What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-04 · 211 added, 311 removed, 447 unchanged (54% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2023 December 31, 2022

7 unchanged sentences

Investment in financing leases, net 16,105 16,130

Total real estate investments 442,526 343,694

Total real estate investments, net 474,386 459,864

Cash 2,112 1,495

Escrows and reserves 338 1,169

Escrow and reserves 672 547

Rent and other receivables 2,861 4,613

14 unchanged sentences

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

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

500,000,000 shares authorized;

19,737,709 and 19,528,066 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

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

27,206 shares authorized:

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

27,206 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Additional paid-in capital 254,030 254,107

7 unchanged sentences

POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except share data )

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(in thousands, except share and per share data )

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

Rental income $ 14,499 $ 11,349

12 unchanged sentences

Write-off and amortization of deferred financing fees ( 165 ) ( 129 )

Loss on early extinguishment of debt — — — ( 202 )

Interest income — 1

1 unchanged sentence

Income before income tax expense 449 732

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

Income tax expense ( 16 ) ( 11 )

Net income 433 721

5 unchanged sentences

Basic and Diluted 19,294,896 18,368,130

Comprehensive income:

Comprehensive (loss) income:

Net income $ 433 $ 721

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

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

Comprehensive income attributable to Operating Partnership unitholders’ non-controlling interests ( 1,240 ) ( 229 ) ( 2,109 ) ( 404 )

Comprehensive income attributable to common stockholders $ 5,262 $ 841 $ 9,294 $ 1,614

Unrealized (loss) gain on derivative instruments ( 2,837 ) 2,511

Comprehensive (loss) income ( 2,404 ) 3,232

Comprehensive loss (income) attributable to Operating Partnership unitholders’ non-controlling interests 473 ( 565 )

Comprehensive (loss) income attributable to common stockholders $ ( 1,931 ) $ 2,667

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

POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(in thousands, except share data)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share and per share data)

shares of Common

Stock Additional

Capital Accumulated Other Comprehensive Income Accumulated

(Deficit) Total Stockholders’

Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’

equity Operating

3 unchanged sentences

Net proceeds from sale of common stock 55,082 1 709 — — 710 — 710

Shares issued upon redemption of OP Units 22,798 — 409 — — 409 ( 409 ) —

Issuance and amortization of equity-based compensation 146,627 1 1,376 — — 1,377 568 1,945

1 unchanged sentence

Restricted stock withholdings ( 21,310 ) — ( 327 ) — — ( 327 ) — ( 327 )

Dividends declared ($ 0.2175 per share)

— — — — ( 2,916 ) ( 2,916 ) ( 650 ) ( 3,566 )

Dividends and distributions — — — — ( 4,787 ) ( 4,787 ) ( 1,176 ) ( 5,963 )

Accumulated other comprehensive loss — — — ( 2,279 ) — ( 2,279 ) ( 558 ) ( 2,837 )

Net income — — — — 348 348 85 433

1 unchanged sentence

Balance – March 31, 2023 19,764,915 $ 197 $ 254,030 $ 5,207 $ ( 36,996 ) $ 222,438 $ 55,328 $ 277,766

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

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

Amortization under ESPP — — 8 — — 8 — 8

Restricted stock withholdings ( 10,906 ) — ( 221 ) — — ( 221 ) — ( 221 )

Dividends declared ($ 0.22 per share)

— — — — ( 2,951 ) ( 2,951 ) ( 668 ) ( 3,619 )

Net income — — — — 671 671 152 823

Reallocation of non-controlling interest — — 2,611 — — 2,611 ( 2,611 ) —

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

3 unchanged sentences

Restricted stock withholdings ( 3,492 ) — ( 62 ) — — ( 62 ) — ( 62 )

Dividends declared ($ 0.2275 per share)

— — — — ( 4,295 ) ( 4,295 ) ( 902 ) ( 5,197 )

Dividends and distributions — — — — ( 4,295 ) ( 4,295 ) ( 902 ) ( 5,197 )

Accumulated other comprehensive income — — — 2,072 — 2,072 439 2,511

2 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 acquisition transactions — — — — — — 1,987 1,987

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

Issuance and amortization under ESPP — — 2 — — 2 — 2

Restricted stock withholdings ( 14,590 ) — ( 221 ) — — ( 221 ) — ( 221 )

Dividends declared ($ 0.23 per share)

— — — — ( 4,342 ) ( 4,342 ) ( 963 ) ( 5,305 )

Accumulated other comprehensive income — — — 412 — 412 92 504

Net income — — — — — 953 953 212 1,165

Reallocation of non-controlling interest — — 225 — — 225 ( 225 ) —

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 Nine Months Ended

September 30,

For the Three Months Ended

Cash flows from operating activities:

1 unchanged sentence

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 7,744 5,548

Depreciation and amortization 3,067 2,346

Amortization of in-place intangibles 1,770 1,764

2 unchanged sentences

Amortization of intangible liability ( 24 ) ( 16 )

Gain on insurance proceeds received for damage due to property — ( 378 )

Equity based compensation 1,960 1,706

Loss on early extinguishment of debt — 202

Deferred rent receivable ( 85 ) ( 156 )

8 unchanged sentences

Investment in financing leases — ( 10 )

Repayment of financing lease — 4

Escrows for acquisition and construction deposits ( 223 ) ( 1,445 )

5 unchanged sentences

Repayments of secured borrowings ( 93 ) ( 88 )

Proceeds from term loan 75,000 50,000

Proceeds from revolving credit facility 17,000 29,000

Repayments of revolving credit facility — ( 2,000 )

Repayments from other financing activity — ( 53 )

Net proceeds from issuance of shares 3,507 59,865

Net proceeds (costs) from issuance of shares 718 ( 199 )

Deferred offering costs ( 107 ) —

Debt issuance costs ( 623 ) ( 1,296 )

Proceeds from issuance of ESPP shares 79 83

Shares withheld for payment of taxes on restricted share vesting ( 461 ) ( 162 )

Distributions and dividends ( 15,970 ) ( 11,080 )

Dividends and distributions ( 5,963 ) ( 5,197 )

Other financing activities ( 130 ) ( 139 )

Net cash provided by financing activities 11,043 21,298

Net increase (decrease) in Cash and Escrows and Reserves ( 2,118 ) 1,655

Net increase in Cash and Escrows and Reserves 742 229

Cash and Escrows and Reserves at the beginning of period 2,042 7,026

1 unchanged sentence

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Unrealized gain on interest rate swaps, net 8,366 —

OP Units issued for property acquisitions 8,487 9,031

OP Units issued for business acquisition 1,451 —

Unrealized (loss) gain on interest rate swaps, net ( 2,837 ) 2,511

Reallocation of non-controlling interest 2,338 346

Reclassification of acquisition costs included in prepaid expenses and other assets 696 792

Accrued capital expenditures included in accounts payable and accrued expenses 445 336

Reclassification of acquisition deposits included in prepaid expenses and other assets 205 280

Write-off of fixed assets no longer in service 139 86

Accrued costs of capital included in accounts payable and accrued expenses — 14

Right of use assets 39 1,131

Accrued capital expenditures included in accounts payable and accrued expenses 123 272

OP Units issued for property acquisitions — 1,787

OP Units issued for business acquisition — 1,451

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

10 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 September 30, 2022, the Company held an approximately 80.6 % interest in the Operating Partnership.

As of March 31, 2023, the Company held an approximately 80.1 % 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 September 30, 2022, the Company owned a portfolio of 1,232 properties located in 49 states and one territory.

As of March 31, 2023, the Company owned a portfolio of 1,325 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”).

In addition, through its taxable REIT subsidiary (“TRS”), Real Estate Asset Counseling, LLC (formerly known as Postal Realty Management TRS, LLC) (“REAC”), the Company provides fee-based third party property management services for an additional 397 properties, which are owned by Andrew Spodek, the Company's chief executive officer ("CEO"), and his affiliates, and certain advisory services to third-party owners of postal properties.

In addition, through its taxable REIT subsidiary (“TRS”), Real Estate Asset Counseling, LLC (“REAC”), the Company provides fee-based third party property management services for an additional 397 properties, which are owned by Andrew Spodek, the Company's chief executive officer ("CEO"), and his affiliates, and certain advisory services to third-party owners of postal properties.

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 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.

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

Additionally, any income earned by the TRS and any other TRS the Company forms in the future will be subject to federal, state and local corporate income tax.

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

5 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

Substantially all of the assets and liabilities of the Company relate to the Operating Partnership.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Balance Sheets.

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 reflects the income attributed to controlling and non-controlling interests.

7 unchanged sentences

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.

As discussed in the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, t he Company’s most significant assumptions and estimates are related to the valuation of investments in real estate properties and impairment of long-lived assets.

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

Offering and Other Costs

Offering costs are recorded in “Total Stockholders’ Equity” in the Consolidated Balance Sheets as a reduction of additional paid-in capital.

Offering costs are recorded in “Total Stockholders’ Equity” on the Consolidated Balance Sheets as a reduction of additional paid-in capital.

Deferred Costs

1 unchanged sentence

Deferred financing costs related to the revolving credit facility component (the "Revolving Credit Facility") of the Credit Facilities are deferred and amortized as an increase to interest expense over the terms of the Revolving Credit Facility and are included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets .

Reclassifications

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

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,

2023 December 31,

11 unchanged sentences

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

The Company’s determination of the probability to collect lease payments is impacted by numerous factors, including the Company's assessment of the tenant’s creditworthiness, economic conditions, historical experience with the tenant, future prospects for the tenant and the length of the lease term.

If leases currently classified as probable of collection are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in rental income.

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.

2 unchanged sentences

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

At lease inception, the Company records an asset within "Investments in financing leases, net" on the Consolidated Balance Sheets, which represents the Company’s net investment in the direct financing leases.

This initial net investment is determined by aggregating the total future minimum lease payments attributable to the direct financing leases and the estimated residual value of the property, if any, less unearned income.

Over the lease term, the investment in the direct financing leases is reduced and income is recognized as revenue in “Fee and other” in the Consolidated Statements of Operations and Comprehensive Income and produces a constant periodic rate of return on the investment in financing leases, net.

At lease inception, the Company records an asset within "Investment in financing leases, net" on the 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.

Over the lease term, the investment in the direct financing lease is reduced and income is recognized as revenue in “Fee and other” in the Consolidated Statements of Operations and Comprehensive (Loss) Income and produces a constant periodic rate of return on the "Investment in financing leases, net".

Revenue from advisory services is generated from service contracts generally based on (i) time and expense arrangements (where the Company recognizes revenues based on hours incurred and contracted rates), (ii) fixed-fee arrangements (where the Company recognizes revenues earned to date by applying the proportional performance method) or (iii) performance-based or contingent arrangements (where the Company recognizes revenues at a point in time when the client receives the benefit of the promised service).

Reimbursable expenses for the advisory services, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues and in general and administrative expenses in the period in which the expense is incurred.

Business Combinations, Goodwill and Intangible Assets

The Company accounts for business combinations using the acquisition method, which requires the identification of the acquirer, the determination of the acquisition date and the allocation of the purchase price paid by the acquirer to the identifiable tangible and intangible assets acquired, the liabilities assumed, including any contingent consideration and any non-controlling interest in the acquiree at their acquisition date fair values.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired, including the amount assigned to identifiable intangible assets.

Intangible assets may include customer relationships, trademarks and acquired software.

Identifiable intangible assets with finite lives are amortized over their expected useful lives.

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

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.

Goodwill is evaluated at the reporting unit level by comparing the fair value of the reporting unit with its carrying amount including goodwill.

An impairment of goodwill exists if the carrying amount of the reporting unit exceeds its fair value.

The impairment loss is the amount by which the carrying amount exceeds the reporting unit’s fair value, limited to the total amount of goodwill allocated to that reporting unit.

Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If an impairment indicator is present, the Company evaluates recoverability of assets to be held and used by a comparison of the carrying value of the assets with future undiscounted net cash flows expected to be generated by the assets.

The Company groups assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows generated by other asset groups.

If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset group, the Company estimates the fair value of the asset group to determine whether an impairment loss should be recognized.

Fair Value Measurements

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

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.

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 have realized on disposition of the assets and liabilities as of March 31, 2023 and December 31, 2022.

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 (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 $ 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).

The fair value of these financial instruments was determined by using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and 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 March 31, 2023 and December 31, 2022 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 market rate, which reprices frequently.

The fair value was determined using the Adjusted Term SOFR (as defined below) as of March 31, 2023 and December 31, 2022, plus an applicable spread under the Credit Facilities, a Level 2 classification in the fair value hierarchy.

The fair value of the Company’s secured borrowings aggregated approximately $ 28.2 million and $ 27.5 million as compared to the principal balance of $ 33.0 million and $ 33.1 million as of March 31, 2023 and December 31, 2022, respectively.

The fair value of the Company’s secured debt was categorized as a Level 3 fair value estimate (as provided by ASC 820, Fair Value Measurements and Disclosures).

The fair value of the mortgage debt was determined by discounting the future contractual interest and principal payments by a market rate.

The Company's derivative assets and liabilities, comprised of interest rate swap derivative instruments entered into in connection with the Credit Facilities, are recorded at fair value based on a variety of observable inputs, including contractual terms, interest rate curves, yield curves, measure of volatility and correlations of such inputs.

The Company measures its derivatives at fair value on a recurring basis based on the expected size of future cash flows on a discounted basis and incorporating a measure of non-performance risk.

The fair value of the Company's derivative assets and liabilities was categorized as a Level 2 basis (as provided by ASC 820, Fair Value Measurements and Disclosures).

The Company measures its

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

derivatives at fair value on a recurring basis based on the expected amount of future cash flows on a discounted basis and incorporating a measure of non-performance risk.

The fair value of the Company's derivative assets and liabilities was categorized as a Level 2 fair value estimate (as provided by ASC 820, Fair Value Measurements and Disclosures).

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 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.

As of March 31, 2023 and December 31, 2022, the fair value of the Company’s interest rate swap derivative assets was approximately $ 6.4 million and $ 9.2 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

As of March 31, 2023, the fair value of the Company’s interest rate swap derivative liabilities was approximately $ 0.1 million, included in “Accounts payable, accrued expenses and other, net” on the Consolidated Balance Sheets.

Disclosure about fair value of assets and liabilities is based on pertinent information available to management as of March 31, 2023 and December 31, 2022.

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 March 31, 2023 and current estimates of fair value may differ significantly from the amounts presented herein.

Derivative Instruments and Hedging Activities

5 unchanged sentences

Derivatives and Hedging Activities for further details.

Impairment of Long-Lived Assets

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.

3 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

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.

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 months ended March 31, 2023 and 2022.

Concentration of Credit Risks

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.

As of March 31, 2023, the Company’s properties were leased primarily to a single tenant, the USPS.

For the three months ended March 31, 2023, approximately 13.7 % of the Company’s total rental income, or $ 2.0 million, was concentrated in Pennsylvania.

For the three months ended March 31, 2022, approximately 17.2 % of the Company's total rental income, or $ 2.0 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.

1 unchanged sentence

The Company has not experienced any losses in such accounts.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Equity-Based Compensation

1 unchanged sentence

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 records 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.

The Company records forfeitures as a reduction of equity-based compensation expense as such forfeitures 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 to 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.

Stockholders’ Equity for further details.

Insurance Accounting

5 unchanged sentences

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 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.

As of March 31, 2023 and 2022, 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.

1 unchanged sentence

Earnings Per Share for further details.

Future Application of Accounting Standards

Recently Adopted Accounting Pronouncements

In September 2016, the FASB issued ASU No.

1 unchanged sentence

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

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.

The guidance replaces the current "incurred loss" model with an "expected loss" approach.

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, Codification Improvements to Topic 326, Financial Instruments - Credit Losses .

The guidance changed how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The guidance replaced the previous "incurred loss" model with an "expected loss" approach.

The guidance also requires entities to disclose information about how they developed the allowances, including changes in the factors that influenced 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 EGC.

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

This guidance became effective for the Company and was adopted by the Company on January 1, 2023.

Upon adoption of this guidance, the Company had two direct financing leases with a net investment balance aggregating approximately $ 16.1 million prior to any credit loss adjustment.

Historically, the Company has had no collection issues related to these direct financing leases and its other leases in which the Company is the lessor;

therefore, the Company assessed the probability of default on these leases based on the lessee’s status as an independent agency of the executive branch of the U.S.

federal government, financial condition and business prospects and the remaining term of the leases.

Based on the aforementioned, the Company did not recognize any credit loss adjustment for such leases.

POSTAL REALTY TRUST, INC.

1 unchanged sentence

Real Estate Acquisitions

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

The following tables summarizes the Company’s acquisitions for the three months ended March 31, 2023.

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):

Nine Months Ended Number of

Three Months Ended Number of

Properties Land Building

3 unchanged sentences

leases Below-

leases Other (1)

leases Other Total (1)

March 31, 2023 (2) 39 $ 2,802 $ 14,271 $ 152 $ 1,134 $ 43 $ ( 826 ) $ — $ 17,576

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

Explanatory Notes :

(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, 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)

(1) Includes closing costs of approximately $ 0.3 million for the three months ended March 31, 2023.

(2) Includes the acquisition of 39 properties in various states in individual or portfolio transactions for a price of approximately $ 17.6 million, including closing costs, which was primarily funded with borrowings under the Credit Facilities.

Intangible Assets and Liabilities

3 unchanged sentences

(in thousands)

September 30, 2022:

March 31, 2023:

In-place lease intangibles

11 unchanged sentences

( 19,077 ) 7,256 ( 11,821 )

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):

Amortization of in-place lease intangibles was $ 1.8 million and $ 1.8 million for the three months ended March 31, 2023 and 2022, respectively.

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

Amortization of acquired above market leases was $ 0.04 million and $ 0.02 million for the three months ended March 31, 2023 and 2022, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Amortization of acquired below market leases was $ 0.6 million and $ 0.5 million for the three months ended March 31, 2023 and 2022, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Year Ending December 31, In-place lease

8 unchanged sentences

$ 15,051 $ 403 $ ( 12,030 )

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):

The following table summarizes the Company’s indebtedness as of March 31, 2023 and December 31, 2022 (dollars in thousands):

Outstanding Balance as of

September 30,

2023 Outstanding

1 unchanged sentence

2022 Interest

September 30,

2023 Maturity Date

Revolving Credit Facility (1)

2021 Revolving Credit Facility $ 31,000 $ 13,000 SOFR+ 150 bps (2)

$ 17,000 $ — SOFR+ 148 bps (2)

2021 Term Loan (1)

19 unchanged sentences

(1) On August 9, 2021, the Company entered into the Credit Facilities, which included the $ 150.0 million Revolving Credit Facility and the $ 50.0 million senior unsecured term loan facility (the "2021 Term Loan").

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 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.

On May 11, 2022, the Company amended the Credit Facilities to, among other things, add a new $ 75.0 million senior unsecured delayed draw term loan facility (the "2022 Term Loan" and, together with the 2021 Term Loan, the "Term Loans"), replace the London Interbank Offered Rate with the Secured Overnight Financing Rate ("SOFR") as the benchmark interest rate and allow for a decrease in the applicable margin by 0.02 % if the Company achieves certain sustainability targets.

On December 6, 2022, the Company further exercised $ 40.0 million of term loan accordion under the 2022 Term Loan.

The Credit Facilities include an accordion feature which permit the Company to borrow up to an additional $ 150.0 million under the Revolving Credit Facility and up to an additional $ 35.0 million under the Term Loans (after exercise of the $ 40.0 million term loan accordion in December 2022), in each case subject to customary terms and conditions.

The Revolving Credit Facility matures in January 2026, which may be extended for two six-month periods subject to customary conditions, the 2021 Term Loan matures in January 2027 and the 2022 Term Loan matures in February 2028.

Borrowings under the Credit Facilities carry an interest rate of, (i) in the case of the Revolving Credit Facility, either a base rate plus a margin ranging from 0.5 % to 1.0 % per annum or Adjusted Term SOFR (as defined below) plus a margin ranging from 1.5 % to 2.0 % per annum, or (ii) in the case of the Term Loans, either a base rate plus a margin ranging from 0.45 % to 0.95 % per annum or Adjusted Term SOFR plus a margin ranging from 1.45 % to 1.95 % per annum, in each case depending on the Company's consolidated leverage ratio.

With respect to the 2021 Revolving Credit Facility, the Company will pay, if the usage is equal to or less than 50 %, an unused facility fee of 0.20 % per annum, or if the usage is greater than 50 %, an unused facility fee of 0.15 % per annum, in each case on the average daily unused commitments under the 2021 Revolving Credit Facility.

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

With respect to the Revolving Credit Facility, the Company will pay, if the usage is equal to or less than 50 %, an unused facility fee of 0.20 % per annum, or if the usage is greater than 50 %, an unused

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

facility fee of 0.15 % per annum, in each case on the average daily unused commitments under the Revolving Credit Facility.

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

During the three months ended March 31, 2023 and 2022, the Company incurred $ 0.1 million and $ 0.1 million, respectively, of unused facility fees related to the Revolving Credit Facility.

As of March 31, 2023, 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”) .

Upon the Company's achievement of certain sustainability targets for 2022, the applicable margins for the Credit Facilities were reduced by 0.02 % for the year ending December 31, 2023, which is reflected in the margins noted in the table above.

(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 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):

The weighted average maturity date for the Company's indebtedness as of March 31, 2023 and December 31, 2022 was approximately 5.0 years and 5.5 years, respectively.

The scheduled principal repayments of indebtedness as of March 31, 2023 are as follows (in thousands):

Year Ending December 31, Amount

1 unchanged sentence

Derivatives and Hedging Activities

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 has five interest rate swaps with a total notional amount of $ 165.0 million that are used to manage its interest rate risk and fix the SOFR component on the Credit Facilities.

Within the $ 165.0 million, $ 50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.27 % as of March 31, 2023.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.217 % as of March 31, 2023.

An additional $ 25.0 million of the swaps mature in February 2028 and fix the additional $ 25.0 million amount outstanding under the 2022 Term Loan at 4.79 % as of March 31, 2023.

The remaining $ 40.0 million of the swaps mature in February 2028 and fix the remaining $ 40.0 million amount outstanding under the 2022 Term Loan at 4.932 % as of March 31, 2023.

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.

To accomplish these objectives, the Company uses the interest rate swaps as part of its interest rate risk management strategy.

The interest rate swaps are designated as cash flow hedges, with any gain or loss recorded in “Accumulated other comprehensive income” on the Consolidated Balance Sheets and subsequently reclassified into interest expense as interest payments are made on the Company’s Credit Facilities.

During the next twelve months, the Company estimates that an additional $ 3.7 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 nine months ended September 30, 2022 and 2021.

The table below presents the effect of the Company’s interest rate swap derivative instruments in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2023 and 2022 (in thousands).

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps) 2023 2022

Amount of gain recognized on derivative in "Accumulated other comprehensive income"

Amount of (loss) gain recognized on derivative in "Accumulated other comprehensive income"

$ ( 1,938 ) $ 2,426

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

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

$ 899 $ ( 85 )

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.

"Interest expense, net" presented in the Consolidated Statements of Operations and Comprehensive (Loss) Income, in which the effects of cash flow hedges are recorded, totaled $ 2.2 million and $ 0.8 million for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, the Company also had 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 March 31, 2023, it could have been required to settle its obligations under the agreements of any interest rate swap in a net liability position for approximately $ 0.1 million, which is at their termination value.

Lessor Accounting

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.

As of March 31, 2023, 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 March 31, 2023 as discussed below.

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

5 unchanged sentences

The Company elected the practical expedient to account for its lease and non-lease components as a single combined operating lease component under Topic 842.

As a result, rental income and tenant reimbursements were aggregated into a single line within rental income in the Consolidated Statements of Operations and Comprehensive Income.

As a result, rental income and tenant reimbursements were aggregated into a single line within rental income in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table represents rental revenue that the Company recognized related to its operating leases (in thousands):

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

Fixed payments

2 unchanged sentences

$ 14,499 $ 11,349

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

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:

Future minimum lease payments to be received as of March 31, 2023 under non-cancellable operating leases for the next five years and thereafter are as follows (in thousands):

Year Ending December 31, Amount (1)

(in thousands)

2023 - Remaining (2)

1 unchanged sentence

(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 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.

(2) As of March 31, 2023, the leases at 101 of the Company's properties were expired, and the USPS was occupying such properties as a holdover tenant.

As such, the above minimum lease payments to be received do not include payments under these holdover leases.

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 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 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,

As of March 31, 2023, operating leases for 65 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 March 31, 2023, 62 of these properties acquired for an aggregate purchase price of approximately $ 48.8 million had an aggregate purchase option price of approximately $ 58.6 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.

Investment in Financing Leases, Net

As of March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022 are summarized in the table below (in thousands):

Total minimum lease payment receivable

3 unchanged sentences

Investment in financing leases, net $ 16,105 $ 16,130

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:

Revenue earned under direct financing leases for the three months ended March 31, 2023 and 2022 were $ 0.3 million and $ 0.3 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

Future lease payments to be received under the Company’s direct financing leases as of March 31, 2023 for the next five years and thereafter are as follows (in thousands):

Year Ending December 31, Amount

(in thousands)

2023 – Remaining $ 853

1 unchanged sentence

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

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,

As of March 31, 2023, these leases had remaining terms, including renewal options, of one to 56 years and a weighted average remaining lease term of 22.4 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, net” on the Consolidated Balance Sheets as follows (in thousands):

ROU asset – operating leases

4 unchanged sentences

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.

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.

The Company used a discount rate ranging from 4.25 % to 6.37 % 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 nine months ended September 30, 2022 and 2021 was $ 0.06 million and $ 0.2 million, respectively.

Operating lease expense for each of the three months ended March 31, 2023 and 2022 was $ 0.06 million.

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):

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of March 31, 2023 for the next five years and thereafter are as follows (in thousands):

2023 — Remaining $ 185

4 unchanged sentences

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

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.

For the three months ended March 31, 2023 and 2022, income tax expense related to REAC was $ 0.01 million and $ 0.01 million, respectively.

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

("UPH"), a portion of our predecessor, agreed to reimburse the Company for unrecognized tax benefits primarily related to the utilization of certain loss carryforwards at UPH.

("UPH"), a portion of the Company's predecessor, agreed to reimburse the Company for unrecognized tax benefits primarily related to the utilization of certain loss carryforwards at UPH.

The Company recorded an indemnification asset in the same amount as the unrecognized tax benefits.

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

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.

As of December 31, 2022, the Company had remaining unrecognized tax benefits of $ 0.02 million, which were inclusive of interest and penalties, and a corresponding indemnification asset, which were included in "Prepaid expenses and other assets, net" on the Consolidated Balance Sheets.

During the three months ended March 31, 2023, the Company reversed the remaining $ 0.02 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 $ 0.9 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 September 30, 2022 and December 31, 2021, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets.

REAC recognized management fee income of $ 0.3 million for each of the three months ended March 31, 2023 and 2022 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 (Loss) Income.

Accrued management fees receivable of $ 0.3 million and $ 0.3 million as of March 31, 2023 and December 31, 2022, 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 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.

Rental expenses associated with the Office Lease for each of the three months ended March 31, 2023 and 2022 were $ 0.05 million and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income.

The Company determined this Office Lease was an operating lease.

For further details, see Note 7.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 September 30, 2022 and December 31, 2021, respectively.

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 March 31, 2023 and December 31, 2022, respectively.

As a guarantor, Mr.

Spodek's interests with respect to the amount of debt he is guaranteeing (and the terms of any repayment or default) may not align with the Company’s interests and could result in a conflict of interest.

Share Purchase

On November 16, 2021, Mr.

Spodek acquired 58,823 shares of the Company's Class A common stock at a price of $ 17.00 per share as a part of the Company's November 2021 Offering (as defined below).

Earnings Per Share

2 unchanged sentences

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2022 2021 2022 2021

Numerator for earnings per share – basic and diluted:

7 unchanged sentences

(1) Diluted EPS reflects the potential dilution of the conversion of obligations and the assumed exercises of securities including the effects of restricted shares and RSUs issued under the Company’s 2019 Equity Incentive Plan (the “Plan”) (See Note 11.

Stockholder’s Equity).

Stockholders’ Equity).

The effect of such shares and RSUs would not be dilutive and were not included in the computation of weighted average number of shares outstanding for the periods presented in the table above.

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As such, the assumed conversion of these OP Units and LTIP Units would have no net impact on the determination of diluted EPS.

Stockholder’s Equity

On January 11, 2021, the Company priced a public offering of 3.25 million shares of its Class A common stock (the “January 2021 Offering”) at $ 15.25 per share.

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

Stockholders’ Equity

On November 4, 2022, the Company entered into separate open market sale agreements for its at-the-market offering program (the "ATM Program") with each of Jefferies LLC, BMO Capital Markets Corp., Janney Montgomery Scott LLC, Stifel, Nicolaus & Company, Incorporated and Truist Securities, Inc., as agents, pursuant to which the Company may offer and sell, from time to time, shares of its Class A common stock having an aggregate sales price of up to $ 50.0 million.

The agreements also provide that the Company may enter into one or more forward sale agreements under separate master forward confirmations and related supplemental confirmations with affiliates of certain agents.

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, 2022, 751,382 shares were issued under the ATM Program and the Company's previous at-the-market offering program.

During the three months ended March 31, 2023, 55,082 shares were issued under the ATM Program.

During the three months ended March 31, 2022, the Company did not issue any shares under

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.

On November 16, 2021, the underwriters purchased the full allotment of 637,500 shares pursuant to a 30-day option at $ 17.00 per share (the “November 2021 Additional Shares”).

The November 2021 Offering, including the November 2021 Additional Shares, closed on November 19, 2021 resulting in $ 83.1 million in gross proceeds, and approximately $ 79.0 million in net proceeds after deducting approximately $ 4.1 million in underwriting discounts and before giving effect to $ 0.2 million in other related expenses.

On December 14, 2020, the Company entered into separate open market sale agreements for its at-the-market offering program (the "ATM Program") with each of Jefferies LLC, Stifel, Nicolaus & Company, Incorporated, BMO Capital Markets Corp., Janney Montgomery Scott LLC and D.A.

Davidson & Co.

Davidson”), pursuant to which the Company may offer and sell, from time to time, shares of the Company’s Class A common stock having an aggregate sales price of up to $ 50.0 million.

On May 14, 2021, the Company delivered to D.A.

Davidson a notice of termination of the open market sale agreement with D.A.

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 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

its previous at-the-market offering program.

As of March 31, 2023, the Company had approximately $ 41.0 million remaining that may be issued under the ATM Program.

Three Months Ended March 31, 2023

Shares issued 55,082

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Average gross sales price per share $ 15.01

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

During the three months ended March 31, 2023, the Company's Board of Directors approved and the Company declared and paid dividends of $ 5.9 million to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.2375 per share or unit, as shown in the table below.

Declaration Date Record Date Date Paid Amount Per Share or Unit

February 1, 2023 February 15, 2023 February 28, 2023 $ 0.2375

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 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)

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 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.

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 employees and the Board of Directors in connection with the IPO and/or in lieu of their cash compensation.

During the three months ended March 31, 2023, the Company issued 143,288 LTIP Units to the Company’s CEO for his 2022 incentive bonus, his election to defer 100 % of his 2023 annual salary and for long term incentive compensation, 75,489 LTIP Units to the Company’s president for his 2022 incentive bonus and his election to defer 50% of his 2023 annual salary, 57,057 LTIP Units to the Company's Chief Financial Officer for his 2022 incentive bonus and for long term incentive compensation, 25,510 LTIP Units to an employee for his 2022 incentive bonus, his election to defer a portion of his 2023 annual salary and for long term incentive compensation and 3,304 LTIP Units to a consultant under the consultancy agreement with the Company.

As of March 31, 2023 and December 31, 2022, non-controlling interests consisted of 4,110,821 OP Units and 841,516 LTIP Units and 4,133,619 OP Units and 536,868 LTIP Units, respectively.

This represented approximately 19.9 % and 19.2 % of the outstanding Operating Partnership units as of March 31, 2023 and December 31, 2022, respectively.

OP Units and shares of Class A 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 date on which a person first became a holder of common units, each limited partner and assignees of limited partners will generally 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 Class A common stock, on an one -for-one basis determined in accordance with and subject to adjustment under the partnership agreement.

During the three months ended March 31, 2023, 22,798 OP Units were redeemed for 22,798 shares of Class A common stock.

The Company adjusted the carrying value of non-controlling interests to reflect its share of the book value of the Operating Partnership reflecting the change in the Company’s ownership of the Operating Partnership.

Such adjustments are recorded to additional paid-in capital as a reallocation of non-controlling interest in the Consolidated Statements of Changes in Equity.

The Operating Partnership unitholders are entitled to share in cash distributions from the Operating Partnership in proportion to their percentage ownership of OP Units.

Restricted Stock and Other Awards

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

As of March 31, 2023, the remaining shares available under the Plan for future issuance was 1,062,126 .

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 the Company's outstanding restricted shares of Class A common stock, LTIP Units and RSUs.

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:

The balance as of March 31, 2023 represents unvested restricted shares of Class A common stock and LTIP Units and RSUs that are outstanding, whether vested or not:

Shares (1)(2)

Total Shares/Units Weighted

Total Shares/Units/RSUs Weighted

Outstanding, as of January 1, 2023

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123,801 304,648 110,968 539,417 $ 15.60

Vesting of restricted shares (5)

Vesting of restricted shares and RSUs (5)

( 24,091 ) — ( 27,456 ) ( 51,547 ) $ 10.34

( 4,839 ) — ( 11,216 ) ( 16,055 ) $ 8.33

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

Outstanding, as of March 31, 2023 543,947 841,516 301,796 1,687,259 $ 16.20

Explanatory Notes :

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(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 , 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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

metric at target.

(3) Includes 143,288 LTIP Units granted to the Company’s CEO, 75,489 LTIP Units granted to the Company’s president and 57,057 LTIP Units granted to the Company's Chief Financial Officer, which vest over three years or cliff vest at the end of eight years .

Also includes 25,510 LTIP Units granted to an employee of the Company, a portion of which will vest on December 31, 2023 with the remaining to vest over three years or cliff vest at the end of eight years , and 3,304 LTIP Units granted to a consultant under the consultancy agreement with the Company that will vest on June 30, 2023.

(4) Includes 63,512 RSUs granted to certain officers and employees of the Company during the three months ended March 31, 2023, 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 performance-based hurdles relating to the Company’s specified absolute and relative total stockholder return goals and continued employment with the Company over the approximately three-year period from the grant date through December 31, 2025.

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

Also, includes 46,258 time-based RSUs issued for 2022 incentive bonuses to certain employees that vested fully on January 31, 2023, the date of grant, and 1,197 time-based RSUs granted to certain employees for their election to defer a portion of their 2023 salary that will vest on December 31, 2023.

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

(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 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.

(5) Includes 30,237 of restricted shares and RSUs that vested and 21,310 shares of restricted shares that were withheld to satisfy minimum statutory withholding requirements.

During the year ended December 31, 2020, the Company issued 38,672 RSUs (the “2020 Performance-Based Awards”) to certain employees that were market-based awards and subject to the achievement of performance-based hurdles relating to the Company’s absolute total stockholder return goals and continued employment with the Company over the approximately three-year performance period ended December 31, 2022.

In January 2023, the Company's Corporate Governance and Compensation Committee of the Board of Directors determined that the Company's total stockholder return for such three-year performance period exceeded the threshold performance hurdles for the 2020 Performance-Based Awards and,

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

as a result, approved the payout of (i) 27,456 RSUs for such awards, which were settled using the Company’s shares of Class A common stock, and (ii) their cash dividends for the three-year performance period.

During the three months ended March 31, 2023, the Company recognized compensation expense of $ 1.6 million and $ 0.3 million in “General and administrative expenses” and "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive (Loss) Income, respectively, related to all awards.

During the three months ended March 31, 2022, the Company recognized compensation expense of $ 1.5 million and $ 0.2 million in “General and administrative expenses” and "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive (Loss) Income, respectively, related to all awards.

As of March 31, 2023, there was $ 18.0 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 5.5 years.

Employee Stock Purchase Plan

In connection with the IPO, the Company established the Postal Realty Trust, Inc.

2019 Qualified Employee Stock Purchase Plan (“ESPP”), which allows the Company’s employees to purchase shares of the Class A common stock at a discount.

The Company's 2019 Qualified Employee Stock Purchase Plan (“ESPP”) allows its employees to purchase shares of the Class A common stock at a discount.

A total of 100,000 shares of Class A common stock was reserved for sale and authorized for issuance under the ESPP.

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 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.

As of March 31, 2023 and December 31, 2022, 36,156 and 29,710 shares have been issued under the ESPP since commencement, respectively.

During the three months ended March 31, 2023 and 2022, the Company recognized compensation expense of $ 0.01 million and $ 0.02 million, respectively, related to the ESPP.

Commitments and Contingencies

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.

As of March 31, 2023, 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.

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Business Acquisition

On March 4, 2022, the Company acquired a postal real estate consulting business and its employees (the “Business”) through the issuance of 79,794 OP Units and $ 0.2 million in cash for an aggregate purchase price of approximately $ 1.7 million to complement the Company's core business of acquiring, managing, servicing and being a consolidator of postal properties.

On March 4, 2022, the Company acquired a postal real estate consulting business and its employees through the issuance of 79,794 OP Units and $ 0.2 million in cash for an aggregate purchase price of approximately $ 1.7 million to complement the Company's core business of acquiring, managing, servicing and being a consolidator of postal properties.

In connection with the acquisition, the Company recorded an intangible asset related to the customer relationships and trade name of approximately $ 0.2 million in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets, which is being amortized over the estimated useful life of four years, and goodwill of approximately $ 1.5 million.

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Subsequent Events

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.

The Company's Board of Directors approved, and on April 24, 2023, the Company declared a first quarter common stock dividend of $ 0.2375 per share, which is payable on May 31, 2023 to stockholders of record as of May 5, 2023.

As of May 3, 2023, the Company had $ 182.0 million drawn on the Credit Facilities, with $ 50.0 million drawn on the 2021 Term Loan, $ 115.0 million drawn on the 2022 Term Loan and $ 17.0 million drawn on the Revolving Credit Facility.

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 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.

As of May 3, 2023 and d uring the period subsequent to March 31, 2023, the Company acquired seven properties for approximately $ 4.5 million, excluding closing costs.

As of May 3, 2023 and d uring the period subsequent to March 31, 2023, the Company had entered into definitive agreements to acquire 13 properties for approximately $ 4.1 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