital improvements

9 unchanged sentences

Repayments of revolving credit facility

(48,500,000 )

Proceeds from other financing activity

3 unchanged sentences

Debt issuance costs

Proceeds from issuance of shares

Proceeds from issuance of ESPP shares

Shares withheld for payment of taxes on restricted share vesting

6 unchanged sentences

Cash and Escrow and Reserves at the end of period

accompanying notes are an integral part of these unaudited consolidated and combined consolidated financial statements.

REALTY TRUST, INC.

TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

The accompanying notes are an integral

part of these unaudited consolidated and combined consolidated financial statements.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED

FINANCIAL STATEMENTS

Organization and Description of Business

Realty Trust, Inc.

Postal Realty Trust,

(the “Company”

“we”, “us”, or “our”) was organized in the state

of Maryland on November 19, 2018.

On May 17, 2019, the Company completed its initial public offering (“IPO”) of the

Company’s Class A common stock, par value $0.01 per share (our “Class A common stock”).

The Company contributed

the net proceeds from the IPO to Postal Realty LP, a Delaware limited partnership (the “Operating Partnership”), in

exchange for common units of limited partnership interest in the Operating Partnership (each, an “OP Unit,”

and collectively,

the “OP Units”).

Both the Company and the Operating Partnership commenced operations upon completion of the IPO and

certain related formation transactions (the “Formation Transactions”).

Prior to the completion of the IPO and the

Formation Transactions, the Company had no operations.

Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of

profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of OP Units.

sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage

and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners.

As of June 30, 2020, the Company held an approximately 65.7% interest in the Operating Partnership.

“we”, “us”, or “our”) was organized in the state of Maryland

on November 19, 2018.

On May 17, 2019, the Company completed its initial public offering (“IPO”) of the Company’s

Class A common stock, par value $0.01 per share (our “Class A common stock”).

The Company contributed the net proceeds

from the IPO to Postal Realty LP, a Delaware limited partnership (the “Operating Partnership”), in exchange for common

units of limited partnership interest in the Operating Partnership (each, an “OP Unit,”

and collectively, the “OP

Units”).

Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related

formation transactions (the “Formation Transactions”).

Prior to the completion of the IPO and the Formation Transactions,

the Company had no operations.

The Company’s

interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses

of, the Operating Partnership in proportion to the Company’s percentage ownership of OP Units.

As the sole general partner

and the majority interest holder, the Company consolidates the financial position and results of operations of the Operating Partnership.

The Operating Partnership is considered a variable interest entity (“VIE”) in which we are the primary beneficiary.

Predecessor (the “Predecessor”) is a combination of limited liability companies (the “LLCs”), one C-Corporation

(“UPH”), one S-Corporation (“NPM”) and one limited partnership.

The entities that comprise the Predecessor

were majority owned and controlled by Mr.

Andrew Spodek and his affiliates and were acquired by contribution to, or merger with,

the Company and the Operating Partnership.

Predecessor does not represent a legal entity.

The Predecessor and its related assets and liabilities were under common control

and were contributed to the Operating Partnership in connection with the Company’s IPO.

the periods prior to May 17, 2019, the Predecessor, through the LLCs, UPH and the limited partnership, owned 190 post office properties

in 33 states.

was formed on November 17, 2004, for the purpose of managing commercial real estate properties.

of June 30, 2020, the Company owned a portfolio of 568 postal properties located in 47 states.

Our properties were leased to a

single tenant, the United States Postal Service (the “USPS”).

addition, through its taxable REIT subsidiary (“TRS”), Postal Realty Management TRS, LLC (“PRM”), the

Company provides fee-based third party property management services for an additional 400 postal properties, which are owned by

Spodek and his affiliates, his family members and their partners.

Company, until May 15, 2019, was authorized to issue up to 600,000,000 shares of common stock, par value $0.01 per share.

15, 2019, in connection with the IPO, the Company amended its articles of incorporation such that the Company is currently authorized

to issue up to 500,000,000 shares of Class A common stock, 27,206 shares of Class B common stock, $0.01 par value per share (our

“Class B common stock”

of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage and conduct the Operating

Partnership’s business, subject to limited approval and voting rights of the limited partners.

As of September 30, 2020,

the Company held an approximately 76.9% interest in the Operating Partnership.

As the sole general partner and the majority interest

holder, the Company consolidates the financial position and results of operations of the Operating Partnership.

The Operating Partnership

is considered a variable interest entity (“VIE”) in which we are the primary beneficiary.

Our Predecessor (the

“Predecessor”) is a combination of limited liability companies (the “LLCs”), one C-Corporation (“UPH”),

one S-Corporation (“NPM”) and one limited partnership.

The entities that comprise the Predecessor were majority owned

and controlled by Mr.

Andrew Spodek and his affiliates and were acquired by contribution to, or merger with, the Company and the

Operating Partnership.

The Predecessor does

not represent a legal entity.

The Predecessor and its related assets and liabilities were under common control and were contributed

to the Operating Partnership in connection with the Company’s IPO.

For the periods prior

to May 17, 2019, the Predecessor, through the LLCs, UPH and the limited partnership, owned 190 post office properties in 33 states.

NPM was formed on November

17, 2004, for the purpose of managing commercial real estate properties.

As of September 30,

2020, the Company owned a portfolio of 691 postal properties located in 47 states.

Our properties were leased to a single tenant,

the United States Postal Service (the “USPS”).

In addition, through

its taxable REIT subsidiary (“TRS”), Postal Realty Management TRS, LLC (“PRM”), the Company provides fee-based

third party property management services for an additional 400 postal properties, which are owned by Mr.

Spodek and his affiliates,

his family members and their partners.

The Company, until

May 15, 2019, was authorized to issue up to 600,000,000 shares of common stock, par value $0.01 per share.

On May 15, 2019, in

connection with the IPO, the Company amended its articles of incorporation such that the Company is currently authorized to issue

up to 500,000,000 shares of Class A common stock, 27,206 shares of Class B common stock, $0.01 par value per share (our “Class

B common stock”

or “Voting Equivalency stock”), and up to 100,000,000 shares of preferred stock.

Company believes it has been organized in conformity with, and has operated in a manner that has enabled it to meet, the requirements

or qualification as a real estate investment trust (“REIT”) under the Code, and will elect to be taxed as a REIT under

the Code beginning with its short taxable year ended December 31, 2019 upon the filing of its federal income tax return for such

As a REIT, the Company generally will not be subject to federal income tax to the extent that it distributes its REIT taxable

income for each tax year to its stockholders.

REITs are subject to a number of organizational and operational requirements.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

The Company believes

it has been organized in conformity with, and has operated in a manner that has enabled it to meet, the requirements or qualification

as a real estate investment trust (“REIT”) under the Code, and the Company elected to be taxed as a REIT under the

Code beginning with its short taxable year ended December 31, 2019.

As a REIT, the Company generally will not be subject to federal

income tax to the extent that it distributes its REIT taxable income for each tax year to its stockholders.

REITs are subject to

a number of organizational and operational requirements.

to the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company qualifies as an emerging growth company (“EGC”).

3 unchanged sentences

The Company’s IPO and Formation Transactions

the Company and the Operating Partnership commenced operations upon completion of the IPO and the Formation Transactions on May

The Company’s operations are carried out primarily through the Operating Partnership and the wholly owned subsidiaries

of the Operating Partnership.

May 17, 2019, the Company completed its IPO, pursuant to which it sold 4,500,000 shares of its Class A common stock at a public

offering price of $17.00 per share.

The Company raised $76.5 million in gross proceeds, resulting in net proceeds of approximately

$71.1 million after deducting approximately $5.4 million in underwriting discounts and before giving effect to $6.4 million in

other expenses relating to the IPO.

The Company’s Class A common stock began trading on the New York Stock Exchange under

the symbol “PSTL”

Both the Company and

the Operating Partnership commenced operations upon completion of the IPO and the Formation Transactions on May 17, 2019.

The Company’s

operations are carried out primarily through the Operating Partnership and the wholly owned subsidiaries of the Operating Partnership.

On May 17, 2019, the

Company completed its IPO, pursuant to which it sold 4,500,000 shares of its Class A common stock at a public offering price of

$17.00 per share.

The Company raised $76.5 million in gross proceeds, resulting in net proceeds of approximately $71.1 million

after deducting approximately $5.4 million in underwriting discounts and before giving effect to $6.4 million in other expenses

relating to the IPO.

The Company’s Class A common stock began trading on the New York Stock Exchange under the symbol “PSTL”

on May 15, 2019.

REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

connection with the IPO and Formation Transactions, the Company, through its Operating Partnership, used a portion of the net

proceeds to repay approximately $31.7 million of outstanding indebtedness related to the Predecessor.

to the Formation Transactions, the Company, directly or through the Operating Partnership, acquired the entities that comprise

the Predecessor.

The initial properties and other interests were contributed in exchange for 1,333,112 OP Units, 637,058 shares

of Class A common stock, 27,206 shares of Voting Equivalency stock and $1.9 million of cash.

In addition, the Operating Partnership

purchased 81 post office properties (the “Acquisition Properties”) in exchange for $26.9 million in cash, including

approximately $1.0 million paid to Mr.

Spodek, the Company’s chief executive officer and a director for his non-controlling

ownership in nine of the Acquisition Properties.

Company’s results of operations for the three and six months ended June 30, 2019 reflect the results of operations of the

Predecessor together with the Company, while the financial condition as of December 31, 2019 and June 30, 2020 reflects solely

In connection with

the IPO and Formation Transactions, the Company, through its Operating Partnership, used a portion of the net proceeds to repay

approximately $31.7 million of outstanding indebtedness related to the Predecessor.

Pursuant to the Formation

Transactions, the Company, directly or through the Operating Partnership, acquired the entities that comprise the Predecessor.

The initial properties and other interests were contributed in exchange for 1,333,112 OP Units, 637,058 shares of Class A common

stock, 27,206 shares of Voting Equivalency stock and $1.9 million of cash.

In addition, the Operating Partnership purchased 81

post office properties (the “Acquisition Properties”) in exchange for $26.9 million in cash, including approximately

$1.0 million paid to Mr.

Spodek, the Company’s chief executive officer and a director for his non-controlling ownership in

nine of the Acquisition Properties.

The Company’s

results of operations for the three and nine months ended September 30, 2019 reflect the results of operations of the Predecessor

together with the Company, while the financial condition as of December 31, 2019 and September 30, 2020 reflects solely the Company.

References in these notes to consolidated financial statements to “Postal Realty Trust, Inc.”

the Company for the period after the completion of the IPO and the Formation Transactions and the Predecessor for all prior periods.

following is a summary of the Predecessor Statement of Operations for the period from April 1, 2019 through May 16, 2019 and for

the period from January 1, 2019 through May 16, 2019, and the Company’s Statement of Operations for the period from May

17, 2019 through June 30, 2019.

These amounts are included in the consolidated and combined consolidated statement of operations

herein for the three and six months ended June 30, 2019.

signify the Company for

the period after the completion of the IPO and the Formation Transactions and the Predecessor for all prior periods.

following is a summary of the Predecessor Statement of Operations for the period from January 1, 2019 through May 16, 2019, and

the Company’s Statement of Operations for the period from May 17, 2019 through September 30, 2019.

These amounts are included

in the Consolidated and Combined Consolidated Statement of Operations herein for the nine months ended September 30, 2019.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Postal Realty

September 30,

Rental income

23 unchanged sentences

Net loss attributable to common stockholders

REALTY TRUST, INC.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Summary of Significant Accounting Policies

of Presentation

accompanying unaudited Consolidated and Combined Consolidated Financial Statements include the financial position and results

of operations of the Company and its Predecessor, the Operating Partnership and its wholly owned subsidiaries.

The Company did

not have any operations from the date of formation to May 17, 2019.

The Predecessor represents a combination of certain entities

holding interests in real estate that were commonly controlled prior to the Formation Transactions.

Due to their common control,

the financial statements of the separate Predecessor entities which owned the properties and the management company are presented

on a combined consolidated basis.

Basis of Presentation

The accompanying unaudited

Consolidated and Combined Consolidated Financial Statements include the financial position and results of operations of the Company

and its Predecessor, the Operating Partnership and its wholly owned subsidiaries.

The Company did not have any operations from

the date of formation to May 17, 2019.

The Predecessor represents a combination of certain entities holding interests in real estate

that were commonly controlled prior to the Formation Transactions.

Due to their common control, the financial statements of the

separate Predecessor entities which owned the properties and the management company are presented on a combined consolidated basis.

The effects of all significant intercompany balances and transactions have been eliminated.

Company consolidates the Operating Partnership, a VIE in which the Company is considered the primary beneficiary.

beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic

performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could

be significant to the VIE.

non-controlling interest is defined as the portion of the equity in an entity not attributable, directly or indirectly, to the

Non-controlling interests are required to be presented as a separate component of equity in the Consolidated Balance

Accordingly, the presentation of net income (loss) reflects the income attributed to controlling and non-controlling interests.

accompanying consolidated and combined consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form

10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP for

complete financial statements.

interim financial information should be read in conjunction with the consolidated and combined consolidated financial statements

included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Management believes

that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included.

financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31,

The Company consolidates

the Operating Partnership, a VIE in which the Company is considered the primary beneficiary.

The primary beneficiary is the entity

that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the

obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

A non-controlling interest

is defined as the portion of the equity in an entity not attributable, directly or indirectly, to the Company.

Non-controlling

interests are required to be presented as a separate component of equity in the Consolidated Balance Sheets.

Accordingly, the presentation

of net income (loss) reflects the income attributed to controlling and non-controlling interests.

The accompanying consolidated

and combined consolidated financial statements have been prepared in accordance with accounting principles generally accepted in

the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of

Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

This interim financial

information should be read in conjunction with the consolidated and combined consolidated financial statements included in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Management believes that all adjustments

of a normal, recurring nature considered necessary for a fair presentation have been included.

This interim financial information

does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2020.

All material intercompany accounts and transactions have been eliminated.

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of

revenues and expenses during the reporting period.

Although management believes its estimates are reasonable, actual results could

differ from those estimates.

Use of Estimates

The preparation of

financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses

during the reporting period.

Although management believes its estimates are reasonable, actual results could differ from those

Reclassifications

prior period amounts have been reclassified to conform to the current period’s presentation.

and Escrows and Reserves

Certain prior period

amounts have been reclassified to conform to the current period’s presentation.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Cash and Escrows and Reserves

Cash includes unrestricted

cash with a maturity of three months or less.

Escrows and reserves consists of restricted cash.

The following table provides a

reconciliation of cash and escrows and reserves reported within the Company’s Consolidated Balance Sheets and Consolidated

and Combined Consolidated Statements of Cash Flows:

Escrows and reserves consist of restricted cash.

The following table provides a reconciliation

of cash and escrows and reserves reported within the Company’s Consolidated Balance Sheets and Consolidated and Combined

Consolidated Statements of Cash Flows:

September 30,

Escrows and reserves:

1 unchanged sentence

Cash and escrows and reserves

REALTY TRUST, INC.

Revenue Recognition

The Company has operating

lease agreements with tenants, some of which contain provisions for future rental increases.

Rental income is recognized on a straight-line

basis over the term of the lease.

In addition, certain lease agreements provide for reimbursements from tenants for real estate

taxes and other recoverable costs, which are recorded on an accrual basis as “Tenant reimbursement revenue”

Company’s Consolidated and Combined Consolidated Statement of Operations.

Fee and other income

primarily consist of property management fees.

These fees arise from contractual agreements with entities that are affiliated with

the Company’s CEO.

Management fee income is recognized as earned under the respective agreements.

The Company carries

liability insurance to mitigate its exposure to certain losses, including those relating to property damage and business interruption.

The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset

(typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds

is deemed probable.

Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency

and is not recorded in fee and other income until the proceeds are received.

Insurance recoveries for business interruption for

lost revenue or profit are accounted for as gain contingencies in their entirety, and therefore are not recorded in income until

the proceeds are received.

Revenue from direct

financing leases is recognized over the lease term using the effective interest rate method.

At lease inception, we record an asset

within investments on the Company’s consolidated balance sheets, which represents the Company’s net investment in the

direct financing lease.

This initial net investment is determined by aggregating the total future minimum lease payments attributable

to the direct financing lease and the estimated residual value of the property, if any, less unearned income.

lease term, the investment in the direct financing lease is reduced and income is recognized as revenue in “Fee

and other income”

on the Company’s Consolidated and Combined Consolidated Statement of Operations and produces a constant

periodic rate of return on the investment in direct financing lease, net.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Value of Financial Instruments

following disclosure of estimated fair value was determined by management using available market information and appropriate valuation

methodologies.

UNAUDITED (CONTINUED)

Fair Value of Financial Instruments

The following disclosure

of estimated fair value was determined by management using available market information and appropriate valuation methodologies.

However, considerable judgment is necessary to interpret market data and develop estimated fair value.

the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the assets

and liabilities as of June 30, 2020 and December 31, 2019.

The use of different market assumptions and/or estimation methodologies

may have a material effect on the estimated fair value amounts.

Cash, escrows and reserves, receivables, prepaid expenses, accounts

payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of June 30, 2020 and December

Accordingly, the estimates

presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the assets and liabilities

as of September 30, 2020 and December 31, 2019.

The use of different market assumptions and/or estimation methodologies may have

a material effect on the estimated fair value amounts.

Cash, escrows and reserves, receivables, prepaid expenses, accounts payable

and accrued expenses are carried at amounts which reasonably approximate their fair values as of September 30, 2020 and December

31, 2019 due to their short maturities.

fair value of the Company’s borrowings under its Credit Facility approximates carrying value.

The fair value of the Company’s

secured borrowings aggregated approximately $16.9 million and $3.2 million as compared to the principal balance of $16.9 million

and $3.2 million as of June 30, 2020 and December 31, 2019, respectively.

As of September 30,

2020, the Company had an investment in a direct financing lease with a carrying value of $0.5 million and an effective

interest rate of 7.89%.

The carrying value of the investment in a direct financing lease approximated the fair market

value as of September 30, 2020.

The fair value of the Company’s debt was categorized as a Level 3 basis (as provided

by ASC 820, Fair Value Measurements and Disclosures).

The fair value of the

Company’s borrowings under its Credit Facility approximates carrying value.

The fair value of the Company’s secured

borrowings aggregated approximately $16.9 million and $3.2 million as compared to the principal balance of $16.8 million and $3.2

million as of September 30, 2020 and December 31, 2019, respectively.

The fair value of the Company’s debt was categorized

5 unchanged sentences

and principal payments by a market rate.

about fair value of assets and liabilities is based on pertinent information available to management as of June 30, 2020 and December

Disclosure about fair

value of assets and liabilities is based on pertinent information available to management as of September 30, 2020 and December

Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts

have not been comprehensively revalued for purposes of these financial statements since June 30, 2020 and current estimates of

fair value may differ significantly from the amounts presented herein.

carrying value of real estate investments and related intangible assets are reviewed for impairment whenever events or changes

in circumstances indicate that the carrying amount may not be recoverable.

An impairment exists when the carrying amount of an

asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis.

An impairment

loss is measured based on the excess of the asset’s carrying amount over its estimated fair value.

Impairment analyses will

be based on current plans, intended holding periods and available market information at the time the analyses are prepared.

estimates of the projected future cash flows, anticipated holding periods or market conditions change, the evaluation of impairment

losses may be different and such differences may be material.

The evaluation of anticipated cash flows is subjective and is based,

in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual

No impairments were recorded during the three and six months ended June 30, 2020 and 2019.

Concentration

of Credit Risks

of June 30, 2020, the Company’s properties were leased to a single tenant, the USPS.

For the six months ended June 30, 2020,

no state had a concentration of rental income over 10% as a percentage of total rental income.

For the six months ended June 30,

have not been comprehensively revalued for purposes of these financial statements since September 30, 2020 and current estimates

of fair value may differ significantly from the amounts presented herein.

The carrying value

of real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount may not be recoverable.

An impairment exists when the carrying amount of an asset exceeds the

aggregate projected future cash flows over the anticipated holding period on an undiscounted basis.

An impairment loss is measured

based on the excess of the asset’s carrying amount over its estimated fair value.

Impairment analyses will be based on current

plans, intended holding periods and available market information at the time the analyses are prepared.

If estimates of the projected

future cash flows, anticipated holding periods or market conditions change, the evaluation of impairment losses may be different

and such differences may be material.

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions

regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

No impairments

were recorded during the three and nine months ended September 30, 2020 and 2019.

Concentration of Credit Risks

As of September 30,

2020, the Company’s properties were leased to a single tenant, the USPS.

For the nine months ended September 30, 2020, no

state had a concentration of rental income over 10% as a percentage of total rental income.

For the nine months ended September

30, 2019, our total rental income of $5.7 million was concentrated in the following states:

Texas (11.5%), Massachusetts (11.1%)

Wisconsin (10.9%) and Pennsylvania (10.2%).

The ability of the USPS to honor the terms of their leases is dependent upon regulatory,

economic, environmental or competitive conditions in any of these areas and could have an effect on our overall business results.

Company has deposited cash and maintains its bank deposits with large financial institutions in amounts that exceed federally

insured limits.

The Company has not experienced any losses in such accounts.

Based Compensation

Company accounts for equity-based compensation in accordance with ASC Topic 718 Compensation –

Stock Compensation, which

requires the Company to recognize an expense for the grant date fair value of equity-based awards.

Equity-classified stock awards

granted to employees and non-employees that have a service condition and/or a market condition are measured at fair value at date

of grant and remeasured at fair value only upon a modification of the award.

The Company will record forfeitures as they occur.

Company recognizes compensation expense on a straight-line basis over the requisite service period of each award, with the amount

of compensation expense recognized at the end of a reporting period at least equal the portion of fair value of the respective

award at grant date or modification date, as applicable, that has vested through that date.

For awards with a market condition,

compensation cost is not reversed if a market condition is not met so long as the requisite service has been rendered, as a market

condition does not represent a vesting condition.

Stockholder’s Equity for further details.

REALTY TRUST, INC.

and Pennsylvania (10.7%).

The ability of the USPS to honor the terms of their leases is dependent upon regulatory, economic, environmental

or competitive conditions in any of these areas and could have an effect on our overall business results.

The Company has deposited

cash and maintains its bank deposits with large financial institutions in amounts that exceed federally insured limits.

has not experienced any losses in such accounts.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

Company calculates net loss per share based upon the weighted average shares outstanding less issued and outstanding non-vested

shares of Class A common stock for the period beginning May 17, 2019.

Diluted earnings per share is calculated after giving effect

to all potential dilutive shares outstanding during the period.

There were 2,855,102 potentially dilutive shares outstanding related

to the issuance of OP Units and LTIP Units held by non-controlling interests as of June 30, 2020.

Application of Accounting Standards

February 2016, the FASB issued ASU 2016-02, Leases;

in July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic

842, Leases, and ASU 2018-11, Leases —

UNAUDITED (CONTINUED)

Equity Based Compensation

The Company accounts

for equity-based compensation in accordance with ASC Topic 718 Compensation –

Stock Compensation, which requires the Company

to recognize an expense for the grant date fair value of equity-based awards.

Equity-classified stock awards granted to employees

and non-employees that have a service condition and/or a market condition are measured at fair value at date of grant and remeasured

at fair value only upon a modification of the award.

The Company will record forfeitures as they occur.

The Company recognizes

compensation expense on a straight-line basis over the requisite service period of each award, with the amount of compensation

expense recognized at the end of a reporting period at least equal the portion of fair value of the respective award at grant date

or modification date, as applicable, that has vested through that date.

For awards with a market condition, compensation cost is

not reversed if a market condition is not met so long as the requisite service has been rendered, as a market condition does not

represent a vesting condition.

Stockholder’s

Equity for further details.

Earnings per Share

The Company calculates

net loss per share based upon the weighted average shares outstanding less issued and outstanding non-vested shares of Class A

common stock for the period beginning May 17, 2019.

Diluted earnings per share is calculated after giving effect to all potential

dilutive shares outstanding during the period.

There were 2,855,102 potentially dilutive shares outstanding related to the issuance

of OP Units and LTIP Units held by non-controlling interests as of September 30, 2020.

Future Application of Accounting Standards

In February 2016, the

FASB issued ASU 2016-02, Leases;

in July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and

ASU 2018-11, Leases —

Targeted Improvements;

and in December 2018, the FASB issued ASU 2018-20, Narrow-Scope

Improvements for Lessors.

and in December 2018, the FASB issued ASU 2018-20, Narrow-Scope Improvements

This group of ASUs is collectively referred to as Topic 842.

Topic 842 supersedes the existing standards

for lease accounting (Topic 840, Leases).

Topic 842 supersedes the existing standards for lease

accounting (Topic 840, Leases).

Topic 842 will be effective for the Company on January 1, 2021 as a result of its classification

as an emerging growth company.

Company expects to elect the practical expedients provided by Topic 842, including:

the package of practical expedients that allows

an entity not to reassess upon adoption (i) whether an expired or existing contract contains a lease, (ii) whether a lease classification

related to expired or existing lease arrangements, and (iii) whether costs incurred on expired or existing leases qualify as initial

direct costs, and as a lessor, the practical expedient not to separate certain non-lease components, such as common area maintenance,

The Company expects

to elect the practical expedients provided by Topic 842, including:

the package of practical expedients that allows an entity not

to reassess upon adoption (i) whether an expired or existing contract contains a lease, (ii) whether a lease classification related

to expired or existing lease arrangements, and (iii) whether costs incurred on expired or existing leases qualify as initial direct

costs, and as a lessor, the practical expedient not to separate certain non-lease components, such as common area maintenance,

from the lease component if the timing and pattern of transfer are the same for the non-lease component and associated lease component,

and the lease component would be classified as an operating lease if accounted for separately.

842 requires lessees to record most leases on their balance sheet through a right-of-use (“ROU”) model, in which a

lessee records an ROU asset and a lease liability on their balance sheet.

Leases that are less than 12 months do not need to be

accounted for under the ROU model.

Lessees will account for leases as financing or operating leases, with the classification affecting

the timing and pattern of expense recognition in the income statement.

Lease expense will be recognized based on the effective

interest method for leases accounted for as finance leases and on a straight-line basis over the term of the lease for leases

accounted for as operating leases.

As of June 30, 2020, the Company was the lessee under one office lease and one ground lease

that would require accounting under the ROU model.

accounting by a lessor under Topic 842 is largely unchanged from that of Topic 840.

Under Topic 842, lessors will continue to

account for leases as a sales-type, direct-financing, or operating.

A lease will be treated as a sale if it is considered to transfer

control of the underlying asset to the lessee.

A lease will be classified as direct-financing if risks and rewards are conveyed

without the transfer of control.

Topic 842 requires

lessees to record most leases on their balance sheet through a right-of-use (“ROU”) model, in which a lessee records

a ROU asset and a lease liability on their balance sheet.

Leases that are less than 12 months do not need to be accounted for under

the ROU model.

Lessees will account for leases as financing or operating leases, with the classification affecting the timing and

pattern of expense recognition in the income statement.

Lease expense will be recognized based on the effective interest method

for leases accounted for as finance leases and on a straight-line basis over the term of the lease for leases accounted for as

operating leases.

As of September 30, 2020, the Company was the lessee under one office lease and two ground leases that would

require accounting under the ROU model.

The accounting by a

lessor under Topic 842 is largely unchanged from that of Topic 840.

Under Topic 842, lessors will continue to account for leases

as a sales-type, direct-financing, or operating.

A lease will be treated as a sale if it is considered to transfer control of the

underlying asset to the lessee.

A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer

Otherwise, the lease is treated as an operating lease.

Topic 842 requires accounting for a transaction

as a financing in a sale leaseback in certain circumstances, including when the seller-lessee is provided an option to purchase

the property from the landlord at the tenant’s option.

The Company expects that this provision could change the accounting

for these types of leases in the future.

Topic 842 requires accounting for a transaction as a financing

in a sale leaseback in certain circumstances, including when the seller-lessee is provided an option to purchase the property from

the landlord at the tenant’s option.

The Company expects that this provision could change the accounting for these types

of leases in the future.

Topic 842 also includes the concept of separating lease and non-lease components.

Topic 842, non-lease components, such as common area maintenance, would be accounted for under Topic 606 and separated from the

lease payments.

However, the Company will elect the lessor practical expedient allowing the Company to not separate these components

when certain conditions are met.

Upon adoption of Topic 842, the Company expects to combine tenant reimbursements with rental

income on its consolidated statements of operations.

September 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

of Credit Losses on Financial Instruments and in November 2018 issued ASU No.

2018-19, Codification Improvements to Topic

326, Financial Instruments - Credit Losses .

The guidance changes how entities will measure credit losses for most financial

assets and certain other instruments that are not measured at fair value through net income.

The guidance replaces the current

‘incurred loss’

model with an ‘expected loss’

The Company will also be required to disclose

information about how it developed the allowances, including changes in the factors that influenced the Company’s estimate

of expected credit losses and the reasons for those changes.

2018-19 excludes operating lease receivables from the scope

of this guidance.

This guidance will be effective for the Company on January 1, 2023 as a result of its classification as an emerging

growth company.

The Company is currently in the process of evaluating the impact the adoption of the guidance will have on its

consolidated financial statements.

Under Topic 842, non-lease

components, such as common area maintenance, would be accounted for under Topic 606 and separated from the lease payments.

the Company will elect the lessor practical expedient allowing the Company to not separate these components when certain conditions

Upon adoption of Topic 842, the Company expects to combine tenant reimbursements with rental income on its consolidated

statements of operations.

POSTAL REALTY TRUST, INC.

1 unchanged sentence

UNAUDITED (CONTINUED)

In September 2016,

the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments and in November 2018 issued ASU No.

2018-19, Codification Improvements to Topic 326, Financial

Instruments - Credit Losses .

The guidance changes how entities will measure credit losses for most financial assets and certain

other instruments that are not measured at fair value through net income.

The guidance replaces the current ‘incurred loss’

model with an ‘expected loss’

The Company will also be required to disclose information about how it developed

the allowances, including changes in the factors that influenced the Company’s estimate of expected credit losses and the

reasons for those changes.

2018-19 excludes operating lease receivables from the scope of this guidance.

This guidance

will be effective for the Company on January 1, 2023 as a result of its classification as an emerging growth company.

is currently in the process of evaluating the impact the adoption of the guidance will have on its consolidated financial statements.

Real Estate Acquisitions

The following tables

summarizes the Company’s acquisitions for the six months ended June 30, 2020.

The purchase prices including transaction costs

were allocated to the separately identifiable tangible and intangible assets and liabilities based on their relative fair values

at the date of acquisition.

summarizes the Company’s acquisitions for the nine months ended September 30, 2020.

The purchase prices including transaction

costs were allocated to the separately identifiable tangible and intangible assets and liabilities based on their relative fair

values at the date of acquisition.

The total purchase price including transaction costs was allocated as follows:

4 unchanged sentences

June 30, 2020 (6)

September 30, 2020 (7)

$ (2,722,900 )

2 unchanged sentences

on the Company’s Consolidated Balance Sheets.

Includes acquisition costs of $0.3 million for the three months ended March 31, 2020 and $0.2 million for the three months ended June 30, 2020.

Includes acquisition costs of $0.3 million for the three months ended March 31, 2020, $0.2 million for the three months ended June 30, 2020 and $0.8 million for the three months ended September 30, 2020.

Includes the acquisition of a 21-building portfolio leased to the USPS.

5 unchanged sentences

Includes the acquisition of 20 postal properties in individual or smaller portfolio transactions for approximately $8.1 million, including closing costs.

the acquisition of a 13-building portfolio leased to the USPS in various states for approximately

$7.2 million, including closing costs.

In addition, the Company purchased six postal

properties in individual or smaller portfolio transactions for approximately $3.4 million,

including closing costs.

Includes the acquisition of a 13-building portfolio leased to the USPS in various states for approximately $7.2 million, including closing costs.

In addition, the Company purchased six postal properties in individual or smaller portfolio transactions for approximately $3.4 million, including closing costs.

Includes the acquisition of 122 postal properties in various states in individual or portfolio transactions for approximately $27.1 million, including closing costs, which was funded with borrowings under our Credit Facility.

In addition, the Company closed on one postal property which is a direct financing lease and is included in “Investment in financing lease, net”

on the Company’s Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Intangible Assets and Liabilities

2 unchanged sentences

(Amortization)/

June 30, 2020:

September 30, 2020:

In-place lease intangibles

9 unchanged sentences

Amortization of in-place

lease intangibles was $1.1 million and $2.2 million for the three and six months ended June 30, 2020, respectively and $0.4 million

and $0.6 million for the three and six months ended June 30, 2019, respectively.

This amortization is included in “Depreciation

and amortization”

lease intangibles was $1.2 million and $3.4 million for the three and nine months ended September 30, 2020, respectively and $0.6

million and $1.2 million for the three and nine months ended September 30, 2019, respectively.

This amortization is included in

“Depreciation and amortization”

on the Company’s Consolidated and Combined Consolidated Statements of Operations.

Amortization of acquired

above market leases was $3,576 and $6,682 for the three and six months ended June 30, 2020, respectively, and $2,616 and $4,986

for the three and six months ended June 30, 2019, respectively and is included in “Rental income”

above market leases was $5,213 and $11,895 for the three and nine months ended September 30, 2020, respectively, and $2,865 and

$7,851 for the three and nine months ended September 30, 2019, respectively and is included in “Rental income”

Company’s Consolidated and Combined Consolidated Statements of Operations.

Amortization of acquired below market leases was

$0.3 million and $0.9 million for the three and nine months ended September 30, 2020, respectively, and $0.1 million and $0.3 million

for the three and nine months ended September 30, 2019, respectively, and is included in “Rental income”

on the Company’s

Consolidated and Combined Consolidated Statements of Operations.

Amortization of acquired below market leases was $0.3 million

and $0.6 million for the three and six months ended June 30, 2020, respectively, and $0.1 million and $0.2 million for the three

and six months ended June 30, 2019, respectively, and is included in “Rental income”

on the Company’s Consolidated

and Combined Consolidated Statements of Operations.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Future amortization/accretion

4 unchanged sentences

The following table summarizes the Company’s

indebtedness as of June 30, 2020 and December 31, 2019:

indebtedness as of September 30, 2020 and December 31, 2019:

Balance as of

September 30,

Balance as of

Interest Rate

September 30,

Maturity Date

Revolving Credit Facility (1)

LIBOR+170bps (2)

September 2023

11 unchanged sentences

Unamortized deferred financing costs

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Explanatory Notes:

2 unchanged sentences

On January 30, 2020, the Company amended the Credit Agreement in order to exercise a portion of the Accordion Feature to increase the maximum amount available under the Credit Facility to $150.0 million, subject to the borrowing base properties identified therein remaining unencumbered and subject to an enforceable lease.

In May 2020, the Company determined that it had overdrawn its Credit Facility by approximately $5.1 million.

The Company satisfied such amount with a portion of the proceeds from the First Oklahoma Bank-June 2020 secured mortgage financing.

On June 25, 2020, the Company further amended the Credit Agreement to revise, among other items, certain definitions and borrowing base calculations to increase available capacity, as well as the restrictive covenant pertaining to Consolidated Tangible Net Worth (as defined in such amendment).

7 unchanged sentences

the aggregate unused revolving commitments, with both periods utilizing calculations of daily unused commitments under the Credit

During the three and six

months ended June 30, 2020, the Company incurred $0.1 million and $0.2 million, respectively, of unused fees related to the Credit

The Company’s ability to borrow under the Credit Facility is subject to ongoing compliance with a number of customary

affirmative and negative covenants.

As of June 30, 2020, the Company was in compliance with all of the Credit Facility’s

debt covenants.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

As of June 30, 2020, the one-month LIBOR rate was 0.16%.

Five properties are collateralized under this loan as of June 30, 2020 with Mr.

During the three and nine

months ended September 30, 2020, the Company incurred $0.1 million and $0.3 million, respectively, of unused fees related to the

Credit Facility.

The Company’s ability to borrow under the Credit Facility is subject to ongoing compliance with a number

of customary affirmative and negative covenants.

As of September 30, 2020, the Company was in compliance with all of the Credit

Facility’s debt covenants.

As of September 30, 2020, the one-month LIBOR rate was 0.15%.

Five properties are collateralized under this loan as of September 30, 2020 with Mr.

Spodek as the guarantor.

5 unchanged sentences

In connection with the acquisition of a property, we obtained seller financing secured by the property in the amount of $0.4 million requiring five annual payments of principal and interest of $105,661 with the first installment due on January 2, 2021 based on a 6.0% interest rate per annum through January 2, 2025.

(7) In connection with the purchase of a 13-building portfolio,

the Company obtained $4.5 million of mortgage financing, at a fixed interest rate of 4.25% with interest only for the first 18

months, which resets in November 2026 to the greater of Prime or 4.25%.

The financing matures in April 2040.

(8) The loan is collateralized by first mortgage liens

on 22 properties.

In connection with the purchase of a 13-building portfolio, the Company obtained $4.5 million of mortgage financing, at a fixed interest rate of 4.25% with interest only for the first 18 months, which resets in November 2026 to the greater of Prime or 4.25%.

The loan is collateralized by first mortgage liens on 22 properties.

Interest rates resets in January 2027 to the greater of Prime or 4.25%.

The financing matures in June 2040.

The weighted average

maturity date for our secured borrowing as of September 30, 2020 and December 31, 2019 was 18.8 years and 15.7 years, respectively.

The scheduled principal repayments

of indebtedness as of June 30, 2020 are as follows:

of indebtedness as of September 30, 2020 are as follows:

Year Ending December 31,

As of June 30, 2020,

all of the properties owned by the Company were occupied by a single tenant, the USPS.

Certain leases have expired and the balance

expire at various dates through November 30, 2029.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

As of September 30,

2020, all of our rental income is paid by a single tenant, the USPS.

Certain leases have expired and the balance expire at various

dates through November 30, 2029.

Future minimum lease

payments to be received as of June 30, 2020 under non-cancellable operating leases for the next five years and thereafter are as

payments to be received as of September 30, 2020 under non-cancellable operating leases for the next five years and thereafter

are as follows:

Year Ending December 31,

2 unchanged sentences

The above minimum lease payments to be received do not include reimbursements from the USPS for real estate taxes.

As of June 30, 2020, the leases at 43 of our properties had expired and the USPS was occupying such properties as a holdover tenant.

As of September

30, 2020, the leases at 58 of our properties were expired, and the USPS was occupying such properties as a holdover tenant.

In addition, the lease at one of our properties is a month to month lease.

Holdover rent is paid as the greater of market rent or the rent amount due under the expired lease.

Holdover rent is typically paid as the greater of

estimated market rent or the rent amount due under the expired lease.

The Company has received notice

on one property which the USPS intends to vacate in August 2021.

Direct Financing Lease

As of September 30,

2020, the Company has one direct financing lease agreement related to one of its postal properties.

The components of the Company’s

net investment in financing lease as of September 30, 2020 are summarized in the table below:

As of September 30,

Total minimum lease payment receivable

unearned income

Investment in financing lease, net

Future lease payments

to be received under the Company’s direct financing lease as of September 30, 2020 for the next five years and thereafter

are as follows:

Year Ending December 31,

POSTAL REALTY TRUST, INC.

1 unchanged sentence

UNAUDITED (CONTINUED)

During the nine months

ended September 30, 2020, the Company assumed an operating ground lease at two acquired properties which includes rent escalations

throughout the lease term (including renewal options).

Ground lease expense is included in “Property Operating Expenses”

on the Company’s Consolidated and Combined Consolidated Statements of Operations.

The table below

presents the future minimum ground lease payments as of September 30, 2020.

Year Ending December 31,

Impact of COVID-19

5 unchanged sentences

is not yet known and may result in an adverse impact to the Company’s tenant and operating results.

During the six months

ended June 30, 2020, the Company assumed an operating ground lease at one of our properties which includes rent escalations throughout

the lease term (including renewal options) and expires on September 30, 2059.

Ground lease expense is included in “Property

Operating Expenses”

on the Company’s Consolidated and Combined Consolidated Statements of Operations.

Year Ending December 31,

tax expense related to UPH for the three and six months ended June 30, 2019 was zero and $39,749 at an effective tax rate of 13.4%.

The effective tax rate for the three months and six months ended June 30, 2019 differs from the statutory rate of 21% due to certain

entities included in the combined consolidated financial statements that are not subject to tax at the entity level, state taxes

and interest and penalties from unrecognized tax benefits primarily related to the utilization of loss carryforwards.

three and six months ended June 30, 2020, the Company recorded a benefit of $9,657 due to finalizing certain state taxes filings

Income tax expense

related to UPH for the three and nine months ended September 30, 2019 was $0 and $39,749 at an effective tax rate of 13.4%.

effective tax rate for the three months and nine months ended September 30, 2019 differs from the statutory rate of 21% due to

certain entities included in the combined consolidated financial statements that are not subject to tax at the entity level, state

taxes and interest and penalties from unrecognized tax benefits primarily related to the utilization of loss carryforwards.

the three and nine months ended September 30, 2020, the Company recorded a benefit of $0 and $0.01 million, respectively, due to

finalizing certain state taxes filings of UPH.

In connection with

3 unchanged sentences

PRM generates income, resulting in federal and state corporate income tax liability for PRM.

three and six months ended June 30, 2020, income tax expense related to PRM was $14,582 and $24,779, respectively.

three and nine months ended September 30, 2020, income tax expense related to PRM was $0.02 million and $0.05 million, respectively.

During the three and

nine months ended September 30, 2020, the Company recorded income tax expense of $0.01 million related to certain state taxes.

The Company has unrecognized

tax benefits as of June 30, 2020 of $0.5 million which is inclusive of interest and penalties and a corresponding indemnification

tax benefits as of September 30, 2020 of $0.4 million which is inclusive of interest and penalties and a corresponding indemnification

asset which is recorded in prepaid expenses and other assets on the consolidated balance sheet.

During the three months ended September 30, 2020, the Company reversed $0.1 million of unrecognized tax benefits and the corresponding indemnification asset due to the

expiration of statute of limitations.

In connection with

11 unchanged sentences

taxable income or tax liabilities, we will continue to analyze the provisions of the CARES Act and related guidance as it is published.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Related Party Transactions

1 unchanged sentence

PRM recognized management

fee income of $0.2 million and $0.5 million for the three and six months ended June 30, 2020, respectively and the Predecessor

recognized management fee income of $0.1 million and $0.4 million for the three and six months ended June 30, 2019 from various

properties which were affiliated with Mr.

Following the IPO, PRM recognized management fee income of $0.1 million for the

three and six months ended June 30, 2019 from various properties which are affiliated with the Company’s CEO.

These amounts

are included in “Fee and other income”

on the Company’s Consolidated and Combined Consolidated Statements of

Accrued management fees receivable of $0.1 million and $0.08 million as of June 30, 2020 and December 31, 2019, respectively,

are included in “Rents and other receivables”

fee income of $0.3 million and $0.8 million for the three and nine months ended September 30, 2020, respectively and the Predecessor

recognized management fee income of $0.4 million for the nine months ended September 30, 2019 from various properties which were

affiliated with Mr.

Following the IPO, PRM recognized management fee income of $0.2 million and $0.4 million for the three

and nine months ended September 30, 2019, respectively from various properties which are affiliated with the Company’s CEO.

These amounts are included in “Fee and other income”

on the Company’s Consolidated and Combined Consolidated

Statements of Operations.

Accrued management fees receivable of $0.3 million and $0.08 million as of September 30, 2020 and December

31, 2019, respectively, are included in “Rents and other receivables”

on the Company’s Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Related Party Lease

11 unchanged sentences

17, 2019 and will expire on May 16, 2024.

Rental expenses associated with the office lease for the three and six months ended June

30, 2020 was $47,782 and $95,564, respectively, was recorded in “General and administrative expenses”

on the Company’s

Consolidated and Combined Consolidated Statements of Operations.

Rental expenses associated with the office lease for the three and nine months ended

September 30, 2020 was $0.05 million and $0.1 million, respectively, was recorded in “General and administrative expenses”

on the Company’s Consolidated and Combined Consolidated Statements of Operations.

The following table represents the Company’s

20 unchanged sentences

of any repayment or default) may not align with our interests and could result in a conflict of interest.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Earnings Per Share

5 unchanged sentences

For the Three Months Ended

For the Six Months Ended

September 30,

For the Nine Months Ended

September 30,

Numerator for earnings per share –

4 unchanged sentences

basic and diluted

$ (1,110,169 )

Denominator for earnings per share –

3 unchanged sentences

The combined statements of operations prior to May 17, 2019 represents the activity of the Predecessor and EPS was not applicable.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

Stockholder’s Equity

The Company issued

4,500,000 shares of Class A common stock in conjunction with the IPO resulting in net proceeds of approximately $71.1 million after

deducting approximately $5.4 million in underwriting discounts and before giving effect to $6.4 million in other expenses relating

In addition, the Company issued 637,058 shares of Class A common stock and 27,206 shares of Voting Equivalency stock

in connection with the Formation Transactions.

Each outstanding share of Voting Equivalency stock entitles its holder to 50 votes

on all matters on which Class A common stockholders are entitled to vote, including the election of directors, and holders

of shares of Class A common stock and Voting Equivalency stock will vote together as a single class.

Shares of Voting Equivalency

stock are convertible into shares of Class A common stock, on a one-for-one basis, at the election of the holder at any time.

Additionally, one share of Voting Equivalency stock will automatically convert into one share of Class A common stock for

each 49 OP Units transferred (including by the exercise of redemption rights afforded with respect to OP Units) to a person other

than a permitted transferee.

This ratio is a function of the fact that each share of Voting Equivalency stock entitles its holder

to 50 votes on all matters on which Class A common stockholders are entitled to vote and maintains the voting proportion of

holders of Voting Equivalency stock with the holder’s economic interest in our Company.

4.5 million shares of Class A common stock in conjunction with the IPO resulting in net proceeds of approximately $71.1 million

after deducting approximately $5.4 million in underwriting discounts and before giving effect to $6.4 million in other expenses

relating to the IPO.

In addition, the Company issued 637,058 shares of Class A common stock and 27,206 shares of Voting Equivalency

stock in connection with the Formation Transactions.

Each outstanding share of Voting Equivalency stock entitles its holder to

50 votes on all matters on which Class A common stockholders are entitled to vote, including the election of directors, and

holders of shares of Class A common stock and Voting Equivalency stock will vote together as a single class.

Shares of Voting

Equivalency stock are convertible into shares of Class A common stock, on a one-for-one basis, at the election of the holder

Additionally, one share of Voting Equivalency stock will automatically convert into one share of Class A common

stock for each 49 OP Units transferred (including by the exercise of redemption rights afforded with respect to OP Units) to a

person other than a permitted transferee.

This ratio is a function of the fact that each share of Voting Equivalency stock entitles

its holder to 50 votes on all matters on which Class A common stockholders are entitled to vote and maintains the voting proportion

of holders of Voting Equivalency stock with the holder’s economic interest in our Company.

On July 15, 2020, the

Company priced a public offering of 3.5 million shares of its Class A Common Stock (the “Follow-on Offering”) at $13.00

On July 17, 2020, the underwriters purchased an additional 521,840 shares pursuant to a 30-day option to purchase up

to an additional 525,000 shares at $13.00 per share (the “Additional Shares”).

The Follow-on Offering, including the

Additional Shares, closed on July 20, 2020 resulting in $52.2 million in gross proceeds, and approximately $49.4 million in net

proceeds after deducting approximately $2.9 million in underwriting discounts and before giving effect to $0.9 million in other

estimated expenses relating to the Follow-on Offering.

During the three and

six months ended June 30, 2020, the Board approved and the Company declared and paid dividends of $1.7 million and $3.1 million,

nine months ended September 30, 2020, the Board approved and the Company declared and paid dividends of $2.5 million and $5.6 million,

respectively, to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $0.575 per

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April 30, 2020

July 30, 2020

August 14, 2020

August 31, 2020

Non-controlling Interests

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and LTIP Units primarily issued to the Company’s CEO in connection with the IPO and in lieu of cash compensation.

the six months ended June 30, 2020, the Company issued 483,333 OP Units in January 2020 in connection with a portfolio that the

Company acquired, 53,230 LTIP Units in February 2020 to the Company’s CEO for his 2019 incentive bonus, 13,708 LTIP Units

the nine months ended September 30, 2020, the Company issued 483,333 OP Units in January 2020 in connection with a portfolio that

the Company acquired, 53,230 LTIP Units in February 2020 to the Company’s CEO for his 2019 incentive bonus, 13,708 LTIP Units

in March 2020 to the Company’s CEO and 27,365 LTIP Units in May 2020 to the Company’s CEO for his salary for the

period of May 18, 2020 to December 31, 2020.

As of June 30, 2020, and

December 31, 2019, non-controlling interests consisted of 2,640,795 OP Units and 214,307 LTIP Units and 2,157,462 OP Units and

120,004 LTIP Units, respectively.

This represented approximately 34.3% and 30.0% of the outstanding Operating Partnership units

as of June 30, 2020 and December 31, 2019, respectively.

Operating Partnership units and shares of common stock have essentially

the same economic characteristics, as they share equally in the total net income or loss distributions of the Operating Partnership.

Beginning on or after the date which is 12 months after the later of (i) the completion of the IPO or (ii) the date on which a

person first became a holder of common units, each limited partner and assignees of limited partners will have the right, subject

to the terms and conditions set forth in the partnership agreement to require the Operating Partnership to redeem all or a portion

of the OP Units held by such limited partner or assignee in exchange for cash, or at the Company's sole discretion, in shares

of the Company’s Class A common stock, on a one-for-one basis determined in accordance with and subject to adjustment under

the partnership agreement.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

As of September 30,

2020, and December 31, 2019, non-controlling interests consisted of 2,640,795 OP Units and 214,307 LTIP Units and 2,157,462 OP

Units and 120,004 LTIP Units, respectively.

This represented approximately 23.1% and 30.0% of the outstanding Operating Partnership

units as of September 30, 2020 and December 31, 2019, respectively.

Operating Partnership units and shares of common stock have

essentially the same economic characteristics, as they share equally in the total net income or loss distributions of the Operating

Beginning on or after the date which is 12 months after the later of (i) the completion of the IPO or (ii) the date

on which a person first became a holder of common units, each limited partner and assignees of limited partners will have the right,

subject to the terms and conditions set forth in the partnership agreement to require the Operating Partnership to redeem all or

a portion of the OP Units held by such limited partner or assignee in exchange for cash, or at the Company’s sole discretion,

in shares of the Company’s Class A common stock, on a one-for-one basis determined in accordance with and subject to

adjustment under the partnership agreement.

The Operating Partnership

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stockholders approved such amendment on June 26, 2020.

As of June 30, 2020, the remaining shares available under the Plan for future

issuance was 751,697.

The Plan provides for grants of stock options, stock awards, stock appreciation rights, performance units,

incentive awards, other equity-based awards (including LTIP units) and dividend equivalents in connection with the grant of performance

units and other equity-based awards.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

As of September 30, 2020, the remaining shares available under the Plan

for future issuance was 751,697.

The Plan provides for grants of stock options, stock awards, stock appreciation rights, performance

units, incentive awards, other equity-based awards (including LTIP units) and dividend equivalents in connection with the grant

of performance units and other equity-based awards.

The following table

presents a summary of restricted stock, LTIP Units and RSUs.

The balance as of June 30, 2020 represents unvested shares

The balance as of September 30, 2020 represents unvested shares

of restricted stock and LTIP Units and RSUs that are outstanding, whether vested or not:

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Vesting of restricted shares (5)

Outstanding, as of June 30, 2020

Outstanding, as of September 30, 2020

Explanatory Notes:

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vest over one to three years.

LTIP units to our officers

and employees typically vest over three to eight years.

During the six months ended June

30, 2020, 2,843 LTIPs issued to an employee vested as a result of a modification of the award

and 13,708 LTIPs to the Company’s CEO.

In May 2020, pursuant to the Plan, the Company

issued 27,365 LTIP Units to the Company’s CEO in lieu of his salary payable for the

period from the one-year anniversary of the IPO to December 31, 2020.

LTIP Units issued

to the Company’s CEO in lieu of cash compensation cliff vest on the eighth anniversary

of the date of grant.

Includes 38,672 RSUs granted to certain officers of the Company during the six months ended June 30, 2020 subject to the achievement of a service condition and a market condition.

LTIP units to our officers and employees typically vest over three to eight years.

During the nine months ended September 30, 2020, 2,843 LTIPs issued to an employee vested as a result of a modification of the award and 13,708 LTIPs to the Company’s CEO.

In May 2020, pursuant to the Plan, the Company issued 27,365 LTIP Units to the Company’s CEO in lieu of his salary payable for the period from the one-year anniversary of the IPO to December 31, 2020.

LTIP Units issued to the Company’s CEO in lieu of cash compensation cliff vest on the eighth anniversary of the date of grant.

Includes 38,672 RSUs granted to certain officers of the Company during the nine months ended September 30, 2020 subject to the achievement of a service condition and a market condition.

Such RSUs are market-based awards and are subject to the achievement of hurdles relating to the Company’s absolute total stockholder return and continued employment with the Company over the approximately three-year period from the grant date through December 31, 2022.

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RSUs reflect the right to receive shares of Class A common stock, subject to the applicable vesting criteria.

(5) Includes 49,839 of restricted shares that vested and

11,342 shares of restricted shares that were withheld to satisfy minimum statutory withholding requirements.

Includes 49,839 of restricted shares that vested and 11,342 shares of restricted shares that were withheld to satisfy minimum statutory withholding requirements.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

During the three and

six months ended June 30, 2020, the Company recognized compensation expense of $0.5 million and $1.2 million, respectively, and

during the three and six months ended June 30, 2019 the Company recognized $0.2 million, related to all awards which is recorded

in “General and administrative”

on the Company’s Consolidated and Combined Consolidated Statements of Operations.

The fair value of restricted shares that

vested during the six months ended June 30, 2020 was $1.0 million.

As of June 30, 2020, there was $6.6

million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted

average period of 4.25 years.

nine months ended September 30, 2020, the Company recognized compensation expense of $0.6 million and $1.8 million, respectively,

and during the three and nine months ended September 30, 2019 the Company recognized $0.4 million and $0.6 million, respectively,

related to all awards.

The fair value of restricted

shares that vested during the nine months ended September 30, 2020 was $1.0 million.

As of September 30, 2020,

there was $6.1 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized

over a weighted average period of 4.0 years.

Employee Stock Purchase Plan

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of the offering period and the close of the offering period.

As of June 30, 2020, 3,538 shares have been issued under the ESPP

since commencement.

During the three and six months ended June 30, 2020, the Company recognized compensation expense of $1,557

and $10,102 which is recorded in “General and administrative”

on the Company’s Consolidated and Combined Consolidated

Statements of Operations.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED AND COMBINED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED (CONTINUED)

As of September 30, 2020, 7,189 shares have been issued under the

ESPP since commencement.

During the three and nine months ended September 30, 2020, the Company recognized compensation expense

of $11,795 and $21,897.

Commitments and Contingencies

As of June 30, 2020,

the Company was not involved in any litigation nor to its knowledge is any litigation threatened against the Predecessor or the

Company, as applicable, that, in management’s opinion, would result in any material adverse effect on the Company’s

As of September 30,

2020, the Company was not involved in any litigation nor to its knowledge is any litigation threatened against the Predecessor

or the Company, as applicable, that, in management’s opinion, would result in any material adverse effect on the Company’s

financial position, or which is not covered by insurance.

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Subsequent Events

On July 8, 2020, the

Company borrowed an additional $4.5 million under the Credit Facility.

On July 15, 2020, the

Company priced a public offering of 3.5 million shares of its Class A Common Stock (the “Follow-on Offering”) at $13.00

On July 17, 2020, the underwriters purchased an additional 521,840 shares pursuant to a 30-day option to purchase up

to an additional 525,000 shares at $13.00 per share (the “Additional Shares”).

The Follow-on Offering, including the

Additional Shares, closed on July 20, 2020 resulting in $52.2 million in gross proceeds, and approximately $49.4 million in net

proceeds after deducting approximately $2.9 million in underwriting discounts and before giving effect to $0.9 million in other

estimated expenses relating to the Follow-on Offering.

On July 17, 2020, the

Company borrowed an additional $6.5 million under the Credit Facility.

On July 24, 2020, the

Company paid down approximately $42.0 million under the Credit Facility with a portion of the proceeds received from the Follow-on

On July 30, 2020, the

Company's Board of Directors approved, and the Company declared a second quarter common stock dividend of $0.205 per share

which is payable on August 31, 2020 to stockholders of record as of August 14, 2020.

On August 7, 2020,

On October 30, 2020,

the Company borrowed an additional $3.0 million under the Credit Facility.

Currently, the Company had $39.5 million drawn on its

Credit Facility.

As of August 11, 2020,

we purchased 98 postal properties for approximately $23.4 million during the period subsequent to June 30, 2020.

As of August 11, 2020,

the Company had entered into definitive agreements to acquire postal properties leased to the USPS for approximately $3.7 million.

Formal due diligence has been completed and the majority of these transactions are expected to close during the third quarter of

2020, subject to the satisfaction of customary closing conditions.

As of the date of this report, the Company has $52.0

million drawn on its Credit Facility.

On October 30, 2020,

the Company’s Board of Directors approved, and the Company declared a third quarter common stock dividend of $0.215

per share which is payable on November 30, 2020 to stockholders of record as of November 16, 2020.

As of November 11,

2020, the Company closed on the acquisitions of 14 postal properties for approximately $8.0 million during the period subsequent

to September 30, 2020.

As of November 11,

2020, the Company had entered into agreements to acquire 12 postal properties for approximately $10.1 million.

The majority of

these transactions are anticipated to close during the fourth quarter of 2020, subject to the satisfaction of customary closing

Furthermore, the Company has signed a material agreement for an industrial building in Warrendale, Pennsylvania

for $47.0 million.

The USPS occupies 73% of this property as a distribution facility.

The Company is currently performing formal

due diligence procedures customary for this transaction and cannot provide assurance as to the timing of when, or on what terms,

the transaction will close, if at all.

Current Lease Renewal and Revised

USPS Lease Form

As of August 11, 2020,

the leases at 55 of our properties (consisting of one lease for which the lease expired in 2018 which we acquired in July 2020,

21 properties for which leases expired in 2019, including two leases that expired as of the date of our acquisition, and 33 properties

for which leases expired in 2020) had expired and the USPS is occupying such properties as a holdover tenant, representing an aggregate

annualized rental income of $2.4 million.

As of the date of this report, the USPS has not vacated or notified us of its intention

to vacate any of these 55 properties.

The Company has received all holdover rent on a month to month basis, with the USPS paying

the greater of estimated market rent or the rent amount due under the expired lease.

The USPS has adopted

a revised form of our modified double-net lease, which transfers the responsibility for additional maintenance expenses and obligations

to the landlord, including some components of plumbing and electrical systems.

As of the date of this report, we have not renewed

or entered into revised leases for any of our leases with the USPS that are currently in holdover.

In addition, we have not entered

into any definitive agreement or addendum with to respect to the leases at the properties for which the USPS occupies as a holdover

As of November

11, 2020, we have executed 29 leases with respect to the total of all leases that have expired in 2019 or 2020, or will

expire in 2020.

As of the same date, the leases at 52 of our properties (consisting of one lease for which the lease expired

in 2018 which we acquired in July 2020, 15 properties for which leases expired in 2019, including six leases that expired as

of the date of our acquisition, and 36 properties for which leases expired in 2020) were expired and the USPS is occupying

such properties as a holdover tenant, aggregating approximately $2.5 million in annualized rental income.

As of November 11,

2020, the USPS has not vacated any of these 52 properties.

The Company has received all holdover rent on a month-to-month

basis, with the USPS typically paying the greater of estimated market rent or the rent amount under the expired lease.

USPS has adopted a revised form of our modified double-net lease, which transfers the responsibility for additional maintenance

expenses and obligations to the landlord, including some components of plumbing and electrical systems.

As of November 11, 2020,

we have entered into 29 leases reflecting this revised form, including an addendum, as applicable, to its revised form of lease

for leases acquiring annual rent in excess of $25,000, pursuant to which documentation requirements are streamlined and some of

the new responsibilities placed on the landlord by the USPS’

revised form of our modified double-net lease would be mitigated

for leases that expired in 2019 or 2020, or will expire in 2020.

MANAGEMENT’S DISCUSSION

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lack or insufficient amounts of insurance;

limitations imposed on our business in order to qualify and maintain our status as a REIT and our failure to qualify for or maintain such status;

limitations imposed on our business in order to maintain our status as a REIT and our failure to maintain such status;

public health threats such as COVID-19.

While forward-looking

statements reflect our good faith beliefs, they are not guarantees of future performance.

We disclaim any obligation to publicly

update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data

or methods, future events or other changes after the date of this Quarterly Report on Form 10-Q, except as required by applicable

You should not place undue reliance on any forward-looking statements that are based on information currently available to

us or the third parties making the forward-looking statements.

For a further discussion of these and other factors that could impact

our future results, performance or transactions, see Item 1A titled “Risk Factors”

in this Quarterly Report and in

our Annual Report on Form 10-K for the year ended December 31, 2019.

While forward-looking statements reflect

our good faith beliefs, they are not guarantees of future performance.

We disclaim any obligation to publicly update or revise

any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future

events or other changes after the date of this Quarterly Report on Form 10-Q, except as required by applicable law.

not place undue reliance on any forward-looking statements that are based on information currently available to us or the third

parties making the forward-looking statements.

For a further discussion of these and other factors that could impact our future

results, performance or transactions, you should carefully review and consider (i) the information contained under Item 1A titled

“Risk Factors”

herein, in our Annual Report on Form 10-K and in our quarterly reports on Form 10-Q and (ii) such similar

information as may be contained in our other reports and filings that we make with the SEC.

We were formed as a

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other subsidiaries.

We will elect to be

treated as a REIT under the Code beginning with our short taxable year ended December 31, 2019, upon the filing of our federal

income tax return for such year.

As long as we qualify and maintain our qualification as a REIT, we generally will not be subject

to federal income tax to the extent that we distribute our taxable income for each tax year to our stockholders.

We elected to be treated

as a REIT under the Code beginning with our short taxable year ended December 31, 2019.

As long as we maintain our qualification

as a REIT, we generally will not be subject to federal income tax to the extent that we distribute our taxable income for each

tax year to our stockholders.

We are the sole general

partner of our Operating Partnership through which our postal properties are directly or indirectly owned.

As of September 30,

2020, we owned approximately 76.9% of the outstanding common units of limited partnership interest in the Operating Partnership

(each, an “OP Unit,”

and collectively, the “OP Units”) including long term incentive units of the Operating

Partnership (each, an “LTIP Unit”

and collectively, the “LTIP Units”).

Our Board oversees our business

Initial Public Offering

On May 17, 2019, we

completed our IPO, pursuant to which we sold 4,500,000 shares of our Class A common stock, par value $0.01 per share (our “Class

completed our IPO, pursuant to which we sold 4.5 million shares of our Class A common stock, par value $0.01 per share (our “Class

A common stock”), at a public offering price of $17.00 per share.

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his affiliates in exchange for the Predecessor properties and interests.

We are the sole general

partner of our Operating Partnership through which our postal properties are directly or indirectly owned.

As of June 30, 2020,

we owned approximately 65.7% of the outstanding common units of limited partnership interest in the Operating Partnership (each,

an “OP Unit,”

and collectively, the “OP Units”) including long term incentive units of the Operating Partnership

(each, an “LTIP Unit”

and collectively, the “LTIP Units”).

Our Board oversees our business and affairs.

Follow-on Offering

On July 15, 2020, we priced

a public offering of 3.5 million shares of our Class A Common Stock (the “Follow-on Offering”) at $13.00 per share.

On July 17, 2020, the underwriters purchased an additional 521,840 shares pursuant to a 30-day option to purchase up to an additional

525,000 shares at $13.00 per share (the “Additional Shares”).

The Follow-on Offering, including the Additional Shares,

closed on July 20, 2020 resulting in $52.2 million in gross proceeds and approximately $49.4 million in net proceeds after deducting

approximately $2.9 million in underwriting discounts and before giving effect to $0.9 million in other estimated expenses relating

to the Follow-on Offering.

On July 15, 2020, we

priced a public offering of 3.5 million shares of our Class A Common Stock (the “Follow-on Offering”) at $13.00 per

On July 17, 2020, the underwriters purchased an additional 521,840 shares pursuant to a 30-day option to purchase up to

an additional 525,000 shares at $13.00 per share (the “Additional Shares”).

The Follow-on Offering, including the Additional

Shares, closed on July 20, 2020 resulting in $52.2 million in gross proceeds and approximately $49.4 million in net proceeds after

deducting approximately $2.9 million in underwriting discounts and before giving effect to $0.9 million in other estimated expenses

relating to the Follow-on Offering.

Executive Overview

We are an internally

managed REIT with a focus on acquiring and managing properties leased to the USPS.

We believe the overall opportunity for consolidation

that exists in the sector is very attractive.

We continue to execute our strategy to acquire and consolidate postal properties

that we believe will generate strong earnings for our shareholders.

managed REIT with a focus on acquiring and managing properties primarily leased to the USPS.

We believe the overall opportunity

for consolidation that exists in the sector is very attractive.

We continue to execute our strategy to acquire and consolidate

postal properties primarily leased to the USPS that we believe will generate strong earnings for our shareholders.

At the completion of

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of 872,000 net leasable interior square feet, all of which were leased to the USPS.

As of June 30, 2020, our portfolio consisted

of 568 owned postal properties, located in 47 states and comprising approximately 1.8 million net leasable interior square feet.

As of September 30, 2020, our portfolio consisted

of 691 owned postal properties (including properties accounted for as finance leases), located in 47 states and comprising approximately

2.1 million net leasable interior square feet.

Q32020 Highlights

Acquisitions and Related Financings

on the acquisition of a 13-property portfolio leased to the USPS for approximately $7.2 million, including closing

In connection, with the purchase we obtained $4.5 million of mortgage financing at a fixed interest rate of

4.25%, with interest-only payments due for the first 18 months.

The financing matures in April 2040.

Closed on the acquisition of 6 additional postal properties leased to the USPS in individual or smaller portfolio transactions for approximately $3.4 million, including closing costs.

On June 8, 2020, we obtained $9.2 million

mortgage financing at a fixed interest rate of 4.25%, with interest-only payments due for the first 18 months.

financing matures in June 2040.

On June 25, 2020, the Company further amended the Credit Agreement to revise, among other items, certain definitions and borrowing base calculations to increase available capacity, the restrictive covenants related to Consolidated Tangible Net Worth.

Our Board of Directors approved and we declared a first quarter common stock dividend of $0.20 per share which was paid on May 29, 2020 to stockholders of record on May 11, 2020.

Closed on the acquisition of 123 postal properties in various states in individual or portfolio transactions for approximately $27.6 million, including closing costs, which was funded with borrowings under our Credit Facility.

Completed our Follow-on Offering on July 20, 2020 for 4.0 million shares priced at $13.00 per share resulting in $52.2 million in gross proceeds and approximately $49.4 million in net proceeds after deducting $2.9 million in underwriting discounts and before giving effect to $0.9 million in other estimated expenses relating to the Follow-on Offering

Our Board of Directors approved, and we declared a second quarter common stock dividend of $0.205 per share which was paid on August 31, 2020 to stockholders of record on August 14, 2020.

Emerging Growth Company

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pandemic continues to present uncertainty and risk with respect to the Company’s operations and the operations of the USPS,

which could adversely affect the Company and its financial performance Although the Company has received all of its July rents

which could adversely affect the Company and its financial performance Although the Company has received all of its October rents

and payments due from holdover tenants and has not received any request for rent concessions as of the date of this Quarterly Report,

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obligations when due.

Further, although the Coronavirus Aid, Relief, and Economic Security (CARES) Act includes a $10 billion loan

to the USPS, there can be no assurances that this financing will be approved or sufficient to sustain USPS operations in light

of current shortfalls resulting from reduced mail volumes.

In relation thereto,

the ongoing COVID-19 pandemic and measures being taken to prevent its spread has resulted in a reduction in foot traffic in many

public places, including post office properties.

A continued reduction in the use of in-person services may reduce the demand for

post office properties by the USPS and our results of operations could decline as a result.

The ongoing COVID-19 pandemic has also

caused a decline in mail volume, particularly in advertising conducted through the mail, which may adversely affect the USPS’s

financial condition, and therefore the demand for post office properties.

Continued reduction or permanent changes to mail volume

could reduce demand for postal properties and materially adversely affect our result of operations.

Finally, as a result

of (i) the proposed and executed operational, managerial and strategic changes within the USPS and (ii) the ongoing COVID-19 pandemic,

which significantly increased the number of absentee ballots utilized for the 2020 presidential election, the USPS is the focal

point of recent litigation.

As of November 2020, twelve lawsuits have been filed against Mr.

DeJoy, the USPS and President Donald

Trump pertaining to operational changes at the USPS, mail delays and mail-in voting for the 2020 presidential election.

a result of any backlogs, political rhetoric or litigation, the USPS suffers reputational or financial harm or an increase in regulatory

scrutiny, the demand for USPS services may decline, which may lead to reduced demand for USPS properties.

The results of these

changes or any future changes could lead to additional delays or financing shortfalls for the USPS.

We derive revenues

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partners pursuant to the management agreements and typically is a percentage of the lease revenue for the managed property.

of June 30, 2020, all properties leased to the USPS had an average remaining lease term of 2.41 years.

Factors that could affect

our rental income, tenant reimbursement and fee and other income in the future include, but are not limited to:

(i) our ability

to renew or replace expiring leases and management agreements;

of September 30, 2020, all properties leased to the USPS had an average remaining lease term of 3.44 years.

Factors that could

affect our rental income, tenant reimbursement and fee and other income in the future include, but are not limited to:

ability to renew or replace expiring leases and management agreements;

(ii) local, regional or national economic conditions;

(iii) an oversupply

of, or a reduction in demand for, post office space;

an oversupply of, or a reduction in demand for, post office space;

(iv) changes in market rental rates;

(v) changes to the USPS’s current

property leasing program or form of lease;

(v) changes to the USPS’s

current property leasing program or form of lease;

and (vi) our ability to provide adequate services and maintenance at our properties

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General and administrative

expenses include employee compensation costs (including equity-based compensation), professional fees, legal fees, insurance, consulting

fees, portfolio servicing costs and other expenses related to corporate governance, filing reports with the United States Securities

and Exchange Commission (the “SEC”) and the NYSE, and other compliance matters.

Our Predecessor was privately owned

and historically did not incur costs that we incur as a public company.

In addition, while we expect that our general and administrative

expenses will continue to rise as our portfolio grows, we expect that such expenses as a percentage of our revenues will decrease

over time due to efficiencies and economies of scale.

expense represents personnel costs, professional fees, legal fees, insurance, consulting fees, portfolio servicing costs and other

expenses related to corporate governance, filing reports with the United States Securities and Exchange Commission (the “SEC”)

and the NYSE, and other compliance matters.

Our Predecessor was privately owned and historically did not incur costs that we incur

as a public company.

In addition, while we expect that our general and administrative expenses will continue to rise as our portfolio

grows, we expect that such expenses as a percentage of our revenues will decrease over time due to efficiencies and economies of

Equity-Based Compensation Expense

equity-based compensation expense is recognized in our consolidated statements of operations as components of general

and administrative expense and property operating expenses.

We issue share-based awards to align our employees’

with those of our investors.

Depreciation and Amortization

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Net Worth (as defined in such amendment).

As of June 30, 2020, the leases at 43 of our properties had expired and the USPS was

occupying such properties as a holdover tenant, thereby excluding such properties from being part of the borrowing base under our

Credit Facility We intend to use the Credit Facility for working capital purposes, which may include repayment of mortgage indebtedness,

property acquisitions and other general corporate purposes.

Consistent with the method adopted by our Predecessor, we amortize

on a non-cash basis the deferred financing costs associated with its debt to interest expense using the straight-line method, which

approximates the effective interest rate method over the terms of the related loans.

Any changes to the debt structure, including

debt financing associated with property acquisitions, could materially influence the operating results depending on the terms of

any such indebtedness.

As of September 30, 2020, the leases at 58 of our properties were expired and the USPS

was occupying such properties as a holdover tenant, thereby excluding such properties from being part of the borrowing base under

our Credit Facility We intend to use the Credit Facility for working capital purposes, which may include repayment of mortgage

indebtedness, property acquisitions and other general corporate purposes.

Consistent with the method adopted by our Predecessor,

we amortize on a non-cash basis the deferred financing costs associated with its debt to interest expense using the straight-line

method, which approximates the effective interest rate method over the terms of the related loans.

Any changes to the debt structure,

including debt financing associated with property acquisitions, could materially influence the operating results depending on the

terms of any such indebtedness.

Income Tax Benefit (Expense)

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USPS Lease Form

As of August 11, 2020,

the leases at 55 of our properties (consisting of one lease for which the lease expired in 2018 which we acquired in July 2020,

21 properties for which leases expired in 2019, including two leases that expired as of the date of our acquisition, and 33 properties

for which leases expired in 2020) had expired and the USPS is occupying such properties as a holdover tenant, aggregating approximately

220,000 interior square feet and $2.4 million in annualized rental income.

To date, the USPS has not vacated or notified us of

its intention to vacate any of these 55 properties.

When a lease expires, the USPS becomes a holdover tenant on a month-to-month

basis typically paying the greater of estimated market rent or the rent amount under the expired lease

The USPS has adopted a revised form of our modified double-net

lease, which transfers the responsibility for some additional maintenance expenses and obligations to the landlord, including some

components of plumbing and electrical systems.

To date, we have not renewed or entered into revised leases for any of our leases

with the USPS that have expired in 2019 or 2020 and the one lease that we acquired that expired in 2018.

As of August 11, 2020,

we believe we have tentatively agreed to preliminary terms with the USPS on an addendum to its revised form of lease for leases

requiring annual rent in excess of $25,000, pursuant to which documentation requirements are streamlined and some of the new responsibilities

placed on the landlord by the USPS’

revised form of our modified double-net lease would be mitigated.

We also have agreed

in letters of intent to preliminary terms on rental rates for 80 out of 90 properties for which leases expired or will expire in

2020 or before, including 48 of 55 properties for which leases have expired, and at which the USPS is a holdover tenant.

remaining ten properties with leases expired or will expire in 2020 or before, six are from properties acquired in 2020.

we believe that in connection with executing revised-form leases, we will generally receive a lump sum reimbursement from the USPS

for increased rents and any real estate taxes the Company paid from the date of expiration to the date of lease execution.

We anticipate

that we will execute new, revised-form leases for all remaining leases that have expired, and the addendum for such leases requiring

annual rent in excess of $25,000.

However, we have not entered into any definitive documentation with respect to this addendum,

rental rates or leases for the 55 properties at which the USPS is a holdover tenant, and there can be no guarantee that any new

leases that we enter into with the USPS will reflect our expectations with respect to terms or timing.

As of November 11,

2020, we have executed 29 leases with respect to the total of all leases that have expired in 2019 or 2020, or will expire in 2020.

We have agreed to non-binding letters of intent to rental rates on all remaining holdover properties for the leases set to expire

As of the same date, the leases at 52 of our properties (consisting of one lease for which the lease expired in 2018 which

we acquired in July 2020, 15 properties for which leases expired in 2019, including six leases that expired as of the date of our

acquisition, and 36 properties for which leases expired in 2020) were expired and the USPS is occupying such properties as a holdover

tenant, aggregating approximately $2.5 million in annualized rental income.

To date, the USPS has not vacated any of these 52 properties.

The Company has received all holdover rent on a month-to-month basis, with the USPS typically paying the greater of estimated market

rent or the rent amount under the expired lease.

The USPS has adopted

a revised form of our modified double-net lease, which transfers the responsibility for some additional maintenance expenses and

obligations to the landlord, including some components of plumbing and electrical systems.

To date, we have entered into 29 leases

reflecting this revised form, including the addendum discussed below, as applicable, that expired in 2019 or 2020, or will expire

In addition, in connection with executing revised-form leases, we have and will continue to receive lump sum catch up

payments from the USPS for increased rents and reimbursement of real estate taxes the Company paid from the date of expiration

to the date of lease execution.

As we adopt the USPS’s

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projected net income as we adopt this new form of lease as our legacy leases expire.

Furthermore, we have agreed to terms with

the USPS on an addendum to its revised form of lease for leases acquiring annual rent in excess of $25,000, pursuant to which documentation

requirements are streamlined and some of the new responsibilities placed on the landlord by the USPS’

revised form of our

modified double-net lease would be mitigated.

Results of Operations

Comparison of the three months ended June

30, 2020 and June 30, 2019

Comparison of the three months ended September

30, 2020 and September 30, 2019

For the Three Months Ended

September 30,

Rental income

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Total operating expenses

Income from operations

Income (loss) from operations

Interest expense, net

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Write-off and amortization of deferred financing fees

Loss on extinguishment of debt

Interest income

Total interest expense, net

Loss before income tax expense

Income tax expense

Explanatory Note:

the results of operations of the Predecessor for the period from April 1, 2019 to May 16,

Income (loss) before income tax expense

Income tax (expense) benefit

Total revenues increased

by $3.2 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

The increase in revenue

is attributable to the properties that we acquired in connection with the Formation Transactions and the properties that we acquired

since the completion of our IPO.

by $3.3 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

in revenue is attributable to the properties that we acquired in connection with the Formation Transactions and the properties

that we acquired since the completion of our IPO.

Rental income

Rental income increased by $2.8 million for the three months ended June 30, 2020 compared to the three months ended June

30, 2019 and is made up of $0.2 million related to the properties purchased by our Predecessor and $2.6 million for the properties

that we acquired in connection with the Formation Transactions and the properties that we acquired since the completion of our

Rental income increased by $2.9 million for the three months ended September 30, 2020 compared to the three months ended

September 30, 2019 and is primarily related to the properties that we acquired in connection with the Formation Transactions and

the properties that we acquired since the completion of our IPO.

Tenant reimbursements

Tenant reimbursements increased $0.4 million for the three months ended June 30, 2020 compared to the three months ended

June 30, 2019, primarily due to the properties that we acquired in connection with the Formation Transactions and the properties

that we acquired since the completion of our IPO.

Fee and other income

Fee and other income increased by $35,461, or 12.8%, to $311,786 for the three months ended June 30, 2020 from $276,325

for the three months ended June 30, 2019, primarily due to higher insurance recoveries for the three months ended June 30, 2020,

offset by lower miscellaneous income.

Tenant reimbursements increased $0.4 million for the three months ended September 30, 2020 compared to the three months

ended September 30, 2019, primarily due to the properties that we acquired in connection with the Formation Transactions and the

properties that we acquired since the completion of our IPO.

Operating Expenses

Real estate taxes

Real estate taxes increased by $0.4 million for the three months ended June 30, 2020 compared to the three months ended

June 30, 2019 as a result of the properties that we acquired in connection with the Formation Transactions and the properties that

we acquired since the completion of our IPO.

Real estate taxes increased by $0.4 million for the three months ended September 30, 2020 compared to the three months

ended September 30, 2019 as a result of the properties that we acquired in connection with the Formation Transactions and the properties

that we acquired since the completion of our IPO.

Property operating

expenses –

Property operating expenses increased by $0.1 million to $0.4 million for the three months ended June 30,

2020 from $0.3 million for the three months ended June 30, 2019.

The increase was a result of an increase in property management

expenses of $0.02 million to $189,155 for the three months ended June 30, 2020 from $164,296 for the three months ended June 30,

The remainder of the increase of $0.08 million is related to repairs and maintenance and insurance for the 81 properties

that were acquired as part of the Formation Transactions and the properties that we have acquired since our IPO.

Property operating expenses increased by $0.1 million to $0.5 million for the three months ended September

30, 2020 from $0.3 million for the three months ended September 30, 2019.

The increase was a result of an increase in property

management expenses of $0.02 million to $0.2 million for the three months ended September 30, 2020 from $0.2 million for the three

months ended September 30, 2019.

The remainder of the increase of $0.08 million is related to repairs and maintenance and insurance

for the additional properties that we have acquired since September 30, 2019.

General and administrative

General and administrative expenses increased by $0.9 million to $1.9 million for the three months ended June 30, 2020

from $1.0 million for the three months ended June 30, 2019, primarily due to higher professional fees and increased personnel and

investor relations expenses as a result of being a public company.

In addition, equity-based compensation expense increased by

$0.3 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 due to additional awards

granted during the first quarter of 2020.

Our Predecessor did not have any equity-based compensation expense.

General and administrative expenses increased by $0.4 million to $2.0 million for the three months ended September

30, 2020 from $1.6 million for the three months ended September 30, 2019, primarily due to higher professional fees and increased

personnel and investor relations expenses as a result of being a public company.

In addition, equity-based compensation expense

increased by $0.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 due

to additional awards granted during the first quarter of 2020.

Depreciation and

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Depreciation and amortization expense increased by $1.3 million to $2.4 million for the three months ended

June 30, 2020 from $0.8 million for the three months ended June 30, 2019 and is primarily related to the properties that we acquired

as part of the Formation Transactions and the properties that were acquired since our IPO.

September 30, 2020 from $1.1 million for the three months ended September 30, 2019 and is primarily related to the properties that

we acquired as part of the Formation Transactions and the properties that were acquired since our IPO.

Interest Expense

During the three months ended June 30,

2020, we incurred interest expense of $0.7 million compared to $0.4 million for the three months ended June 30, 2019.

in interest expense was due to the interest paid on the $67.5 million outstanding balance on our Credit Facility.

This increase

is offset by a loss on early extinguishment of debt incurred in connection with the IPO.

Comparison of the six months ended June

30, 2020 and June 30, 2019

For the Six Months Ended

During the three months ended September

30, 2020, we incurred interest expense of $0.6 million compared to $0.05 million for the three months ended September 30, 2019.

The increase in interest expense is related to the interest paid on our outstanding balance of our Credit Facility.

Comparison of the nine months ended September

30, 2020 and September 30, 2019

For the Nine Months Ended

September 30,

Rental income

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Explanatory Note:

the results of operations of the Predecessor for the period from January 1, 2019 to May 16,

Includes the results of operations of the Predecessor for the period from January 1, 2019 to May 16, 2019.

Total revenues increased

by $6.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The increase in revenue

is attributable to the properties that we acquired in connection with the Formation Transactions and the properties that we acquired

since the completion of our IPO.

by $9.7 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

in revenue is attributable to the properties that we acquired in connection with the Formation Transactions and the properties

that we acquired since the completion of our IPO.

Rental income

Rental income increased by $5.6 million for the six months ended June 30, 2020 compared to the six months ended June 30,

2019 and is made up of $0.4 million related to the properties purchased by our Predecessor and $5.2 million for the properties

that we acquired in connection with the Formation Transactions and the properties that we acquired since the completion of our

Rental income increased by $8.5 million for the nine months ended September 30, 2020 compared to the nine months ended

September 30, 2019 and the increase is related to the properties that we acquired in connection with the Formation Transactions

and the properties that we acquired since the completion of our IPO.

Tenant reimbursements

Tenant reimbursements increased $0.7 million for the six months ended June 30, 2020 compared to the six months ended June

30, 2019, primarily due to the properties that we acquired in connection with the Formation Transactions and the properties that

we acquired since the completion of our IPO.

Tenant reimbursements increased $1.1 million for the nine months ended September 30, 2020 compared to the nine months ended

September 30, 2019, primarily due to the properties that we acquired in connection with the Formation Transactions and the properties

that we acquired since the completion of our IPO.

Fee and other income .

Other revenue increased by $44,054, or 7.8%, to $607,289 for the six months ended June 30, 2020 from $563,251 for the six months

ended June 30, 2019, primarily due to higher insurance recoveries for the six months ended June 30, 2020, offset by lower miscellaneous

Other revenue increased by $0.05 million, to $0.9 million for the nine months ended September 30, 2020 from $0.

8 million for the

nine months ended September 30, 2019, primarily due to higher insurance recoveries for the nine months ended September 30, 2020,

offset by lower miscellaneous income.

Operating Expenses

Real estate taxes

Real estate taxes increased by $0.8 million for the six months ended June 30, 2020 compared to the six months ended

June 30, 2019 as a result of the properties that we acquired in connection with the Formation Transactions and the properties that

we acquired since the completion of our IPO.

Real estate taxes increased by $1.3 million for the nine months ended September 30, 2020 compared to the nine months

ended September 30, 2019 as a result of the properties that we acquired in connection with the Formation Transactions and the

properties that we acquired since the completion of our IPO.

Property operating

expenses –

Property operating expenses increased by $0.3 million to $0.8 million for the six months ended June 30, 2020

from $0.5 million for the six months ended June 30, 2019.

The increase was a result of an increase in property management expenses

of $0.1 million to $430,691 for the six months ended June 30, 2020 from $329,146 for the six months ended June 30, 2019.

The remainder

of the increase of $0.2 million is related to repairs and maintenance and insurance for the 81 properties that were acquired as

part of the Formation Transactions and the properties that we have acquired since our IPO.

administrative –

General and administrative expenses increased by $2.9 million to $4.2 million for the six months

ended June 30, 2020 from $1.3 million for the six months ended June 30, 2019, primarily due to higher professional fees and

increased personnel and investor relations expenses as a result of being a public company.

In addition, equity-based

compensation expense increased by $1.1 million for the six months ended June 30, 2020 compared to the six months ended June

30, 2019 due to additional compensation expense for awards that have been granted since our IPO.

Property operating expenses increased by $0.4 million to $1.3 million for the nine months ended September

30, 2020 from $0.8 million for the nine months ended September 30, 2019.

The increase was a result of an increase in property

management expenses of $0.1 million to $0.6 million for the nine months ended September 30, 2020 from $0.5 million for the nine

months ended September 30, 2019.

The remainder of the increase of $0.3 million is related to repairs and maintenance and insurance

for the 81 properties that were acquired as part of the Formation Transactions and the properties that we have acquired since

General and administrative

General and administrative expenses increased by $3.2 million to $6.2 million for the nine months ended September

30, 2020 from $3.0 million for the nine months ended September 30, 2019, primarily due to higher professional fees and increased

personnel and investor relations expenses as a result of being a public company.

In addition, equity-based compensation expense

increased by $1.1 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 due

to additional equity-based compensation expense for awards that have been granted since our IPO.

Depreciation and

amortization –

Depreciation and amortization expense increased by $2.9 million to $4.2 million for the six months ended

June 30, 2020 from $1.3 million for the six months ended June 30, 2019 and is primarily related to the properties that we acquired

as part of the Formation Transactions and the properties that were acquired since our IPO.

Income Tax Expense

Income tax expense decreased by $30,886 to $15,122 for the six months ended June 30, 2020 from $46,008 for the six months

ended June 30, 2019 and was primarily attributable to a reduction in taxable income related to UPH, offset by an increase in income

tax expense related to PRM for the six months ended June 30, 2020.

Depreciation and amortization expense increased by $4.3 million to $6.6 million for the nine months ended

September 30, 2020 from $2.3 million for the nine months ended September 30, 2019 and is primarily related to the properties that

we acquired as part of the Formation Transactions and the properties that were acquired since our IPO.

Interest Expense

During the six months

ended June 30, 2020, we incurred interest expense of $1.5 million compared to $0.8 million for the six months ended June 30, 2019.

The increase in interest expense is due to the interest paid on the $67.5 million outstanding balance on our Credit Facility.

increase is offset by a loss on early extinguishment of debt incurred in connection with the IPO.

Comparison of the six months ended

June 30, 2020 and the six months ended June 30, 2019

During the nine months

ended September 30, 2020, we incurred interest expense of $2.1 million compared to $0.8 million for the nine months ended September

The increase in interest expense is related to the interest paid on the outstanding balance of our Credit Facility.

This increase is offset by a loss on early extinguishment of debt of $0.2 million incurred in connection with the IPO during the

nine months ended September 30, 2019.

Comparison of the nine months ended

September 30, 2020 and the nine months ended September 30, 2019

The Company had $7.8

million of cash and $0.7 million of escrows and reserves as of June 30, 2020 compared to $11.7 million of cash and $0.6 million

of escrows and reserves as of June 30, 2019.

million of cash and $0.7 million of escrows and reserves as of September 30, 2020 compared to $11.0 million of cash and $0.6 million

of escrows and reserves as of September 30, 2019.

Cash flow from

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Net cash provided by operating activities increased by $3.9 million to $6.0 million

for the six months ended June 30, 2020 compared to $0.9 million for the same period in 2019.

The increase in net cash provided

by operating activities was primarily due to an increase in rental income due to the properties that were acquired as part of our

Formation Transactions and the properties since our IPO.

for the nine months ended September 30, 2020 compared to $2.1 million for the same period in 2019.

The increase in net cash

provided by operating activities was primarily due to an increase in rental income due to the properties that were acquired as

part of our Formation Transactions and the properties acquired since our IPO.

Cash flow from

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Net cash used in investing activities increased by $22.2 million to $61.6 million for

the six months ended June 30, 2020 compared to $27.2 million for the same period in 2019.

The increase was primarily due to

the acquisition of postal properties during the six months ended June 30, 2020.

the nine months ended September 30, 2020 compared to $39.4 million for the same period in 2019.

The increase was primarily

due to the acquisition of postal properties during the nine months ended September 30, 2020.

Cash flow from

financing activities –

Net cash provided by financing activities decreased by $14.3 million to $23.5 million

for the six months ended June 30, 2020 compared to $37.8 million for the same period in 2019.

This decrease was primarily

due to the proceeds from the IPO during the six months ended June 30, 2019 offset by higher net borrowings during the six months

ended June 30, 2020.

Net cash provided by financing activities increased by $2.8 million to $50.9 million

for the nine months ended September 30, 2020 compared to $48.1 million for the same period in 2019.

This increase was primarily

due to higher net borrowings during the nine months ended September 30, 2020 offset by lower proceeds from equity offerings and

higher payments of dividends since our IPO.

Non-GAAP Financial Measures

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to such other REITs.

We calculate AFFO by

starting with FFO and adjusting for recurring capital expenditures (defined as all capital expenditures that are recurring in nature,

excluding beginning with Q2 2020 as a policy change all capital improvements that are planned at the acquisition of a property

or obtaining a lease or lease renewal) and acquisition related expenses (defined as acquisition-related expenses that are incurred

for investment purposes and do not correlate with the ongoing operations of our existing portfolio, including due diligence costs

for acquisitions not consummated and certain auditing and accounting fees incurred that were directly related to completed acquisitions

or dispositions) that are not capitalized and then adding back non-cash items including:

non-real estate depreciation, loss on

extinguishment of debt, write-off and amortization of debt issuance costs, straight-line rent adjustments, fair value lease adjustments

We calculate AFFO

by starting with FFO and adjusting for recurring capital expenditures (defined as all capital expenditures and beginning with

Q3 2020, leasing costs that are recurring in nature, excluding beginning with Q2 2020 as a policy change all capital improvements

that are planned at the acquisition of a property or obtaining a lease or lease renewal) and acquisition related expenses (defined

as acquisition-related expenses that are incurred for investment purposes and do not correlate with the ongoing operations of

our existing portfolio, including due diligence costs for acquisitions not consummated and certain auditing and accounting fees

incurred that were directly related to completed acquisitions or dispositions) that are not capitalized and then adding back items

non-real estate depreciation, loss on extinguishment of debt, write-off and amortization of debt issuance costs, straight-line

rent adjustments (beginning with Q3 2020, including lump sum catch up payments for increased rents), fair value lease adjustments

and non-cash components of compensation expense.

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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

These metrics are non-GAAP

financial measures and should not be viewed as an alternative measurement of our operating performance to net income.

believes that accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate’

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.

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provides a reconciliation of net loss before allocation to non-controlling interests, the most comparable GAAP measure, to FFO

For the Three

Depreciation and amortization of real estate assets

Recurring capital expenditures

Acquisition related expenses

Amortization of debt issuance costs

Straight-line rent adjustments

Amortization of above and below market leases

Non-cash stock compensation expense

September 30,

and amortization

Recurring capital

of debt issuance costs

Straight-line

rent adjustments

Fair value lease

Acquisition related

components of compensation expense

Liquidity and Capital Resources

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We had approximately

$4.9 million of cash and $0.7 million of escrows and reserves as of June 30, 2020.

$7.8 million of cash and $0.7 million of escrows and reserves as of September 30, 2020.

On September 27, 2019,

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The Credit Agreement provides for the senior

revolving Credit Facility with revolving commitments in an aggregate principal amount of a $100.0 million and a maturity date

of September 27, 2023.

revolving Credit Facility with revolving commitments in an aggregate principal amount of a $100.0 million and a maturity

date of September 27, 2023.

The Credit Agreement

provides that, subject to customary conditions, including obtaining lender commitments and compliance with its financial maintenance

covenants under the Credit Agreement, we may seek to increase the aggregate lending commitments under the Credit Agreement by up

to $100.0 million, with such increase in total lending commitments to be allocated to increasing the revolving commitments.

covenants under the Credit Agreement, we may seek to increase the aggregate lending commitments under the Credit Agreement by

up to $100.0 million, with such increase in total lending commitments to be allocated to increasing the revolving commitments.

The interest rates

applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.7% to

1.4% per annum or LIBOR plus a margin ranging from 1.7% to 2.4% per annum, each based on a consolidated leverage ratio.

we paid, for the period through and including the calendar quarter ending March 31, 2020, an unused facility fee on the revolving

commitments under the Credit Facility of 0.75% per annum for the first $100.0 million and 0.25% per annum for the portion of revolving

commitments exceeding $100.0 million, and will pay for the period thereafter, an unused facility fee of 0.25% per annum for the

aggregate unused revolving commitments, with both periods utilizing calculations of daily unused commitments under the Credit Facility.

We are permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty,

subject to reimbursement of any LIBOR breakage costs of the lenders.

On January 30, 2020, we

amended the Credit Agreement in order to exercise a portion of the accordion feature on the Credit Facility to increase permitted

applicable to loans under the Credit Facility are, at our option, equal to either a base rate plus a margin ranging from 0.7%

to 1.4% per annum or LIBOR plus a margin ranging from 1.7% to 2.4% per annum, each based on a consolidated leverage ratio.

addition, we paid, for the period through and including the calendar quarter ending March 31, 2020, an unused facility fee on

the revolving commitments under the Credit Facility of 0.75% per annum for the first $100.0 million and 0.25% per annum for the

portion of revolving commitments exceeding $100.0 million, and will pay for the period thereafter, an unused facility fee of 0.25%

per annum for the aggregate unused revolving commitments, with both periods utilizing calculations of daily unused commitments

under the Credit Facility.

We are permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity

without premium or penalty, subject to reimbursement of any LIBOR breakage costs of the lenders.

On January 30, 2020,

we amended the Credit Agreement in order to exercise a portion of the accordion feature on the Credit Facility to increase permitted

borrowings by $50.0 million to $150.0 million, subject to the borrowing base properties identified therein remaining unencumbered

and subject to an executed lease.

As of June 30, 2020, we had $67.5 million outstanding under our Credit Facility.

June 30, 2020, the leases at 43 of our properties had expired and the USPS was occupying such properties as a holdover tenant,

thereby excluding such properties from being part of the borrowing base under our Credit Facility.

We believe that we have agreed

to preliminary terms regarding re-leasing 40 of these properties.

On June 25, 2020, the Company further amended the Credit Agreement

to revise, among other items, certain definitions and borrowing base calculations to increase available capacity, as well as the

restrictive covenant pertaining to Consolidated Tangible Net Worth (as defined in such amendment).

As of September 30, 2020, we had $49.0 million outstanding under our Credit Facility.

of September 30, 2020, the leases at 58 of our properties had expired and the USPS was occupying such properties as a holdover

tenant, thereby excluding such properties from being part of the borrowing base under our Credit Facility.

On June 25, 2020, the

Company further amended the Credit Agreement to revise, among other items, certain definitions and borrowing base calculations

to increase available capacity, as well as the restrictive covenant pertaining to Consolidated Tangible Net Worth (as defined in

such amendment).

Our Credit Facility

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However, in the future, there may be a number of factors that could have a material

and adverse effect on our ability to access these capital sources, including unfavorable conditions in the overall equity and credit

markets, our degree of leverage, our unencumbered asset base, borrowing restrictions imposed by our lenders, general market conditions

for REITs, our operating performance, liquidity and market perceptions about us.

The success of our business strategy will depend,

to a significant degree, on our ability to access these various capital sources.

In addition, we continuously evaluate possible

acquisitions of postal properties, which largely depend on, among other things, the market for owning and leasing postal properties

and the terms on which the USPS will enter into new or renewed leases.

and adverse effect on our ability to access these capital sources, including unfavorable conditions in the overall equity and

credit markets, our degree of leverage, our unencumbered asset base, borrowing restrictions imposed by our lenders, general market

conditions for REITs, our operating performance, liquidity and market perceptions about us.

The success of our business strategy

will depend, to a significant degree, on our ability to access these various capital sources.

In addition, we continuously evaluate

possible acquisitions of postal properties, which largely depend on, among other things, the market for owning and leasing postal

properties and the terms on which the USPS will enter into new or renewed leases.

To maintain our qualification

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transactions, the availability and attractiveness of the terms of which cannot be assured.

Consolidated Indebtedness as of June

As of June 30, 2020,

Consolidated Indebtedness as of September

As of September 30,

2020, we had approximately $65.8 million of outstanding consolidated principal indebtedness.

The following table sets forth information

as of June 30, 2020 with respect to the outstanding indebtedness of the Company:

as of September 30, 2020 with respect to the outstanding indebtedness of the Company:

Amount Outstanding as of

Interest Rate at

September 30,

Maturity Date

Credit Facility (1)

LIBOR+170bps (2)

September 2023

Vision Bank (3)

September 2036

First Oklahoma Bank (4)

Oklahoma Bank (4)

December 2037

Vision Bank –

Seller Financing (6)

First Oklahoma Bank –

Financing (6)

Oklahoma Bank –

April 2020 (7)

First Oklahoma Bank –

Oklahoma Bank –

June 2020 (8)

Total Principal

Explanatory Notes:

On September 27, 2019, we entered into our Credit Agreement, which provides for revolving commitments in an aggregate principal amount of a $100.0 million and an accordion feature that permits us to borrow up to $200.0 million, subject to customary conditions.

During the three months ended March 31, 2020, we amended the Credit Agreement in order to exercise a portion our accordion feature to increase permitted borrowings to $150.0 million from $100.0 million, subject to the borrowing base properties identified therein remaining unencumbered and subject to an enforceable lease.

On April 14, 2020, we borrowed an additional $6.0 million under the Credit Facility.

In May 2020, we determined that we had overdrawn our Credit Facility by approximately $5.1 million.

We satisfied such amount with a portion of the proceeds from the secured mortgage financing described below.

27, 2019, we entered into our Credit Agreement, which provides for revolving commitments in an aggregate principal amount

of a $100.0 million and an accordion feature that permits us to borrow up to $200.0 million, subject to customary conditions.

During the three months ended March 31, 2020, we amended the Credit Agreement in order to exercise a portion our accordion

feature to increase permitted borrowings to $150.0 million from $100.0 million, subject to the borrowing base properties identified

therein remaining unencumbered and subject to an enforceable lease.

On April 14, 2020, we borrowed an additional $6.0 million

under the Credit Facility.

On June 25, 2020, the Company further amended the Credit Agreement to revise, among other items,

certain definitions and borrowing base calculations to increase available capacity, as well as the restrictive covenant pertaining

to Consolidated Tangible Net Worth (as defined in such amendment).

Refer to Item 5.

Other Information of this Quarterly Report for a discussion of such amendment.

As of June 30, 2020, $150.0 million in aggregate principal amount under the Credit Facility was authorized and $68.0 million was drawn.

Our ability to borrow under the Credit Facility is subject to continued compliance with a number of customary affirmative and negative covenants.

As of June 30, 2020, we were in compliance with all of the Credit Facility’s debt covenants.

As of the date of this filing, $39.5 million is outstanding under the Credit Facility.

As of June 30, 2020, the one-month LIBOR rate was 0.16%.

Five properties are collateralized under this loan as of March 31, 2020 with Mr.

Other Information of this Quarterly Report

for a discussion of such amendment.

As of September 30, 2020, $150.0 million in aggregate principal amount under the Credit

Facility was authorized and $49.0 million was drawn.

Our ability to borrow under the Credit Facility is subject to continued

compliance with a number of customary affirmative and negative covenants.

As of September 30, 2020, we were in compliance

with all of the Credit Facility’s debt covenants.

As of the date of this filing, $52.0 million is outstanding under

the Credit Facility.

As of September

30, 2020, the one-month LIBOR rate was 0.15%.

Five properties

are collateralized under this loan as of September 30, 2020 with Mr.

Spodek as the guarantor.

On September 8, 2021 and every five years thereafter, the interest rate will reset at a variable annual rate of Wall Street Journal Prime Rate (“Prime”) + 0.5%.

The loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by Mr.

Interest rate resets on December 31, 2022 to Prime + 0.25%.

The loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by Mr.

Interest rate resets on January 31, 2023 to Prime + 0.5%.

In connection with the acquisition of a property, we obtained seller financing secured by the property in the amount $0.4 million requiring five annual payments of principal and interest of $105,661 with the first installment due on January 2, 2021 based on a 6.0% interest rate per annum through January 2, 2025.

(7) In connection with the purchase of a 13-building portfolio,

the Company obtained $4.5 million of mortgage financing, at a fixed interest rate of 4.25% with interest only for the first 18

months, which resets in November 2026 to the greater of Prime or 4.25%.

On September 8, 2021 and every

five years thereafter, the interest rate will reset at a variable annual rate of Wall Street Journal Prime Rate (“Prime”)

The loan is collateralized

by first mortgage liens on four properties and a personal guarantee of payment by Mr.

Interest rate resets on December

31, 2022 to Prime + 0.25%.

The loan is collateralized

by first mortgage liens on one property and a personal guarantee of payment by Mr.

Interest rate resets on January

31, 2023 to Prime + 0.5%.

In connection

with the acquisition of a property, we obtained seller financing secured by the property in the amount $0.4 million requiring

five annual payments of principal and interest of $105,661 with the first installment due on January 2, 2021 based on a 6.0%

interest rate per annum through January 2, 2025.

In connection

with the purchase of a 13-building portfolio, the Company obtained $4.5 million of mortgage financing, at a fixed interest

rate of 4.25% with interest only for the first 18 months, which resets in November 2026 to the greater of Prime or 4.25%.

The financing matures in April 2040.

(8) The loan is

collateralized by first mortgage liens on 22 properties.

Interest rates resets in January

2027 to the greater of Prime or 4.25%.

The financing matures in June 2040.

Secured Borrowings as of June 30,

As of June 30, 2020,

The loan is collateralized

by first mortgage liens on 22 properties.

Interest rates resets in January 2027 to the greater of Prime or 4.25%.

The financing

matures in June 2040.

Secured Borrowings as of September

As of September 30,

2020, we had approximately $16.8 million of secured borrowings outstanding, all of which was fixed rate debt with a weighted average

interest rate of 4.3% per annum.

Historically, our Predecessor’s

equity capital was principally provided by Mr.

Spodek as the majority equity owner of the Predecessor entities and its debt capital

was principally provided through first mortgage loans on the properties owned by the Predecessor and promissory notes payable to

related parties.

Following the completion of our IPO and the Formation Transactions, we repaid approximately $31.7 million of indebtedness

of the Predecessor using a portion of the net proceeds from our IPO.

Depending on our ability to borrow under our Credit Facility,

we may pursue significant secured borrowings in the future;

although, we have not entered into any preliminary or binding documentation

with respect to any such additional secured borrowings and there is no guarantee that any lender will be willing to lend to us

on the terms and timing that we expect, if at all.

To qualify and maintain

our qualification as a REIT, we are required to pay dividends to stockholders at least equal to 90% of our REIT taxable income

determined without regard to the deduction for dividends paid and excluding net capital gains.

During the three and six months

ended June 30, 2020, we paid cash dividends of $0.20 and $0.37 per share, respectively.

On July 30, 2020, our Board of Directors

approved and we declared a second quarter common stock dividend of $0.205 per share which is payable on August 31, 2020 to stockholders

of record on August 14, 2020.

Historically, our

Predecessor’s equity capital was principally provided by Mr.

Spodek as the majority equity owner of the Predecessor entities

and its debt capital was principally provided through first mortgage loans on the properties owned by the Predecessor and promissory

notes payable to related parties.

Following the completion of our IPO and the Formation Transactions, we repaid approximately

$31.7 million of indebtedness of the Predecessor using a portion of the net proceeds from our IPO.

Depending on our ability to

borrow under our Credit Facility, we may pursue significant secured borrowings in the future;

although, we have not entered into

any preliminary or binding documentation with respect to any such additional secured borrowings and there is no guarantee that

any lender will be willing to lend to us on the terms and timing that we expect, if at all.

To maintain our qualification

as a REIT, we are required to pay dividends to stockholders at least equal to 90% of our REIT taxable income determined without

regard to the deduction for dividends paid and excluding net capital gains.

During the three and nine months ended September 30,

2020, we paid cash dividends of $0.205 and $0.575 per share, respectively.

On October 30, 2020, our Board of Directors approved

and we declared a third quarter common stock dividend of $0.215 per share which is payable on November 30, 2020 to stockholders

of record on November 16, 2020.

Subsequent Real Estate Acquisitions

As of August 11, 2020,

we purchased 98 postal properties for approximately $23.4 million during the period subsequent to June 30, 2020.

As of November 11,

2020, we purchased 14 postal properties for approximately $8.0 million during the period subsequent to September 30, 2020.

Acquisition Pipeline

As of August 11, 2020,

we had entered into definitive agreements to acquire postal properties for a purchase price of approximately $3.7 million.

majority of these transactions are anticipated to close by the end of the third quarter subject to the satisfaction of customary

closing conditions.

In addition, the Company

has entered into agreements to acquire 12 postal properties for approximately $10.1 million.

The majority of these transactions

are anticipated to close during the fourth quarter subject to the satisfaction of customary closing conditions.

Furthermore, the

Company has signed a material agreement for an approximately 431,000 square foot industrial building in Warrendale, Pennsylvania

for $47.0 million.

The USPS occupies 73.0% of this property as a distribution facility.

The Company is currently performing formal

due diligence procedures customary for this transaction and cannot provide assurance as to the timing of when, or on what terms,

the transaction will close, if at all.

We continue to identify,

2 unchanged sentences

Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any off-balance sheet

arrangements.

As of September 30, 2020, we did not have

any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

12 unchanged sentences

taxes and thus the tenant must reimburse us for real estate taxes.

We believe that if inflation increases expenses over time, increases

in lease renewal rates will materially offset such increase.

We believe that if inflation increases expenses over time,

increases in lease renewal rates will materially offset such increase.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements