Postal Realty Trust (PSTL) 15th Annual Midwest IDEAS Investor Conference summary

Business model and market context

• Operates a portfolio of post office properties in 49 states, focusing on last mile and flex facilities, with industrial assets acquired opportunistically.

• Maintains a 99%+ tenant retention rate over 10+ years due to the Postal Service's reliability and lease structure.

• Postal real estate market is highly fragmented, with 25,000 leased facilities owned by about 17,000 owners, many of whom are aging and unsophisticated in property management.

• Company leverages economies of scale and a proprietary lease structure, including annual escalations not available to other owners.

• Educates the market by segmenting assets into last mile, flex, and industrial, with most acquisitions in the first two categories.

Growth strategy and acquisitions

• Grown five to six times since going public five years ago, despite slowdowns from COVID and rising interest rates.

• Targets $90 million in acquisitions for the year, with $50 million closed in the first half and a weighted average cap rate above 7.5%.

• 75% of deal flow is off-market, sourced directly from owners, enabling efficient and cost-effective acquisitions.

• Acquisitions are funded through a balanced mix of debt and equity, with a typical 60/40 split, and the use of an UPREIT structure to facilitate tax-advantaged transactions for sellers.

• Operating partnership units are used in 10-15% of deals, appealing to owners seeking tax deferral and estate planning flexibility.

Lease structure and financial management

• Leases are modified double net, with the owner responsible mainly for roof, structure, and insurance, while real estate taxes are passed through.

• Proprietary leases include annual escalations (3% in 2023), a unique feature among postal property owners, supporting internal growth.

• Insurance costs have been effectively managed, with single-digit annual increases despite broader market pressures.

• Real estate is acquired at or below replacement cost, typically under $150 per square foot, providing a value advantage over comparable net lease assets.