Postal Realty Trust, Inc. 10-Q

Item 1. Financial Statements POSTAL REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except par value and share data) March 31, 2025 December 31, 2024 Assets Investments: Real estate properties, at cost: Land $ 132,297 $ 128,457 Building and improvements 524,490 512,248 Tenant improvements 7,609 7,501 Total real estate properties, at cost 664,396 648,206 Less: Accumulated depreciation ( 61,961 ) ( 58,175 ) Total real estate properties, net 602,435 590,031 Investment in financing leases, net 15,923 15,951 Total real estate investments, net 618,358 605,982 Cash 639 1,799 Escrow and reserves 926 744 Rent and other receivables 4,961 6,658 Prepaid expenses and other assets, net 12,032 14,519 Goodwill 1,536 1,536 Deferred rent receivable 3,154 2,639 In-place lease intangibles, net 12,140 12,636 Above market leases, net 272 305 Total Assets $ 654,018 $ 646,818 Liabilities and Equity Liabilities: Term loans, net $ 248,901 $ 248,790 Revolving credit facility 24,000 14,000 Secured borrowings, net 33,820 33,918 Accounts payable, accrued expenses and other, net 15,580 16,441 Below market leases, net 16,812 16,171 Total Liabilities 339,113 329,320 Commitments and Contingencies Equity: Class A common stock, par value $ 0.01 per share; 500,000,000 shares authorized; 23,696,171 and 23,494,487 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 237 235 Class B common stock, par value $ 0.01 per share; 27,206 shares authorized; 27,206 shares issued and outstanding as of March 31, 2025 and December 31, 2024 — — Additional paid-in capital 310,131 310,031 Accumulated other comprehensive income 3,001 5,230 Accumulated deficit ( 67,890 ) ( 64,211 ) Total Stockholders’ Equity 245,479 251,285 Operating partnership unitholders’ non-controlling interests 69,426 66,213 Total Equity 314,905 317,498 Total Liabilities and Equity $ 654,018 $ 646,818 The accompanying notes are an integral part of these unaudited consolidated financial statements. 1 Table of Contents POSTAL REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED) (in thousands, except share and per share data ) For the Three Months Ended March 31, 2025 2024 Revenues: Rental income $ 21,480 $ 16,604 Fee and other 670 683 Total revenues 22,150 17,287 Operating expenses: Real estate taxes 2,649 2,302 Property operating expenses 2,461 2,353 General and administrative 4,936 4,292 Casualty and impairment losses, net 150 — Depreciation and amortization 5,624 5,301 Total operating expenses 15,820 14,248 Loss on sale of real estate assets ( 49 ) — Income from operations 6,281 3,039 Other income 30 50 Interest expense, net: Contractual interest expense ( 3,437 ) ( 2,637 ) Write-off and amortization of deferred financing fees and amortization of debt discount ( 211 ) ( 181 ) Interest income 6 1 Total interest expense, net ( 3,642 ) ( 2,817 ) Income before income tax expense 2,669 272 Income tax expense ( 14 ) ( 16 ) Net income 2,655 256 Net income attributable to operating partnership unitholders’ non-controlling interests ( 573 ) ( 50 ) Net income attributable to common stockholders $ 2,082 $ 206 Net income (loss) per share: Basic and Diluted $ 0.06 $ ( 0.01 ) Weighted average common shares outstanding: Basic and Diluted 23,216,150 22,045,310 Comprehensive (loss) income: Net income $ 2,655 $ 256 Unrealized (loss) gain on derivative instruments ( 2,844 ) 2,819 Comprehensive (loss) income ( 189 ) 3,075 Comprehensive loss (income) attributable to operating partnership unitholders’ non-controlling interests 41 ( 602 ) Comprehensive (loss) income attributable to common stockholders $ ( 148 ) $ 2,473 The accompanying notes are an integral part of these unaudited consolidated financial statements. 2 Table of Contents POSTAL REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED) (in thousands, except share data) Number of shares of Common Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ equity Operating Partnership Unitholders’ Non-controlling Interests Total Equity Balance – December 31, 2024 23,521,693 $ 235 $ 310,031 $ 5,230 $ ( 64,211 ) $ 251,285 $ 66,213 $ 317,498 Net proceeds from sale of common stock 139,626 1 1,819 — — 1,820 — 1,820 Issuance of operating partnership units in connection with acquisition transactions — — — — — — 1,026 1,026 Issuance and amortization of equity-based compensation, net of forfeitures 77,623 1 817 — — 818 1,514 2,332 Issuance and amortization under the employee stock purchase plan ("ESPP") 5,527 — 77 — — 77 — 77 Restricted stock withholdings ( 21,092 ) — ( 277 ) — — ( 277 ) — ( 277 ) Dividends and distributions — — — — ( 5,761 ) ( 5,761 ) ( 1,621 ) ( 7,382 ) Unrealized loss on derivative instruments — — — ( 2,229 ) — ( 2,229 ) ( 615 ) ( 2,844 ) Net income — — — — 2,082 2,082 573 2,655 Reallocation of non-controlling interest — — ( 2,336 ) — — ( 2,336 ) 2,336 — Balance – March 31, 2025 23,723,377 $ 237 $ 310,131 $ 3,001 $ ( 67,890 ) $ 245,479 $ 69,426 $ 314,905 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 Issuance of operating partnership units in connection with acquisition transactions — — — — — — 5,788 5,788 Issuance and amortization of equity-based compensation, net of forfeitures 120,941 1 1,147 — — 1,148 965 2,113 Issuance and amortization under the ESPP 5,137 — 77 — — 77 — 77 Restricted stock withholdings ( 27,919 ) — ( 396 ) — — ( 396 ) — ( 396 ) Dividends and distributions — — — — ( 5,520 ) ( 5,520 ) ( 1,339 ) ( 6,859 ) Unrealized gain on derivative instruments — — — 2,267 — 2,267 552 2,819 Net income — — — — 206 206 50 256 Reallocation of non-controlling interest — — ( 1,079 ) — — ( 1,079 ) 1,079 — Balance – March 31, 2024 22,634,457 $ 226 $ 294,878 $ 6,888 $ ( 53,860 ) $ 248,132 $ 65,158 $ 313,290 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents POSTAL REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) For the Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 2,655 $ 256 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,624 5,301 Write-off and amortization of deferred financing fees and debt discounts 211 181 Amortization of above/below market leases ( 742 ) ( 684 ) Amortization of intangible liability ( 88 ) ( 59 ) Casualty and impairment losses 435 — Loss on sale of real estate assets 49 — Equity based compensation 2,351 2,126 Deferred rent receivable ( 515 ) ( 101 ) Other ( 6 ) ( 3 ) Changes in assets and liabilities: Rent and other receivables 1,725 247 Prepaid expenses and other assets 683 850 Accounts payable, accrued expenses and other ( 1,564 ) ( 1,713 ) Net cash provided by operating activities 10,818 6,401 Cash flows from investing activities: Acquisition of real estate ( 15,140 ) ( 12,967 ) Proceeds from sale of real estate assets 825 — Escrows for acquisition deposits ( 653 ) ( 157 ) Capital improvements ( 660 ) ( 599 ) Other investing activities ( 130 ) ( 134 ) Net cash used in investing activities ( 15,758 ) ( 13,857 ) Cash flows from financing activities: Repayments of secured borrowings ( 104 ) ( 98 ) Proceeds from revolving credit facility 17,000 16,000 Repayments of revolving credit facility ( 7,000 ) ( 9,000 ) Net proceeds from issuance of shares 1,890 7,821 Debt issuance costs ( 5 ) — Proceeds from issuance of ESPP shares 61 64 Value of shares withheld for payment of taxes related to employee stock compensation ( 331 ) ( 513 ) Dividends and distributions ( 7,382 ) ( 6,859 ) Other financing activities ( 167 ) ( 137 ) Net cash provided by financing activities 3,962 7,278 Net decrease in Cash and Escrows and Reserves ( 978 ) ( 178 ) Cash and Escrows and Reserves at the beginning of period 2,543 2,867 Cash and Escrow and Reserves at the end of period $ 1,565 $ 2,689 Supplemental Disclosure of Non-Cash Investing and Financing Activities Operating partnership units issued for property acquisitions 1,026 5,788 Unrealized (loss) gain on derivative instruments, net ( 2,844 ) 2,819 Reallocation of non-controlling interest 2,336 1,079 Reclassification of acquisition deposits included in prepaid expenses and other assets 197 147 Write-off of fixed assets no longer in service — 29 Accrued capital expenditures included in accounts payable and accrued expenses 465 114 Reclassification of construction deposits included in prepaid expenses and other assets 38 — Right of use assets, net — 64 Accrued costs of capital included in accounts payable and accrued expenses 72 85 4 Table of Contents The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Organization and Description of Business Postal Realty Trust, Inc. (the “Company”) was organized in the state of Maryland on November 19, 2018. On May 17, 2019, the Company completed its initial public offering (“IPO”) of the Company’s Class A common stock, par value $ 0.01 per share (the “Class A common stock”). The Company contributed the net proceeds from the IPO to Postal Realty LP, a Delaware limited partnership (the “Operating Partnership”), in exchange for common units of limited partnership interest in the Operating Partnership (the “OP Units”). Both the Company and the Operating Partnership commenced operations upon completion of the IPO and certain related formation transactions. Prior to the completion of the IPO and the formation transactions, the Company had no operations. The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of OP Units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the limited partners. As of March 31, 2025, the Company held an approximately 78.0 % interest in the Operating Partnership. As the sole general partner and the majority interest holder, the Company consolidates the financial position and results of operations of the Operating Partnership. The Operating Partnership is considered a variable interest entity (“VIE”) in which the Company is the primary beneficiary. As of March 31, 2025, the Company owned a portfolio of 1,738 properties located in 49 states and one territory. The Company’s properties are leased primarily to a single tenant, the United States Postal Service (the “USPS”). The Company also owns several, and may in the future further acquire, land parcels that may be added to existing or future leases with the USPS or used for other purposes that are consistent with the Company’s investment strategy. In addition, through its taxable REIT subsidiary (“TRS”), Real Estate Asset Counseling, LLC (“REAC”), the Company provides fee-based third-party property management services for an additional 360 properties, which are owned by Andrew Spodek, the Company's chief executive officer ("CEO"), and his affiliates, and certain advisory services to third-party owners of postal properties. Pursuant to the Company’s charter, the Company is currently authorized to issue up to 500,000,000 shares of Class A common stock, 27,206 shares of Class B common stock, $ 0.01 par value per share (the “Voting Equivalency stock”), and up to 100,000,000 shares of preferred stock. The Company elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the Company's short taxable year ended December 31, 2019, and intends to continue to qualify as a REIT. As a REIT, the Company generally will not be subject to federal income tax to the extent that it distributes its REIT taxable income for each tax year to its stockholders. REITs are subject to a number of organizational and operational requirements. Additionally, any income earned by the TRS and any other TRS the Company may form in the future will be subject to federal, state and local corporate income tax. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited Consolidated Financial Statements include the financial position and results of operations of the Company, the Operating Partnership and its wholly owned subsidiaries. The Company consolidates the Operating Partnership, a VIE in which the Company is considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Substantially all of the assets and liabilities of the Company relate to the Operating Partnership. A non-controlling interest is defined as the portion of the equity in an entity not attributable, directly or indirectly, to the Company. Non-controlling interests are required to be presented as a separate component of equity in the Consolidated 6 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Balance Sheets. Accordingly, the presentation of net income reflects the income attributed to controlling and non-controlling interests. The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial state ments. This interim financial information should be read in conjunction with the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2025. All material intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. As discussed in the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, t he Company’s most significant assumptions and estimates are related to the valuation of investments in real estate properties and impairment of long-lived assets. Although management believes its estimates are reasonable, actual results could differ from those estimates. Offering and Other Costs Offering costs are recorded in “Total Stockholders’ Equity” on the Consolidated Balance Sheets as a reduction of additional paid-in capital. Segment Reporting The Company leases its properties primarily to the USPS and reports its business as a single reportable segment. The Company's Chief Executive Officer is the Chief Operating Decision Maker ("CODM") who allocates resources and assesses financial performance. The CODM reviews net income and assesses the performance of the Company's current portfolio of properties primarily leased to the USPS and makes operating decisions accordingly. Net income is used by the CODM in assessing the operating performance of the segment and to monitor budget versus actual results. The measure of segment assets is reported on the Consolidated Balance Sheets as total assets. As a result, the Company conducts its business as a single operating segment. All expense categories on the consolidated statement of operations are significant. Interest income is not a significant component of interest expense, net. As a part of his review as the CODM, the CEO also separately examines the equity-based compensation component of general and administrative expenses, which is also considered a significant segment expense. Deferred Costs and Discounts Financing costs related to the issuance of the Company’s long-term debt, including the term loan facility component of the Company's existing credit facilities (the "Credit Facilities"), are deferred and amortized as an increase to interest expense over the term of the related debt instrument using the straight-line method, which approximates the effective-interest rate method, and are reported as a reduction of the related debt balance on the Consolidated Balance Sheets. 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. Debt discounts represent fair value adjustments to account for the difference between the stated rates and market rates of debt assumed or entered in connection with the Company’s property acquisitions. The debt discounts are amortized to interest expense over the term of the related loans using the straight-line method, which approximates the effective-interest rate method, and are reported as a reduction of the related debt balance on the Consolidated Balance Sheets. As of March 31, 2025 and December 31, 2024, the net unamortized debt discounts was $ 0.2 million. 7 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Reclassifications Certain prior period amounts have been reclassified to conform to the current period’s presentation. Cash and Escrows and Reserves Cash includes unrestricted cash with a maturity of three months or less. Escrows and reserves consist of restricted cash. The following table provides a reconciliation of cash and escrows and reserves reported within the Consolidated Balance Sheets and Consolidated Statements of Cash Flows: As of March 31, 2025 December 31, 2024 (in thousands) Cash $ 639 $ 1,799 Escrows and reserves: Maintenance reserve 449 422 Real estate tax reserve 393 225 ESPP reserve 84 97 Total escrows and reserves $ 926 $ 744 Cash and escrows and reserves $ 1,565 $ 2,543 Revenue Recognition The Company has operating lease agreements with tenants, some of which contain provisions for future rental increases. Rental income is recognized on a straight-line basis over the term of the lease. In addition, certain lease agreements provide for reimbursements from tenants for real estate taxes and other recoverable costs, which are recorded on an accrual basis as part of “Rental income” in the Consolidated Statements of Operations and Comprehensive (Loss) Income. The Company’s determination of the probability to collect lease payments is impacted by numerous factors, including the Company's assessment of the tenant’s creditworthiness, economic conditions, historical experience with the tenant, future prospects for the tenant and the length of the lease term. If leases currently classified as probable of collection are subsequently reclassified as not probable, any outstanding lease receivables (including straight-line rent receivables) would be written-off with a corresponding decrease in rental income. For certain leases with lease incentive costs, such costs are included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets and amortized on a straight-line basis over the respective lease terms as a reduction of rental revenues. Fee and other primarily consists of (i) property management fees, (ii) income recognized from properties accounted for as financing leases and (iii) fees earned from providing advisory services to third-party owners of postal properties. The management fees arise from contractual agreements with entities that are affiliated with the Company’s CEO. Management fee income is recognized as earned under the respective agreements. Revenue from direct financing leases is recognized over the lease term using the effective interest rate method. At lease inception, the Company records an asset within "Investment in financing leases, net" on the Consolidated Balance Sheets, which represents the Company’s net investment in the direct financing lease. This initial net investment is determined by aggregating the total future minimum lease payments attributable to the direct financing lease and the estimated residual value of the property, if any, less unearned income. Over the lease term, the investment in the direct financing lease is reduced and interest is recognized as revenue in “Fee and other” in the Consolidated Statements of Operations and Comprehensive (Loss) Income and produces a constant periodic rate of return on the "Investment in financing leases, net." Revenue from advisory services is generated from service contracts generally based on (i) time and expense arrangements (where the Company recognizes revenues based on hours incurred and contracted rates), (ii) fixed-fee arrangements (where the Company recognizes revenues earned to date by applying the proportional performance method) or (iii) performance-based or contingent arrangements (where the Company recognizes revenues at a point in time when the client receives the benefit of the promised service). Reimbursable expenses for the advisory services, including those relating to 8 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues and in general and administrative expenses in the period in which the expense is incurred. Fair Value Measurements The following disclosure of estimated fair value was determined by management using available market information and appropriate valuation methodologies. However, considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could have realized on disposition of the assets and liabilities as of March 31, 2025 and December 31, 2024. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Cash, escrows and reserves, receivables, prepaid expenses and other assets (excluding derivatives), accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of March 31, 2025 and December 31, 2024 due to their short maturities. The fair value of the Company’s borrowings under its Credit Facilities approximates carrying value because such borrowings are subject to a variable market rate, which reprices frequently. The fair value was determined using the Adjusted Term SOFR (as defined below) as of March 31, 2025 and December 31, 2024, 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 $ 29.3 million and $ 28.7 million as compared to the principal balance of $ 34.2 million and $ 34.3 million as of March 31, 2025 and December 31, 2024, 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. The Company measures its derivatives at fair value on a recurring basis based on the expected amount of future cash flows on a discounted basis and incorporating a measure of non-performance risk. The fair value of the Company's derivative assets and liabilities was categorized as a Level 2 fair value estimate (as provided by ASC 820, Fair Value Measurements and Disclosures). The Company considers its own credit risk, as well as the credit risk of its counterparties, when evaluating the fair value of its derivative assets and liabilities. As of March 31, 2025 and December 31, 2024, the fair value of the Company’s interest rate swap derivative assets was approximately $ 4.3 million and $ 6.7 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets. As of March 31, 2025 and December 31, 2024, the fair value of the Company's interest rate swap derivative liabilities was approximately $ 0.7 million and $ 0.3 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, 2025 and December 31, 2024. 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, 2025 and current estimates of fair value may differ significantly from the amounts presented herein. Derivative Instruments and Hedging Activities In accordance with ASC 815, Derivatives and Hedging, the Company records all derivative instruments on the Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. See Note 6. Derivatives and Hedging Activities for further details. Assets Held for Sale 9 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The Company may sell properties from time to time for various reasons, including the exercise of purchase options by our tenants. The Company classifies long-lived assets as held for sale once certain criteria have been met. The Company classifies a real estate property, or portfolio, as held for sale when: (i) management has approved the disposal, (ii) the property is available for sale in its present condition, (iii) an active program to locate a buyer has been initiated, (iv) it is probable that the property will be disposed of within one year, (v) the property is being marketed at a reasonable price relative to its fair value, and (vi) it is unlikely that the disposal plan will significantly change or be withdrawn. Following the classification of a property as “held for sale,” no further depreciation or amortization is recorded on the assets and the assets are recorded at the lower of carrying value or fair market value, less cost to sell. No properties were classified as held for sale as of March 31, 2025 and December 31, 2024. Impairment of Long-Lived Assets The carrying value of real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an undiscounted basis. An impairment loss is measured based on the excess of the asset’s carrying amount over its estimated fair value. Impairment analyses will be based on current plans, intended holding periods and available market information at the time the analyses are prepared. 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. During the three months ended March 31, 2025, the Company assessed the recoverability of the carrying amount of its real estate and related intangibles. The assessment resulted in the remeasurement of one property, based upon an accumulation of costs in excess of what was originally expected, and such property was written down to its estimated fair value and was classified as Level 3 in the fair value hierarchy. The Company's estimate of the fair value was based on a discounted cash flow analysis. The Company 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 Company's Consolidated Statements of Operations and Comprehensive (Loss) Income. No impairments were recorded for the three months ended March 31, 2024. Concentration of Credit Risks As of March 31, 2025, the Company’s properties were leased primarily to a single tenant, the USPS. For the three months ended March 31, 2025, approximately 11.0 % of the Company’s total rental income, or $ 2.4 million, was concentrated in Pennsylvania. 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. 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. The Company has deposited cash and maintains its bank deposits with large financial institutions in amounts that, from time to time, exceed federally insured limits. The Company has not experienced any losses in such accounts. Equity-Based Compensation The Company accounts for equity-based compensation in accordance with ASC Topic 718 Compensation – Stock Compensation, which requires the Company to recognize an expense for the grant date fair value of equity-based awards. Equity-classified stock awards granted to employees and non-employees that have a service condition and/or a market condition are measured at fair value at date of grant and remeasured at fair value only upon a modification of the award. The Company records forfeitures as a reduction of equity-based compensation expense as such forfeitures occur. The Company recognizes compensation expense on a straight-line basis over the requisite service period of each award, with the amount of compensation expense recognized at the end of a reporting period at least equal to the portion of fair value of the respective award at grant date or modification date, as applicable, that has vested through that date. For awards with a market condition, compensation cost is not reversed if a market condition is not met so long as the requisite service has been rendered, as a market condition does not represent a vesting condition. See Note 11. Stockholders’ Equity for further details. 10 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Insurance Accounting The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage and business interruption. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when the amount is determinable and approved by the insurance company. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is not recorded in other income until the amount is determinable and approved by the insurance company. Insurance recoveries for business interruption for lost revenue or profit are accounted for as gain contingencies in their entirety, and therefore are not recorded in income until the amount is determinable and approved by the insurance company. Earnings Per Share The Company calculates earnings per share ("EPS") based upon the weighted average shares outstanding less issued and outstanding non-vested shares of Class A common stock. As of March 31, 2025 and 2024, 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. Diluted EPS is calculated after giving effect to all potential dilutive shares outstanding during the period. See Note 10. Earnings Per Share for further details . Recent Accounting Standards In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). The amendments in ASU 2024-03 apply to all public business entities and require disclosure of specified information about certain costs and expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the potential impact of adopting ASU 2024-03. Note 3. Real Estate Transactions The following tables summarizes the Company’s acquisitions for the three months ended March 31, 2025. The purchase prices including transaction costs were allocated to the separately identifiable tangible and intangible assets and liabilities based on their relative fair values at the date of acquisition. The total purchase price including transaction costs was allocated as follows (in thousands, except for the number of properties): Three Months Ended Number of Properties Land Building and Improvements Tenant Improvements In-place lease intangibles Above- market leases Below- market leases Other (1) Total (2) 2025 March 31, 2025 36 $ 3,990 $ 12,579 $ 114 $ 1,192 $ — $ ( 1,415 ) $ ( 119 ) $ 16,341 Explanatory Notes : (1) Includes intangible liabilities related to unfavorable operating leases with purchase options on three properties during the three months ended March 31, 2025 that is included in “Accounts payable, accrued expenses and other, net" on the Consolidated Balance Sheets. (2) Includes closing costs of approximately $ 0.5 million for the three months ended March 31, 2025 . Sale of Real Estate During the three months ended March 31, 2025, the Company sold one real estate property for net proceeds of $ 0.8 million and recorded a loss of $ 0.05 million. 11 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Casualty Loss, Net During the three months ended March 31, 2025, the Company recognized $ 0.5 million in gross charges primarily related to the net book value of two properties damaged and related repairs, partially offset by an estimated $ 0.4 million of related insurance claims, that are included in “Rent and other receivables” on the Consolidated Balance Sheets, that the Company believes is probable it will recover, resulting in a net charge of $ 0.1 million included within "Casualty and impairment losses, net" in the Consolidated Statement of Operations and Comprehensive (Loss) Income. The Company expects insurance proceeds to cover substantially all of such loss subject to applicable deductibles. The Company has comprehensive all risk property insurance coverage on its two properties subject to the casualty losses, including for business interruption, with an aggregate $ 15.2 million limit of liability, subject to conditions, exclusions, deductibles and sub-limits. To the extent insurance proceeds ultimately exceed the difference between replacement cost and net book value of the damaged assets and any related expenses incurred, the excess will be reflected as income in the period those amounts are determinable and approved by the insurance company. No determination has been made as to the total amount of timing of insurance payments that may be received as a result of the events. Note 4. Intangible Assets and Liabilities The following table summarizes the Company’s intangible assets and liabilities: As of Gross Asset (Liability) Accumulated Amortization Net Carrying Amount (in thousands) March 31, 2025: In-place lease intangibles $ 52,757 $ ( 40,617 ) $ 12,140 Above-market leases 795 ( 523 ) 272 Other intangibles ( 1,337 ) 566 $ ( 771 ) Below-market leases ( 30,483 ) 13,671 ( 16,812 ) December 31, 2024: In-place lease intangibles $ 51,630 $ ( 38,994 ) $ 12,636 Above-market leases 795 ( 490 ) 305 Other intangibles ( 1,262 ) 523 $ ( 739 ) Below-market leases ( 29,069 ) 12,898 ( 16,171 ) Amortization of in-place lease intangibles was $ 1.7 million for the three months ended March 31, 2025 and $ 1.8 million for the three months ended March 31, 2024, respectively. This amortization is included in “Depreciation and amortization” in the Consolidated Statements of Operations and Comprehensive (Loss) Income. Amortization of acquired above-market leases was $ 0.03 million and $ 0.05 million for each of the three months ended March 31, 2025 and 2024, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive (Loss) Income. Amortization of other intangibles was $ 0.1 million for the three months ended March 31, 2025 and $ 0.1 million for the three months ended March 31, 2024, respectively, and is included in "Rental income" in the Consolidated Statements of Operations and Comprehensive (Loss) Income. Amortization of acquired below-market leases was $ 0.8 million for the three months ended March 31, 2025 and $ 0.7 million for the three months ended March 31, 2024, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive (Loss) Income. 12 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Future amortization/accretion of these intangibles is below (in thousands): Year Ending December 31, In-place lease intangibles Above-market leases Other intangibles Below-market leases 2025-Remaining $ 4,424 $ 89 $ ( 241 ) $ ( 2,276 ) 2026 3,858 93 ( 201 ) ( 2,501 ) 2027 1,958 47 ( 127 ) ( 2,022 ) 2028 1,004 22 ( 74 ) ( 1,647 ) 2029 592 17 ( 58 ) ( 1,456 ) Thereafter 304 4 ( 70 ) ( 6,910 ) Total $ 12,140 $ 272 $ ( 771 ) $ ( 16,812 ) Note 5. Debt The following table summarizes the Company’s indebtedness as of March 31, 2025 and December 31, 2024 (dollars in thousands): Outstanding Balance as of March 31, 2025 Outstanding Balance as of December 31, 2024 Interest Rate at March 31, 2025 Maturity Date Revolving Credit Facility (1) $ 24,000 $ 14,000 SOFR+ 150 bps (2) January 2026 2021 Term Loan (1) 75,000 75,000 SOFR+ 145 bps (2) January 2027 2022 Term Loan (1) 175,000 175,000 SOFR+ 145 bps (2) February 2028 Secured Borrowings: Vision Bank (3) 1,409 1,409 3.69 % September 2041 First Oklahoma Bank (4) 294 299 3.63 % December 2037 Vision Bank – 2018 (5) 844 844 3.69 % September 2041 Seller Financing (6) — 100 6.00 % January 2025 AIG (7) 30,225 30,225 2.80 % January 2031 Seller Financing - 2024 (8) 1,400 1,400 5.00 % September 2039 Total Principal 308,172 298,277 Unamortized deferred financing costs ( 1,244 ) ( 1,360 ) Unamortized debt discount ( 207 ) ( 209 ) Total Debt $ 306,721 $ 296,708 Explanatory Notes : (1) On August 9, 2021, the Company had entered into the Credit Facilities, which initially included the $ 150.0 million Revolving Credit Facility and the $ 50.0 million 2021 Term Loan. On May 11, 2022, the Company amended the Credit Facilities (the "First Amendment") to, among other things, add a new $ 75.0 million senior unsecured delayed draw term loan facility (the "2022 Term Loan" and, together with the 2021 Term Loan, the "Term Loans"), replace the LIBOR with the Secured Overnight Financing Rate ("SOFR") as the benchmark interest rate and allow for a decrease in the applicable margin by 0.02 % if the Company achieves certain sustainability targets. 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 $ 35.0 million of accordion under the Term Loans. On October 25, 2024, the Company amended the Credit Facilities (the "Third Amendment") to, among other things, increase the 2022 Term Loan commitments in an aggregate principal amount of up to $ 50.0 million in which the Company further exercised $ 40.0 million under the 2022 Term Loan, and on a delayed-draw basis, $ 10.0 million. 13 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The Credit Facilities include an accordion feature which permits the Company 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. Borrowings under the Credit Facilities carry an interest rate of, (i) in the case of the Revolving Credit Facility, either a base rate plus a margin ranging from 0.5 % to 1.0 % per annum or Adjusted Term SOFR (as defined below) plus a margin ranging from 1.5 % to 2.0 % per annum, or (ii) in the case of the Term Loans, either a base rate plus a margin ranging from 0.45 % to 0.95 % per annum or Adjusted Term SOFR plus a margin ranging from 1.45 % to 1.95 % per annum, in each case depending on the Company's consolidated leverage ratio. With respect to the Revolving Credit Facility, the Company will pay, if the usage is equal to or less than 50 %, an unused facility fee of 0.20 % per annum, or if the usage is greater than 50 %, an unused facility fee of 0.15 % per annum, in each case on the average daily unused commitments under the Revolving Credit Facility. The Credit Facilities contain a number of customary financial and non-financial covenants. During the three months ended March 31, 2025, the Company incurred $ 0.06 million and during the three months ended March 31, 2024, the Company incurred $ 0.07 million of unused facility fees related to the Revolving Credit Facility. As of March 31, 2025, the Company was in compliance with all of the Credit Facilities’ debt covenants. (2) Based upon the applicable SOFR rate plus a SOFR adjustment of 0.10 %, subject to a 0 % floor (the “Adjusted Term SOFR”) . (3) Five properties are collateralized under this loan and Mr. Spodek also provided a personal guarantee of payment for 50 % of the outstanding amount thereunder. The loan has a fixed interest rate of 3.69 % for the first five years with interest payments only (ending in October 2026), then adjusting every subsequent five-year period thereafter with principal and interest payments to the rate based on the five-year weekly average yield on United States Treasury securities adjusted to a constant maturity of five years , as made available to the Board of Governors of the Federal Reserve System (the "Five-Year Treasury Rate"), plus a margin of 2.75 %, with a minimum annual rate of 2.75 %. (4) The loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by Mr. Spodek. The loan has a fixed interest rate of 3.625 % for the first five years (ending in August 2026), then adjusting annually thereafter to a variable annual rate of Wall Street Journal Prime Rate with a minimum annual rate of 3.625 %. (5) The loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by Mr. Spodek. The loan has a fixed interest rate of 3.69 % for the first five years with interest payments only (ending in October 2026), then adjusting every subsequent five-year period thereafter with principal and interest payments to the rate based on the Five-Year Treasury Rate, plus a margin of 2.75 %, with a minimum annual rate of 2.75 %. (6) In connection with the acquisition of a property, the Company obtained seller financing secured by the property in the amount of $ 0.4 million requiring five annual payments of principal and interest of $ 0.1 million with the first installment due on January 2, 2021 based on a 6.0 % interest rate per annum through January 2, 2025. As of January 2, 2025, the seller financing has been fully repaid. (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 (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. The weighted average maturity date for the Company's indebtedness as of March 31, 2025 and December 31, 2024 was approximately 2.9 years and 3.2 years, respectively. 14 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The scheduled principal repayments of indebtedness as of March 31, 2025 are as follows (in thousands): Year Ending December 31, Amount 2025 - Remaining $ 14 2026 24,636 2027 75,776 2028 175,802 2029 831 Thereafter 31,113 Total $ 308,172 Note 6. Derivatives and Hedging Activities As of March 31, 2025, the Company had nine interest rate swaps with a total notional amount of $ 250.0 million that are used to manage its interest rate risk and fix the SOFR component on the term loans of the Credit Facilities: Notional Amount ($ in thousands) Fixed Rate (1) Effective Date Maturity Date $ 50,000 2.270 % May 2022 January 2027 $ 25,000 4.217 % May 2022 February 2028 $ 25,000 4.217 % May 2022 February 2028 $ 25,000 4.790 % July 2022 February 2028 $ 40,000 4.932 % December 2022 February 2028 $ 25,000 5.736 % July 2023 January 2027 $ 10,000 6.049 % September 2023 February 2028 $ 40,000 5.271 % October 2024 February 2028 $ 10,000 5.552 % November 2024 February 2028 Explanatory Note : (1) Reflects the all-in effective interest rate for the specified portion of the Term Loans hedged by the interest rate swaps. The Company’s objectives in using the interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses the interest rate swaps as part of its interest rate risk management strategy. The interest rate swaps are designated as cash flow hedges, with any gain or loss recorded in “Accumulated other comprehensive (loss) income” on the Consolidated Balance Sheets and subsequently reclassified into interest expense as interest payments are made on the Credit Facilities. During the next twelve months, the Company estimates that an additional $ 2.4 million will be reclassified from “Accumulated other comprehensive (loss) income” as a decrease to interest expense. The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as cash flow hedges. 15 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The table below presents the effect of the Company’s interest rate swap derivative instruments in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2025 and 2024 (in thousands): For the Three Months Ended March 31, Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps) 2025 2024 Amount of (loss) gain recognized on derivative in "Accumulated other comprehensive (loss) income" $ ( 1,961 ) $ 4,150 Amount of income reclassified from "Accumulated other comprehensive (loss) income" into interest expense $ 883 $ 1,331 "Interest expense, net" presented in the Consolidated Statements of Operations and Comprehensive (Loss) Income, in which the effects of cash flow hedges are recorded, totaled $ 3.6 million for the three months ended March 31, 2025 and $ 2.8 million for the three months ended March 31, 2024. As of March 31, 2025, 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, 2025, it could have been required to settle its obligations under the agreements of any interest rate swap in a net liability position for approximately $ 0.7 million, which is at their termination value. Note 7. Leases Lessor Accounting As of March 31, 2025, the Company's properties were leased primarily to the USPS, with leases expiring at various dates through June 30, 2035. Certain leases had expired and were in holdover status as of March 31, 2025 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. All of the Company’s leases are operating leases with the exception of two that are direct financing leases. The Company's operating leases and direct financing leases are described below. Rental income related to the Company’s leases is recognized on a straight-line basis over the remaining lease term. The Company’s total revenue includes fixed base rental payments provided under the lease and variable payments which principally consist of tenant expense reimbursements for certain property operating expenses, including real estate taxes. The Company elected the practical expedient to account for its lease and non-lease components as a single combined operating lease component under Topic 842. As a result, rental income and tenant reimbursements were aggregated into a single line within rental income in the Consolidated Statements of Operations and Comprehensive (Loss) Income. The following table represents rental revenue that the Company recognized related to its operating leases (in thousands): For the Three Months Ended March 31, 2025 2024 Fixed payments $ 18,661 $ 14,439 Variable payments 2,819 2,165 $ 21,480 $ 16,604 16 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Future minimum lease payments to be received as of March 31, 2025 (excluding base rental payments from properties classified as held for sale under non-cancellable operating leases for the next five years and thereafter are as follows (in thousands): Year Ending December 31, Amount (1)(2) 2025 - Remaining $ 51,720 2026 61,535 2027 46,879 2028 34,681 2029 24,955 Thereafter 61,159 Total $ 280,929 Explanatory Notes : (1) The above minimum lease payments to be received do not include reimbursements from tenants for real estate taxes and other reimbursed expenses. (2) As of March 31, 2025, the leases at seven of the Company's properties were expired and the USPS was occupying such properties as a holdover tenant. As such, the above minimum lease payments to be received do not include payments under these holdover leases. Holdover rent is typically paid as the greater of estimated market rent or the rent amount due under the expired lease. Purchase Option Provisions As of March 31, 2025, operating leases for 88 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 (1) , in each case as of dates set forth in the lease. As of March 31, 2025, 85 of these properties had an aggregate carrying value of approximately $ 62.5 million with an aggregate purchase option price of approximately $ 80.4 million and the remaining three properties had an aggregate carrying value of approximately $ 3.0 million with purchase options exercisable at fair market value. Explanatory Notes : (1) Properties with more than one calculation method are categorized based on the lowest valuation method. Investment in Financing Leases, Net As of March 31, 2025 and December 31, 2024, 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, 2025 and December 31, 2024 are summarized in the table below (in thousands): As of March 31, 2025 As of December 31, 2024 Total minimum lease payment receivable $ 30,656 $ 30,940 Less: unearned income ( 14,733 ) ( 14,989 ) Investment in financing leases, net $ 15,923 $ 15,951 17 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Revenue earned under direct financing leases for each of the three months ended March 31, 2025 and 2024 were $ 0.3 million, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive (Loss) Income. Future lease payments to be received under the Company’s direct financing leases as of March 31, 2025 for the next five years and thereafter are as follows (in thousands): Year Ending December 31, Amount 2025 – Remaining $ 853 2026 1,137 2027 1,137 2028 1,137 2029 1,137 Thereafter 25,255 Total $ 30,656 Lessee Accounting As a lessee, the Company has ground and office leases which were classified as operating leases. As of March 31, 2025, these leases had remaining terms, including renewal options, of 0.3 years to 57.8 years and a weighted average remaining lease term of 21.3 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): As of March 31, 2025 As of December 31, 2024 ROU asset – operating leases $ 2,131 $ 2,188 Lease liability – operating leases $ 2,116 $ 2,165 The difference between the recorded ROU assets and lease liabilities is mainly due to the reclassification of the below market ground lease intangible asset which was included within the ROU assets recognized upon transition. 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 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 the three months ended March 31, 2025 and 2024 was $ 0.09 million and $ 0.07 million, respectively. See Note 9. Related Party Transactions for more details. 18 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) Future minimum lease payments to be paid by the Company as a lessee for operating leases as of March 31, 2025 for the next five years and thereafter are as follows (in thousands): 2025 — Remaining $ 244 2026 325 2027 318 2028 319 2029 324 Thereafter 1,969 Total future minimum lease payments 3,499 Interest discount ( 1,383 ) Total $ 2,116 Note 8. Income Taxes TRS In connection with the IPO, the Company and REAC jointly elected to treat REAC as a TRS. REAC performs management services, including for properties the Company does not own, and advisory services to third-party owners of postal properties. REAC generates income, resulting in federal and state corporate income tax liability for REAC. For the three months ended March 31, 2025 and 2024, income tax expense related to REAC was $ 0.01 million and $ 0.01 million, respectively. Note 9. Related Party Transactions Management Fee Income REAC recognized management fee income of $ 0.4 million for the three months ended March 31, 2025 and $ 0.3 million for the three months ended March 31, 2024 from various parties which were affiliated with the Company's CEO. These amounts are included in “Fee and other” in the Consolidated Statements of Operations and Comprehensive (Loss) Income. Accrued management fees receivable of $ 0.7 million and $ 0.4 million as of March 31, 2025 and December 31, 2024, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets. Related Party Lease In connection with the Company's IPO and the related formation transactions, the Company entered into a lease for office space in Cedarhurst, New York with an entity affiliated with the Company’s CEO (the “Prior Office Lease”). Pursuant to the Prior Office Lease, the monthly rent was $ 15,000 subject to escalations. The term of the Prior Office Lease was five years commencing on May 17, 2019 and expired on May 16, 2024. In May 2024, the Prior Office Lease was extended to December 31, 2024 at the same rental rate. In December 2024, the Company entered into a new lease with the Company's CEO (the "2025 Office Lease," and, collectively with the Prior Office Lease, the "Office Leases"). Pursuant to the 2025 Office Lease, the monthly rent is $ 18,750 subject to escalations. The term of the 2025 Office Lease is five years commencing on January 1, 2025 and will expire on December 31, 2029. The 2025 Office Lease was approved by a special committee of the Company’s Board of Directors consisting of four independent directors. Rental expenses associated with the Office Leases for the three months ended March 31, 2025 and 2024 were $ 0.06 million and $ 0.05 million, respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income. The Company determined the Office Leases were an operating lease. For further details, see Note 7. Leases. Right of First Offer Transactions In connection with the Company's IPO and the related formation transactions, the Company entered into a Right of First Offer Agreement (the “ROFO Agreement”) with certain members of the family (the “Related Party”) of Andrew Spodek, the Company’s CEO. Pursuant to the ROFO Agreement, the Company has the right of first offer to acquire from the Related Party 250 properties that are currently managed by the Company. On May 30, 2024, the Company acquired from the Related Party a portfolio of 36 properties currently leased to the USPS for approximately $ 12.5 million in cash, excluding closing costs. 19 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) The transaction was approved by a special committee of the Company’s Board of Directors consisting of four independent directors. The Company has a remaining right of first offer to purchase 214 of the 360 managed properties. Guarantees As disclosed above in Note 5. Debt, Mr. Spodek personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $ 1.8 million and $ 1.8 million as of March 31, 2025 and December 31, 2024, respectively. As a guarantor, Mr. Spodek's interests with respect to the amount of debt he is guaranteeing (and the terms of any repayment or default) may not align with the Company’s interests and could result in a conflict of interest. Note 10. Earnings Per Share EPS is calculated by dividing net income attributable to common stockholders by the weighted average number of shares outstanding for the period. The following table presents a reconciliation of income from operations used in the basic and diluted EPS calculations (dollars in thousands, except share and per share data). For the Three Months Ended March 31, 2025 2024 Numerator for earnings per share – basic and diluted: Net income attributable to common stockholders $ 2,082 $ 206 Less: Income attributable to participating securities ( 590 ) ( 375 ) Numerator for earnings per share — basic and diluted $ 1,492 $ ( 169 ) Denominator for earnings per share – basic and diluted (1) 23,216,150 22,045,310 Basic and diluted net (loss) income per share $ 0.06 $ ( 0.01 ) 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). 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. OP Units and LTIP Units are redeemable for cash or, at the Company’s option, shares of Class A common stock on an one -for-one basis. The income allocable to such OP Units and LTIP Units is allocated on this same basis and reflected as non-controlling interests in these unaudited Consolidated Financial Statements. As such, the assumed conversion of these OP Units and LTIP Units would have no net impact on the determination of diluted EPS. Note 11. Stockholders’ Equity ATM Program On November 4, 2022, the Company entered into separate open market sale agreements for its at-the-market offering programs with each of Jefferies LLC, BMO Capital Markets Corp., Janney Montgomery Scott LLC, Stifel, Nicolaus & Company, Incorporated and Truist Securities, Inc., as agents (the "ATM Program"), pursuant to which the Company may offer and sell shares of its Class A common stock having an aggregate sales price of up to $ 50.0 million. The agreements also provide that the Company may enter into one or more forward sale agreements under separate master forward confirmations and related supplemental confirmations with affiliates of certain agents. On August 8, 2023, the Company amended the ATM Program to increase the aggregate offering amount under the program to $ 150.0 million. On November 4, 2024, the Company entered into separate open market sale agreements for the ATM Program with each of Mizuho Securities USA LLC (“Mizuho”) and M&T Securities, Inc. (“M&T”), as additional sales agents, and affiliates of Mizuho, as forward sellers. 20 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) 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, 2025, 139,626 shares were issued under the ATM program. During the three months ended March 31, 2024, 576,087 shares were issued under the ATM program. As of March 31, 2025, the Company had approximately $ 91.7 million remaining that may be issued under the ATM Program. Three Months Ended March 31, 2025 2024 Shares issued 140 576 Gross proceeds received $ 1,983 $ 8,211 Fees, issuance and other costs ( 163 ) ( 344 ) Net proceeds received $ 1,820 $ 7,867 Average gross sales price per share $ 14.20 $ 14.25 Dividends and Distributions During the three months ended March 31, 2025, the Company's Board of Directors approved and the Company declared and paid dividends or distributions, as applicable, of $ 7.4 million to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.2425 per share or unit as shown in the table below. Declaration Date Record Date Date Paid Amount Per Share or Unit January 30, 2025 February 14, 2025 February 28, 2025 $ 0.2425 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 as a part of their compensation. During the three months ended March 31, 2025, the Company issued 219,335 LTIP Units to the Company’s CEO for his 2024 incentive bonus, his election to defer 100 % of his 2025 annual salary and for long term incentive compensation, 90,909 LTIP Units to the Company’s President for his 2024 incentive bonus, 12,952 LTIP Units to the Company's Chief Financial Officer for his long term incentive compensation and 121,913 LTIP Units to certain other employees for their 2024 incentive bonus and for long term incentive compensation. As of March 31, 2025 and December 31, 2024, non-controlling interests consisted of 5,071,875 OP Units and 1,687,053 LTIP Units and 4,998,738 OP Units and 1,241,944 LTIP Units, respectively. This represented approximately 22.1 % and 20.9 % of the outstanding Operating Partnership units as of March 31, 2025 and December 31, 2024, 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. 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 Pursuant to the Postal Realty Trust Inc., 2019 Equity Incentive Plan, (the "Plan"), the Company may grant equity incentive awards to its directors, officers, employees and consultants. As of March 31, 2025, the remaining shares available under the Plan for future issuance was 973,737 . The Plan provides for grants of stock options, stock awards, stock appreciation 21 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) rights, performance units, incentive awards, other equity-based awards (including LTIP Units) and dividend equivalents in connection with the grant of performance units and other equity-based awards. The following table presents a summary of the Company's outstanding restricted shares of Class A common stock, LTIP Units and RSUs. The balance as of March 31, 2025 represents unvested restricted shares of Class A common stock and LTIP Units and RSUs that are outstanding, whether vested or not: Restricted Shares (1)(2) LTIP Units (3) RSUs (4) Total Shares/Units/RSUs Weighted Average Grant Date Fair Value Outstanding, as of January 1, 2025 505,342 1,241,944 346,946 2,094,232 $ 15.76 Granted 76,180 445,109 104,176 625,465 $ 12.84 Vesting of restricted shares and RSUs (5) ( 54,375 ) — ( 1,442 ) ( 55,817 ) $ 15.33 Forfeited — — ( 47,005 ) ( 47,005 ) $ 12.28 Outstanding, as of March 31, 2025 527,147 1,687,053 402,675 2,616,875 $ 15.13 Explanatory Notes : (1) Represents restricted shares awards included in Class A common stock. (2) The time-based restricted share awards granted to the Company's officers and employees typically vest in three annual installments or cliff vest at the end of three years , five years or eight years . (3) Includes 219,335 LTIP Units granted to the Company’s CEO, 90,909 LTIP Units granted to the Company’s President and 12,952 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 121,913 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 90,362 RSUs granted to certain officers and employees of the Company during the three months ended March 31, 2025, 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, 2027. 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 13,814 time-based RSUs issued for 2024 incentive bonuses to certain employees that vested fully on February 1, 2025, the date of grant. RSUs reflect the right to receive shares of Class A common stock, subject to the applicable vesting criteria. (5) Includes 34,725 of restricted shares and RSUs that vested and 21,092 shares of restricted shares that were withheld to satisfy minimum statutory withholding requirements. 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 February 2024, the Company's Corporate Governance and Compensation Committee of the Board of Directors ("CGC Committee") 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. During the year ended December 31, 2022, the Company issued 47,005 RSUs (the “2022 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, 2024. In January 2025, the Company's CGC Committee 22 Table of Contents POSTAL REALTY TRUST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) determined that the Company's total stockholder return for such three-year performance period did not meet the threshold performance hurdles for the 2022 Performance-Based Awards and, as a result, approved the cancellation of 47,005 RSUs for such awards. During the three months ended March 31, 2025, the Company recognized compensation expense of $ 2.0 million and during the three months ended March 31, 2024, the Company recognized compensation expense of $ 1.8 million in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive (Loss) Income related to all awards. During the three months ended March 31, 2025, the Company recognized compensation expense of $ 0.4 million and during the three months ended March 31, 2024, the Company recognized compensation expense of $ 0.3 million in "Property operating expenses" in the Consolidated Statements of Operations and Comprehensive (Loss) Income related to all awards. As of March 31, 2025, there was $ 22.1 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 5.09 years. Employee Stock Purchase Plan The Company's ESPP allows its employees to purchase shares of the Class A common stock at a discount. A total of 100,000 shares of Class A common stock was reserved for sale and authorized for issuance under the ESPP. The Code permits the Company to provide up to a 15 % discount on the lesser of the fair market value of such shares of Class A common stock at the beginning of the offering period and the close of the offering period. As of March 31, 2025 and December 31, 2024, 64,096 and 58,569 shares have been issued under the ESPP since commencement, respectively. During the three months ended March 31, 2025 , the Company recognized compensation expense of $ 0.02 million and during the three months ended March 31, 2024, the Company recognized compensation expense of $ 0.01 million related to the ESPP. Note 12. Commitments and Contingencies As of March 31, 2025, 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. Note 13. 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 March 31, 2025: The Company's Board of Directors approved, and on April 21, 2025, the Company declared a first quarter 2025 common stock dividend of $ 0.2425 per share, which is payable on May 30, 2025 to stockholders of record as of May 1, 2025. As of April 30, 2025 , the Company had $ 33.0 million drawn on the Revolving Credit Facility. As of April 30, 2025 and d uring the period subsequent to March 31, 2025, the Company acquired 25 leased properties for approximately $ 12.7 million, excluding closing costs. As of April 30, 2025 and d uring the period subsequent to March 31, 2025, the Company issued 109,374 shares of its Class A common stock under the ATM Program for gross proceeds of approximately $ 1.6 million. As of April 30, 2025 and d uring the period subsequent to March 31, 2025, the Company had entered into definitive agreements to acquire 51 properties for approximately $ 30.7 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. 23 Table of Contents