Executive Summary / Key Takeaways

• Postal Realty Trust ($PSTL) is solidifying its position as the leading owner of U.S. postal real estate, leveraging a specialized focus on properties leased to the United States Postal Service (USPS), which are critical to the nation's logistics infrastructure.
• The company's "programmatic leasing" approach with the USPS, a key operational differentiator, has significantly improved re-leasing efficiency, predictability, and lease terms, leading to robust internal growth and enhanced revenue visibility.
• PSTL reported strong financial performance in Q3 2025, with Adjusted Funds From Operations (AFFO) per share growing 10% year-over-year to $0.33, and an increased 2025 AFFO guidance of $1.30 to $1.32 per share, implying 13% annual growth at the midpoint.
• The company maintains a disciplined acquisition strategy, targeting accretive postal properties at or above a 7.5% cash cap rate, with 2025 acquisition volume projected to meet or exceed $110 million.
• A strong balance sheet, characterized by low leverage (5.2x net debt to annualized adjusted EBITDA) and substantial fixed-rate debt (93%), coupled with ample liquidity, supports continued accretive growth and dividend stability.

The Unseen Backbone: PSTL's Strategic Foundation in Essential Infrastructure

Postal Realty Trust, Inc. ($PSTL) operates as an internally managed real estate investment trust, carving out a unique and stable niche within the broader real estate market by focusing almost exclusively on properties leased to the United States Postal Service (USPS). These assets, ranging from last-mile post offices to industrial facilities, form the unseen backbone of the nation's logistics infrastructure, facilitating cost-effective and efficient last-mile delivery solutions across 169 million delivery points nationwide. The company's overarching strategy is built upon three core pillars: driving organic growth through programmatic leasing with the Postal Service, executing accretive postal property acquisitions, and deepening its access to capital to fund this growth.

PSTL's competitive positioning is defined by its specialized expertise and market leadership. It stands as the largest owner in this niche, holding approximately 8% of the market. This specialized focus differentiates PSTL from more diversified net lease REITs such as Realty Income Corporation , Essential Properties Realty Trust (EPRT), and W. P. Carey Inc. (WPC). While these competitors offer broad diversification across various sectors and geographies, PSTL's strength lies in its deep understanding of the USPS's real estate needs and its ability to serve as a highly responsive single point of contact for the tenant. This focused approach allows PSTL to develop unparalleled operational efficiencies tailored to government-leased properties.

A critical differentiator for PSTL, akin to a technological moat, is its "multi-tiered programmatic approach" to the re-leasing process with the USPS. This operational innovation, refined significantly in 2024, has led to "automation in our acquisitions and operations" and the establishment of "systems and people in place to ramp up acquisitions." The tangible benefits of this process technology are substantial and quantifiable: it has dramatically improved the timing and efficiency of re-leasing, enhanced revenue predictability, and resulted in new leases often featuring 10-year terms and 3% annual rent escalations. For instance, as of October 17, 2025, 53% of PSTL's portfolio rent was subject to annual rent escalations, and 38% consisted of leases with 10-year terms, based on executed and agreed-upon leases through 2026. This operational excellence directly contributes to PSTL's competitive moat by ensuring stable, growing cash flows and strengthening its market position against rivals who lack such specialized, efficient processes for government leases.

Operational Momentum and Financial Strength

PSTL's strategic evolution, particularly its programmatic leasing initiative, has translated into robust financial performance. For the three months ended September 30, 2025, rental income surged by 26.20% to $23.70 million, and for the nine months ended September 30, 2025, it increased by 28.70% to $67.90 million. This growth was primarily driven by the volume of new acquisitions and the successful execution of new leases incorporating annual escalations. While "Fee and other" revenue saw a decrease, mainly due to lower management fees, the core rental income segment demonstrated significant strength.

Operational efficiency has also been a hallmark of recent performance. Property operating expenses decreased due to optimized repairs and maintenance, while general and administrative expenses saw a reduction partly due to a reversal of previously recognized compensation costs related to forfeited awards from a former Chief Financial Officer. The company reported Adjusted Funds From Operations (AFFO) of $0.33 per share for Q3 2025, marking a 10% increase year-over-year. Net cash provided by operating activities also saw a substantial increase, rising by $8.90 million to $33.20 million for the nine months ended September 30, 2025, reflecting the positive impact of acquisitions and new leases.

The company's acquisition strategy continues to be a critical driver of external growth. For the nine months ended September 30, 2025, PSTL acquired 151 properties for approximately $96.60 million. A notable acquisition in Q3 2025 was a high-quality flex property in Newtonville, Massachusetts, purchased for $23.5 million at an initial cash cap rate of 7.6%, which is expected to increase to 8.3% in three years. These acquisitions are accretive from day one and are expected to yield significantly higher returns over time as they are integrated into PSTL's efficient operational platform and benefit from programmatic re-leasing. The use of Operating Partnership (OP) units as a currency in approximately 10-15% of its deal flow, and its role in sourcing 75% of acquisitions off-market, further underscores PSTL's differentiated approach to portfolio expansion.

Capital Strength and Future Outlook

PSTL maintains a robust capital structure, essential for funding its growth initiatives. As of September 30, 2025, the company had $315 million of aggregate principal outstanding under its Credit Facilities, which were recently amended, extended, and expanded to $440 million on September 19, 2025. This includes a $150 million Revolving Credit Facility (maturing November 2029) and $290 million in Term Loans (maturing January 2030 and February 2028). The company's net debt to annualized adjusted EBITDA stood at a healthy 5.2x, with 93% of its borrowings at fixed rates, providing stability against interest rate fluctuations. Furthermore, PSTL boasts ample liquidity, with $125 million of undrawn revolver capacity and an additional $250 million in accordion capacity.

Management's outlook for 2025 reflects strong confidence in its strategy. The company increased its 2025 AFFO guidance to a range of $1.30 to $1.32 per share, representing an impressive 13% annual growth at the midpoint. This guidance is supported by an updated 2025 same-store cash Net Operating Income (NOI) guidance of 8.5% to 9.5%, a significant increase from prior estimates, driven by faster lease executions and better-than-expected re-leasing outcomes. Acquisitions are projected to meet or exceed $110 million for the year. The company also anticipates $0.7 million, $1.4 million, and $1.8 million in contractual rent escalations to be realized in 2025, 2026, and 2027, respectively, based on executed leases, highlighting the embedded growth in its portfolio.

Risks and Competitive Dynamics

Despite its strong position, PSTL faces inherent risks, primarily stemming from its heavy reliance on the USPS as its sole major tenant. The USPS's ability to honor its leases is dependent on various regulatory, economic, and competitive conditions, and any significant decline in its financial health or demand for its services could materially impact PSTL's business. While PSTL's programmatic leasing mitigates renewal risk, there is no guarantee of consistently positive rent renewal spreads or comparable terms. Furthermore, while largely hedged, exposure to variable interest rates on its debt presents a market risk, with a 1% increase in Adjusted Term SOFR potentially impacting cash flows by approximately $0.25 million annually.

In the broader competitive landscape, PSTL's niche focus, while a strength, also means it lacks the diversification of larger net lease REITs like Realty Income (O), which spreads risk across a wider array of tenants and industries. PSTL's operational "technology" in programmatic leasing provides an edge in its specific market, potentially leading to stronger customer loyalty and more stable revenues within the government sector. However, larger, more diversified competitors may benefit from greater scale in capital markets and a broader pipeline of acquisition opportunities outside the postal sector. Barriers to entry in the REIT industry, such as high capital requirements and regulatory hurdles, generally protect PSTL's specialized position by limiting new entrants.

Conclusion

Postal Realty Trust presents a compelling investment thesis rooted in its specialized focus on mission-critical USPS properties and its innovative operational approach to property management and leasing. The company's "programmatic leasing" framework acts as a powerful differentiator, driving predictable internal growth through consistent rent escalations and extended lease terms. This, combined with a disciplined acquisition strategy and a robust capital structure, positions PSTL for continued accretive growth. While the inherent tenant concentration with the USPS presents a key risk, the essential nature of postal services and PSTL's proven operational efficiencies in this niche market provide a strong foundation. Investors looking for stable, growing cash flows backed by essential American infrastructure, and benefiting from a unique operational edge, may find PSTL an attractive long-term opportunity, particularly as its technological leadership in process innovation continues to unlock value.