What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 54 added, 34 removed, 265 unchanged (25% of the section changed)

15 unchanged sentences

On August 8, 2023, we 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.

On November 4, 2024, we entered into separate open market sales agreements with each of Mizuho Securities USA LLC (“Mizuho”) and M&T Securities, Inc.

(“M&T”), as additional sales agents, Mizuho Markets Americas LLC, as additional forward purchaser, and Mizuho, as additional forward seller (in its capacity as agent for its affiliated forward purchaser).

On November 4, 2024, we also amended the existing open market sale agreements to reflect the addition of Mizuho and M&T as sales agents, Mizuho Markets Americas LLC as forward purchaser and Mizuho as forward seller.

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

8 unchanged sentences

For the year ended December 31, 2024, approximately 11.9% of our total rental income was concentrated in Pennsylvania.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards.

We have availed ourselves of these exemptions;

although, subject to certain restrictions, we may elect to stop availing ourselves of these exemptions in the future even while we remain an “emerging growth company.”

We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenue equals or exceeds $1.235 billion (subject to periodic adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of our IPO, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

We are also a “smaller reporting company” as defined in Regulation S-K under the Securities Act and have elected to take advantage of certain scaled disclosures available to smaller reporting companies.

We may continue to be a smaller reporting company even after we are no longer an “emerging growth company.”

We elected to be treated as a REIT under the Code beginning with our short taxable year ended December 31, 2019 and intend to continue to qualify as a REIT.

Registrant Elections

We are a “smaller reporting company” as defined in Regulation S-K under the Securities Act and have elected to take advantage of certain scaled disclosures available to smaller reporting companies.

We have also elected to be treated as a REIT under the Code beginning with our short taxable year ended December 31, 2019 and intend to continue to qualify as a REIT.

As long as we qualify as a REIT, we generally will not be subject to federal income tax to the extent that we distribute our taxable income for each tax year to our stockholders.

1 unchanged sentence

We are dependent on the USPS’ financial and operational stability.

The USPS is currently facing a variety of circumstances that are threatening its ability to fund its operations and other obligations as currently conducted without

intervention by the federal government.

The USPS is currently facing a variety of circumstances that are threatening its ability to fund its operations and other obligations as currently conducted without intervention by the federal government.

The USPS is constrained by laws and regulations that restrict revenue sources and pricing, mandate certain expenses and cap its borrowing capacity.

3 unchanged sentences

The occurrence of a regional epidemic or a global pandemic, such as the COVID-19 pandemic, and measures taken to prevent its spread may also have a material and unpredictable effect on the USPS’ operations and liquidity, including significant additional operating expenses caused by pandemic-related disruptions.

The lingering effect of the COVID-19 pandemic and other geopolitical and economic factors have also created significant inflationary pressures resulting in higher compensation, benefits, transportation and fuel costs for the USPS.

If the USPS becomes unable to meet its financial obligations or its revenue declines due to reduced demand for its services, the USPS may reduce its demand for leasing postal properties, which would have a material adverse effect on our business and operations.

7 unchanged sentences

Spodek and his affiliates pursuant to the management agreements and is a percentage of the lease revenue for the managed properties, (ii) revenue our TRS received from providing advisory services to third-party owners of postal properties and (iii) income recognized from properties accounted for as financing leases.

As of December 31, 2023, properties leased to our tenants had an average remaining lease term of approximately three years.

As of December 31, 2024, properties leased to our tenants had an average remaining lease term of approximately four years.

Factors that could affect our rental income and fee and other in the future include, but are not limited to:

30 unchanged sentences

On July 24, 2023, we further 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 exercised $35.0 million of accordion under the term loans.

On October 25, 2024, we amended the Credit Facilities (the "Third Amendment") to, among other things, replace the Bank of Montreal with Truist Bank as the administrative agent, letter of credit issuer and swingline lender.

In addition, the third amendment increases the 2022 Term Loan commitments in an aggregate principal amount of up to $50.0 million in which we further exercised $40.0 million under the 2022 Term Loan on the closing date of the transaction, and on a delayed-draw basis, $10.0 million.

On November 21, 2024, we further exercised the remaining $10.0 million under the 2022 Term Loan.

We intend to use the Credit Facilities for working capital purposes, which may include repayment of mortgage indebtedness, property acquisitions and other general corporate purposes.

8 unchanged sentences

Lease Renewal

As of February 29, 2024, the leases at 91 of our properties, representing approximately 631,000 net leasable interior square feet, had expired and the USPS was occupying such properties as a holdover tenant.

As of February 26, 2025, the leases at seven of our properties, representing approximately 28,258 net leasable interior square feet, had expired and the USPS was occupying such properties as a holdover tenant.

"Properties—Lease Expiration Schedule”.

17 unchanged sentences

General and administrative 16,008 14,654 1,354 9.2 %

Casualty and impairment losses, net

404 — 404 N/A

Depreciation and amortization 22,202 19,688 2,514 12.8 %

Total operating expenses 57,588 49,716 7,872 15.8 %

Gain on sale of real estate assets 2,393 — 2,393 N/A

Income from operations 21,177 13,996 7,181 51.3 %

17 unchanged sentences

General and administrative – General and administrative expenses increased by $1.4 million to $16.0 million for the year ended December 31, 2024 from $14.7 million for the year ended December 31, 2023, primarily due to expanding our staff, an increase in information technology related costs as a result of our continued growth and an increase in equity-based compensation expense related to awards that have been granted to our employees throughout 2023 and 2024.

Casualty and impairment losses, net – Casualty and impairment losses, net for the year ended December 31, 2024 was $0.4 million which primarily reflects a casualty loss for an asset damaged as a result of vandalism.

No casualty and impairment losses, net occurred for the year ended December 31, 2023.

Depreciation and amortization – Depreciation and amortization expense increased by $2.5 million to $22.2 million for the year ended December 31, 2024 from $19.7 million for the year ended December 31, 2023, primarily due to the volume of our acquisitions.

Gain on sale of real estate assets

Gain on sale of real estate assets includes the sale of two properties during the year ended December 31, 2024.

No properties were sold during the year ended December 31, 2023.

Other income primarily includes insurance recoveries related to property damage claims.

6 unchanged sentences

Cash flows from operating activities – Net cash provided by operating activities increased by $5.1 million to $33.5 million for the year ended December 31, 2024 compared to $28.4 million for the year ended December 31, 2023.

The increase is primarily due to the volume of our acquisitions, all of which have generated additional rental income and related changes in working capital.

Cash flows from investing activities – Net cash used in investing activities of $72.6 million for the year ended December 31, 2023 primarily consisted of $73.1 million of acquisitions and capital improvements offset by $0.7 million of insurance proceeds that were received.

The increase is due to the volume of our acquisitions and the execution of new leases with rental escalations, all of which have generated additional rental income and related changes in working capital.

Cash flows from investing activities – Net cash used in investing activities of $79.1 million for the year ended December 31, 2024 primarily consisted of $84.8 million of acquisitions and capital improvements offset by $6.0 million in proceeds received from the sale of real estate assets.

Net cash used in investing activities of $72.6 million for the year ended December 31, 2023 primarily consisted of $73.1 million of acquisitions and capital improvements offset by $0.7 million of insurance proceeds that were received.

Cash flows from financing activities – Net cash provided by financing activities decreased by $(0.3) million to $45.3 million for the year ended December 31, 2024 compared to $45.0 million for the year ended December 31, 2023.

The decrease was primarily related to an increase in payments of dividends and distributions and a decrease in net proceeds received from term loans and the Revolving Credit Facility during the year ended December 31, 2023, partially offset by an increase in net proceeds from issuance of shares and lower amount of repayments under the Revolving Credit Facility during the year ended December 31, 2023.

The decrease was primarily related to an increase in payments of dividends and distributions and a decrease in net proceeds from issuance of shares partially offset by an increase in borrowings from term loans and the Revolving Credit Facility during the year ended December 31, 2024.

Liquidity and Capital Resources

7 unchanged sentences

On December 6, 2022, we exercised $40.0 million of accordion feature under the 2022 Term Loan.

2023, we entered into the Second Amendment and further exercised $35.0 million of accordion under the Term Loans.

On July 24, 2023, we entered into the Second Amendment and further exercised $35.0 million of accordion under the Term Loans.

On October 25, 2024, we entered into the Third Amendment and increased our commitments on the 2022 Term Loan and further exercised $50.0 million.

As of December 31, 2024, we had $264.0 million of aggregate principal amount outstanding under our Credit Facilities, with $75.0 million drawn on the 2021 Term Loan, $175.0 million drawn on the 2022 Term Loan and $14.0 million drawn on the Revolving Credit Facility.

The Credit Facilities include an accordion feature which permit us to borrow up to an additional $150.0 million under the Revolving Credit Facility subject to customary terms and conditions.

The Credit Facilities include an accordion feature which permit us to borrow up to an additional (i) $150.0 million under the Revolving Credit Facility and (ii) $50.0 million under the Term Loans, subject to customary terms and conditions.

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

5 unchanged sentences

As of December 31, 2024, we were in compliance with all of the Credit Facilities’ debt covenants.

As of December 31, 2023, we had seven interest rate swaps with a total notional amount of $200.0 million that are used to manage our interest rate risk and fix the SOFR component on the Term Loans of the Credit Facilities (together, the "Interest Rate Swaps").

As of December 31, 2024, we had nine interest rate swaps with a total notional amount of $250.0 million that are used to manage our interest rate risk and fix the SOFR component on the Term Loans of the Credit Facilities (together, the "Interest Rate Swaps").

Derivatives and Hedging Activities in the Notes to our Consolidated Financial Statements included under Item 8 herein for further details regarding the Interest Rate Swaps.

3 unchanged sentences

We have an effective shelf registration statement on file with the SEC under which we may issue equity financing through the instruments and on the terms most attractive to us at such time, including through our $150.0 million ATM Program.

Our long-term liquidity requirements primarily consist of funds necessary for the repayment of debt at maturity, distributions to our limited partners and distributions to our stockholders required to qualify for REIT status, property acquisitions and non-recurring capital improvements.

acquisitions and non-recurring capital improvements.

We expect to meet our long-term liquidity requirements with net cash from operations, long-term indebtedness including our Credit Facilities and mortgage financing, the issuance of equity and debt securities and proceeds from select sales of our properties.

3 unchanged sentences

The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources.

In addition, we continuously evaluate possible acquisitions of postal properties, which largely depend on, among other

things, the market for owning and leasing postal properties and the terms on which the USPS will enter into new or renewed leases.

In addition, we continuously evaluate possible acquisitions of postal properties, which largely depend on, among other things, the market for owning and leasing postal properties and the terms on which the USPS will enter into new or renewed leases.

To maintain our qualification as a REIT, we must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding capital gains.

23 unchanged sentences

100 194 6.00 % January 2025

AIG – December 2020 (7)

30,225 30,225 2.80 % January 2031

Seller Financing - 2024 (8)

1,400 — 5.00 % September 2039

Total Principal $ 298,277 $ 241,988

3 unchanged sentences

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

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

Upon our achievement of certain sustainability targets for 2023, the applicable

margins for the Credit Facilities were reduced by 0.02% for the year ended December 31, 2024, which is reflected in the margins noted in the table above.

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

8 unchanged sentences

The loan has a fixed interest rate of 2.80% with interest-only payments for the first five years (ending in January 2026) and fixed payments of principal and interest thereafter based on a 30-year amortization schedule.

(8) In connection with the acquisition of two properties, the Company obtained seller financing secured by the properties in the amount of $1.4 million based on a fixed interest rate of 5.00% with interest-only payments through September 1, 2039.

Secured Borrowings as of December 31, 2024

13 unchanged sentences

(1) The amounts shown relate to (i) the Revolving Credit Facility based on the outstanding balance and interest rate in effect as of December 31, 2024 and assuming an unused facility fee under the Revolving Credit Facility through the remainder of the term based on such outstanding balance, (ii) the Term Loans based on the interest rate fixed through the Interest Rate Swaps and outstanding balance as of December 31, 2024 and (iii) the mortgage loans based on the outstanding balance and, for mortgage loans with interest rates adjustable after a certain period, interest rate in effect as of December 31, 2024 with respect to their future interest payments.

(2) Operating lease obligations relate to three leases for our corporate headquarters and eight ground leases at certain of our properties.

(2) Operating lease obligations relate to three leases for our corporate headquarters and 10 ground leases at certain of our properties.

To maintain our qualification as a REIT, we are required to pay dividends to stockholders at least equal to 90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding net capital gains.

2 unchanged sentences

2025 Financing Activity

We had net credit facility activity of $2.0 million during the period subsequent to December 31, 2023.

As of the date of this report, we had $211.0 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 $11.0 million drawn on the Revolving Credit Facility.

2024 Real Estate Acquisitions

Subsequent to December 31, 2023, we have acquired eight properties in individual or small portfolio transactions for approximately $4.5 million, excluding closing costs.

Our Board of Directors approved and, on February 2, 2024, we declared a fourth quarter 2023 common stock dividend of $0.24 per share which was paid on February 29, 2024 to stockholders of record on February 16, 2024.

As of the date of this report, we had $26.0 million drawn on the Revolving Credit Facility.

2025 Real Estate Transactions

Subsequent to December 31, 2024, we have acquired 18 properties in individual or small portfolio transactions for approximately $8.4 million, excluding closing costs.

Subsequent to December 31, 2024, we sold one vacant property for a total sales price of approximately $0.8 million.

Our Board of Directors approved and, on January 30, 2025, we declared a fourth quarter 2024 common stock dividend of $0.2425 per share which is payable on February 28, 2025 to stockholders of record on February 14, 2025.

Share Repurchase Program

On February 25, 2025, the Board of Directors authorized the creation of a share repurchase program (the “Share Repurchase Program”) pursuant to which we may repurchase up to $25.0 million of our Class A common stock.

Repurchases of our Class A common stock conducted under the Share Repurchase Program may be made through open market transactions, block trades or other methods designed to comply with Rule 10b-18 of the Exchange Act.

As of February 26, 2025, no shares of our Class A common stock were repurchased pursuant to the Share Repurchase Program and the dollar value of Class A common stock shares that remained available to be repurchased under the Share Repurchase Program was $25.0 million.

The Share Repurchase Program does not obligate us to repurchase any specific dollar amount, or to acquire any specific number, of shares of our Class A common stock and may be suspended or discontinued at any time at the discretion of the Board of Directors.

Critical Accounting Estimates

26 unchanged sentences

At lease inception, we record an asset within investments on the Consolidated Balance Sheets, which represents our net investment in the direct financing lease.

This initial net investment is determined by aggregating the total future minimum lease payments attributable to the direct financing

lease and the estimated residual value of the property, if any, less unearned income.

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

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

6 unchanged sentences

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

As of December 31, 2023 and 2022, no impairment related to our long-lived assets was identified.

During the year ended December 31, 2024, based upon an accumulation of costs in excess of what was originally expected, we assessed the recoverability of the carrying amount of our real estate and related intangibles.

The assessment resulted in the remeasurement of one property, which was written down to its estimated fair value and was classified as Level 3 in the fair value hierarchy.

Our estimate of the fair value was based on a discounted cash flow analysis.

We used two significant unobservable inputs which was the cash flow discount rate (11.0%) and the terminal capitalization rate (10.0%).

The remeasurement resulted in an impairment loss of $0.1 million, which is included in "Casualty and impairment loss, net" in the Consolidated Statements of Operations and Comprehensive Income.

No impairment was recorded during the year ended December 31, 2023.

New Accounting Pronouncements

5 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis