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Item 1. Financial Statements

2023-08-08 compared with 2023-05-04 · 196 added, 146 removed, 512 unchanged (40% of the section changed)

32 unchanged sentences

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

20,002,769 and 19,528,066 shares issued and outstanding as of June 30, 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 March 31, 2023 and December 31, 2022

27,206 shares issued and outstanding as of June 30, 2023 and December 31, 2022

Additional paid-in capital 258,331 254,107

5 unchanged sentences

Total Liabilities and Equity $ 527,150 $ 501,303

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

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

POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except share and per share data )

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Rental income $ 14,762 $ 12,135 $ 29,261 $ 23,484

23 unchanged sentences

Basic and Diluted 19,544,833 18,398,808 19,417,304 18,383,544

Comprehensive (loss) income:

Comprehensive income:

Net income $ 1,261 $ 1,165 $ 1,694 $ 1,886

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.

Unrealized gain on derivative instruments 3,399 504 562 3,015

Comprehensive income 4,660 1,669 2,256 4,901

Comprehensive income attributable to Operating Partnership unitholders’ non-controlling interests ( 921 ) ( 304 ) ( 448 ) ( 869 )

Comprehensive income attributable to common stockholders $ 3,739 $ 1,365 $ 1,808 $ 4,032

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

POSTAL REALTY TRUST, INC.

9 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 ) —

Shares issued upon redemption of operating partnership units ("OP Units") 22,798 — 409 — — 409 ( 409 ) —

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

Issuance and amortization under ESPP 6,446 — 94 — — 94 — 94

Issuance and amortization under the employee stock purchase plan ("ESPP")

6,446 — 94 — — 94 — 94

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

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

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

Unrealized loss on derivative instrument — — — ( 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 265,225 3 3,840 — — 3,843 — 3,843

Issuance of OP Units in connection with transaction — — — — — — 548 548

Cash redemption for non-controlling interests — — — — — — (558) (558)

Issuance and amortization of equity-based compensation, net of forfeitures ( 165 ) — 684 — — 684 558 1,242

Issuance and amortization under ESPP — — 6 — — 6 — 6

Dividends and distributions — — — — ( 4,770 ) ( 4,770 ) ( 1,167 ) ( 5,937 )

Unrealized gain on derivative instrument — — — 2,727 — 2,727 672 3,399

Net income — — — — 1,012 1,012 249 1,261

Reallocation of non-controlling interest — — ( 229 ) — — ( 229 ) 229 —

Balance – June 30, 2023 20,029,975 $ 200 $ 258,331 $ 7,934 $ ( 40,754 ) $ 225,711 $ 55,859 $ 281,570

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

8 unchanged sentences

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

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

Net proceeds from sale of common stock — — — — — — — —

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 and distributions — — — — ( 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

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

POSTAL REALTY TRUST, INC.

1 unchanged sentence

(in thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

6 unchanged sentences

Amortization of intangible liability ( 49 ) ( 41 )

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

Equity based compensation 3,207 2,691

16 unchanged sentences

Repayments of secured borrowings ( 97 ) ( 92 )

Proceeds from term loans — 75,000

Proceeds from revolving credit facility 32,000 92,000

Repayments of revolving credit facility ( 3,000 ) ( 87,000 )

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

Redemption of OP Units ( 558 ) —

Net proceeds from issuance of shares 4,561 —

Deferred offering costs ( 107 ) ( 242 )

Debt issuance costs — ( 612 )

Proceeds from issuance of ESPP shares 79 83

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

Value of shares withheld for payment of taxes related to employee stock compensation ( 467 ) ( 383 )

Dividends and distributions ( 11,900 ) ( 10,502 )

1 unchanged sentence

Net cash provided by financing activities 20,374 68,136

Net increase in Cash and Escrows and Reserves 742 229

Net increase (decrease) in Cash and Escrows and Reserves 900 ( 1,079 )

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

Reallocation of non-controlling interest 2,567 571

Unrealized gain on interest rate swaps, net 562 3,015

OP Units issued for property acquisitions 548 3,773

Shares issued upon redemption of OP Units 409 —

Accrued capital expenditures included in accounts payable and accrued expenses 235 846

Reclassification of acquisition deposits included in prepaid expenses and other assets 205 504

Write-off of fixed assets no longer in service 151 129

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

OP Units issued for property acquisitions — 1,787

Reclassification of construction deposits included in prepaid expenses and other assets 113 12

Accrued costs of capital included in accounts payable and accrued expenses 8 11

Right of use assets — 38

OP Units issued for business acquisition — 1,451

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

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

POSTAL REALTY TRUST, INC.

9 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 March 31, 2023, the Company held an approximately 80.1 % interest in the Operating Partnership.

As of June 30, 2023, the Company held an approximately 80.2 % 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 March 31, 2023, the Company owned a portfolio of 1,325 properties located in 49 states and one territory.

As of June 30, 2023, the Company owned a portfolio of 1,364 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”).

9 unchanged sentences

Basis of Presentation

The accompanying Consolidated Financial Statements include the financial position and results of operations of the Company, the Operating Partnership and its wholly owned subsidiaries.

The accompanying unaudited Consolidated Financial Statements include the financial position and results of operations of the Company, the Operating Partnership and its wholly owned subsidiaries.

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

6 unchanged sentences

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

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X.

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

29 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 (Loss) 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.

6 unchanged sentences

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".

Over the lease term, the investment in the direct financing lease is reduced and interest 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".

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).

3 unchanged sentences

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.

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 June 30, 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 March 31, 2023 and December 31, 2022 due to their short maturities.

Cash, escrows and reserves, receivables, prepaid expenses and other assets (excluding derivatives), accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of June 30, 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 was determined using the Adjusted Term SOFR (as defined below) as of June 30, 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 $ 27.8 million and $ 27.5 million as compared to the principal balance of $ 33.0 million and $ 33.1 million as of June 30, 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).

7 unchanged sentences

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

As of 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.

As of June 30, 2023 and December 31, 2022, the fair value of the Company’s interest rate swap derivative assets was approximately $ 9.8 million and $ 9.2 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

Disclosures about fair value of assets and liabilities are based on pertinent information available to management as of June 30, 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 June 30, 2023 and current estimates of fair value may differ significantly from the amounts presented herein.

Derivative Instruments and Hedging Activities

12 unchanged sentences

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.

No impairments were recorded during the three and six months ended June 30, 2023 and 2022.

Concentration of Credit Risks

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.

As of June 30, 2023, the Company’s properties were leased primarily to a single tenant, the USPS.

For the six months ended June 30, 2023, approximately 13.3 % of the Company’s total rental income, or $ 3.9 million, was concentrated in Pennsylvania.

For the six months ended June 30, 2022, approximately 16.1 % of the Company's total rental income, or $ 3.8 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

The Company accounts for equity-based compensation in accordance with ASC Topic 718 Compensation – Stock Compensation, which requires the Company to recognize an expense for the grant date fair value of equity-based awards.

Equity-classified stock awards granted to employees and non-employees that have a service condition and/or a market condition are measured at fair value at date of grant and remeasured at fair value only upon a modification of the award.

Equity-classified stock awards granted to employees and non-employees that have a service condition and/or a market condition

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 a reduction of equity-based compensation expense as such forfeitures occur.

9 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 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.

As of June 30, 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.

19 unchanged sentences

Real Estate Acquisitions

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

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

8 unchanged sentences

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

June 30, 2023 (3) 39 $ 3,241 $ 12,054 $ 117 $ 1,066 $ 24 $ ( 483 ) $ — $ 16,019

Total 78 $ 6,043 $ 26,325 $ 269 $ 2,200 $ 67 $ ( 1,309 ) $ — $ 33,595

Explanatory Notes :

(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.

(1) Includes closing costs of approximately $ 0.3 million for the three months ended March 31, 2023 and $ 0.2 million for the three months ended June 30, 2023.

(2) Includes the acquisition of 39 properties in various states for cash consideration in individual or portfolio transactions for a price of approximately $ 17.6 million, including closing costs.

(3) Includes the acquisition of 39 properties in various states in individual or portfolio transactions for a price of approximately $ 16.0 million, including closing costs, which was funded with both the issuance of OP Units to the sellers (valued at approximately $ 0.5 million using the share price of Class A common stock on the date of each issuance of such OP units) and cash consideration.

Intangible Assets and Liabilities

3 unchanged sentences

(in thousands)

March 31, 2023:

June 30, 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 $ 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.

Amortization of in-place lease intangibles was $ 1.8 million and $ 3.5 million for the three and six months ended June 30, 2023, respectively, and $ 1.7 million and $ 3.5 million for the three and six months ended June 30, 2022, 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 $ 0.04 million and $ 0.08 million for the three and six months ended June 30, 2023, respectively, and $ 0.02 million and $ 0.04 million for the three and six months ended June 30, 2022, respectively,

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Amortization of acquired below-market leases was $ 0.6 million and $ 1.3 million for the three and six months ended June 30, 2023, respectively, and $ 0.5 million and $ 1.1 million for the three and six months ended June 30, 2022, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

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

9 unchanged sentences

$ 14,340 $ 385 $ ( 11,875 )

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

The following table summarizes the Company’s indebtedness as of June 30, 2023 and December 31, 2022 (dollars in thousands):

Outstanding Balance as of

19 unchanged sentences

194 282 6.00 % January 2025

AIG – December 2020 (7)

30,225 30,225 2.80 % January 2031

5 unchanged sentences

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.

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

On July 24, 2023, the Company amended the Credit Facilities (the "Second Amendment") to, among other things, add a daily simple SOFR-based option to the term SOFR-based floating interest rate option as a benchmark rate for borrowings under the Credit Facilities and further exercised $25.0 million of term loan accordion under the 2021 Term Loan and, on a delayed-draw basis, $10.0 million of term loan accordion under the 2022 Term Loan.

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 include an accordion feature which permits the Company to borrow up to an additional $ 150.0 million under the Revolving Credit Facility, subject to customary terms and conditions.

Subsequent to June 30, 2023, the accordion feature under the Term Loans has been fully exercised.

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 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.

During the three and six months ended June 30, 2023, the Company incurred $ 0.07 million and $ 0.1 million, respectively, and, during the three and six months ended June 30, 2022, the Company incurred $ 0.06 million and $ 0.1 million, respectively, of unused facility fees related to the Revolving Credit Facility.

As of June 30, 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”) .

10 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 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):

The weighted average maturity date for the Company's indebtedness as of June 30, 2023 and December 31, 2022 was approximately 4.7 years and 5.5 years, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The scheduled principal repayments of indebtedness as of June 30, 2023 are as follows (in thousands):

Year Ending December 31, Amount

1 unchanged sentence

Derivatives and Hedging Activities

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.

As of June 30, 2023, the Company had 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 June 30, 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 4.217 % as of June 30, 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 June 30, 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 June 30, 2023.

On July 24, 2023, in connection with the exercise of $ 25.0 million term loan accordion under the 2021 Term Loan, the Company further entered into an interest rate swap that effectively fixed the interest rate on the additional $ 25.0 million of the 2021 Term Loan through January 2027 at 5.736 %.

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.

3 unchanged sentences

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 in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2023 and 2022 (in thousands).

The table below presents the effect of the Company’s interest rate swap derivative instruments in the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2023 and 2022 (in thousands):

For the Three Months Ended

June 30, For the Six Months Ended

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

3 unchanged sentences

$ 1,092 $ ( 129 ) $ 1,991 $ ( 214 )

"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.

"Interest expense, net" presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 2.5 million and $ 4.7 million for the three and six months ended June 30, 2023, respectively, and $ 1.3 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Lessor Accounting

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.

As of June 30, 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 June 30, 2023 as discussed below.

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

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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 (Loss) Income.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

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

For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Fixed payments

2 unchanged sentences

1,908 1,653 3,857 3,338

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):

$ 14,762 $ 12,135 $ 29,261 $ 23,484

Future minimum lease payments to be received as of June 30, 2023 under non-cancellable operating leases for the next five years and thereafter are as follows (in thousands):

Year Ending December 31, Amount (1)(2)

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

(2) As of 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.

(2) As of June 30, 2023, the leases at 115 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.

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Purchase Option Provisions

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.

As of June 30, 2023, operating leases for 67 of the Company’s properties provided the USPS with the option to purchase the underlying property either at fair market value or at fixed prices, in each case as of dates set forth in the lease agreement.

As of June 30, 2023, 64 of these properties had an aggregate carrying value of approximately $ 49.2 million with an

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

aggregate purchase option price of approximately $ 61.9 million and the remaining three properties had an aggregate carrying value of approximately $ 2.6 million with 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):

As of June 30, 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 June 30, 2023 and December 31, 2022 are summarized in the table below (in thousands):

Total minimum lease payment receivable

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Investment in financing leases, net $ 16,083 $ 16,130

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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):

Revenue earned under direct financing leases for the three and six months ended June 30, 2023 were $ 0.3 million and $ 0.5 million, respectively, and for the three and six months ended June 30, 2022 were $ 0.3 million and $0.6 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income.

Future lease payments to be received under the Company’s direct financing leases as of June 30, 2023 for the next five years and thereafter are as follows (in thousands):

Year Ending December 31, Amount

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

As of 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.

As of June 30, 2023, these leases had remaining terms, including renewal options, of one to 56 years and a weighted average remaining lease term of 22.1 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):

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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 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 March 31, 2023 for the next five years and thereafter are as follows (in thousands):

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

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

Operating lease expense for each of the three and six months ended June 30, 2023 and 2022 was $ 0.06 million and $ 0.1 million, respectively.

Related Party Transactions for more details.

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of June 30, 2023 for the next five years and thereafter are as follows (in thousands):

2023 — Remaining $ 124

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

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.

For the three and six months ended June 30, 2023, income tax expense related to REAC was $ 0.01 million and $ 0.03 million, respectively.

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

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

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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.

During the six months ended June 30, 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 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.

REAC recognized management fee income of $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2023 and 2022, 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 as of June 30, 2023 and December 31, 2022, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Related Party Lease

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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 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.

Rental expenses associated with the Office Lease for each of the three and six months ended June 30, 2023 and 2022 were $ 0.05 million and $ 0.1 million, respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive Income.

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

As a guarantor, Mr.

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For the Three Months Ended

June 30, For the Six Months Ended

2023 2022 2023 2022

Numerator for earnings per share – basic and diluted:

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OP Units and LTIP Units are redeemable for cash or, at the Company’s option, shares of Class A common stock on an one-for-one basis.

The income allocable to such OP Units and LTIP Units is allocated on this same basis and reflected as non-controlling interests in these Consolidated Financial Statements.

The income allocable to such OP Units and LTIP Units is allocated on this same basis and reflected as non-controlling interests in these unaudited Consolidated Financial Statements.

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

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.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

1 unchanged sentence

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)

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

During the three and six months ended June 30, 2023, 265,225 shares and 320,307 shares were issued under the ATM program, respectively.

During the three and six months ended June 30, 2022, the Company did not issue any shares under its previous at-the-market offering program.

As of June 30, 2023, the Company had approximately $ 37.0 million remaining that may be issued under the ATM Program.

Three Months Ended June 30, 2023

Six Months Ended June 30, 2023

Shares issued 265,225 320,307

3 unchanged sentences

Average gross sales price per share $ 15.07 $ 15.06

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.

During the three and six months ended June 30, 2023, the Company's Board of Directors approved and the Company declared and paid dividends of $ 5.9 million and $ 11.8 million, respectively, to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.2375 per share or unit and $0.475 per share or unit, respectively, 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 24, 2023 May 5, 2023 May 31, 2023 $ 0.2375

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 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.

During the six months ended June 30, 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, 40,635 LTIP Units in June 2023 to the Board of Directors for their annual retainers as compensation for their services as directors, 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 June 30, 2023 and December 31, 2022, non-controlling interests consisted of 4,110,602 OP Units and 882,151 LTIP Units and 4,133,619 OP Units and 536,868 LTIP Units, respectively.

This represented approximately 19.8 % and 19.2 % of the outstanding Operating Partnership units as of June 30, 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.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the six months ended June 30, 2023, 22,798 OP Units were redeemed for 22,798 shares of Class A common stock.

For redemption of OP Units using 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.

During the six months ended June 30, 2023, 37,500 OP Units were also redeemed for cash for the total amount of $0.6 million.

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

As of June 30, 2023, the remaining shares available under the Plan for future issuance was 1,038,299 .

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 March 31, 2023 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 June 30, 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)

6 unchanged sentences

( 5,004 ) — ( 11,216 ) ( 16,220 ) $ 8.51

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

Outstanding, as of June 30, 2023 510,933 882,151 301,796 1,694,880 $ 16.20

Explanatory Notes :

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(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.

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 , 40,635 LTIP Units granted to the Company's independent directors that vest over three years or cliff vest at the end of three years and 3,304 LTIP Units granted to a consultant under the consultancy agreement with the Company that vested on June 30, 2023.

(4) Includes 63,512 RSUs granted to certain officers and employees of the Company during the six months ended June 30, 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.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

1 unchanged sentence

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.

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.

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, 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 and six months ended June 30, 2023, the Company recognized compensation expense of $ 1.2 million and $ 2.8 million, respectively, in “General and administrative expenses” and $ 0.1 million and $ 0.4 million, respectively, in "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive Income related to all awards.

During the three and six months ended June 30, 2022, the Company recognized compensation expense of $ 0.9 million and $ 2.4 million, respectively, in “General and administrative expenses” and $ 0.1 million and $ 0.3 million, respectively, in "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive Income related to all awards.

As of June 30, 2023, there was $ 17.4 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 5.25 years.

In July 2023, the Company issued 9,941 RSUs and 7,370 restricted shares of Class A common stock to certain employees for their elections to receive such RSUs and restricted shares in lieu of a portion of their 2023 annual salaries pursuant to the Company's Alignment of Interest Program.

The RSUs issued to employees in lieu of salaries will cliff vest on December 31, 2023, while the other restricted shares of Class A common stock issued to employees in lieu of salaries will cliff vest on the fifth or eighth anniversary of July 1, 2023.

In addition, in July 2023, the Company issued 5,143 LTIP Units to a consultant under the consultancy agreement with the Company.

Employee Stock Purchase Plan

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.

The Company's 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 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.

As of June 30, 2023 and December 31, 2022, 36,156 and 29,710 shares have been issued under the ESPP since commencement, respectively.

During the three and six months ended June 30, 2023, the Company recognized compensation expense of $ 0.01 million and $ 0.02 million, respectively, related to the ESPP.

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

Commitments and Contingencies

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.

As of June 30, 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.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Business Acquisition

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Subsequent Events

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 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.

The Company's Board of Directors approved, and on July 26, 2023, the Company declared a second quarter common stock dividend of $ 0.2375 per share, which is payable on August 31, 2023 to stockholders of record as of August 7, 2023.

On July 24, 2023, the Company entered into the Second Amendment to the Credit Facilities.

Debt for additional details.

As of August 7, 2023, the Company had $ 190.0 million drawn on the Credit Facilities, with $ 75.0 million drawn on the 2021 Term Loan, $ 115.0 million drawn on the 2022 Term Loan and no amount drawn on the Revolving Credit Facility.

As of August 7, 2023 and d uring the period subsequent to June 30, 2023, the Company issued 514,997 shares of its Class A common stock under the ATM Program for gross proceeds of approximately $ 7.7 million and also entered into forward sales transactions under the ATM Program for the sale of an additional 798,847 shares of its Class A common stock for gross proceeds of approximately $ 12.0 million .

As of August 7, 2023 and d uring the period subsequent to June 30, 2023, the Company acquired 15 properties for approximately $ 6.2 million, excluding closing costs.

As of August 7, 2023 and d uring the period subsequent to June 30, 2023, the Company had entered into definitive agreements to acquire 15 properties for approximately $ 3.9 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