What changed in this filing

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Item 1. Financial Statements

2023-10-30 compared with 2023-08-08 · 200 added, 146 removed, 562 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2023 December 31, 2022

19 unchanged sentences

Term loans, net $ 198,718 $ 163,753

Revolving credit facility 29,000 —

Secured borrowings, net 32,823 32,909

5 unchanged sentences

500,000,000 shares authorized;

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

21,512,970 and 19,528,066 shares issued and outstanding as of September 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 June 30, 2023 and December 31, 2022

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

Additional paid-in capital 279,585 254,107

10 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

15 unchanged sentences

Total interest expense, net ( 2,620 ) ( 1,826 ) ( 7,296 ) ( 3,906 )

Income before income tax expense 1,282 1,183 1,731 1,915

Income tax expense ( 21 ) ( 18 ) ( 37 ) ( 29 )

Income before income tax (expense) benefit

1,455 1,134 3,186 3,049

Income tax (expense) benefit

( 19 ) 16 ( 56 ) ( 13 )

Net income 1,436 1,150 3,130 3,036

20 unchanged sentences

Non-controlling

interests Total

Balance – December 31, 2022 19,555,272 $ 195 $ 254,107 $ 7,486 $ ( 32,557 ) $ 229,231 $ 54,480 $ 283,711

6 unchanged sentences

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

Unrealized loss on derivative instrument — — — ( 2,279 ) — ( 2,279 ) ( 558 ) ( 2,837 )

Unrealized loss on derivative instruments

— — — ( 2,279 ) — ( 2,279 ) ( 558 ) ( 2,837 )

Net income — — — — 348 348 85 433

2 unchanged sentences

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

Issuance of OP Units in connection with acquisition transactions — — — — — — 548 548

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

2 unchanged sentences

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

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

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

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

1 unchanged sentence

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

Net proceeds from sale of common stock 1,114,997 11 16,178 — — 16,189 — 16,189

Issuance of OP Units in connection with acquisition transactions — — — — — — 2,753 2,753

Shares issued upon redemption of OP Units 379,635 4 6,271 — — 6,275 ( 6,275 ) —

Issuance and amortization of equity-based compensation, net of forfeitures 7,205 — 718 — — 718 591 1,309

Issuance and amortization under ESPP 8,364 — 116 — — 116 — 116

Dividends and distributions — — — — ( 4,941 ) ( 4,941 ) ( 1,167 ) ( 6,108 )

Unrealized gain on derivative instruments — — — 1,680 — 1,680 390 2,070

Net income — — — — 1,166 1,166 270 1,436

Reallocation of non-controlling interest — — ( 2,029 ) — — ( 2,029 ) 2,029 —

Balance – September 30, 2023 21,540,176 $ 215 $ 279,585 $ 9,614 $ ( 44,529 ) $ 244,885 $ 54,450 $ 299,335

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

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

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

7 unchanged sentences

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

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

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

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

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

Dividends and distributions

— — — — ( 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 unaudited consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

40 unchanged sentences

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Shares issued upon redemption of OP Units 6,683 —

Reallocation of non-controlling interest 4,595 1,719

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

OP Units issued for property acquisitions 3,301 8,487

Shares issued upon redemption of OP Units 409 —

Unrealized gain on interest rate swaps, net 2,632 8,366

Accrued capital expenditures included in accounts payable and accrued expenses 229 445

17 unchanged sentences

As the sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners.

As of June 30, 2023, the Company held an approximately 80.2 % interest in the Operating Partnership.

As of September 30, 2023, the Company held an approximately 81.8 % interest in the Operating Partnership.

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

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

As of June 30, 2023, the Company owned a portfolio of 1,364 properties located in 49 states and one territory.

As of September 30, 2023, the Company owned a portfolio of 1,434 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”).

The Company also owns several, and may in the future further acquire, land parcels that may be added to existing or future leases with the USPS or used for other purposes that are consistent with the Company’s investment strategy.

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.

10 unchanged sentences

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

The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

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)

that could be significant to the VIE.

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

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

16 unchanged sentences

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.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cash and Escrows and Reserves

2 unchanged sentences

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

September 30,

2023 December 31,

6 unchanged sentences

$ 2,887 $ 2,042

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Revenue Recognition

4 unchanged sentences

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.

For certain leases with lease incentive costs, such costs are included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets and amortized on a straight-line basis over the respective lease terms as a reduction of rental revenues.

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.

8 unchanged sentences

Fair Value Measurements

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could have realized on disposition of the assets and liabilities as of June 30, 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 September 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 June 30, 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 September 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 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 was determined using the Adjusted Term SOFR (as defined below) as of September 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 $ 26.7 million and $ 27.5 million as compared to the principal balance of $ 33.0 million and $ 33.1 million as of September 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).

1 unchanged sentence

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

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 Company measures its 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 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.

As of September 30, 2023 and December 31, 2022, the fair value of the Company’s interest rate swap derivative assets was approximately $ 11.9 million and $ 9.2 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

As of September 30, 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.

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

Derivative Instruments and Hedging Activities

9 unchanged sentences

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

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

Impairment analyses will be based on current plans, intended holding periods and available market information at the

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

time the analyses are prepared.

If estimates of the projected future cash flows, anticipated holding periods or market conditions change, the evaluation of impairment losses may be different and such differences may be material.

The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

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

No impairments were recorded during the three and nine months ended September 30, 2023 and 2022.

Concentration of Credit Risks

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.

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

For the nine months ended September 30, 2023, approximately 13.5 % of the Company’s total rental income, or $ 6.0 million, was concentrated in Pennsylvania.

For the nine months ended September 30, 2022, approximately 15.4 % of the Company's total rental income, or $ 5.6 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.

3 unchanged sentences

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

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.

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 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 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.

As of September 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.

1 unchanged sentence

Earnings Per Share for further details.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Recently Adopted Accounting Pronouncements

16 unchanged sentences

Real Estate Acquisitions

The following tables summarizes the Company’s acquisitions for the six months ended June 30, 2023.

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

6 unchanged sentences

leases Below-

leases Other Total (1)

leases Other (1)

March 31, 2023 (3) 39 $ 2,802 $ 14,271 $ 152 $ 1,134 $ 43 $ ( 826 ) $ — $ 17,576

June 30, 2023 (4) 39 $ 3,241 $ 12,054 $ 117 $ 1,066 $ 24 $ ( 483 ) $ — $ 16,019

September 30, 2023 (5) 70 $ 4,916 $ 19,282 $ 182 $ 1,709 $ 58 $ ( 983 ) $ ( 342 ) $ 24,822

Total 148 $ 10,959 $ 45,607 $ 451 $ 3,909 $ 125 $ ( 2,292 ) $ ( 342 ) $ 58,417

Explanatory Notes :

(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.

(1) Includes an intangible liability related to unfavorable operating leases with purchase options on two properties during the three months ended September 30, 2023 that is included in “Accounts payable, accrued expenses and other” on the Consolidated Balance Sheets.

(2) Includes closing costs of approximately $ 0.3 million for the three months ended March 31, 2023, $ 0.2 million for the three months ended June 30, 2023 and $ 0.7 million for the three months ended September 30, 2023.

(3) 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.

(4) 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.

(5) Includes the acquisition of 70 properties in various states in individual or portfolio transactions for a price of approximately $ 24.8 million, including closing costs, which was funded with both the issuance of OP Units to the sellers (valued at approximately $ 2.8 million using the share price of Class A common stock on the date of each issuance of such OP units) and cash consideration.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Intangible Assets and Liabilities

3 unchanged sentences

(in thousands)

June 30, 2023:

September 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 $ 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.

Amortization of in-place lease intangibles was $ 1.7 million and $ 5.3 million for the three and nine months ended September 30, 2023, respectively, and $ 1.8 million and $ 5.2 million for the three and nine months ended September 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.

Amortization of acquired above-market leases was $ 0.04 million and $ 0.1 million for the three and nine months ended September 30, 2023, respectively, and $ 0.02 million and $ 0.1 million for the three and nine months ended September 30, 2022, respectively, 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 $ 1.9 million for the three and nine months ended September 30, 2023, respectively, and $ 0.6 million and $ 1.7 million for the three and nine months ended September 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

$ 14,313 $ 401 $ ( 12,214 )

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table summarizes the Company’s indebtedness as of September 30, 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

23 unchanged sentences

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)

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 (which was fully drawn down on September 27, 2023).

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.

As of September 30, 2023, the accordion feature under the Term Loans has been fully exercised.

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.

2 unchanged sentences

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

During the three and nine months ended September 30, 2023, the Company incurred $ 0.07 million and $ 0.2 million, respectively, and, during the three and nine months ended September 30, 2022, the Company incurred $ 0.06 million and

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

$ 0.2 million, respectively, of unused facility fees related to the Revolving Credit Facility.

As of September 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 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):

The weighted average maturity date for the Company's indebtedness as of September 30, 2023 and December 31, 2022 was approximately 4.6 years and 5.5 years, respectively.

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

Year Ending December 31, Amount

2023 - Remaining $ 4

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Derivatives and Hedging Activities

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 %.

As of September 30, 2023, the Company had seven interest rate swaps with a total notional amount of $ 200.0 million that are used to manage its interest rate risk and fix the SOFR component on the Term Loans of the Credit Facilities:

Notional Amount ($ in thousands) Fixed Rate (1)

Effective Date Maturity Date

$ 50,000 2.27 % May 2022 January 2027

$ 25,000 4.217 % May 2022 February 2028

$ 25,000 4.79 % July 2022 February 2028

$ 40,000 4.932 % December 2022 February 2028

$ 25,000 5.736 % July 2023 January 2027

$ 10,000 6.049 % September 2023 February 2028

Explanatory Note :

(1) Reflects the all-in effective interest rate for the specified portion of the Term Loans hedged by the interest rate swaps.

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 Income for the three and six months ended June 30, 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 nine months ended September 30, 2023 and 2022 (in thousands):

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

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

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

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

$ 3,345 $ 5,397 $ 5,897 $ 8,198

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

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

$ 1,275 $ 45 $ 3,265 $ ( 169 )

"Interest expense, net" presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 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)

"Interest expense, net" presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 2.6 million and $ 7.3 million for the three and nine months ended September 30, 2023, respectively, and $ 1.8 million and $ 3.9 million for the three and nine months ended September 30, 2022, respectively.

Lessor Accounting

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.

As of September 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 September 30, 2023 as discussed below.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Therefore, such options are only recognized once they are deemed reasonably certain, typically at the time the option is exercised.

7 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

$ 15,438 $ 13,181 $ 44,699 $ 36,665

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):

Future minimum lease payments to be received as of September 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)(3)

2 unchanged sentences

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

(2) As of June 30, 2023, the leases at 115 of the Company's properties were expired, and the USPS was occupying such properties as a holdover tenant.

(2) As of September 30, 2023, the leases at 51 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.

(3) In August 2023, the Company received notice from the USPS to terminate the lease for one property effective in February 2024.

Purchase Option Provisions

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

As of September 30, 2023, operating leases for 72 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, 2023, 68 of these properties had an aggregate carrying value of approximately $ 53.3 million with an aggregate purchase option price of approximately $ 66.6 million and the remaining four properties had an aggregate carrying value of approximately $ 2.9 million with purchase options exercisable at fair market value.

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 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):

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

September 30,

Total minimum lease payment receivable

3 unchanged sentences

Investment in financing leases, net $ 16,062 $ 16,130

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):

Revenue earned under direct financing leases for the three and nine months ended September 30, 2023 were $ 0.3 million and $ 0.8 million, respectively, and for the three and nine months ended September 30, 2022 were $ 0.3 million and $ 0.8 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, 2023 for the next five years and thereafter are as follows (in thousands):

Year Ending December 31, Amount

2 unchanged sentences

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

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.

As of September 30, 2023, these leases had remaining terms, including renewal options, of less than a year to 55 years and a weighted average remaining lease term of 21.9 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):

September 30,

ROU asset – operating leases

9 unchanged sentences

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.

Operating lease expense for each of the three and nine months ended September 30, 2023 was $ 0.05 million and $ 0.2 million, respectively, and for the three and nine months ended September 30, 2022 was $ 0.06 million and $ 0.2 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):

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

2023 — Remaining $ 63

4 unchanged sentences

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

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.

For the three and nine months ended September 30, 2023, income tax expense related to REAC was $ 0.02 million and $ 0.05 million, respectively.

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

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

3 unchanged sentences

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 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.

During the nine months ended September 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 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.

REAC recognized management fee income of $ 0.4 million and $ 1.0 million for the three and nine months ended September 30, 2023 and 2022, respectively, and $ 0.3 million and $ 0.9 million for the three and nine months ended September 30, 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.

Accrued management fees receivable of $ 0.4 million and $0.3 million as of September 30, 2023 and December 31, 2022, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

4 unchanged sentences

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

Rental expenses associated with the Office Lease for each of the three and six months ended June 30, 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.

Rental expenses associated with the Office Lease for each of the three and nine months ended September 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.

1 unchanged sentence

As disclosed above in Note 5.

Spodek personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $ 1.9 million and $ 1.9 million as of June 30, 2023 and December 31, 2022, respectively.

As a guarantor, Mr.

4 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

8 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.

Stockholders’ Equity).

Stockholders’ Equity) and the impact of the Company's forward sale agreements.

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.

3 unchanged sentences

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.

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.

On August 8, 2023, the Company amended the ATM Program to increase the aggregate offering amount under the program from up to $ 50.0 million to up to $ 150.0 million.

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 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

During the three and nine months ended September 30, 2023, 1,114,997 shares and 1,435,304 shares were issued under the ATM program, respectively.

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

As of September 30, 2023, the Company had approximately $ 117.3 million remaining that may be issued under the ATM Program.

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Shares issued (1)

1,114,997 227,473 1,435,304 227,473

Gross proceeds $ 16,744 $ 3,730 $ 21,568 $ 3,730

Fees and issuance costs ( 153 ) ( 270 )

Fees, issuance and other costs

( 555 ) ( 223 ) ( 826 ) ( 223 )

Net proceeds received $ 16,189 $ 3,507 $ 20,742 $ 3,507

Average gross sales price per share $ 15.02 $ 16.40 $ 15.03 $ 16.40

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.

Explanatory Note :

(1) Includes 600,000 shares that were issued in September 2023 in settlement of forward sales transactions that were entered into by the Company in July 2023.

Additionally, as of September 30, 2023, the Company had an additional 198,847 shares of forward sales transactions that had yet been settled.

On October 11, 2023, the remaining 198,847 shares were settled for net proceeds of approximately $2.9 million.

The Company did not receive any proceeds from the sale of shares at the time when it entered into the forward sales transactions under the ATM Program.

The Company determined that such forward sales transactions met the criteria for equity classification and, therefore, were exempt from derivative accounting.

The Company recorded the forward sales transactions at fair value at inception, which was determined to be zero.

Subsequent changes to fair value are not required under equity classification.

During the three and nine months ended September 30, 2023, the Company's Board of Directors approved and the Company declared and paid dividends of $ 6.1 million and $ 17.9 million, respectively, to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.2375 per share or unit and $ 0.713 per share or unit, respectively, as shown in the table below.

Declaration Date Record Date Date Paid Amount Per Share or Unit

1 unchanged sentence

April 24, 2023 May 5, 2023 May 31, 2023 $ 0.2375

July 26, 2023 August 7, 2023 August 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 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 nine months ended September 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

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.

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 8,447 LTIP Units to a consultant under the consultancy agreement with the Company.

As of September 30, 2023 and December 31, 2022, non-controlling interests consisted of 3,936,516 OP Units and 887,294 LTIP Units and 4,133,619 OP Units and 536,868 LTIP Units, respectively.

This represented approximately 18.2 % and 19.2 % of the outstanding Operating Partnership units as of September 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.

During the nine months ended September 30, 2023, 402,433 OP Units were redeemed for 402,433 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.

During the nine months ended September 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.

1 unchanged sentence

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

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

As of September 30, 2023, the remaining shares available under the Plan for future issuance was 1,025,868 .

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 June 30, 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 September 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

( 5,169 ) — ( 11,216 ) ( 16,385 ) $ 8.58

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

Outstanding, as of September 30, 2023 518,138 887,294 311,737 1,717,169 $ 16.18

Explanatory Notes :

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

(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 .

(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 , five years or eight years .

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(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 , 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.

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 8,446 LTIP Units granted to a consultant under the consultancy agreement with the Company, with 3,304 of such units vested on June 30, 2023 and 5,143 remaining to vest on June 30, 2024.

(4) Includes 63,512 RSUs granted to certain officers and employees of the Company during the nine months ended September 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

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.

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 11,138 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.

2 unchanged sentences

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.

During the three and nine months ended September 30, 2023, the Company recognized compensation expense of $ 1.2 million and $ 4.1 million, respectively, in “General and administrative expenses” and $ 0.1 million and $ 0.5 million, respectively, in "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive Income related to all awards.

During the three and nine months ended September 30, 2022, the Company recognized compensation expense of $ 1.0 million and $ 3.4 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.

As of September 30, 2023, there was $ 16.4 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 5.1 years.

Employee Stock Purchase Plan

2 unchanged sentences

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

As of June 30, 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.

As of September 30, 2023 and December 31, 2022, 44,520 and 29,710 shares have been issued under the ESPP since commencement, respectively.

During the three and nine months ended September 30, 2023, the Company recognized compensation expense of $ 0.01 million and $ 0.03 million, respectively, related to the ESPP.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Commitments and Contingencies

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.

As of September 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

6 unchanged sentences

Subsequent Events

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.

In addition to the subsequent events discussed elsewhere in the notes to the unaudited Consolidated Financial Statements, the following events occurred subsequent to September 30, 2023:

The Company's Board of Directors approved, and on October 23, 2023, the Company declared a third quarter common stock dividend of $ 0.2375 per share, which is payable on November 30, 2023 to stockholders of record as of November 1, 2023.

As of October 30, 2023, the Company had $ 200.0 million drawn on the Credit Facilities, with $ 75.0 million drawn on the 2021 Term Loan, $ 125.0 million drawn on the 2022 Term Loan and no amount drawn on the Revolving Credit Facility.

As of October 30, 2023 and d uring the period subsequent to September 30, 2023, the Company acquired six leased properties for approximately $ 1.9 million, excluding closing costs.

As of October 30, 2023 and d uring the period subsequent to September 30, 2023, the Company had entered into definitive agreements to acquire 19 properties for approximately $ 5.3 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