What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-13 · 201 added, 164 removed, 526 unchanged (41% of the section changed)

17 unchanged sentences

Prepaid expenses and other assets, net 10,701 7,511

Goodwill and other intangible assets 1,676 —

Goodwill 1,536 —

Deferred rent receivable 959 666

3 unchanged sentences

Liabilities and Equity

Term loan, net $ 49,391 $ 49,359

Term loans, net $ 123,824 $ 49,359

Revolving credit facility 18,000 13,000

Secured borrowings, net 32,908 32,990

Accounts payable, accrued expenses and other 6,563 8,225

Accounts payable, accrued expenses and other, net 8,565 8,225

Below market leases, net 11,133 8,670

2 unchanged sentences

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

500,000,000 shares authorized, 18,765,418 and 18,564,421 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

500,000,000 shares authorized, 18,750,357 and 18,564,421 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

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

27,206 shares authorized:

27,206 shares issued and outstanding as of March 31, 2022 and December 31, 2021

27,206 shares issued and outstanding as of June 30, 2022 and December 31, 2021

Additional paid-in capital 240,403 237,969

10 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Rental income $ 12,135 $ 8,977 $ 23,484 $ 17,464

51 unchanged sentences

Balance – March 31, 2021 13,353,720 $ 133 $ 151,114 $ — $ ( 11,730 ) 139,517 $ 31,083 $ 170,600

Net proceeds from sale of common stock 319,702 3 6,050 — — 6,053 — 6,053

Issuance of OP Units in connection with transactions — — — — — — 9,021 9,021

Issuance and amortization of equity-based compensation 17,102 — 499 — — 499 281 780

Amortization under ESPP — — 8 — — 8 — 8

Restricted stock withholdings ( 10,906 ) — ( 221 ) — — ( 221 ) — ( 221 )

Dividends declared ($ 0.22 per share)

— — — — ( 2,951 ) ( 2,951 ) ( 668 ) ( 3,619 )

Net income — — — — 671 671 152 823

Reallocation of non-controlling interest — — 2,611 — — 2,611 ( 2,611 ) —

Balance – June 30, 2021 13,679,618 $ 136 $ 160,061 $ — $ ( 14,010 ) $ 146,187 $ 37,258 $ 183,445

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

9 unchanged sentences

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

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

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

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

Restricted stock withholdings ( 14,590 ) — ( 221 ) — — ( 221 ) — ( 221 )

Dividends declared ($ 0.23 per share)

— — — — ( 4,342 ) ( 4,342 ) ( 963 ) ( 5,305 )

Accumulated other comprehensive income — — — 412 — 412 92 504

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

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

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

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

2 unchanged sentences

(in thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

25 unchanged sentences

Repayments of secured borrowings ( 92 ) ( 13,810 )

Proceeds from term loan 75,000 —

Proceeds from revolving credit facility 92,000 47,500

1 unchanged sentence

Repayments from other financing activity — ( 53 )

Net (costs) proceeds from issuance of shares ( 199 ) 53,725

Net proceeds from issuance of shares — 59,444

Deferred offering costs ( 242 ) —

13 unchanged sentences

Reallocation of non-controlling interest 571 1,219

Reclassification of acquisition deposits included in prepaid expenses and other assets 280 792

Reclassification of acquisition costs included in prepaid expenses and other assets 504 792

Accrued capital expenditures included in accounts payable and accrued expenses 846 336

4 unchanged sentences

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Organization and Description of Business

7 unchanged sentences

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

As of March 31, 2022, the Company held an approximately 82.0 % interest in the Operating Partnership.

As of June 30, 2022, the Company held an approximately 81.4 % 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, 2022, the Company owned a portfolio of 1,016 properties located in 49 states and one territory.

As of June 30, 2022, the Company owned a portfolio of 1,166 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”).

Spodek and his affiliates, and certain advisory services to third-party owners of postal properties.

In addition, through its taxable REIT subsidiary (“TRS”), Real Estate Asset Counseling, LLC (formerly known as Postal Realty Management TRS, LLC) (“REAC”), the Company provides fee-based third party property management services for an additional 397 properties, which are owned by Andrew Spodek, the Company's chief executive officer ("CEO"), and his affiliates, and certain advisory services to third-party owners of postal properties.

Pursuant to the Company’s articles of amendment and restatement, 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.

10 unchanged sentences

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

13 unchanged sentences

Deferred Costs

Financing costs related to the issuance of the Company’s long-term debt, including the term loan facility component (the "2021 Term Loan") 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.

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 "2021 Revolving Credit Facility") of the Credit Facilities are deferred and amortized as an increase to interest expense over the terms of the 2021 Revolving Credit Facility and are included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

2 unchanged sentences

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cash and Escrows and Reserves

15 unchanged sentences

Fee and other primarily consist 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 chief executive officer (“CEO”).

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.

3 unchanged sentences

Over the lease term, the investment in the direct financing leases 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.

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 obtains control of the promised service).

Reimbursable expenses for the advisory services, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in general and administrative expenses in the period in which the expense is incurred.

Reimbursable expenses for the advisory services, including those relating to 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.

Business Combinations, Goodwill and Intangible Assets

5 unchanged sentences

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

results of operations of acquired businesses are included in the Company’s Consolidated Financial Statements from the acquisition date.

7 unchanged sentences

If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset group, the Company estimates the fair value of the asset group to determine whether an impairment loss should be recognized.

Fair Value of Financial Instruments

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 realize on disposition of the assets and liabilities as of March 31, 2022 and December 31, 2021.

Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the assets and liabilities as of June 30, 2022 and December 31, 2021.

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, accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of March 31, 2022 and December 31, 2021 due to their short maturities.

As of March 31, 2022 and December 31, 2021, the Company had investment in financing leases, net with a carrying value of $ 16.2 million and $ 16.2 million, respectively, net and effective interest rates ranging from 6.48 % and 7.89 %.

The carrying value of the investment in financing leases approximated their fair market value as of March 31, 2022 and December 31, 2021.

The fair value of the Company’s direct financing leases was categorized as a Level 3 basis (as provided by ASC 820, Fair Value Measurements and Disclosures).

The fair value of the Company’s borrowings under its Credit Facilities approximates carrying value because such borrowings are subject to a variable rate.

The fair value of the Company’s secured borrowings aggregated approximately $ 30.2 million and $ 32.1 million as compared to the principal balance of $ 33.1 million and $ 33.2 million as of March 31, 2022 and December 31, 2021, respectively.

Cash, escrows and reserves, receivables, prepaid expenses and other assets, accounts payable and accrued expenses are carried at amounts which reasonably approximate their fair values as of June 30, 2022 and December 31, 2021 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 rate which reprices frequently.

The fair value of the Company’s secured borrowings aggregated approximately $ 28.9 million and $ 32.1 million as compared to the principal balance of $ 33.1 million and $ 33.2 million as of June 30, 2022 and December 31, 2021, respectively.

The fair value of the Company’s debt was categorized as a Level 3 basis (as provided by ASC 820, Fair Value Measurements and Disclosures).

1 unchanged sentence

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

The Company's derivative assets, 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'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 size 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 was categorized as a Level 2 basis (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.

As of March 31, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap derivative instrument was approximately $ 3.5 million and $ 1.0 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.

Disclosure about fair value of assets and liabilities is based on pertinent information available to management as of March 31, 2022 and December 31, 2021.

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, 2022 and current estimates of fair value may differ significantly from the amounts presented herein.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Company's derivative assets and liabilities was categorized as a Level 2 basis (as provided by ASC 820, Fair Value Measurements and Disclosures).

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

As of June 30, 2022 and December 31, 2021, the fair value of the Company’s interest rate swap derivative assets was approximately $ 4.6 million and $ 1.0 million, respectively, included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheet.

As of June 30, 2022, the fair value of the Company’s interest rate swap derivative liabilities was approximately $ 0.6 million, included in "Accounts Payable, Accrued Expenses and Other" on the Consolidated Balance Sheets.

Disclosure about fair value of assets and liabilities is based on pertinent information available to management as of June 30, 2022 and December 31, 2021.

Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since June 30, 2022 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.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

8 unchanged sentences

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

No impairments were recorded during the three months ended March 31, 2022 and 2021.

No impairments were recorded during the three and six months ended June 30, 2022 and 2021.

Concentration of Credit Risks

As of March 31, 2022, the Company’s properties were leased primarily to a single tenant, the USPS.

For the three months ended March 31, 2022, 17.2 % of the Company’s total rental income, or $ 2.0 million, was concentrated in Pennsylvania.

For the three months ended March 31, 2021, 19.6 % of the Company's total rental income, or $ 1.7 million, was concentrated in Pennsylvania .

As of June 30, 2022, the Company’s properties were leased primarily to a single tenant, the USPS.

For the six months ended June 30, 2022, 16.1 % of the Company’s total rental income, or $ 3.8 million, was concentrated in Pennsylvania.

For the six months ended June 30, 2021, 18.9 % of the Company's total rental income, or $ 3.3 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 any of these areas and could have an effect on the Company’s overall business results.

4 unchanged sentences

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 will record forfeitures as they occur.

The Company records forfeitures as they 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 the portion of fair value of the respective award at grant date or modification date, as applicable, that has vested through that date.

1 unchanged sentence

Stockholder’s Equity for further details.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Insurance Accounting

1 unchanged sentence

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 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 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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

determinable and approved by 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 insurance company.

Earnings per Share

The Company calculates net income per share based upon the weighted average shares outstanding less issued and outstanding non-vested shares of Class A common stock.

As of March 31, 2022 and 2021, 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 net income per share pursuant to the two-class method.

Diluted earnings per share is calculated after giving effect to all potential dilutive shares outstanding during the period.

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

As of June 30, 2022 and 2021, 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.

Diluted EPS is calculated after giving effect to all potential dilutive shares outstanding during the period.

Earnings Per Share for further details.

11 unchanged sentences

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Real Estate Acquisitions

The following tables summarizes the Company’s acquisitions for the three months ended March 31, 2022.

The following tables summarizes the Company’s acquisitions for the six months ended June 30, 2022.

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

Six Months Ended Number of

Properties Land Building

5 unchanged sentences

March 31, 2022 (3) 50 $ 5,422 $ 22,233 $ 214 $ 1,889 $ 28 $ ( 1,848 ) $ ( 363 ) $ 27,575

June 30, 2022 (4) 150 $ 13,039 $ 41,462 $ 380 $ 3,520 $ 2 $ ( 1,659 ) $ — $ 56,744

Total 200 $ 18,461 $ 63,695 $ 594 $ 5,409 $ 30 $ ( 3,507 ) $ ( 363 ) $ 84,319

Explanatory Notes :

(1) Includes an intangible liability related to unfavorable operating leases on two properties during the three months ended March 31, 2022 that is included in “Accounts payable, accrued expenses and other” on the Consolidated Balance Sheets.

(2) Includes closing costs of approximately $ 0.6 million for the three months ended March 31, 2022.

(2) Includes closing costs of approximately $ 0.6 million for the three months ended March 31, 2022 and approximately $ 1.7 million for the three months ended June 30, 2022.

(3) Includes the acquisition of 50 properties in various states in individual or portfolio transactions for a price of approximately $ 27.6 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash consideration (valued at approximately $ 1.8 million using the share price of Class A common stock on the date of each issuance of such OP Units) and borrowings under the Credit Facilities.

(4) Includes the acquisition of 150 properties in various states in individual or portfolio transactions for a price of approximately $ 56.7 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash consideration (valued at approximately $ 2.0 million using the share price of Class A common stock on the date of each issuance of such OP Units) and borrowings under the Credit Facilities.

Intangible Assets and Liabilities

5 unchanged sentences

(in thousands)

March 31, 2022:

June 30, 2022:

In-place lease intangibles

11 unchanged sentences

( 13,654 ) 4,984 ( 8,670 )

Amortization of in-place lease intangibles was $ 1.8 million and $ 1.4 million for the three months ended March 31, 2022 and 2021, respectively.

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

Amortization of acquired above market leases was $ 0.02 million and $ 0.01 million for the three months ended March 31, 2022 and 2021, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of acquired below market leases was $ 0.5 million and $ 0.4 million for the three months ended March 31, 2022 and 2021, respectively, and is included in “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of in-place lease intangibles was $ 1.7 million and $ 3.5 million for the three and six months ended June 30, 2022, respectively, and $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2021, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

Amortization of acquired above market leases was $ 0.02 million and $ 0.04 million for the three and six months ended June 30, 2022, respectively, and $ 0.01 million and $ 0.01 million for the three and six months ended June 30, 2021, respectively, and is included as a reduction to “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

Amortization of acquired below market leases was $ 0.5 million and $ 1.1 million for the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 0.8 million for the three and six months ended June 30, 2021, respectively, and is included as an increase to “Rental income” in the Consolidated Statements of Operations and Comprehensive Income.

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

9 unchanged sentences

$ 16,400 $ 241 $ ( 11,133 )

The following table summarizes the Company’s indebtedness as of March 31, 2022 and December 31, 2021 (dollars in thousands):

The following table summarizes the Company’s indebtedness as of June 30, 2022 and December 31, 2021 (dollars in thousands):

Outstanding Balance as of

4 unchanged sentences

Revolving Credit Facility (1):

2021 Revolving Credit Facility $ 40,000 $ 13,000 LIBOR+ 150 bps (2)

2021 Revolving Credit Facility $ 18,000 $ 13,000 SOFR+ 150 bps (2)

2021 Term Loan (1)

50,000 50,000 LIBOR+ 145 bps (2)

50,000 50,000 SOFR+ 145 bps (2)

2022 Term Loan (1)

75,000 — SOFR+145 bps (2)

February 2028

Secured Borrowings:

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Explanatory Notes :

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

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

In connection with entering into the Credit Facilities, the Company terminated its previous credit facility and paid off the outstanding loans thereunder.

The Credit Facilities include an accordion feature which permit the Company to borrow up to an additional $ 150.0 million under the 2021 Revolving Credit Facility and, prior to the First Amendment (as defined below), up to an additional $ 50.0 million under the 2021 Term Loan, in each case subject to customary terms and conditions.

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

Prior to the First Amendment, borrowings under the Credit Facilities carried an interest rate of, (i) in the case of the 2021 Revolving Credit Facility, either a base rate plus a margin ranging from 0.5 % to 1.0 % per annum or the London Interbank Offered Rate (“LIBOR”) plus a margin ranging from 1.5 % to 2.0 % per annum, or (ii) in the case of the 2021 Term Loan, either a base rate plus a margin ranging from 0.45 % to 0.95 % per annum or LIBOR plus a margin ranging from 1.45 % to 1.95 % per annum, in each case depending on the Company's consolidated leverage ratio.

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"), replace the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate ("SOFR") as the benchmark

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

interest rate and allow for a decrease in the applicable margin by 0.02 % if the Company achieves certain sustainability targets.

The Credit Facilities include an accordion feature which permit the Company to borrow up to an additional $ 150.0 million under the 2021 Revolving Credit Facility and up to an additional $ 75.0 million under the term loans, in each case subject to customary terms and conditions.

The 2021 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 2021 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 2021 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 2021 Revolving Credit Facility.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the three months ended March 31, 2022 and 2021, the Company incurred $ 0.06 million and $ 0.05 million, respectively, of unused facility fees related to its previous credit facility and the 2021 Revolving Credit Facility.

As of March 31, 2022, the Company was in compliance with all of the Credit Facilities’ debt covenants.

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") that matures in February 2028, increase the accordion feature under the Credit Facilities for term loans to $ 75.0 million, replace 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.

As amended, the Credit Facilities carry an interest rate of, (i) in the case of the 2021 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 2021 Term Loan and the 2022 Term Loan, 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 .

The Adjusted Term SOFR option is SOFR plus a term SOFR adjustment of 0.10 %, subject to a 0 % floor (the “Adjusted Term SOFR”).

(2) Based upon the one-month U.S.

Dollar LIBOR rate.

During the three and six months ended June 30, 2022, the Company incurred $ 0.06 million and $ 0.1 million, respectively, and, during the three and six months ended June 30, 2021, the Company incurred $ 0.05 million and $ 0.1 million, respectively, of unused facility fees related to its previous credit facility and the 2021 Revolving Credit Facility.

As of June 30, 2022, the Company was in compliance with all of the Credit Facilities’ debt covenants.

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

(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, 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 %.

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.

The loan has a fixed interest rate of 3.625 % fixed for the first five years , then adjusting annually thereafter to a variable annual rate of Wall Street Journal Prime Rate with a minimum annual rate of 3.625 %.

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.

(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.

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

The weighted average maturity date for the Company's indebtedness as of March 31, 2022 and December 31, 2021 was 5.7 years and 6.5 years, respectively.

The weighted average maturity date for the Company's indebtedness as of June 30, 2022 and December 31, 2021 was 5.8 years and 6.5 years, respectively.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The scheduled principal repayments of indebtedness as of March 31, 2022 are as follows (in thousands):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The scheduled principal repayments of indebtedness as of June 30, 2022 are as follows (in thousands):

Year Ending December 31, Amount

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Derivatives and Hedging Activities

On August 9, 2021, the Company entered into an interest rate swap that effectively fixed the LIBOR component of the interest rate on $ 50.0 million of the Credit Facilities through January 29, 2027.

The interest rate swap initially applied to the $ 50.0 million 2021 Term Loan, fixing the interest rate for the 2021 Term Loan at 2.291 % as of March 31, 2022.

Upon entry into the First Amendment, the Company concurrently amended this interest rate swap to reference SOFR instead of LIBOR.

On May 11, 2022, the Company entered into two additional interest rate swaps that effectively fixed the SOFR component of the interest rate on $ 50.0 million of the Credit Facilities through February 11, 2028.

The interest rate swaps initially applied to the $ 50.0 million amount outstanding under the 2022 Term Loan, fixing the interest rate for the 2022 Term Loan initially at 4.237 %.

The Company has three interest rate swaps with a total notional amount of $100.0 million that are used to manage its interest rate risk and fix the SOFR component on the Credit Facilities.

$ 50.0 million of the swaps mature in January 2027 and fix the interest rate of the 2021 Term Loan at 2.291 % as of June 30, 2022.

The remaining $ 50.0 million mature in February 2028 and fix the first $ 50.0 million amount outstanding under the 2022 Term Loan at 4.237 % as of June 30, 2022.

In June 2022, the Company also entered into a forward-starting interest rate swap for a notional amount of $ 25.0 million, which became effective in July 2022 and fixed the SOFR component of $ 25.0 million of the Credit Facilities through February 2028.

The forward-starting interest rate swap initially applied to the remaining $ 25.0 million amount outstanding under the 2022 Term Loan, fixing the interest rate for this portion of the 2022 Term Loan initially at 4.81 %.

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 income” in the Consolidated Statements of Operations and Comprehensive Income and subsequently reclassified into interest expense as interest payments are made on the Company’s Credit Facilities.

The interest rate swaps are designated as cash flow hedges, with any gain or loss recorded in “Accumulated other comprehensive income” on the Consolidated Balance Sheets and subsequently reclassified into interest expense as interest payments are made on the Company’s Credit Facilities.

During the next twelve months, the Company estimates that an additional $ 1.2 million will be reclassified from “Accumulated other comprehensive 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 hedges.

The table below presents the effect of the Company’s interest rate swap derivative instrument on the Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2022 and 2021.

The table below presents the effect of the Company’s interest rate swap derivative instruments on the Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2022 and 2021.

For the Three Months Ended

June 30, For the Six Months Ended

Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps) 2022 2021 2022 2021

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

$ 375 $ — $ 2,801 $ —

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

Interest expense, net presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 0.8 million and $ 1.0 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the Company does not have any derivatives in a net liability position and has not posted any collateral related to these agreements.

If the Company had breached any of these provisions as of March 31, 2022, it could have been required to settle its obligations under the agreements at their termination value.

$ 129 $ — $ 214 $ —

Interest expense, net presented in the Consolidated Statements of Operations and Comprehensive Income, in which the effects of cash flow hedges are recorded, totaled $ 1.3 million and $ 2.1 million for the three and six months ended June 30, 2022, respectively, and $ 0.8 million and $ 1.8 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, the Company has derivatives in a net liability position and has not posted any collateral related to these agreements.

If the Company had breached any of these provisions as of June 30, 2022, it could have been required to settle its obligations under the agreements of any interest rate swap in a net liability position for approximately $ 0.6 million, which is their termination value.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Lessor Accounting

As of March 31, 2022, the Company's properties were leased primarily to the USPS, with leases expiring at various dates through May 31, 2031.

Certain leases had expired and were in holdover status as of March 31, 2022 as discussed below.

As of June 30, 2022, the Company's properties were leased primarily to the USPS, with leases expiring at various dates through May 31, 2031.

Certain leases had expired and were in holdover status as of June 30, 2022 as discussed below.

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

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For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Fixed payments

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1,653 1,154 3,338 2,296

Future minimum lease payments to be received as of March 31, 2022 under non-cancellable operating leases for the next five years and thereafter are as follows:

$ 12,135 $ 8,977 $ 23,484 $ 17,464

Future minimum lease payments to be received as of June 30, 2022 under non-cancellable operating leases for the next five years and thereafter are as follows:

Year Ending December 31, Amount (1)

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

(2) As of March 31, 2022, the leases at 11 of the Company's properties were expired, and the USPS was occupying such properties as a holdover tenant.

(2) As of June 30, 2022, the leases at 29 of the Company's properties were expired, and the USPS was occupying such properties as a holdover tenant.

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, 2022, operating leases for 50 of the Company’s properties provided the USPS with the option to purchase the underlying property either at fair market value or at fixed prices, in each case as of dates set forth in the lease agreement.

As of March 31, 2022, 47 of these properties acquired for an aggregate purchase price of approximately $ 36.2

As of June 30, 2022, operating leases for 54 of the Company’s properties provided the USPS with the option to purchase the underlying property either at fair market value or at fixed prices, in each case as of dates set forth in the lease agreement.

As of June 30, 2022, 51 of these properties acquired for an aggregate purchase price of approximately $ 39.3 million

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

million had an aggregate purchase option price of approximately $ 43.4 million and the remaining three properties acquired for an aggregate purchase price of approximately $ 6.7 million had purchase options exercisable at fair market value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

had an aggregate purchase option price of approximately $ 46.9 million and the remaining three properties acquired for an aggregate purchase price of approximately $ 2.6 million had purchase options exercisable at fair market value.

Direct Financing Leases

As of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021 are summarized in the table below (in thousands):

As of June 30, 2022 and December 31, 2021, financing leases for two of the Company's properties provide the USPS with the option to purchase the underlying property at fixed prices as of dates set forth in the lease agreement.

The components of the Company’s net investment in financing leases as of June 30, 2022 and December 31, 2021 are summarized in the table below (in thousands):

Total minimum lease payment receivable

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Investment in financing leases, net $ 16,168 $ 16,213

Revenue earned under direct financing leases for the three months ended March 31, 2022 and 2021 were $ 0.3 million and $ 0.01 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income.

Future lease payments to be received under the Company’s direct financing leases as of March 31, 2022 for the next five years and thereafter are as follows:

Revenue earned under direct financing leases for the three and six months ended June 30, 2022 were $ 0.3 million and $ 0.6 million, respectively, and for the three and six months ended June 30, 2021 were $ 0.01 million and $ 0.02 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and Comprehensive Income.

Future lease payments to be received under the Company’s direct financing leases as of June 30, 2022 for the next five years and thereafter are as follows:

Year Ending December 31, Amount

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

As of March 31, 2022, these leases had remaining terms, including renewal options, of two to 51 years and a weighted average remaining lease term of 22.5 years.

As of June 30, 2022, these leases had remaining terms, including renewal options, of two to 56 years and a weighted average remaining lease term of 24.2 years.

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

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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 weighted average discount rate of 4.25 % based on the yield of its current borrowings in determining its lease liabilities.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Company used a weighted average discount rate ranging from 4.25 % to 5.76 % based on the yield of its current borrowings in determining its lease liabilities.

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

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

Operating lease expense for each of the three months ended March 31, 2022 and 2021 was $ 0.06 million and $ 0.1 million, respectively.

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of March 31, 2022 for the next five years and thereafter are as follows (in thousands):

Operating lease expense for each of the three and six months ended June 30, 2022 and 2021 was $ 0.06 million and $ 0.1 million, respectively.

Future minimum lease payments to be paid by the Company as a lessee for operating leases as of June 30, 2022 for the next five years and thereafter are as follows (in thousands):

2022 — Remaining $ 118

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economy and business activity globally, the full impact of which is not yet known and may result in an adverse impact to the Company’s tenants and operating results.

For the three months ended March 31, 2022, the Company received 100 % of its rents and the Company believes there was no material impact caused by COVID-19 on the Company.

For the six months ended June 30, 2022, the Company received 100 % of its rents and the Company believes there was no material impact caused by COVID-19 on the Company.

In connection with the IPO, the Company and REAC jointly elected to treat REAC as a TRS.

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

For each of the three months ended March 31, 2022 and 2021, income tax expense related to REAC was $ 0.01 million.

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

For the three and six months ended June 30, 2021, income tax expense related to REAC was $ 0.03 million and $ 0.04 million, respectively.

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

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The indirect sole shareholder of UPH will be responsible for all tax related matters related to UPH.

As of March 31, 2022 and December 31, 2021, the Company had unrecognized tax benefits of $ 0.2 million and $ 0.2 million, respectively, which are inclusive of interest and penalties, and a corresponding indemnification asset, which are included in "Prepaid expenses and other assets" on the Consolidated Balance Sheets.

As of June 30, 2022 and December 31, 2021, the Company had unrecognized tax benefits of $ 0.2 million and $ 0.2 million, respectively, which are inclusive of interest and penalties, and a corresponding indemnification asset, which are included in "Prepaid expenses and other assets" on the Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Related Party Transactions

Management Fee Income

REAC recognized management fee income of $ 0.3 million for each of the three months ended March 31, 2022 and 2021 from various parties which were affiliated with the Company's CEO.

REAC recognized management fee income of $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2022, respectively, and $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2021, respectively, from various parties which were affiliated with the Company's CEO.

These amounts are included in “Fee and other” in the Consolidated Statements of Operations and Comprehensive Income.

Accrued management fees receivable of $ 0.3 million and $ 0.3 million as of March 31, 2022 and December 31, 2021, respectively, are included in “Rents and other receivables” on the Consolidated Balance Sheets.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued management fees receivable of $ 0.3 million and $ 0.3 million as of June 30, 2022 and December 31, 2021, respectively, are included in “Rent and other receivables” on the Consolidated Balance Sheets.

Related Party Lease

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

Rental expenses associated with the Office Lease for each of the three months ended March 31, 2022 and 2021 were $ 0.05 million and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive Income.

Rental expenses associated with the Office Lease for each of the three and six months ended June 30, 2022 and 2021 were $ 0.05 million and $ 0.1 million, respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and Comprehensive Income.

The Company determined this Office Lease was an operating lease.

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As disclosed above in Note 5.

Spodek, the Company's CEO, personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $ 1.9 million and $ 1.9 million as of March 31, 2022 and December 31, 2021, respectively.

Spodek personally guaranteed a portion of or the entire amount outstanding under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $ 1.9 million and $ 1.9 million as of June 30, 2022 and December 31, 2021, respectively.

As a guarantor, Mr.

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Earnings Per Share

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.

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

June 30, For the Six Months Ended

2022 2021 2022 2021

Numerator for earnings per share – basic and diluted:

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Basic and diluted earnings per share $ 0.04 $ 0.04 $ 0.06 $ 0.04

Explanatory Note :

(1) For the three months ended March 31, 2022, 492,686 restricted shares of Class A common stock, 135,276 RSUs, 3,651,937 OP Units and 493,654 LTIP Units would not be dilutive and were not included in the computation of weighted average number of shares outstanding for the period.

For the three months ended March 31, 2021, 364,311 restricted shares of Class A common stock, 88,503 RSUs, 2,640,795 OP Units and 346,268 LTIP Units would not be dilutive and were not included in the computation of weighted average number of shares outstanding for the period.

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, held by non-controlling interests as of March 31, 2022 and 2021, respectively.

The income allocable to such OP Units and LTIP Units is allocated on this same basis and reflected as non-controlling interests in the accompanying 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 earnings per share.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

Stockholder’s 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 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.

Stockholder’s Equity

On January 11, 2021, the Company priced a public offering of 3.25 million shares of its Class A common stock (the “January 2021 Offering”) at $ 15.25 per share.

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During the year ended December 31, 2021, 344,717 shares were issued under the ATM Program.

During the three months ended March 31, 2022, the Company did not issue any shares under the ATM Program.

As of March 31, 2022, the Company had approximately $ 43.1 million remaining that may be issued under the ATM Program.

During the three months ended March 31, 2022, the Board of Directors approved and the Company declared and paid dividends of $ 5.2 million to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.2275 per share or unit, as shown in the table below.

During the three and six months ended June 30, 2022, the Company did not issue any shares under the ATM Program.

As of June 30, 2022, the Company had approximately $ 43.1 million remaining that may be issued under the ATM Program.

During the three and six months ended June 30, 2022, the Board of Directors approved and the Company declared and paid dividends of $ 5.3 million and $ 10.5 million, respectively, to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and LTIP unitholders, or $ 0.23 per share or unit and $ 0.4575 per share or unit, respectively, as shown in the table below.

Declaration Date Record Date Date Paid Amount Per Share

February 1, 2022 February 15, 2022 February 28, 2022 $ 0.2275

April 28, 2022 May 13, 2022 May 27, 2022 $ 0.23

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 CEO and the Board of Directors in connection with the IPO and/or in lieu of their cash compensation.

During the three months ended March 31, 2022, the Company issued 118,389 LTIP Units in January 2022 to the Company’s CEO for his 2021 incentive bonus, his election to defer 100 % of his 2022 annual salary and for long term incentive compensation.

In addition, during the three months ended March 31, 2022, the Company issued 179,716 OP Units to certain contributors in connection with portfolio acquisition and business acquisition (for further details, see Note 13.

During the six months ended June 30, 2022, the Company issued

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

118,389 LTIP Units in January 2022 to the Company’s CEO for his 2021 incentive bonus, his election to defer 100 % of his 2022 annual salary and for long term incentive compensation and issued 38,174 LTIP Units in June 2022 to the Board of Directors for their annual retainers as compensation for their services as directors.

In addition, during the six months ended June 30, 2022, the Company issued 310,210 OP Units to certain contributors in connection with portfolio acquisitions and a business acquisition (for further details, see Note 13.

Business Acquisitions).

As of March 31, 2022 and December 31, 2021, non-controlling interests consisted of 3,651,937 OP Units and 493,654 LTIP Units and 3,472,221 OP Units and 375,265 LTIP Units, respectively.

This represented approximately 18.0 % and 17.1 % of the outstanding Operating Partnership units as of March 31, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, non-controlling interests consisted of 3,782,431 OP Units and 531,828 LTIP Units and 3,472,221 OP Units and 375,265 LTIP Units, respectively.

This represented approximately 18.6 % and 17.1 % of the outstanding Operating Partnership units as of June 30, 2022 and December 31, 2021, respectively.

OP Units and shares of common stock generally have the same economic characteristics, as they share equally in the total net income or loss distributions of the Operating Partnership.

Beginning on or after the date which is 12 months after the later of (i) the completion of the IPO or (ii) the date on which a person first became a holder of common units, each limited partner and assignees of limited partners will 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,

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

or at the Company's sole discretion, shares of the Class A common stock, on an one -for-one basis determined in accordance with and subject to adjustment under the partnership agreement.

The Operating Partnership unitholders are entitled to share in cash distributions from the Operating Partnership in proportion to their percentage ownership of OP Units.

Restricted Stock and Other Awards

Pursuant to the Company’s 2019 Equity Incentive Plan (the “Plan”), the Company may grant equity incentive awards to its directors, officers, employees and consultants.

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

The maximum number of shares of Class A common stock that were originally authorized for issuance under the Plan were 541,584 .

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The stockholders approved such amendment on June 18, 2021.

As of March 31, 2022, the remaining shares available under the Plan for future issuance was 1,211,337 .

As of June 30, 2022, the remaining shares available under the Plan for future issuance was 1,204,129 .

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

The Company has an anti-pledging policy that prohibits directors, officers and employees from pledging the Company’s securities as collateral for a loan or holding Company securities in a margin account, except in very limited circumstances and with prior approval pursuant to the policy.

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, 2022 represents unvested restricted shares of Class A common stock and LTIP Units and RSUs that are outstanding, whether vested or not:

The balance as of June 30, 2022 represents unvested restricted shares of Class A common stock and LTIP Units and RSUs that are outstanding, whether vested or not:

Shares (1)(2)

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( 57,039 ) — — ( 57,039 ) $ 16.74

Outstanding, as of March 31, 2022 492,686 493,654 219,604 1,205,944 $ 16.22

( 382 ) — — ( 382 ) $ 17.04

Outstanding, as of June 30, 2022 444,233 531,828 219,604 1,195,665 $ 16.16

Explanatory Notes :

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(2) The time-based restricted share awards granted to the Company's officers and employees typically vest in three annual installments or cliff vest at the end of three years or eight years .

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(3) Includes 464,657 LTIP Units granted to the Company’s CEO that vest over eight years and 67,171 LTIP Units granted to the Company's independent directors that vest over three years or cliff vest at the end of three years .

(4) Includes 47,005 RSUs granted to certain officers and employees of the Company during the three months ended March 31, 2022, subject to the achievement of a service condition and a market condition.

(4) Includes 47,005 RSUs granted to certain officers and employees of the Company during the six months ended June 30, 2022, 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 hurdles relating to the Company’s absolute total stockholder return and continued employment with the Company over the approximately three-year period from the grant date through December 31, 2024.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) Includes 38,957 of restricted shares that vested and 18,082 shares of restricted shares that were withheld to satisfy minimum statutory withholding requirements.

During the three months ended March 31, 2022 and 2021, the Company recognized compensation expense of $ 1.7 million and $ 1.1 million, respectively, related to all awards.

As of March 31, 2022, there was $ 13.4 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 4.7 years.

During the three and six months ended June 30, 2022, the Company recognized compensation expense of $ 1.0 million and $ 2.7 million, respectively, related to all awards.

During the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.8 million and $ 1.9 million, respectively, related to all awards.

As of June 30, 2022, there was $ 13.0 million of total unrecognized compensation cost related to unvested awards, which is expected to be recognized over a weighted average period of 4.8 years.

In July 2022, the Company issued 9,895 RSUs and 28,711 restricted shares of Class A common stock to certain employees for their elections to receive such RSUs and restricted shares in lieu of a portion of their 2022 annual salaries pursuant to the Company's Alignment of Interest Program.

The RSUs issued to employees in lieu of salaries will cliff vest on December 31, 2022, while the other restricted shares of Class A common stock issued to employees in lieu of salaries will cliff vest on the third or eighth anniversary of July 5, 2022.

In addition, in July 2022, the Company issued 5,040 LTIP Units to a consultant under the consultancy agreement with the Company.

Employee Stock Purchase Plan

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

As of March 31, 2022 and December 31, 2021, 21,680 and 16,293 shares have been issued under the ESPP since commencement, respectively.

During the three months ended March 31, 2022 and 2021, the Company recognized compensation expense of $ 0.02 million and $ 0.01 million, respectively.

As of June 30, 2022 and December 31, 2021, 21,680 and 16,293 shares have been issued under the ESPP since commencement, respectively.

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

During the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.01 million and $ 0.02 million, respectively.

Commitments and Contingencies

As of March 31, 2022, 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, or which is not covered by insurance.

As of June 30, 2022, the Company was not involved in any litigation nor to its knowledge is any litigation threatened against the Company, that, in management’s opinion, would result in any material adverse effect on the Company’s financial position and results of operations, or which is not covered by insurance.

In the ordinary course of the Company’s business, the Company enters into non-binding (except with regard to exclusivity and confidentiality) letters of intent indicating a willingness to negotiate for acquisitions.

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

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Business Acquisition

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

The accounting for a business combination is dependent upon obtaining valuations and other information for certain assets and liabilities which have not yet been completed or obtained to a point where definitive estimates can be made.

The process for estimating the fair values of identified intangible assets, certain tangible assets and assumed liabilities require the use of judgment to determine the appropriate assumptions.

Until the Company finalizes estimates of the fair value of assets acquired and liabilities assumed, substantially all of the purchase price allocation for the Business is provisional.

Additional purchase price adjustments will be recorded during the measurement period not to exceed one year beyond the acquisition date.

These adjustments may have a material impact on the Company’s results of operations and financial position.

The Company has provisionally recorded an intangible asset related to the customer relationships and trade name of approximately $ 0.2 million and goodwill of approximately $ 1.5 million.

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

The goodwill recorded is deductible for income tax purposes.

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Subsequent Events

The Company's Board of Directors approved, and on April 28, 2022, the Company declared a first quarter common stock dividend of $ 0.23 per share, which is payable on May 27, 2022 to stockholders of record as of May 13, 2022.

POSTAL REALTY TRUST, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 11, 2022, the Company entered into the First Amendment to the Credit Facilities.

Debt for additional details.

As of the date of these Consolidated Financial Statements, the Company had $ 110.0 million drawn on the Credit Facilities, with $ 50.0 million drawn on the 2021 Term Loan, $ 50.0 million drawn on the 2022 Term Loan and $ 10.0 million drawn on the 2021 Revolving Credit Facility.

As of May 11, 2022 and during the period subsequent to March 31, 2022, the Company closed on the acquisitions of 44 properties for approximately $ 14.0 million, excluding closing costs, some of which include OP Units as part of the consideration.

As of May 11, 2022 and during the period subsequent to March 31, 2022, the Company had entered into definitive agreements to acquire 107 properties for approximately $ 34.6 million, some of which include OP Units as part of the consideration.

The majority of these transactions are anticipated to close during the second and third quarters of 2022, subject to the satisfaction of customary closing conditions.

The Company's Board of Directors approved, and on July 27, 2022, the Company declared a second quarter common stock dividend of $ 0.2325 per share, which is payable on August 26, 2022 stockholders of record as of August 8, 2022.

As of the date of this report, the Company had $ 146.0 million drawn on the Credit Facilities, with $ 50.0 million drawn on the 2021 Term Loan, $ 75.0 million drawn on the 2022 Term Loan and $ 21.0 million drawn on the 2021 Revolving Credit Facility.

During the period subsequent to June 30, 2022, the Company acquired 16 properties for approximately $ 4.6 million, excluding closing costs.

During the period subsequent to June 30, 2022, the Company had entered into definitive agreements to acquire 36 properties for approximately $ 14.1 million, some of which include OP Units as part of the consideration.

The majority of these transactions are anticipated to close during the third and fourth quarters of 2022, subject to the satisfaction of customary closing conditions.

However, the Company can provide no assurances that the properties will be consummated on the terms of timeframe described herein, or at all.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements