What changed in this filing

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Item 1. Financial Statements

2024-05-07 compared with 2023-10-30 · 166 added, 266 removed, 496 unchanged (47% of the section changed)

3 unchanged sentences

(In thousands, except par value and share data)

September 30,

2024 December 31, 2023

19 unchanged sentences

Term loans, net $ 198,885 $ 198,801

Revolving credit facility 16,000 9,000

Secured borrowings, net 32,730 32,823

5 unchanged sentences

500,000,000 shares authorized;

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

22,607,251 and 21,933,005 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

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

27,206 shares authorized;

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

27,206 shares issued and outstanding as of March 31, 2024 and December 31, 2023

Additional paid-in capital 294,878 287,268

3 unchanged sentences

Operating partnership unitholders’ non-controlling interests

65,158 58,063

Total Equity 313,290 301,625

2 unchanged sentences

POSTAL REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data )

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Rental income $ 16,604 $ 14,499

14 unchanged sentences

Total interest expense, net ( 2,817 ) ( 2,210 )

Income before income tax (expense) benefit

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

Income tax (expense) benefit

Income before income tax expense

Income tax expense

( 16 ) ( 16 )

1 unchanged sentence

Net income attributable to operating partnership unitholders’ non-controlling interests

( 50 ) ( 85 )

Net income attributable to common stockholders $ 206 $ 348

Net income per share:

Net (loss) income per share:

Basic and Diluted $ ( 0.01 ) $ 0.00

1 unchanged sentence

Basic and Diluted 22,045,310 19,294,896

Comprehensive income:

Comprehensive income (loss):

Net income $ 256 $ 433

Unrealized gain on derivative instruments 2,070 5,352 2,632 8,367

Comprehensive income 3,506 6,502 5,762 11,403

Comprehensive income attributable to Operating Partnership unitholders’ non-controlling interests ( 660 ) ( 1,240 ) ( 1,108 ) ( 2,109 )

Comprehensive income attributable to common stockholders $ 2,846 $ 5,262 $ 4,654 $ 9,294

Unrealized gain (loss) on derivative instruments

2,819 ( 2,837 )

Comprehensive income (loss)

3,075 ( 2,404 )

Comprehensive (loss) income attributable to operating partnership unitholders’ non-controlling interests

Comprehensive income (loss) attributable to common stockholders

$ 2,473 $ ( 1,931 )

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands, except share and per share data)

(in thousands, except share data)

shares of Common

4 unchanged sentences

Balance – December 31, 2023

21,960,211 $ 219 $ 287,268 $ 4,621 $ ( 48,546 ) $ 243,562 $ 58,063 $ 301,625

Net proceeds from sale of common stock 576,087 6 7,861 — — 7,867 — 7,867

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

Issuance of operating partnership units in connection with acquisition transactions

— — — — — — 5,788 5,788

Issuance and amortization of equity-based compensation 120,941 1 1,147 — — 1,148 965 2,113

3 unchanged sentences

Dividends and distributions — — — — ( 5,520 ) ( 5,520 ) ( 1,339 ) ( 6,859 )

Unrealized loss on derivative instruments

Unrealized gain on derivative instrument

— — — 2,267 — 2,267 552 2,819

2 unchanged sentences

Balance – March 31, 2024 22,634,457 $ 226 $ 294,878 $ 6,888 $ ( 53,860 ) $ 248,132 $ 65,158 $ 313,290

Net proceeds from sale of common stock 265,225 3 3,840 — — 3,843 — 3,843

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

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

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

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

Shares issued upon redemption of operating partnership 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 5,387 — 100 — — 100 — 100

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

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

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

Net income — — — — 595 595 126 721

Reallocation of non-controlling interest — — 346 — — 346 ( 346 ) —

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

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

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

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

Issuance and amortization under the 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 income — — — 412 — 412 92 504

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

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

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

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

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

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

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

Dividends and distributions

Unrealized loss on derivative instruments

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

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

Net income — — — — 348 348 85 433

Reallocation of non-controlling interest — — ( 2,338 ) — — ( 2,338 ) 2,338 —

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

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

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

2 unchanged sentences

(in thousands)

For the Nine Months Ended

September 30,

For the Three Months Ended

Cash flows from operating activities:

9 unchanged sentences

Deferred rent expense payable 1 2

Other ( 4 ) 12

Changes in assets and liabilities:

5 unchanged sentences

Acquisition of real estate ( 12,967 ) ( 17,389 )

Investment in financing leases — ( 10 )

Escrows for acquisition and construction deposits ( 157 ) ( 223 )

Capital improvements ( 599 ) ( 393 )

Insurance proceeds related to property damage claims 441 557

Other investing activities ( 134 ) ( 11 )

2 unchanged sentences

Repayments of secured borrowings ( 98 ) ( 93 )

Proceeds from term loans 35,000 75,000

Proceeds from revolving credit facility 16,000 17,000

Repayments of revolving credit facility ( 9,000 ) —

Redemption of OP Units ( 558 ) —

Net proceeds from issuance of shares 7,821 718

Deferred offering costs — ( 107 )

Debt issuance costs ( 261 ) ( 623 )

Proceeds from issuance of ESPP shares 64 79

3 unchanged sentences

Net cash provided by financing activities 7,278 11,043

Net increase (decrease) in Cash and Escrows and Reserves 845 ( 2,118 )

Net (decrease) increase in Cash and Escrows and Reserves

Cash and Escrows and Reserves at the beginning of period 2,867 2,042

1 unchanged sentence

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Shares issued upon redemption of OP Units 6,683 —

Reallocation of non-controlling interest 1,079 2,338

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

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

Operating partnership units issued for property acquisitions

Unrealized gain (loss) on interest rate swaps, net

2,819 ( 2,837 )

Accrued capital expenditures included in accounts payable and accrued expenses 114 123

1 unchanged sentence

Write-off of fixed assets no longer in service 29 139

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

Accrued costs of capital included in accounts payable and accrued expenses 85 —

Right of use assets 64 —

OP Units issued for business acquisition — 1,451

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

10 unchanged sentences

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

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

As of March 31, 2024, the Company held an approximately 79.2 % 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 September 30, 2023, the Company owned a portfolio of 1,434 properties located in 49 states and one territory.

As of March 31, 2024, the Company owned a portfolio of 1,537 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”).

5 unchanged sentences

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

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

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

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

27 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,

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2024 December 31,

4 unchanged sentences

Real estate tax reserve

Total escrows and reserves

Cash and escrows and reserves $ 2,689 $ 2,867

$ 2,887 $ 2,042

Revenue Recognition

1 unchanged sentence

Rental income is recognized on a straight-line basis over the term of the lease.

In addition, certain lease agreements provide for reimbursements from tenants for real estate taxes and other recoverable costs, which are recorded on an accrual basis as part of “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

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

7 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 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".

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 (Loss) 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).

1 unchanged sentence

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 September 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 March 31, 2024 and December 31, 2023.

The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash, escrows and reserves, receivables, prepaid expenses and other assets (excluding derivatives), accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of September 30, 2023 and December 31, 2022 due to their short maturities.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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, 2024 and December 31, 2023 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 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).

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

The fair value was determined using the Adjusted Term SOFR (as defined below) as of March 31, 2024 and December 31, 2023, 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 $ 27.6 million and $ 28.0 million as compared to the principal balance of $ 32.9 million and $ 33.0 million as of March 31, 2024 and December 31, 2023, respectively.

The fair value of the Company’s secured borrowings was categorized as a Level 3 fair value estimate (as provided by ASC 820, Fair Value Measurements and Disclosures) and was determined by discounting the future contractual interest and principal payments by a market rate.

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

2 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 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.

As of March 31, 2024 and December 31, 2023, the fair value of the Company’s interest rate swap derivative assets was approximately $ 8.7 million and $ 6.4 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

As of March 31, 2024 and December 31, 2023, the fair value of the Company's interest rate swap derivative liabilities was approximately $ 0.2 million and $ 0.7 million, respectively, 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 March 31, 2024 and December 31, 2023.

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, 2024 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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

time the analyses are prepared.

Impairment analyses will be based on current plans, intended holding periods and available market information at the 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 nine months ended September 30, 2023 and 2022.

No impairments were recorded during the three months ended March 31, 2024 and 2023.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Concentration of Credit Risks

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.

As of March 31, 2024, the Company’s properties were leased primarily to a single tenant, the USPS.

For the three months ended March 31, 2024, approximately 12.4 % of the Company’s total rental income, or $ 2.1 million, was concentrated in Pennsylvania.

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.

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.

15 unchanged sentences

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

As of September 30, 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 March 31, 2024 and 2023, 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

In September 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

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

2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses .

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

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

The guidance also requires entities to disclose information about how they developed the allowances, including changes in the factors that influenced estimate of expected credit losses and the reasons for those changes.

2018-19 excludes operating lease receivables from the scope of this guidance.

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

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

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

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

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

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

Future Application of Accounting Standards

In November 2023, the FASB issued Accounting Standards Codification ("ASC") No.

2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

2023-07 improves disclosures about public entities' reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment's expenses.

The provisions in this amendment are applicable to public entities with a single reportable segment.

The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Real Estate Acquisitions

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

December 15, 2024, with early adoption permitted.

The Company has one reportable segment and continues to evaluate additional disclosures that may be required for entities with a single reportable segment.

Real Estate Transactions

The following tables summarizes the Company’s acquisitions for the three months ended March 31, 2024.

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 (1)

March 31, 2024 (2) 29 $ 6,442 $ 12,362 $ 98 $ 1,372 $ 34 $ ( 1,442 ) $ — $ 18,866

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 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)

(1) Includes closing costs of approximately $ 0.3 million for the three months ended March 31, 2024.

(2) Includes the acquisition of 29 properties in various states for cash consideration in individual or portfolio transactions for a price of approximately $ 18.9 million, including closing costs, which was funded with both the issuance of OP Units to the sellers (valued at approximately $ 5.8 million using the share price of Class A common stock on the date of each issuance of such OP Units) and cash consideration.

In addition, during the three months ended March 31, 2024, the Company entered into a definitive agreement to sell one property with an immaterial net book value, which transaction was completed in April 2024.

Intangible Assets and Liabilities

3 unchanged sentences

(in thousands)

September 30, 2023:

March 31, 2024:

In-place lease intangibles

11 unchanged sentences

( 22,940 ) 9,840 ( 13,100 )

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 $ 0.1 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.

Amortization of in-place lease intangibles was $ 1.8 million and $ 1.8 million for the three months ended March 31, 2024 and 2023, respectively.

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

Amortization of acquired above-market leases was $ 0.05 million and $ 0.04 million for the three months ended March 31, 2024 and 2023, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Amortization of acquired below-market leases was $ 0.7 million and $ 0.6 million for the three months ended March 31, 2024 and 2023, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

9 unchanged sentences

$ 13,701 $ 342 $ ( 13,811 )

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):

The following table summarizes the Company’s indebtedness as of March 31, 2024 and December 31, 2023 (dollars in thousands):

Outstanding Balance as of

September 30,

2024 Outstanding

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2023 Interest

September 30,

2024 Maturity Date

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Explanatory Notes :

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

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

(1) The Company have entered into the Credit Facilities, which include the $ 150.0 million Revolving Credit Facility, the $ 75.0 million senior unsecured term loan facility (the "2021 Term Loan") and the $ 125.0 million senior unsecured term loan facility (the "2022 Term Loan").

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.

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.

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

During the three months ended March 31, 2024 and 2023, the Company incurred $ 0.07 million and $ 0.07 million, respectively, of unused facility fees related to the Revolving Credit Facility.

As of March 31, 2024, the Company was in compliance with all of the Credit Facilities’ debt covenants.

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

Upon the Company's achievement of certain sustainability targets for 2023, the applicable margins for the Credit Facilities were reduced by 0.02 % for the year ending December 31, 2024, which is reflected in the margins noted in the table above.

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(7) The loan is secured by a first mortgage lien on an industrial property located in Warrendale, Pennsylvania.

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

The weighted average maturity date for the Company's indebtedness as of September 30, 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):

The loan has a fixed interest rate of 2.80 % with interest-only payments for the first five years (ending in January 2026) 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, 2024 and December 31, 2023 was approximately 3.9 years and 4.2 years, respectively.

The scheduled principal repayments of indebtedness as of March 31, 2024 are as follows (in thousands):

Year Ending December 31, Amount

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Derivatives and Hedging Activities

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:

As of March 31, 2024, 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)

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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 nine months ended September 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 (Loss) for the three months ended March 31, 2024 and 2023 (in thousands):

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps) 2024 2023

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

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

$ 4,150 $ ( 1,938 )

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

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

$ 1,331 $ 899

"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 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.

"Interest expense, net" presented in the Consolidated Statements of Operations and Comprehensive Income (Loss), in which the effects of cash flow hedges are recorded, totaled $ 2.8 million and $ 2.2 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, 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, 2024, it could have been required to settle its obligations under the agreements of any interest rate swap in a net liability position for approximately $ 0.2 million, which is at their termination value.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Lessor Accounting

As of March 31, 2024, 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, 2024 as discussed below.

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

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

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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 Income.

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

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

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Fixed payments

2 unchanged sentences

$ 16,604 $ 14,499

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

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):

Future minimum lease payments to be received as of March 31, 2024 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)

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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 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.

(2) As of March 31, 2024, the leases at 98 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.

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

Also excludes lease payments from one property sold in April 2024.

Purchase Option Provisions

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)

As of March 31, 2024, operating leases for 75 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, 2024, 70 of these properties had an aggregate carrying value of approximately $ 52.4 million with an aggregate purchase option price of approximately $ 68.0 million and the remaining five properties had an aggregate carrying value of approximately $ 4.3 million with purchase options exercisable at fair market value.

Investment in Financing Leases, Net

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,

As of March 31, 2024 and December 31, 2023, 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, 2024 and December 31, 2023 are summarized in the table below (in thousands):

Total minimum lease payment receivable

3 unchanged sentences

Investment in financing leases, net $ 16,018 $ 16,042

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):

Revenue earned under direct financing leases for each of the three months ended March 31, 2024 and 2023 were $0.3 million, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Future lease payments to be received under the Company’s direct financing leases as of March 31, 2024 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 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,

As of March 31, 2024, these leases had remaining terms, including renewal options, of less than a year to 58.8 years and a weighted average remaining lease term of 22.0 years.

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

ROU asset – operating leases

$ 857 $ 1,010

Lease liability – operating leases $ 997 $ 994

1 unchanged sentence

Operating lease assets and liabilities are measured at the commencement date based on the present value of future lease payments.

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

The Company used a discount rate ranging from 4.25 % to 6.37 % based on the yield of its current borrowings in determining its lease liabilities.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

rate based on the information available at the commencement date in determining the present value of future payments.

The Company used a discount rate ranging from 4.25 % to 7.35 % based on the yield of its current borrowings in determining its lease liabilities.

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

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

Operating lease expense for each of the three and nine months ended September 30, 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.

Operating lease expense for the three months ended March 31, 2024 and 2023 was $ 0.07 million and $ 0.06 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 September 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 March 31, 2024 for the next five years and thereafter are as follows (in thousands):

2024 — Remaining $ 97

4 unchanged sentences

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

For the three and nine months ended September 30, 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.

For each of the three months ended March 31, 2024 and 2023, income tax expense related to REAC was $ 0.01 million.

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 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.

During the three months ended March 31, 2023, the Company reversed the remaining $ 0.02 million of unrecognized tax benefits and the corresponding indemnification asset due to the expiration of statute of limitations.

Related Party Transactions

Management Fee Income

REAC recognized management fee income of $ 0.4 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 $ 0.4 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.

REAC recognized management fee income of $ 0.3 million for each of the three months ended March 31, 2024 and 2023 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 (Loss).

Accrued management fees receivable of $ 0.3 million and $ 0.3 million as of March 31, 2024 and December 31, 2023, 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 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.

Rental expenses associated with the Office Lease for each of the three months ended March 31, 2024 and 2023 were $ 0.05 million and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive Income (Loss).

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 September 30, 2023 and December 31, 2022, respectively.

Spodek personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $ 1.9 million and $ 1.9 million as of March 31, 2024 and December 31, 2023, respectively.

As a guarantor, Mr.

4 unchanged sentences

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Numerator for earnings per share – basic and diluted:

4 unchanged sentences

22,045,310 19,294,896

Basic and diluted earnings per share $ 0.04 $ 0.04 $ 0.08 $ 0.10

Basic and diluted net (loss) income per share

$ ( 0.01 ) $ 0.00

Explanatory Note :

(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) and the impact of the Company's forward sale agreements.

Stockholders’ Equity).

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

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.

On November 4, 2022, the Company entered into separate open market sale agreements for its at-the-market offering program with each of Jefferies LLC, BMO Capital Markets Corp., Stifel, Nicolaus & Company, Incorporated and Truist Securities, Inc., as agents (the "ATM Program"), 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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

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 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.

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

During the three months ended March 31, 2024, 576,087 shares were issued under the ATM program.

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

As of March 31, 2024, the Company had approximately $ 105.8 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

Gross proceeds received

$ 8,211 $ 827

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

Fees, issuance and other costs ( 344 ) ( 117 )

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

Net proceeds received $ 7,867 $ 710

Average gross sales price per share $ 14.25 $ 15.01

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.

Dividends and Distributions

During the three months ended March 31, 2024, the Company's Board of Directors approved and the Company declared and paid dividends or distributions, as applicable, of $ 6.8 million to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.24 per share or unit, as shown in the table below.

Declaration Date Record Date Date Paid Amount Per Share or Unit

February 2, 2024 February 16, 2024 February 29, 2024 $ 0.24

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 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)

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.

During the three months ended March 31, 2024, the Company issued 151,916 LTIP Units to the Company’s CEO for his 2023 incentive bonus, his election to defer 100 % of his 2024 annual salary and for long term incentive compensation, 51,490 LTIP Units to the Company’s President for his 2023 incentive bonus, 53,906 LTIP Units to the Company's Chief Financial Officer for his 2023 incentive bonus and for long term incentive compensation and 51,940 LTIP Units to certain other employees for their 2023 incentive bonus and for long term incentive compensation.

As of March 31, 2024 and December 31, 2023, non-controlling interests consisted of 4,799,318 OP Units and 1,193,873 LTIP Units and 4,387,334 OP Units and 884,621 LTIP Units, respectively.

This represented approximately 20.8 % and 19.3 % of the outstanding Operating Partnership units as of March 31, 2024 and December 31, 2023, 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, 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 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.

Restricted Stock and Other Awards

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

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

As of March 31, 2024, the remaining shares available under the Plan for future issuance was 1,047,055 .

The Plan provides for grants of stock options, stock awards, stock appreciation rights, performance units, incentive awards, other equity-based awards (including LTIP Units) and dividend equivalents in connection with the grant of performance units and other equity-based awards.

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

The balance as of September 30, 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 March 31, 2024 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

( 5,381 ) — ( 23,359 ) ( 28,740 ) $ 12.67

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

Outstanding, as of March 31, 2024 553,148 1,193,873 378,320 2,125,341 $ 15.80

Explanatory Notes :

1 unchanged sentence

(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)

Also includes 5,336 shares of restricted stock granted to a consultant under the consultancy agreement with the Company, which shares will vest on February 28, 2025.

(3) Includes 151,916 LTIP Units granted to the Company’s CEO, 51,490 LTIP Units granted to the Company’s President and 53,906 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 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.

Also includes 51,940 LTIP Units granted to certain other employees of the Company, certain of which vested fully on the date of grant with the remaining vesting over three years or cliff vest at the end of eight years .

(4) Includes 79,296 RSUs granted to certain officers and employees of the Company during the three months ended March 31, 2024, 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, 2026.

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 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.

Also, includes 34,841 time-based RSUs issued for 2023 incentive bonuses to certain employees that vested fully on February 2, 2024, the date of grant.

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

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During the year ended December 31, 2021, the Company issued 46,714 RSUs (the “2021 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, 2023.

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 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.

In February 2024, 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 met the threshold performance hurdles for the 2021 Performance-Based Awards and, as a result, approved the payout of (i) 23,357 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.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

During the three months ended March 31, 2024 and 2023, the Company recognized compensation expense of $ 1.8 million and $ 1.6 million, respectively, in “General and administrative expenses” and $ 0.3 million and $ 0.3 million, respectively, in "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive Income (Loss) related to all awards.

As of March 31, 2024, there was $ 20.5 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 5.2 years.

Employee Stock Purchase Plan

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

As of 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)

As of March 31, 2024 and December 31, 2023, 49,657 and 44,520 shares have been issued under the ESPP since commencement, respectively.

During the three months ended March 31, 2024 and 2023, the Company recognized compensation expense of $ 0.01 million and $ 0.01 million, respectively, related to the ESPP.

Commitments and Contingencies

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.

As of March 31, 2024, 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.

Business Acquisition

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

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

The goodwill recorded is deductible for income tax purposes.

All assets acquired in connection with the business acquisition were assigned to the Company’s single reportable segment.

The results of operations of this acquired business have been included since the acquisition date.

Pro forma information has not been presented for this business acquisition because such information is not material to the financial statements.

Subsequent Events

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.

In addition to the subsequent events discussed elsewhere in the notes to the unaudited Consolidated Financial Statements, the following events occurred subsequent to March 31, 2024:

The Company's Board of Directors approved, and on April 30, 2024, the Company declared a first quarter 2024 common stock dividend of $ 0.24 per share, which is payable on May 31, 2024 to stockholders of record as of May 8, 2024.

As of May 7, 2024, the Company had $ 15.0 million drawn on the Revolving Credit Facility.

As of May 7, 2024 and d uring the period subsequent to March 31, 2024, the Company acquired six leased properties for approximately $ 4.1 million, excluding closing costs.

As of May 7, 2024 and d uring the period subsequent to March 31, 2024, the Company issued 57,993 shares of its Class A common stock under the ATM Program for gross proceeds of approximately $ 0.8 million.

As of May 7, 2024 and d uring the period subsequent to March 31, 2024, the Company had entered into definitive agreements to acquire 11 properties for approximately $ 3.5 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