Postal Realty Trust, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, regarding the effectiveness of our disclosure controls and procedures as of December 31, 2020, the end of the period covered by this Annual Report on Form 10-K. Based on the foregoing, our principal executive officer and principal financial officer have concluded, as of December 31, 2020, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the original framework in Internal Control - Integrated Framework issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2020. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None 45 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 is incorporated by reference to our definitive Proxy Statement for our 2021 annual stockholders’ meeting. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated by reference to our definitive Proxy Statement for our 2021 annual stockholders’ meeting. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 is incorporated by reference to our definitive Proxy Statement for our 2021 annual stockholders’ meeting. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 is incorporated by reference to our definitive Proxy Statement for our 2021 annual stockholders’ meeting. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by Item 14 is incorporated by reference to our definitive Proxy Statement for our 2021 annual stockholders’ meeting. 46 PART IV EXHIBITS, FINANCIAL STATEMENT SCHEDULES (1) Financial Statements Our consolidated financial statements and notes thereto, together with the Reports of Independent Registered Public Accounting Firm are included in Item 8 of this Annual Report on Form 10-K commencing on page F-1. (2) Financial Statement Schedule Our financial statement schedule are included in Item 8 of this Annual Report on Form 10-K commencing on page F-1. (3) Exhibits A list of exhibits to this Annual Report on Form 10-K is set forth on the Index to Exhibits commencing on page 50 and is incorporated herein by reference. 47 Postal Realty Trust, Inc. Schedule III - Real Estate and Accumulated Depreciation As of December 31, 2020 Number Initial Cost to Company Costs Capitalized Subsequent Gross Amount Carried at Close of Period (2) Depreciable State of Properties Encumbrances Land Buildings & Improvements to Acquisition Land Buildings & Improvements Total Accumulated Depreciation Date Acquired (Year) Life (Yrs) (1) Alaska 1 $ - $ 15,133 $ 50,688 $ - $ 15,133 $ 50,688 $ 65,821 $ 5,030 2018 40 Alabama 9 891,940 534,201 2,006,100 25,826 534,201 2,031,927 2,566,128 109,841 2013-2020 40 Arkansas 19 - 1,179,061 3,952,053 - 1,179,061 3,952,053 5,131,114 480,134 2013-2020 40 California 8 1,253,974 3,240,603 4,807,849 - 3,240,603 4,807,849 8,048,452 161,422 2019-2020 40 Colorado 17 620,750 1,189,692 9,415,034 - 1,189,692 9,415,034 10,604,726 275,839 2019-2020 40 Connecticut 3 - 523,487 2,122,874 - 523,487 2,122,874 2,646,361 135,914 2013-2020 40 Delaware 1 447,768 180,769 435,677 - 180,769 435,677 616,446 8,194 2020 40 Florida 11 1,026,775 2,363,968 5,113,214 50,320 2,363,968 5,159,167 7,523,135 118,942 2013-2020 40 Georgia 20 516,750 759,160 2,943,287 44,715 759,160 2,988,002 3,747,162 171,519 2013-2020 40 Iowa 16 237,250 337,702 2,451,506 33,911 337,702 2,485,417 2,823,119 125,705 2013-2020 40 Idaho 9 - 60,886 749,215 - 60,886 749,215 810,101 215,166 2013 40 Illinois 38 91,000 947,821 5,219,940 78,536 947,821 5,298,476 6,246,297 218,059 2013-2020 40 Indiana 18 1,688,334 716,502 4,223,748 59,163 716,502 4,282,911 4,999,413 148,634 2019-2020 40 Kansas 11 - 250,415 1,953,102 4,530 250,415 1,957,632 2,208,047 68,717 2013-2020 40 Kentucky 6 - 171,954 1,382,815 - 171,954 1,382,815 1,554,769 122,010 2013-2020 40 Louisiana 24 393,250 1,290,721 4,571,036 48,400 1,290,721 4,619,437 5,910,158 467,698 2013-2020 40 Massachusetts 12 1,582,750 2,074,870 5,261,158 33,425 2,074,870 5,294,583 7,369,453 1,532,980 2007-2020 40 Maryland 4 311,247 454,009 865,741 17,325 454,009 883,066 1,337,075 60,061 2013-2020 40 Maine 40 - 1,280,640 4,032,600 13,157 1,280,640 4,045,757 5,326,397 135,699 2013-2020 40 Michigan 28 - 2,001,886 5,426,493 15,141 2,001,886 5,401,341 7,403,227 439,167 2011-2020 40 Minnesota 22 364,077 352,694 2,906,821 42,650 352,694 2,949,471 3,302,165 224,739 2013-2020 40 Missouri 26 204,750 774,309 3,482,010 136,616 774,309 3,618,626 4,392,935 203,625 2013-2020 40 Mississippi 13 - 781,157 3,199,131 63,878 781,157 3,263,009 4,044,166 234,550 2013-2020 40 Montana 9 - 217,338 1,770,343 - 217,338 1,770,343 1,987,681 115,505 2013-2020 40 North Carolina 26 234,000 2,363,534 9,196,677 8,525 2,363,534 9,205,202 11,568,736 297,370 2013-2020 40 North Dakota 15 221,000 172,292 1,538,690 - 172,292 1,538,690 1,710,982 106,845 2013-2020 40 Nebraska 12 - 62,890 1,135,114 18,485 62,890 1,153,599 1,216,489 48,660 2013-2020 40 New Hampshire 4 204,750 218,667 614,541 - 218,667 614,541 833,208 22,546 2019-2020 40 New Jersey 2 - 76,592 499,301 - 76,592 499,301 575,893 16,322 2019 40 New Mexico 3 - 321,585 535,517 - 321,585 535,517 857,102 24,209 2019 40 Nevada 2 - 19,603 314,931 - 19,603 314,931 334,534 38,345 2013-2019 40 New York 21 852,066 2,363,491 5,270,382 79,023 2,363,491 5,349,405 7,712,896 130,876 2019-2020 40 Ohio 12 868,818 2,145,141 6,151,101 56,625 2,145,141 6,207,726 8,352,867 472,834 2006-2020 40 Oklahoma 38 1,014,000 1,233,512 5,933,798 157,564 1,233,512 6,039,796 7,273,308 788,695 2013-2020 40 Oregon 1 - 480,107 597,097 - 480,107 597,097 1,077,204 11,962 2020 40 Pennsylvania 65 32,134,084 7,741,688 55,249,669 57,375 7,741,688 55,307,040 63,048,728 1,459,633 2005-2020 40 South Carolina 7 712,823 379,659 1,756,316 13,200 379,659 1,764,413 2,144,072 58,766 2019-2020 40 South Dakota 9 - 158,406 1,066,604 - 158,406 1,066,604 1,225,010 110,989 2013-2020 40 Tennessee 13 - 1,183,903 3,822,491 27,875 1,183,903 3,850,366 5,034,269 406,735 2013-2020 40 Texas 44 71,500 2,252,059 9,723,087 149,915 2,252,059 9,873,007 12,125,066 1,921,635 2005-2020 40 Utah 1 - 73,353 813,078 - 73,353 813,078 886,431 21,822 2020 40 Virginia 9 - 595,362 2,497,326 - 595,362 2,497,326 3,092,688 78,716 2019-2020 40 Vermont 8 214,500 451,873 1,194,169 - 451,873 1,194,169 1,646,042 56,902 2019 40 Washington 5 - 148,343 795,051 - 148,343 795,051 943,394 66,803 2013-2020 40 Wisconsin 55 877,500 2,069,270 11,465,942 170,382 2,069,270 11,627,236 13,696,506 1,219,748 2005-2020 40 West Virginia 7 - 71,581 798,977 - 71,581 798,977 870,558 30,580 2019-2020 40 Wyoming 2 - 20,783 159,573 - 20,783 159,573 180,356 45,037 2013 40 Corporate 78,000,000 - - - - - - - 726 $ 125,035,656 $ 46,302,672 $ 199,471,867 $ 1,406,562 $ 46,302,672 $ 200,768,015 $ 247,070,687 $ 13,215,180 Explanatory Notes : (1) Estimated useful life for buildings. (2) The aggregate cost for Federal Income Tax purposes was approximately $257.6 million as of December 31, 2020. 48 The following table reconciles real estate for the years ended December 31, 2020 and 2019: For the Years Ended December 31, 2020 2019 Beginning Balance $ 120,583,662 38,435,504 Acquisitions 125,422,611 82,021,291 Capital Improvements 1,150,918 151,582 Write-offs (86,381 ) (24,041 ) Other (123 ) (674 ) Ending Balance $ 247,070,687 $ 120,583,662 Explanatory Note : (1) Other includes reclassification adjustments. The following table reconciles accumulated depreciation for the years ended December 31, 2020 and December 31, 2019: For the Years Ended December 31, 2020 2019 Beginning Balance $ (8,813,579 ) $ (7,121,532 ) Depreciation expense (4,487,982 ) (1,716,088 ) Write-offs 86,381 24,041 Ending Balance $ (13,215,180 ) $ (8,813,579 ) 49 EXHIBIT INDEX Exhibit Number Description 3.1 Articles of Amendment and Restatement of the Company, dated as of May 15, 2019 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on June 27, 2019). 3.2 Amended and Restated Bylaws of the Company, effective as of May 15, 2019 (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). 4.1 Form of Certificate of Class A Common Stock of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11/A filed on May 7, 2019). 4.2 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed with the Commission on March 27, 2020). 10.1 First Amended and Restated Agreement of Limited Partnership of the Postal Realty LP, dated May 16, 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). 10.2 Postal Realty Trust, Inc. Amended and Restated Alignment of Interest Program (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 29, 2020).† 10.3 Representation, Warranty and Indemnity Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP and Andrew Spodek (incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.4 Tax Indemnification Agreement, dated as of May 14, 2019, by and among the Company, United Properties Holding, Inc., United Post Office Investments, Inc. and Andrew Spodek (incorporated by reference to Exhibit 10.15 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.5 Form of Right of First Offer Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-11/A filed on May 7, 2019). † 10.6 Tax Protection Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP, Andrew Spodek, Tayaka Holdings, LLC and IDJ Holdings, LLC (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.7 Tax Protection Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP and Nationwide Postal Management Holdings, Inc. (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.8 Tax Protection Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP and Unlimited Postal Holdings LP (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.9 Form of Third Party Management Agreement (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-11/A filed on May 7, 2019). 10.10 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Patrick Donahoe (incorporated by reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.11 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Anton Feingold (incorporated by reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.12 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Jeremy Garber (incorporated by reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.13 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Jane Gural-Senders (incorporated by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 50 Exhibit Number Description 10.14 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Barry Lefkowitz (incorporated by reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.15 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Andrew Spodek (incorporated by reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.16 Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Matt Brandwein (incorporated by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.17 Employment Agreement, dated June 26, 2019, by and between the Company and Andrew Spodek (incorporated by reference to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.18 Employment Agreement, dated June 26, 2019, by and between the Company and Jeremy Garber (incorporated by reference to Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019). † 10.19 Employment Agreement, dated December 30, 2020, by and between the Company and Robert B. Klein (incorporated by reference to Exhibit 10.29 to the Company’s Current Report on Form 8-K filed on January 4, 2020). † 10.20 2019 Equity Incentive Plan of the Company (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-11/A filed on May 7, 2019). † 10.21 Amendment No. 1 to the Postal Realty Trust, Inc. 2019 Equity Incentive Plan, effective as of June 26, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on July 1, 2020).† 10.22 Form of 2019 Equity Incentive Plan Stock Award Agreement and Notice (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-11 filed on May 7, 2019). † 10.23 2019 Employee Stock Purchase Plan of the Company (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-11/A filed on May 7, 2019). † 10.24 Form of LTIP Unit Vesting Agreement (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-11/A filed on May 7, 2019). † 10.25 Credit Agreement, dated as of September 27, 2019, by and among Postal Realty LP, as borrower, the lenders party thereto and People’s United Bank, National Association, as administrative agent and BMO Capital Markets Corp., as syndication agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 2, 2019). 10.26 First Amendment to Credit Agreement, dated as of January 30, 2020, by and among Postal Realty LP, Postal Realty Trust, Inc., the subsidiary guarantors party thereto, certain lenders party thereto and People’s United Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on June 26, 2020). 10.27 Second Amendment to Credit Agreement, dated as of June 25, 2020, by and among Postal Realty LP, Postal Realty Trust, Inc., the subsidiary guarantors party thereto and People’s United Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on June 26, 2020). 10.28 Third Amendment to Credit Agreement, dated as of November 24, 2020, by and among Postal Realty LP, Postal Realty Trust, Inc., the subsidiary guarantors party thereto and People’s United Bank, National Association, as administrative agent. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 1, 2020). 10.29 Pledge Agreement, dated as of September 27, 2019, by Postal Realty LP, as pledger, in favor of People’s United Bank, National Association, as administration agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on October 2, 2019). 10.30 Guaranty, dated as of September 27, 2019, by and among the Company, certain subsidiary guarantors and People’s United Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on October 2, 2019). 10.31 Form of Open Market Sale Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-K filed on December 14, 2020). 51 Exhibit Number Description 10.32 Open-End Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Leases and Rents, dated as of December 18, 2020, by and among Thorn Hill Postal Realty Holdings LLC, The United States Life Insurance Company in the City of New York and National Union Fire Insurance Company of Pittsburgh, PA (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 21, 2020). 10.33 Promissory Note (USLIC), dated December 18, 2020, made by Thorn Hill Postal Realty Holdings LLC to The United States Life Insurance Company in the City of New York (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 21, 2020). 10.34 Promissory Note (USLIC – Fortitude), dated December 18, 2020, made by Thorn Hill Postal Realty Holdings LLC to The United States Life Insurance Company in the City of New York (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on December 21, 2020). 10.35 Promissory Note (NUFIC), dated December 18, 2020, made by Thorn Hill Postal Realty Holdings LLC to National Union Fire Insurance Company of Pittsburgh, PA (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on December 21, 2020). 10.36 Suretyship Agreement, dated December 18, 2020, in favor of The United States Life Insurance Company in the City of New York and National Union Fire Insurance Company of Pittsburgh, PA (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on December 21, 2020). 21.1 Subsidiaries of the Company.* 23.1 Consent of BDO USA, LLP.* 31.1 Certification of Annual Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Annual Report by President, Treasurer, and Secretary under Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 32.2 Certification of President, Treasurer and Secretary furnished pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 101.INS INSTANCE DOCUMENT** 101.SCH SCHEMA DOCUMENT** 101.CAL CALCULATION LINKBASE DOCUMENT** 101.LAB LABELS LINKBASE DOCUMENT** 101.PRE PRESENTATION LINKBASE DOCUMENT** 101.DEF DEFINITION LINKBASE DOCUMENT** * Filed herewith † Compensatory plan or arrangement ** Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements. ITEM 16. Form 10-K Summary None. 52 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POSTAL REALY TRUST, INC. Date: March 30, 2021 By: /s/ Andrew Spodek Andrew Spodek Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date /s/ Andrew Spodek Chief Executive Officer and Director March 30, 2021 Andrew Spodek (Principal Executive Officer) /s/ Jeremy Garber President, Treasurer and Secretary March 30, 2021 Jeremy Garber (Principal Financial Officer) /s/ Matt Brandwein Senior Vice President and Chief Accounting Officer March 30, 2021 Matt Brandwein (Principal Accounting Officer) /s/ Patrick Donahoe Independent Director, Chairman of March 30, 2021 Patrick Donahoe Board of Directors /s/ Barry Lefkowitz Independent Director March 30, 2021 Barry Lefkowitz /s/ Jane Gural-Senders Independent Director March 30, 2021 Jane Gural-Senders /s/ Anton Feingold Independent Director March 30, 2021 Anton Feingold 53