What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-04 · 196 added, 165 removed, 562 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2022 December 31, 2021

26 unchanged sentences

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

500,000,000 shares authorized, 18,750,357 and 18,564,421 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

500,000,000 shares authorized, 19,014,571 and 18,564,421 shares issued and outstanding as of September 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021

27,206 shares issued and outstanding as of September 30, 2022 and December 31, 2021

Additional paid-in capital 245,793 237,969

10 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

17 unchanged sentences

Income before income tax expense 1,134 713 3,049 1,699

Income tax expense ( 18 ) ( 27 ) ( 29 ) ( 38 )

Income tax benefit (expense) 16 ( 37 ) ( 13 ) ( 75 )

Net income 1,150 676 3,036 1,624

7 unchanged sentences

Net income $ 1,150 $ 676 $ 3,036 $ 1,624

Unrealized gain on financial instrument 504 — 3,015 —

Unrealized gain on derivative instruments 5,352 394 8,367 394

Comprehensive income 6,502 1,070 11,403 2,018

23 unchanged sentences

Net proceeds from sale of common stock 319,702 3 6,050 — — 6,053 — 6,053

Issuance of OP Units in connection with transactions — — — — — — 9,021 9,021

Issuance of OP Units in connection with acquisition transactions — — — — — — 9,021 9,021

Issuance and amortization of equity-based compensation 17,102 — 499 — — 499 281 780

6 unchanged sentences

Balance – June 30, 2021 13,679,618 $ 136 $ 160,061 $ — $ ( 14,010 ) $ 146,187 $ 37,258 $ 183,445

Net proceeds from sale of common stock 25,015 1 408 — — 409 — 409

Issuance of OP Units in connection with acquisition transactions — — — — — — 6,480 6,480

Forfeiture and amortization of equity-based compensation ( 468 ) — 495 — — 495 326 821

Issuance and amortization under ESPP 5,117 — 88 — — 88 — 88

Dividends declared ($0.2225 per share)

— — — — ( 3,054 ) ( 3,054 ) ( 841 ) ( 3,895 )

Accumulated other comprehensive income — — — 310 — 310 84 394

Net income — — — — 531 531 145 676

Reallocation of non-controlling interest — — 2,262 — — 2,262 ( 2,262 ) —

Balance – September 30, 2021 13,709,282 $ 137 $ 163,314 $ 310 $ ( 16,533 ) $ 147,228 $ 41,190 $ 188,418

Balance - December 31, 2021 18,591,627 $ 186 $ 237,969 $ 766 $ ( 18,879 ) $ 220,042 $ 45,431 $ 265,473

Issuance of OP Units in connection with transactions — — — — — — 3,238 3,238

Issuance of OP Units in connection with acquisition transactions — — — — — — 3,238 3,238

Issuance and amortization of equity-based compensation 199,102 2 1,426 — — 1,428 371 1,799

7 unchanged sentences

Balance – March 31, 2022 18,792,624 $ 188 $ 239,779 $ 2,838 $ ( 22,579 ) $ 220,226 $ 48,357 $ 268,583

Issuance of OP Units in connection with transactions — — — — — — 1,987 1,987

Issuance of OP Units in connection with acquisition transactions — — — — — — 1,987 1,987

Issuance and amortization of equity-based compensation, net of forfeitures ( 471 ) — 618 — — 618 366 984

7 unchanged sentences

Balance – June 30, 2022 18,777,563 $ 188 $ 240,403 $ 3,250 $ ( 25,968 ) $ 217,873 $ 49,826 $ 267,699

Net proceeds from sale of common stock 227,473 2 3,505 — — 3,507 — 3,507

Issuance of OP Units in connection with acquisition transactions — — — — — — 4,713 4,713

Issuance and amortization of equity-based compensation, net of forfeitures 28,711 — 620 — — 620 385 1,005

Issuance and amortization under ESPP 8,030 — 117 — — 117 — 117

Dividends declared ($ 0.2325 per share)

— — — — ( 4,397 ) ( 4,397 ) ( 1,071 ) ( 5,468 )

Accumulated other comprehensive income — — — 4,331 — 4,331 1,021 5,352

Net income — — — — 931 931 219 1,150

Reallocation of non-controlling interest — — 1,148 — — 1,148 ( 1,148 ) —

Balance – September 30, 2022 19,041,777 $ 190 $ 245,793 $ 7,581 $ ( 29,434 ) $ 224,130 $ 53,945 $ 278,075

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

2 unchanged sentences

(in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

18 unchanged sentences

Investment in financing leases ( 10 ) —

Repayment of financing lease — 4

Escrows for acquisition and construction deposits ( 471 ) ( 512 )

42 unchanged sentences

As the 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, 2022, the Company held an approximately 81.4 % interest in the Operating Partnership.

As of September 30, 2022, the Company held an approximately 80.6 % 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 the Company is the primary beneficiary.

As of June 30, 2022, the Company owned a portfolio of 1,166 properties located in 49 states and one territory.

As of September 30, 2022, the Company owned a portfolio of 1,232 properties located in 49 states and one territory.

The Company’s properties are leased primarily to a single tenant, the United States Postal Service (the “USPS”).

1 unchanged sentence

Pursuant to the Company’s articles of amendment and restatement, 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 (the “Voting Equivalency stock”), and up to 100,000,000 shares of preferred stock.

The Company believes it has been organized in conformity with, and has operated in a manner that has enabled it to meet, the requirements for qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), and the Company elected to be taxed as a REIT under the Code commencing with the Company's short taxable year ended December 31, 2019.

The Company elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the Company's 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.

7 unchanged sentences

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

Balance Sheets.

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

15 unchanged sentences

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cash and Escrows and Reserves

2 unchanged sentences

The following table provides a reconciliation of cash and escrows and reserves reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows:

September 30,

2022 December 31,

6 unchanged sentences

$ 4,908 $ 7,026

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Revenue Recognition

2 unchanged sentences

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 part of “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Fee and other primarily consist of (i) property management fees, (ii) income recognized from properties accounted for as financing leases and (iii) fees earned from providing advisory services to third-party owners of postal properties.

Fee and other primarily consists of (i) property management fees, (ii) income recognized from properties accounted for as financing leases and (iii) fees earned from providing advisory services to third-party owners of postal properties.

The management fees arise from contractual agreements with entities that are affiliated with the Company’s CEO.

12 unchanged sentences

Acquisition-related costs are expensed in the periods in which the costs are incurred.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

results of operations of acquired businesses are included in the Company’s Consolidated Financial Statements from the acquisition date.

The results of operations of acquired businesses are included in the Company’s Consolidated Financial Statements from the acquisition date.

The Company evaluates goodwill for impairment at least annually, or as circumstances warrant.

8 unchanged sentences

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.

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 June 30, 2022 and December 31, 2021.

However, considerable judgment is necessary to interpret market data and develop

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

estimated fair value.

Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could have realized on disposition of the assets and liabilities as of September 30, 2022 and December 31, 2021.

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 and other assets, accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of June 30, 2022 and December 31, 2021 due to their short maturities.

Cash, escrows and reserves, receivables, prepaid expenses and other assets (excluding derivatives), accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of September 30, 2022 and December 31, 2021 due to their short maturities.

The fair value of the Company’s borrowings under its Credit Facilities approximates carrying value because such borrowings are subject to a variable rate which reprices frequently.

The fair value of the Company’s secured borrowings aggregated approximately $ 28.9 million and $ 32.1 million as compared to the principal balance of $ 33.1 million and $ 33.2 million as of June 30, 2022 and December 31, 2021, respectively.

The fair value of the Company’s secured borrowings aggregated approximately $ 27.4 million and $ 32.1 million as compared to the principal balance of $ 33.1 million and $ 33.2 million as of September 30, 2022 and December 31, 2021, respectively.

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).

5 unchanged sentences

The Company considers its own credit risk, as well as the credit risk of its counterparties, when evaluating the fair value of its derivative assets and liabilities.

As of June 30, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap derivative assets was approximately $ 4.6 million and $ 1.0 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheet.

As of June 30, 2022, the fair value of the Company’s interest rate swap derivative liabilities was approximately $ 0.6 million, included in "Accounts Payable, Accrued Expenses and Other" on the Consolidated Balance Sheets.

Disclosure about fair value of assets and liabilities is based on pertinent information available to management as of June 30, 2022 and December 31, 2021.

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, 2022 and current estimates of fair value may differ significantly from the amounts presented herein.

As of September 30, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap derivative assets was approximately $ 9.3 million and $ 1.0 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheet.

Disclosure about fair value of assets and liabilities is based on pertinent information available to management as of September 30, 2022 and December 31, 2021.

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 September 30, 2022 and current estimates of fair value may differ significantly from the amounts presented herein.

Derivative Instruments and Hedging Activities

In accordance with ASC 815, Derivatives and Hedging, the Company records all derivative instruments on the Consolidated Balance Sheets at fair value.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges.

Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

The Company may enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

Derivatives and Hedging Activities for further details.

4 unchanged sentences

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 six months ended June 30, 2022 and 2021.

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

requirements that could differ materially from actual results.

No impairments were recorded during the three and nine months ended September 30, 2022 and 2021.

Concentration of Credit Risks

As of June 30, 2022, the Company’s properties were leased primarily to a single tenant, the USPS.

For the six months ended June 30, 2022, 16.1 % of the Company’s total rental income, or $ 3.8 million, was concentrated in Pennsylvania.

For the six months ended June 30, 2021, 18.9 % of the Company's total rental income, or $ 3.3 million, was concentrated in Pennsylvania.

The ability of the USPS to honor the terms of its leases is dependent upon regulatory, economic, environmental or competitive conditions in any of these areas and could have an effect on the Company’s overall business results.

As of September 30, 2022, the Company’s properties were leased primarily to a single tenant, the USPS.

For the nine months ended September 30, 2022, 15.4 % of the Company’s total rental income, or $ 5.6 million, was concentrated in Pennsylvania.

For the nine months ended September 30, 2021, 18.3 % of the Company's total rental income, or $ 5.1 million, was concentrated in Pennsylvania.

The ability of the USPS to honor the terms of its leases is dependent upon regulatory, economic, environmental or competitive conditions in Pennsylvania or other regions where the Company operates in and could have a material effect on the Company’s overall business results.

The Company has deposited cash and maintains its bank deposits with large financial institutions in amounts that, from time to time, exceed federally insured limits.

9 unchanged sentences

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 the amount is determinable and approved by insurance company.

Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is not recorded in other income until the amount is

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

determinable and approved by insurance company.

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 amount is determinable and approved by insurance company.

Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is not recorded in other income until the amount is determinable and approved by the insurance company.

Earnings per Share

The Company calculates earnings per share ("EPS") based upon the weighted average shares outstanding less issued and outstanding non-vested shares of Class A common stock.

As of June 30, 2022 and 2021, the Company had unvested restricted shares of Class A common stock, long term incentive units of the Operating Partnership ("LTIP Units") and certain restricted stock units (“RSUs”), which provide for non-forfeitable rights to dividend and dividend equivalent payments.

As of September 30, 2022 and 2021, the Company had unvested restricted shares of Class A common stock, long term incentive units of the Operating Partnership ("LTIP Units") and certain restricted stock units (“RSUs”), which provide for non-forfeitable rights to dividend and dividend equivalent payments.

Accordingly, these unvested restricted shares of Class A common stock, LTIP Units and RSUs are considered participating securities and are included in the computation of basic and diluted EPS pursuant to the two-class method.

5 unchanged sentences

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 .

2018-19, Codification

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

7 unchanged sentences

Real Estate Acquisitions

The following tables summarizes the Company’s acquisitions for the six months ended June 30, 2022.

The following tables summarizes the Company’s acquisitions for the nine months ended September 30, 2022.

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 (in thousands, except for the number of properties):

Six Months Ended Number of

Nine Months Ended Number of

Properties Land Building

6 unchanged sentences

June 30, 2022 (4) 150 $ 13,039 $ 41,462 $ 380 $ 3,520 $ 2 $ ( 1,659 ) $ — $ 56,744

September 30, 2022 (5) 66 $ 2,950 $ 18,012 $ 195 $ 1,532 $ 8 $ ( 1,360 ) $ — $ 21,337

Total 266 $ 21,411 $ 81,707 $ 789 $ 6,941 $ 38 $ ( 4,867 ) $ ( 363 ) $ 105,656

1 unchanged sentence

(1) Includes an intangible liability related to unfavorable operating leases on two properties during the three months ended March 31, 2022 that is included in “Accounts payable, accrued expenses and other” on the Consolidated Balance Sheets.

(2) Includes closing costs of approximately $ 0.6 million for the three months ended March 31, 2022 and approximately $ 1.7 million for the three months ended June 30, 2022.

(2) Includes closing costs of approximately $ 0.6 million for the three months ended March 31, 2022, approximately $ 1.7 million for the three months ended June 30, 2022 and approximately $ 0.5 million for the three months ended September 30, 2022.

(3) Includes the acquisition of 50 properties in various states in individual or portfolio transactions for a price of approximately $ 27.6 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash consideration (valued at approximately $ 1.8 million using the share price of Class A common stock on the date of each issuance of such OP Units) and borrowings under the Credit Facilities.

(4) Includes the acquisition of 150 properties in various states in individual or portfolio transactions for a price of approximately $ 56.7 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash consideration (valued at approximately $ 2.0 million using the share price of Class A common stock on the date of each issuance of such OP Units) and borrowings under the Credit Facilities.

(5) Includes the acquisition of 66 properties in various states in individual or portfolio transactions for a price of approximately $ 21.3 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash consideration (valued at approximately $ 4.7 million using the share price of Class A common stock on the date of each issuance of such OP Units) and borrowings under the Credit Facilities.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Intangible Assets and Liabilities

1 unchanged sentence

As of Gross Asset

(Liability) Accumulated

(Amortization)

/Accretion Net

(Liability) Accumulated Amortization Net

(in thousands)

June 30, 2022:

September 30, 2022:

In-place lease intangibles

11 unchanged sentences

( 13,654 ) 4,984 ( 8,670 )

Amortization of in-place lease intangibles was $ 1.7 million and $ 3.5 million for the three and six months ended June 30, 2022, respectively, and $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2021, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

amortization is included in “Depreciation and amortization” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of acquired above market leases was $ 0.02 million and $ 0.04 million for the three and six months ended June 30, 2022, respectively, and $ 0.01 million and $ 0.01 million for the three and six months ended June 30, 2021, respectively, and is included as a reduction to “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of acquired below market leases was $ 0.5 million and $ 1.1 million for the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2021, respectively, and is included as an increase to “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Future amortization/accretion of these intangibles is below (in thousands):

Amortization of in-place lease intangibles was $ 1.8 million and $ 5.2 million for the three and nine months ended September 30, 2022, respectively, and $ 1.7 million and $ 4.6 million for the three and nine months ended September 30, 2021, respectively.

This amortization is included in “Depreciation and amortization” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of acquired above market leases was $ 0.02 million and $ 0.06 million for the three and nine months ended September 30, 2022, respectively, and $ 0.01 million and $ 0.02 million for the three and nine months ended September 30, 2021, respectively, and is included as a reduction to “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of acquired below market leases was $ 0.6 million and $ 1.7 million for the three and nine months ended September 30, 2022, respectively, and $ 0.4 million and $ 1.2 million for the three and nine months ended September 30, 2021, respectively, and is included as an increase to “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Future amortization of these intangibles is below (in thousands):

Year Ending December 31, In-place lease

8 unchanged sentences

$ 16,174 $ 228 $ ( 11,885 )

The following table summarizes the Company’s indebtedness as of June 30, 2022 and December 31, 2021 (dollars in thousands):

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Company’s indebtedness as of September 30, 2022 and December 31, 2021 (dollars in thousands):

Outstanding Balance as of

September 30,

2022 Outstanding

1 unchanged sentence

2021 Interest

September 30,

2022 Maturity Date

23 unchanged sentences

In connection with entering into the Credit Facilities, the Company terminated its previous credit facility and paid off the outstanding loans thereunder.

On May 11, 2022, the Company amended the Credit Facilities (the "First Amendment") to, among other things, add a new $ 75.0 million senior unsecured delayed draw term loan facility (the "2022 Term Loan"), replace the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate ("SOFR") as the benchmark

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

interest rate and allow for a decrease in the applicable margin by 0.02 % if the Company achieves certain sustainability targets.

The Credit Facilities include an accordion feature which permit the Company to borrow up to an additional $ 150.0 million under the 2021 Revolving Credit Facility and up to an additional $ 75.0 million under the term loans, in each case subject to customary terms and conditions.

3 unchanged sentences

The Credit Facilities contain a number of customary financial and non-financial covenants.

During the three and six months ended June 30, 2022, the Company incurred $ 0.06 million and $ 0.1 million, respectively, and, during the three and six months ended June 30, 2021, the Company incurred $ 0.05 million and $ 0.1 million, respectively, of unused facility fees related to its previous credit facility and the 2021 Revolving Credit Facility.

As of June 30, 2022, the Company was in compliance with all of the Credit Facilities’ debt covenants.

During the three and nine months ended September 30, 2022, the Company incurred $ 0.06 million and $ 0.2 million, respectively, and, during the three and nine months ended September 30, 2021, the Company incurred $ 0.05 million and $ 0.2 million, respectively, of unused facility fees related to its previous credit facility and the 2021 Revolving Credit Facility.

As of September 30, 2022, the Company was in compliance with all of the Credit Facilities’ debt covenants.

(2) Based upon the one-month Adjusted Term SOFR, which is SOFR plus a term SOFR adjustment of 0.10 %, subject to a 0 % floor (the “Adjusted Term SOFR”) .

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(3) Five properties are collateralized under this loan and Mr.

8 unchanged sentences

The loan has a fixed interest rate of 2.80 % with interest-only payments for the first five years and fixed payments of principal and interest thereafter based on a 30-year amortization schedule.

The weighted average maturity date for the Company's indebtedness as of June 30, 2022 and December 31, 2021 was 5.8 years and 6.5 years, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The scheduled principal repayments of indebtedness as of June 30, 2022 are as follows (in thousands):

The weighted average maturity date for the Company's indebtedness as of September 30, 2022 and December 31, 2021 was 5.4 years and 6.5 years, respectively.

The scheduled principal repayments of indebtedness as of September 30, 2022 are as follows (in thousands):

Year Ending December 31, Amount

1 unchanged sentence

Derivatives and Hedging Activities

The Company has three interest rate swaps with a total notional amount of $100.0 million that are used to manage its interest rate risk and fix the SOFR component on the Credit Facilities.

$ 50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.291 % as of June 30, 2022.

The remaining $ 50.0 million mature in February 2028 and fix the first $ 50.0 million amount outstanding under the 2022 Term Loan at 4.237 % as of June 30, 2022.

In June 2022, the Company also entered into a forward-starting interest rate swap for a notional amount of $ 25.0 million, which became effective in July 2022 and fixed the SOFR component of $ 25.0 million of the Credit Facilities through February 2028.

The forward-starting interest rate swap initially applied to the remaining $ 25.0 million amount outstanding under the 2022 Term Loan, fixing the interest rate for this portion of the 2022 Term Loan initially at 4.81 %.

The Company has four interest rate swaps with a total notional amount of $ 125.0 million that are used to manage its interest rate risk and fix the SOFR component on the Credit Facilities.

Within the $ 125.0 million, $ 50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.291 % as of September 30, 2022.

An additional $ 50.0 million of the swaps mature in February 2028 and fix the first $ 50.0 million amount outstanding under the 2022 Term Loan at 4.237 % as of September 30, 2022.

The remaining $ 25.0 million of the swaps mature in February 2028 and fix the remaining $ 25.0 million amount outstanding under the 2022 Term Loan at 4.81 % as of September 30, 2022.

The Company’s objectives in using the interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.

2 unchanged sentences

During the next twelve months, the Company estimates that an additional $ 2.6 million will be reclassified from “Accumulated other comprehensive income” as a decrease to interest expense.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.

The table below presents the effect of the Company’s interest rate swap derivative instruments on the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2022 and 2021.

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps) 2022 2021 2022 2021

1 unchanged sentence

$ 5,397 $ — $ 8,198 $ —

Amount of loss reclassified from "Accumulated other comprehensive income" into interest expense

Amount of income (loss) reclassified from "Accumulated other comprehensive income" into interest expense

$ 45 $ — $ ( 169 ) $ —

Interest expense, net presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 1.3 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively, and $ 0.8 million and $ 1.8 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, the Company has derivatives in a net liability position and has not posted any collateral related to these agreements.

If the Company had breached any of these provisions as of June 30, 2022, it could have been required to settle its obligations under the agreements of any interest rate swap in a net liability position for approximately $ 0.6 million, which is their termination value.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Interest expense, net presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 1.8 million and $ 3.9 million for the three and nine months ended September 30, 2022, respectively, and $ 1.0 million and $ 2.8 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, the Company did not have any derivatives in a net liability position and did not post any collateral related to these agreements.

If the Company had breached any of these provisions as of September 30, 2022, it could have been required to settle its obligations under the agreements at their termination value.

Lessor Accounting

As of June 30, 2022, the Company's properties were leased primarily to the USPS, with leases expiring at various dates through May 31, 2031.

Certain leases had expired and were in holdover status as of June 30, 2022 as discussed below.

As of September 30, 2022, the Company's properties were leased primarily to the USPS, with leases expiring at various dates through May 31, 2031.

Certain leases had expired and were in holdover status as of September 30, 2022 as discussed below.

Certain leases contain renewal, termination and/or purchase options exercisable at the lessee’s election.

8 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

$ 13,181 $ 10,204 $ 36,665 $ 27,668

Future minimum lease payments to be received as of June 30, 2022 under non-cancellable operating leases for the next five years and thereafter are as follows:

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Future minimum lease payments to be received as of September 30, 2022 under non-cancellable operating leases for the next five years and thereafter are as follows:

Year Ending December 31, Amount (1)

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(1) The above minimum lease payments to be received do not include reimbursements from tenants for real estate taxes and other reimbursed expenses.

(2) As of June 30, 2022, the leases at 29 of the Company's properties were expired, and the USPS was occupying such properties as a holdover tenant.

(2) As of September 30, 2022, the leases at 63 of the Company's properties were expired, and the USPS was occupying such properties as a holdover tenant.

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

Purchase Option Provisions

As of June 30, 2022, operating leases for 54 of the Company’s properties provided the USPS with the option to purchase the underlying property either at fair market value or at fixed prices, in each case as of dates set forth in the lease agreement.

As of June 30, 2022, 51 of these properties acquired for an aggregate purchase price of approximately $ 39.3 million

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

had an aggregate purchase option price of approximately $ 46.9 million and the remaining three properties acquired for an aggregate purchase price of approximately $ 2.6 million had purchase options exercisable at fair market value.

As of September 30, 2022, operating leases for 56 of the Company’s properties provided the USPS with the option to purchase the underlying property either at fair market value or at fixed prices, in each case as of dates set forth in the lease agreement.

As of September 30, 2022, 53 of these properties acquired for an aggregate purchase price of approximately $ 40.1 million had an aggregate purchase option price of approximately $ 47.8 million and the remaining three properties acquired for an aggregate purchase price of approximately $ 2.6 million had purchase options exercisable at fair market value.

Direct Financing Leases

As of June 30, 2022 and December 31, 2021, financing leases for two of the Company's properties provide the USPS with the option to purchase the underlying property at fixed prices as of dates set forth in the lease agreement.

The components of the Company’s net investment in financing leases as of June 30, 2022 and December 31, 2021 are summarized in the table below (in thousands):

As of September 30, 2022 and December 31, 2021, financing leases for two of the Company's properties provide the USPS with the option to purchase the underlying property at fixed prices as of dates set forth in the lease agreement.

The components of the Company’s net investment in financing leases as of September 30, 2022 and December 31, 2021 are summarized in the table below (in thousands):

September 30,

Total minimum lease payment receivable

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Investment in financing leases, net $ 16,149 $ 16,213

Revenue earned under direct financing leases for the three and six months ended June 30, 2022 were $ 0.3 million and $ 0.6 million, respectively, and for the three and six months ended June 30, 2021 were $ 0.01 million and $ 0.02 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income.

Future lease payments to be received under the Company’s direct financing leases as of June 30, 2022 for the next five years and thereafter are as follows:

Revenue earned under direct financing leases for the three and nine months ended September 30, 2022 were $ 0.3 million and $ 0.8 million, respectively, and for the three and nine months ended September 30, 2021 were $ 0.01 million and

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

$ 0.03 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income.

Future lease payments to be received under the Company’s direct financing leases as of September 30, 2022 for the next five years and thereafter are as follows:

Year Ending December 31, Amount

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As a lessee, the Company has ground and office leases which were classified as operating leases.

As of June 30, 2022, these leases had remaining terms, including renewal options, of two to 56 years and a weighted average remaining lease term of 24.2 years.

Operating right-of-use ("ROU") assets and lease liabilities are included in “Prepaid expenses and other assets, net” and “Accounts payable, accrued expense and other” in the Consolidated Balance Sheets as follows (in thousands):

As of September 30, 2022, these leases had remaining terms, including renewal options, of two to 56 years and a weighted average remaining lease term of 25.0 years.

Operating right-of-use ("ROU") assets and lease liabilities are included in “Prepaid expenses and other assets, net” and “Accounts payable, accrued expense and other” on the Consolidated Balance Sheets as follows (in thousands):

September 30,

ROU asset – operating leases

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As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company used a weighted average discount rate ranging from 4.25 % to 5.76 % based on the yield of its current borrowings in determining its lease liabilities.

The Company used a weighted average discount rate ranging from 4.25 % to 5.76 % based on the yield of its current borrowings in determining its lease liabilities.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

Operating lease expense for each of the three and six months ended June 30, 2022 and 2021 was $ 0.06 million and $ 0.1 million, respectively.

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of June 30, 2022 for the next five years and thereafter are as follows (in thousands):

Operating lease expense for each of the three and nine months ended September 30, 2022 and 2021 was $ 0.06 million and $ 0.2 million, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of September 30, 2022 for the next five years and thereafter are as follows (in thousands):

2022 — Remaining $ 59

1 unchanged sentence

Interest discount

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) pandemic which has been ongoing.

The resulting restrictions on travel and quarantines imposed have had a negative impact on the U.S.

economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to the Company’s tenants and operating results.

For the six months ended June 30, 2022, the Company received 100 % of its rents and the Company believes there was no material impact caused by COVID-19 on the Company.

In connection with the IPO, the Company and REAC jointly elected to treat REAC as a TRS.

1 unchanged sentence

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

For the three and six months ended June 30, 2022, income tax expense related to REAC was $ 0.02 million and $ 0.03 million, respectively.

For the three and six months ended June 30, 2021, income tax expense related to REAC was $ 0.03 million and $ 0.04 million, respectively.

For the three and nine months ended September 30, 2022, income tax (benefit) expense related to REAC was $( 0.02 ) million and $ 0.01 million, respectively.

For the three and nine months ended September 30, 2021, income tax expense related to REAC was $ 0.04 million and $ 0.08 million, respectively.

In connection with the IPO, the indirect sole shareholder of United Postal Holdings, Inc.

2 unchanged sentences

The indirect sole shareholder of UPH will be responsible for all tax related matters related to UPH.

As of June 30, 2022 and December 31, 2021, the Company had unrecognized tax benefits of $ 0.2 million and $ 0.2 million, respectively, which are inclusive of interest and penalties, and a corresponding indemnification asset, which are included in "Prepaid expenses and other assets" on the Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of September 30, 2022 and December 31, 2021, the Company had unrecognized tax benefits of $ 0.03 million and $ 0.2 million, respectively, which are inclusive of interest and penalties, and a corresponding indemnification asset, which are included in "Prepaid expenses and other assets" on the Consolidated Balance Sheets.

During the three months ended September 30, 2022, the Company reversed $ 0.2 million of unrecognized tax benefits and the corresponding indemnification asset due to the expiration of statute of limitations.

Related Party Transactions

Management Fee Income

REAC recognized management fee income of $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2021, respectively, from various parties which were affiliated with the Company's CEO.

REAC recognized management fee income of $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 2022, respectively, and $ 0.3 million and $ 1.0 million for the three and nine months ended September 30, 2021, respectively, from various parties which were affiliated with the Company's CEO.

These amounts are included in “Fee and other” in the Consolidated Statements of Operations and Comprehensive Income.

Accrued management fees receivable of $ 0.3 million and $ 0.3 million as of June 30, 2022 and December 31, 2021, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets.

Accrued management fees receivable of $ 0.3 million and $ 0.3 million as of September 30, 2022 and December 31, 2021, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets.

Related Party Lease

2 unchanged sentences

The term of the Office Lease is five years commencing on May 17, 2019 and will expire on May 16, 2024.

Rental expenses associated with the Office Lease for each of the three and six months ended June 30, 2022 and 2021 were $ 0.05 million and $ 0.1 million, respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive Income.

Rental expenses associated with the Office Lease for each of the three and nine months ended September 30, 2022 and 2021 were $ 0.05 million and $ 0.1 million, respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Operations and Comprehensive Income.

The Company determined this Office Lease was an operating lease.

1 unchanged sentence

As disclosed above in Note 5.

Spodek personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $ 1.9 million and $ 1.9 million as of June 30, 2022 and December 31, 2021, respectively.

As a guarantor, Mr.

7 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Basic and diluted earnings per share $ 0.04 $ 0.03 $ 0.10 $ 0.06

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Explanatory Note :

8 unchanged sentences

On January 11, 2021, the underwriters purchased the full allotment of 487,500 shares pursuant to a 30-day option at $ 15.25 per share (the “January 2021 Additional Shares”).

The January 2021 Offering, including the January 2021 Additional Shares, closed on January 14, 2021 resulting in $ 57.0 million in gross proceeds, and approximately $ 53.9 million in net proceeds after deducting approximately $ 3.1 million in underwriting discounts and before giving effect to $ 0.6 million in other related expenses.

The January 2021 Offering, including the January 2021 Additional Shares, closed on January 14, 2021 resulting in $ 57.0 million in gross proceeds, and

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

approximately $ 53.9 million in net proceeds after deducting approximately $ 3.1 million in underwriting discounts and before giving effect to $ 0.6 million in other related expenses.

On November 16, 2021, the Company priced a public offering of 4.25 million shares of its Class A common stock (the “November 2021 Offering”) at $ 17.00 per share.

7 unchanged sentences

Davidson, which termination became effective May 14, 2021.

The following table summarizes the activity under the ATM Program for the period presented (dollars in thousands, except per share amounts).

During the year ended December 31, 2021, 344,717 shares were issued under the ATM Program.

During the three and six months ended June 30, 2022, the Company did not issue any shares under the ATM Program.

As of June 30, 2022, the Company had approximately $ 43.1 million remaining that may be issued under the ATM Program.

During the three and six months ended June 30, 2022, the Board of Directors approved and the Company declared and paid dividends of $ 5.3 million and $ 10.5 million, respectively, to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.23 per share or unit and $ 0.4575 per share or unit, respectively, as shown in the table below.

During the three months ended September 30, 2022, 227,473 shares were issued under the ATM Program.

As of September 30, 2022, the Company had approximately $ 39.4 million remaining that may be issued under the ATM Program.

Three Months Ended

September 30, 2022

Shares issued 227,473

Gross proceeds $ 3,730

Fees and issuance costs 223

Net proceeds received $ 3,507

Average gross sales price per share $ 16.40

During the three and nine months ended September 30, 2022, the Board of Directors approved and the Company declared and paid dividends of $ 5.5 million and $ 16.0 million, respectively, to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.2325 per share or unit and $ 0.69 per share or unit, respectively, as shown in the table below.

Declaration Date Record Date Date Paid Amount Per Share

1 unchanged sentence

April 28, 2022 May 13, 2022 May 27, 2022 $ 0.23

July 27, 2022 August 8, 2022 August 26, 2022 $ 0.2325

Non-controlling Interests

Non-controlling interests in the Company represent OP Units held by the Company's prior investors and certain sellers of properties to the Company and LTIP Units primarily issued to the Company’s CEO and the Board of Directors in connection with the IPO and/or in lieu of their cash compensation.

During the six months ended June 30, 2022, the Company issued

During the nine months ended September 30, 2022, the Company issued 118,389 LTIP Units in January 2022 to the Company’s CEO for his 2021 incentive bonus, his election to defer 100 % of his 2022 annual salary and for long term incentive compensation, issued 38,174 LTIP Units in June 2022 to the Board of Directors for their annual retainers as compensation for their services as directors and issued 5,040 LTIP Units in July 2022 to a consultant under the consultancy agreement with the Company.

In addition, during the nine months ended September 30, 2022,

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

118,389 LTIP Units in January 2022 to the Company’s CEO for his 2021 incentive bonus, his election to defer 100 % of his 2022 annual salary and for long term incentive compensation and issued 38,174 LTIP Units in June 2022 to the Board of Directors for their annual retainers as compensation for their services as directors.

In addition, during the six months ended June 30, 2022, the Company issued 310,210 OP Units to certain contributors in connection with portfolio acquisitions and a business acquisition (for further details, see Note 13.

the Company issued 597,769 OP Units to certain contributors in connection with portfolio acquisitions and a business acquisition (for further details, see Note 13.

Business Acquisitions).

As of June 30, 2022 and December 31, 2021, non-controlling interests consisted of 3,782,431 OP Units and 531,828 LTIP Units and 3,472,221 OP Units and 375,265 LTIP Units, respectively.

This represented approximately 18.6 % and 17.1 % of the outstanding Operating Partnership units as of June 30, 2022 and December 31, 2021, respectively.

OP Units and shares of common stock generally have the same economic characteristics, as they share equally in the total net income or loss distributions of the Operating Partnership.

As of September 30, 2022 and December 31, 2021, non-controlling interests consisted of 4,069,990 OP Units and 536,868 LTIP Units and 3,472,221 OP Units and 375,265 LTIP Units, respectively.

This represented approximately 19.4 % and 17.1 % of the outstanding Operating Partnership units as of September 30, 2022 and December 31, 2021, respectively.

OP Units and shares of common stock generally have the same economic characteristics, as they share equally in the total net income or loss and 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, shares of the Class A common stock, on an one -for-one basis determined in accordance with and subject to adjustment under the partnership agreement.

2 unchanged sentences

Pursuant to the Company’s Plan, the Company may grant equity incentive awards to its directors, officers, employees and consultants.

The maximum number of shares of Class A common stock that were originally authorized for issuance under the Plan were 541,584 .

On April 27, 2020, the Board of Directors amended the Plan to increase the total number of shares of Class A common stock that may be issued under the Plan (the "Plan Pool") from 541,584 shares to 1,291,584 shares.

The stockholders approved such amendment on June 26, 2020.

On April 27, 2021, the Board of Directors further amended the Plan to provide for an automatic increase annually in the Plan Pool starting from January 1, 2022, allowing the Plan Pool to equal to 10 % of the Company’s fully diluted shares (including securities convertible into shares of the Class A common stock) outstanding on the last day of the immediately preceding fiscal year.

The stockholders approved such amendment on June 18, 2021.

As of June 30, 2022, the remaining shares available under the Plan for future issuance was 1,204,129 .

As of September 30, 2022, the remaining shares available under the Plan for future issuance was 1,180,962 .

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 Company has an anti-pledging policy that prohibits directors, officers and employees from pledging the Company’s securities as collateral for a loan or holding Company securities in a margin account, except in very limited circumstances and with prior approval pursuant to the policy.

The following table presents a summary of the Company's outstanding restricted shares of Class A common stock, LTIP Units and RSUs.

The balance as of June 30, 2022 represents unvested restricted shares of Class A common stock and LTIP Units and RSUs that are outstanding, whether vested or not:

The balance as of September 30, 2022 represents unvested restricted shares of Class A common stock and LTIP Units and RSUs that are outstanding, whether vested or not:

Shares (1)(2)

Shares Weighted

Total Shares/Units Weighted

Outstanding, as of January 1, 2022

4 unchanged sentences

( 382 ) — — ( 382 ) $ 17.04

Outstanding, as of June 30, 2022 444,233 531,828 219,604 1,195,665 $ 16.16

Outstanding, as of September 30, 2022 472,737 536,868 229,499 1,239,104 $ 16.12

Explanatory Notes :

(1) Represents restricted shares awards included in Class A common stock.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(2) The time-based restricted share awards granted to the Company's officers and employees typically vest in three annual installments or cliff vest at the end of three years or eight years .

The time-based restricted share awards granted to the Company's independent directors vest over three years .

(3) Includes 464,657 LTIP Units granted to the Company’s CEO that vest over eight years and 67,171 LTIP Units granted to the Company's independent directors that vest over three years or cliff vest at the end of three years .

(4) Includes 47,005 RSUs granted to certain officers and employees of the Company during the six months ended June 30, 2022, subject to the achievement of a service condition and a market condition.

(3) Includes 464,657 LTIP Units granted to the Company’s CEO that vest over eight years , 67,171 LTIP Units granted to the Company's independent directors that vest over three years or cliff vest at the end of three years and 5,040 LTIP Units granted to a consultant under the consultancy agreement with the Company that will vest on December 31, 2022.

(4) Includes 47,005 RSUs granted to certain officers and employees of the Company during the nine months ended September 30, 2022, 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, 2024.

The number of market-based RSUs is based on the number of shares issuable upon achievement of the market-based metric at target.

The number of market-based RSUs is based on the number of shares issuable upon achievement of the market-based

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

metric at target.

Also, includes 40,961 time-based RSUs issued for 2021 incentive bonuses to certain employees that vested fully on January 31, 2022, the date of grant, and 12,780 time-based RSUs granted to certain employees for their election to defer a portion of their 2022 salary that will vest on December 31, 2022.

1 unchanged sentence

(5) Includes 39,075 of restricted shares that vested and 18,172 shares of restricted shares that were withheld to satisfy minimum statutory withholding requirements.

During the three and six months ended June 30, 2022, the Company recognized compensation expense of $ 1.0 million and $ 2.7 million, respectively, related to all awards.

During the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.8 million and $ 1.9 million, respectively, related to all awards.

As of June 30, 2022, there was $ 13.0 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 4.8 years.

In July 2022, the Company issued 9,895 RSUs and 28,711 restricted shares of Class A common stock to certain employees for their elections to receive such RSUs and restricted shares in lieu of a portion of their 2022 annual salaries pursuant to the Company's Alignment of Interest Program.

The RSUs issued to employees in lieu of salaries will cliff vest on December 31, 2022, while the other restricted shares of Class A common stock issued to employees in lieu of salaries will cliff vest on the third or eighth anniversary of July 5, 2022.

In addition, in July 2022, the Company issued 5,040 LTIP Units to a consultant under the consultancy agreement with the Company.

During the three and nine months ended September 30, 2022, the Company recognized compensation expense of $ 1.0 million and $ 3.7 million, respectively, related to all awards.

During the three and nine months ended September 30, 2021, the Company recognized compensation expense of $ 0.8 million and $ 2.7 million, respectively, related to all awards.

As of September 30, 2022, there was $ 12.7 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 4.5 years.

Employee Stock Purchase Plan

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The Code permits the Company to provide up to a 15 % discount on the lesser of the fair market value of such shares of Class A common stock at the beginning of the offering period and the close of the offering period.

As of June 30, 2022 and December 31, 2021, 21,680 and 16,293 shares have been issued under the ESPP since commencement, respectively.

During the three and six months ended June 30, 2022, the Company recognized compensation expense of $ 1,625 and $ 0.02 million respectively.

During the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.01 million and $ 0.02 million, respectively.

As of September 30, 2022 and December 31, 2021, 29,710 and 16,293 shares have been issued under the ESPP since commencement, respectively.

During the three and nine months ended September 30, 2022, the Company recognized compensation expense of $ 0.02 million and $ 0.03 million, respectively.

During the three and nine months ended September 30, 2021, the Company recognized compensation expense of $ 0.01 million and $ 0.03 million, respectively.

Commitments and Contingencies

As of June 30, 2022, the Company was not involved in any litigation nor to its knowledge is any litigation threatened against the Company, that, in management’s opinion, would result in any material adverse effect on the Company’s financial position and results of operations, or which is not covered by insurance.

As of September 30, 2022, the Company was not involved in any litigation nor to its knowledge is any litigation threatened against the Company, that, in management’s opinion, would result in any material adverse effect on the Company’s financial position and results of operations, or which is not covered by insurance.

In the ordinary course of the Company’s business, the Company enters into non-binding (except with regard to exclusivity and confidentiality) letters of intent indicating a willingness to negotiate for acquisitions.

There can be no assurance that definitive contracts will be entered into with respect to any matter covered by letters of intent, that the Company will close the transactions contemplated by such contracts on time, or that the Company will consummate any transaction contemplated by any definitive contract.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Business Acquisition

6 unchanged sentences

Subsequent Events

The Company's Board of Directors approved, and on July 27, 2022, the Company declared a second quarter common stock dividend of $ 0.2325 per share, which is payable on August 26, 2022 stockholders of record as of August 8, 2022.

The Company's Board of Directors approved, and on October 26, 2022, the Company declared a third quarter common stock dividend of $ 0.235 per share, which is payable on November 28, 2022 to stockholders of record as of November 7, 2022.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

As of the date of this report, the Company had $ 159.0 million drawn on the Credit Facilities, with $ 50.0 million drawn on the 2021 Term Loan, $ 75.0 million drawn on the 2022 Term Loan and $ 34.0 million drawn on the 2021 Revolving Credit Facility.

During the period subsequent to June 30, 2022, the Company acquired 16 properties for approximately $ 4.6 million, excluding closing costs.

During the period subsequent to June 30, 2022, the Company had entered into definitive agreements to acquire 36 properties for approximately $ 14.1 million, some of which include OP Units as part of the consideration.

The majority of these transactions are anticipated to close during the third and fourth quarters of 2022, subject to the satisfaction of customary closing conditions.

However, the Company can provide no assurances that the properties will be consummated on the terms of timeframe described herein, or at all.

During the period subsequent to September 30, 2022, the Company acquired 7 properties for approximately $ 5.9 million, excluding closing costs.

During the period subsequent to September 30, 2022, the Company had entered into definitive agreements to acquire 14 properties for approximately $ 5.1 million.

However, the Company can provide no assurances that the acquisitions of these properties will be consummated on the terms and timing the Company expects, or at all.

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