Q1 2025 Postal Realty Trust Inc Earnings Call

Operator: Subs by www.zeoranger.co.uk Greetings and welcome to Postal Realty Trust's first quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the prepared remarks. As a reminder, this conference is being recorded.

Greetings and welcome to Boston Realty Trust first quarter 2025 funding Scott at this time all participants are in a listen only mode. A question and answer session will follow the prepared remarks as a reminder, this conference is being recorded I would now.

Jordan Cooperstein: I would now like to turn the conference over to your host, Mr. Jordan Cooperstein, Vice President of FP&A Capital Markets.

Jordan Cooperstein: Now I'd like to turn the conference over to your host Mr. Jordan Cooperstein, Vice President of F. B any capital markets welcome John.

Jordan Cooperstein: Welcome, Jordan. Thank you and good morning everyone.

Speaker Change: Thank you and good morning, everyone. Welcome to Postal Realty Trust first quarter 2025 earnings conference call on the call today, we have Andrew <unk>, Chief Executive Officer, Jeremy Garber, President, Robert Klein, Chief Financial Officer, and Matt <unk>, Chief Accounting Officer.

Jordan Cooperstein: Welcome to Postal Realty Trust's first quarter 2025 earnings conference call. On the call today we have Andrew Spodek, Chief Executive Officer, Jeremy Garber, President, Robert Klein, Chief Financial Officer, and Matt Bramwine, Chief Accounting Officer. Please note the company may use forward-looking statements on this conference call, which are statements that are not historical facts and are considered forward-looking. These forward-looking statements are covered by the Safe Harbor Provisions for Forward-Looking Statements contained in the Private Securities Litigation Form Act of 1995. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, but not limited to, those contained in the company's latest 10K and its other regulatory filings.

Jordan Cooperstein: Sure.

Speaker Change: Please note the company May use forward looking statements on this conference call, which are statements that are not historical facts.

Speaker Change: Are considered forward looking these forward looking statements are covered by the safe Harbor provision for forward looking statements contained in the private Securities Litigation Reform Act of 1095.

Speaker Change: Actual results may differ materially from those described in the forward looking statements.

Speaker Change: Be affected by a variety of risks and factors that are beyond the company's control, including but not limited to those contained in the company's latest 10-K and other regulatory filings the.

Jordan Cooperstein: The company does not assume, and specifically disclaims, any obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally on this conference call, the company may refer to certain non-GAAP financial measures, such as funds from operations, adjusted funds from operations, adjusted EBITDA, and net debt.

Speaker Change: The company does not assume specifically disclaims any obligation to update any forward looking statements, whether as a result of new information future events or otherwise.

Additionally, on this conference call the company may refer to certain non-GAAP financial measures such as funds from operations adjusted funds from operations adjusted EBITDA and net debt.

Jordan Cooperstein: You can find a tabular reconciliation of these on-gap financial measures to the most currently comparable gap measures in the company's earnings release and supplemental.

Speaker Change: You can find a tabular reconciliation of these non-GAAP financial measures. The most currently comparable GAAP measures in the company's earnings release and supplemental <unk> with that I will now turn the call over to Andrew <unk>, Chief Executive Officer of political royalty Trust. Good morning, and thank you for joining us today.

Andrew Spodek: With that, I will now turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust. Good morning and thank you for joining us today. The first quarter saw a continuation of the advances we have made over the last several quarters in all key aspects of our business. As we sit here today, occupancy is at 99.8% and we have the greatest level of visibility into releasing since our inception. Our releasing momentum from last year has continued into 2025. In addition to agreeing to new rents for the 2025 expirations, we also recently agreed to new rents for the 2026 aspirations and are turning our attention, with the Postal Service, to 2027 releases.

Speaker Change: The first quarter saw a continuation of the advances we have made over the last several quarters in all key aspects of our business.

Speaker Change: As we sit here today occupancy is at 99, 8% and we have the greatest level of visibility into releasing since our inception.

Speaker Change: Our re leasing momentum from last year has continued into 2025.

Speaker Change: In addition to agreeing to new rents for the FY 'twenty five explorations. We also recently agreed to new rents for the 2026 aspirations and are turning our attention with the postal service to 2027 releasing.

Speaker Change: The high level of visibility we have into our internal growth has resulted from a multi tiered programmatic approach with the postal service, which I have discussed with you on our last few calls.

Andrew Spodek: The high level of visibility we have into our internal growth has resulted from the multi-tiered programmatic approach with the Postal Service, which I have discussed with you on our last few polls. Importantly, the program leads not only to more efficient and timely releasing, but also has resulted in the inclusion of 3% annual escalators and 10-year leasing. This new approach drives greater efficiency for both us and the Postal Service. Within our organization, this process has allowed internal resources to expand into other value-added areas such as automation in our acquisitions and operations. We have been working diligently with the Postal Service to have fully executed leases in hand prior to upcoming expirations and are fully up to date for 2025 leases.

Speaker Change: Importantly, the program lead not only to more efficient and timely releasing.

Speaker Change: But also has resulted in the inclusion of 3% annual escalators.

Speaker Change: And 10 year leases.

Speaker Change: This new approach drives greater efficiency for both us and the postal service.

Speaker Change: Within our organization. This process has allowed internal resources to expand into other value added areas such as automation in our acquisitions and operations.

Speaker Change: We have been working diligently with the pulse service to have fully executed leases in hand prior to our upcoming explorations and are fully up to date for 2025 leases. As a result, we provided annual <unk> guidance last quarter and we remain on track to achieve $1.20 to $1 22 per share.

Andrew Spodek: As a result, we provided annual AFFO guidance last quarter and we remain on track to achieve $1.20 to $1.22 per share. On the acquisition front, our $16 million acquired in Q1 is consistent with our historical cadence and Q2 is off to a good start with $13 million acquired subsequent to quarter end and an additional $22 million under definitive contract. We continue to anticipate acquisition volume for the year of $80-90 million at or above our targeted 7.5% weighted average going in cap rates. Our faith in our tenancy, business, execution, and our ability to drive internal growth through executing new leases and more efficient management of acquired postal assets gives us confidence to continue pursuing attractive deals as they arise.

Speaker Change: On the acquisition front, our $16 million acquired in Q1 is consistent with our historical cadence in Q2 is off to a good start with $13 million acquired subsequent to quarter end, an additional $22 million under definitive contracts.

Speaker Change: We continue to anticipate acquisition volume for the year of $80 million to $90 million at or above our targeted seven 5% weighted average going in cap rate.

Speaker Change: Our faith in our tenancy business execution, and our ability to drive internal growth through executing new leases and more efficient management of acquired post assets gives us confidence to continue pursuing attractive deals as they arise.

Andrew Spodek: Given our blended cost of capital, our targeted acquisitions make sense today and become even more accretive over time as illustrated in our strong same-store cash NOI results and forward guidance of 4 to 6 percent for 2025. We are encouraged by our active dialogue with owners and the growth in our acquisition pipeline. We are confident that we have the systems and people in place to ramp up acquisitions in the event that our cost of capital and opportunity set are aligned. One of the reasons sellers transact with Postal Realty is our up-reach structure, which provides the ability to transact with operating partnership units in lieu of cash.

Speaker Change: Given our blended cost of capital our targeted acquisitions makes sense today and become even more accretive over time as illustrated in our strong same store cash NOI results and forward guidance of 4% to 6% for 2025.

We are encouraged by our active dialogue with the owners and the growth in our acquisition pipeline.

Speaker Change: We are confident that we have the systems and people in place to ramp up acquisitions in the event that our cost of capital and opportunity set are aligned.

Speaker Change: One of the reasons sellers transact with postal Realty is our up REIT structure, which provides the ability to transact with operating partnership units in lieu of cash in.

Andrew Spodek: In addition to the potential tax benefits, sellers are choosing to invest in our platform of diversified postal assets. This past quarter, we acquired additional properties from one of the larger postal owners in exchange for units, and we have a definitive agreement in place to acquire the remainder of their portfolio as well. They are one of the many owners that have taken OP units over the years. Eleven percent of acquisitions since IPO have been completed with these units, and the medium of exchange creates deal flow for many others, even if we elect to instead close with cash.

Speaker Change: In addition to the potential tax benefits.

Speaker Change: Sellers are choosing to invest in our platform of diversified postal assets.

Speaker Change: This past quarter, we acquired additional properties from one of the larger postal owners in exchange for units and we have a definitive agreement in place to acquire the remainder of their portfolio as well there.

Speaker Change: They were one of the many owners that have taken O P units over the years.

Speaker Change: 11% of acquisition since IPO have been completed with these units and the medium of exchange creates deal flow for many others, even if we elect to instead close with cash.

Andrew Spodek: is also a factor that contributes to approximately 75% of our acquisitions being sourced off-market. Especially in periods of uncertainty, whether exchanging property for OP units or cash, it is becoming increasingly apparent to sellers, both large and small, that the gap between our platform and their go-it-alone plan has materially widened. Postal Realty's unmatched ability to operate and administer properties, including an efficient releasing process, improves our results as we continue to innovate and drive efficiencies as we scale the business.

Speaker Change: It was also a factor that contributes to approximately 75% of our acquisitions being sourced off market.

Speaker Change: Especially in periods of uncertainty, whether exchanging property for opiates or cash it is becoming increasingly apparent to sellers, both large and small that the gap between our platform and they are go it alone plan has materially widened.

Speaker Change: Postal royalties unmatched ability to operate and administer properties, including inefficient re leasing process improves our results as we continue to innovate and drive efficiencies as we scale the business.

Speaker Change: We have been in active dialogue with members of Congress, including recent meetings with Congressman Pete sessions co chair of those caucus and recently attending presentations by other congressional leaders at the annual Association of the United States Postal Lessors Conference in Washington D C.

Andrew Spodek: We have been in active dialogue with members of Congress, including recent meetings with Congressman Pete Sessions, co-chair of Doge Caucus, and recently attending presentations by other congressional leaders at the Annual Association of United States Postal Lessors Conference in Washington, D.C. While there have been no updates on the DOJ-GSA engagement to share, their resounding bipartisan support of the Postal Service Real Estate Network and the acknowledgement of the critical nature of it to their constituents was very encouraging. As a reminder, lease expenses represent only 1.5% of the Postal Service's total operating budget and these facilities are the backbone of their delivery network, enabling them to serve 169 million delivery points across the country.

Speaker Change: While there have been no updates on the Doge BSA engagement to share their resounding bipartisan support of the postal service real estate network and the acknowledgment of the critical nature of it to their constituents was very encouraging.

Speaker Change: As a reminder, lease expenses represent only one 5% of the postal services total operating budget and these facilities are the backbone of their delivery network, enabling them to serve 169 million delivery points across the country.

Speaker Change: We remain confident in the value of our properties to the postal Service's mission, the security and visibility of our cash flows and our ability to generate strong internal growth while continuing to consolidate this highly fragmented market I will now turn the call over to Jeremy.

Andrew Spodek: We remain confident in the value of our properties to the Postal Service's mission, the security and visibility of our cash flows, and our ability to generate strong internal growth while continuing to consolidate this highly fragmented market.

Jeremy Garber: I will now turn the call over to Jeremy. Thank you, Andrew. As mentioned, rents for all leases set to expire in 2025 and 2026 have been agreed upon, with 2025 lease production progressing ahead of expiration date. When all agreed to leases through 2026 are fully executed, 32% of our portfolio will be 10 years in duration, and 56% of the portfolio will contain annual rent escalations. As a result of a few outstanding expired leases from 2023 and 2024 that had new leases executed during the first quarter, the company has received a total net lump sum catch-up payment of $426,000.

Jeremy: Thank you Andrew.

Jeremy: Benton rents for all leases set to expire in 2025 and 2026 have been agreed upon with 2025 lease production progressing ahead of exploration date, when all agreed to leases through 2026 are fully executed 32% of our portfolio will be 10 years in duration and <unk>.

Jeremy: 56% of the portfolio will contain annual rent escalations.

Jeremy: As a result of a few outstanding expired leases from 'twenty to 'twenty, three and 'twenty 'twenty four parks that had new leases executed during the first quarter. The company has received a total net lump sum catch up payment of $426000.

Jeremy Garber: Aside from recent or prospective acquisitions that are acquired in holdover status, lump sum catch-up payments should continue to diminish in frequency and value as we continue to sign leases ahead of their expiration date.

Jeremy: Aside from recent or prospective acquisitions that are acquired in holdover status lump sum catch up payments should continue to diminish in frequency and value as we continue to sign leases ahead of their expiration dates.

Jeremy Garber: In the first quarter of 2025, we acquired 36 properties for approximately $16 million at a 7.6% weighted average cap rate, which added approximately 100,000 net leaseable interior square feet to our portfolio, inclusive of 33,000 square feet from 22 last mile post offices and 67,000 square feet from 14 flex properties.

Jeremy: In the first quarter of 2025, we acquired 36 properties for approximately $16 million at a seven 6% weighted average cap rate, which added approximately 100000, net leasable and serious square feet to our portfolio inclusive of 33000 square feet from 'twenty two last mile Post office.

Speaker Change: <unk> and 67000 square feet from 14th Flex properties subsequent to quarter end and through April 16, We acquired 25 properties for approximately $30 million and placed an additional 35 properties totaling $22 million under definitive contracts I'll now turn.

Jeremy Garber: Subsequent to quarter end and through April 16, we acquired 25 properties for approximately $13 million and placed an additional 35 properties totaling $22 million under definitive contracts.

Robert Klein: I'll now turn the call over to Rob to discuss our first quarter financial results. Thank you, Jeremy, and thank you everyone for joining us for today's call. During the first quarter, we delivered funds from operations or FFO of $0.28 and adjusted funds from operations or AFFO of $0.32 per diluted share. Thanks to our releasing successes over the past few years, the bottom line impact from contractual rent escalations is projected to result in two cents of AFFO per share in 2025. We have maintained low leverage and minimized our exposure to variable rate debt. At the end of the first quarter, our debt outstanding had a weighted average interest rate of 4.4% and a weighted average maturity of 3 years.

Speaker Change: Nicole over to Rob to discuss our first quarter financial results. Thank you Jeremy and thank you everyone for joining us for today's call.

Rob: During the first quarter, we delivered funds from operations or <unk> 28, and adjusted funds from operations or <unk> of 32 cents per diluted share.

Rob: Thanks to our re leasing successes over the past few years, the bottomline impact from contractual rent Escalations is projected to result in two cents per.

Rob: For sure in 2025.

Rob: We have maintained low leverage and minimized our exposure to variable rate debt.

Rob: At the end of the first quarter, our debt outstanding had a weighted average interest rate of 4.4% and a weighted average maturity of three years.

Robert Klein: The company's $150 million senior unsecured revolving credit facility had $24 million outstanding and fixed rate debt comprised 90% of all borrowings. Net debt to annualized adjusted EBITDA remained flat quarter over quarter at 5.2 times, well within our target of below 7 times. During the first quarter, we raised approximately $3 million of equity, issuing nearly 140,000 shares of common stock through our ATM offering program at an average price of $14.20 per share and approximately 73,000 common units in our operating partnership at a price of $14.03 per unit as part of consideration for a portfolio acquisition. Recurring CapEx in Q1 was $168,000.

Rob: The companys $150 million senior unsecured revolving credit facility had $24 million outstanding at fixed rate debt comprised 90% of all borrowings.

Rob: Net debt to annualized adjusted EBITDA remained flat quarter over quarter at five two times well within our target of below seven times.

Rob: During the first quarter, we raised approximately $3 million of equity issuing nearly 140000 shares of common stock through our ATM offering program at an average price of $14.20 per share and approximately 73000 common units in our operating partnership at a price of $14.

Rob: And three cents per unit as part of consideration for our portfolio acquisition.

Rob: Recurring Capex in Q1 was $168000.

Robert Klein: Looking forward to Q2, we anticipate the figure to be between $150,000 and $250,000 depending on the timing of projects. As stated on our Q4 earnings call, we expect total cash G&A expense to be between $10.5 million and $11 million for the full year 2025. We continue to prioritize decreasing cash G&A as a percentage of revenue on an annual basis. Our Board of Directors has approved a quarterly dividend of $0.2425 per share, representing a 1% increase from the Q1 2024 dividend and remains well covered by AFFO. We continue to strengthen our position as the market leader in the postal real estate space as we execute our business plan of acquiring new assets and improving the cash flow.

Rob: Looking forward to Q2, we anticipate the figure to be between 150002 hundred $50000, depending on the timing of projects.

Rob: As stated on our Q4 earnings call. We expect total cash G&A expense to be between $10 $5 million and $11 million for the full year 2025.

Rob: We continued to prioritize decreasing cash G&A as a percentage of revenue on an annual basis.

Rob: Our board of Directors has approved a quarterly dividend of <unk> 24.25 per share representing a 1% increase from the Q1 2024 dividend and remains well covered by F O.

Rob: We continue to strengthen our position as the market leader in the postal real estate space as we execute our business plan of acquiring new assets and improving the cash flow.

Speaker Change: This concludes our prepared remarks, operator, we'd like to open the call for questions.

Robert Klein: This concludes our prepared remarks.

Operator: Operator, we'd like to open the call for questions. Thank you. We will now be conducting a question and answer session.

Rob: Thank you.

Rob: We will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Operator: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question. You may press star 2 if you would like to remove your questions from the Q&A. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Rob: Confirmation tone will indicate your line is in the question queue.

Rob: You May press Star two if you would like to remove your questions from the queue.

Rob: For participants using speaker equipment it may.

Rob: To be necessary to pick up your handset before pressing the stock East one moment, please while we poll for questions.

Operator: One moment please while we poll for questions.

Rob: Yeah.

Jonathan Petersen: The first question comes from the line of Jon Petersen with Jeffries, please go ahead. Good morning, guys. Congrats on all the lease renewals and being done for 2025. Can you give us, I apologize if I missed this, but can you give us the gap in cash leasing spreads on the 25 lease renewals? And then in the press release, you said you've already agreed to rent for 26. So can you give us some indication of what the leasing spreads will be?

Speaker Change: The first question comes from the line of Jon Petersen with Jefferies. Please go ahead.

Speaker Change: Good morning, guys. Congrats on all the lease renewals and being done for 2025 can you give us a apologize if I missed this but can you give us the GAAP and cash leasing spreads on the 25 lease renewals and then in the press release, you said you've already agreed to rents for 26. So can you give us some.

Speaker Change: Indication of what the leasing spreads will be into next year.

Speaker Change: Okay.

Speaker Change: Yes.

Jeremy Garber: Hey John, this is Jeremy. As you know, we historically haven't provided leasing spreads. We have been putting out our same store numbers for the past few quarters and have an estimate for 2025.

Speaker Change: Hey, Jon this is Jeremy.

Speaker Change: As you know, we historically haven't provided leasing spreads.

Speaker Change: We have been putting out our same store numbers for the past.

Speaker Change: A few quarters.

Speaker Change: And have an estimate for 2025.

Speaker Change: Yeah.

Speaker Change: Okay, Alright, that's fine.

Jonathan Petersen: You mentioned productive conversations in Washington, D.C. around DOJ and support for the USPS. Can you talk a little bit more about that? Are there any specific things that you're worried about? Or maybe on the flip side, are there some opportunities that would come from more focus on the budget and maybe improving efficiencies at the end of the year? Yeah, so we we get this question a lot, John.

Speaker Change: You mentioned Congress productive conversations in Washington D. C. You know around around does and kind of support for the U S. P. S.

Speaker Change: Can you talk a little bit more about that I mean, there are there any specific things that you're.

Speaker Change: You're worried about or or maybe on the flip side are there some opportunities that would come from.

Speaker Change: No more focused on on the budget and and maybe improving efficiencies at the post office.

Speaker Change: Yes, so we get this question a lot John.

Andrew: John This is Andrew.

Andrew Spodek: This is Andrew. Look, as I'm sure everybody can imagine, we are constantly monitoring any and all news regarding DOJ and the Postal Service and speaking with members of Congress. But the reality is not much has been said. There really hasn't been anything material said or done as it relates to the Postal Service and DOJ. What we do know is that, you know, we're working very efficiently with the leasing department at the Postal Service, and we've been working with the same people there for the same few years. Their focus is the same as it has been, which is securing these facilities, executing leases, getting them done before lease expiration, which we've been very successful in working with them to get done.

Andrew: Look as Im sure everybody can imagine we are constantly.

Andrew: Constantly monitoring any at all news.

Andrew: Regarding dose and the postal service.

Andrew: And speaking with members of Congress.

Andrew: But the reality is not much has been said there really hasn't been anything material.

Andrew: <unk> said or done as it relates to the postal service and dose.

Andrew: Hmm.

Andrew: What we do know is that you know.

Andrew: We're working very efficiently with the leasing department at the postal service.

Andrew: And we've been working with the same people there for the same few years.

Andrew: Their focus is the same.

Andrew: As it has been.

Andrew: Which is securing these facilities executing leases getting them done before at least ex exploration.

Andrew: Which we've been very successful in working with them to get done.

Andrew Spodek: We've been able to secure these properties for 10-year lease terms. So all indications that we've been having working with the Postal Service is kind of business as usual, and really just moving. toward with trying to make this leasing process as efficient as possible. I do believe that DOJ looking at the postal service may bring about some opportunities. But it's yet to be seen. And we're looking forward to them as they present.

Andrew: To secure these properties for 10 for 10 year lease terms.

Andrew: So all indications that we've been having working with the postal service is a kind of business as usual.

Andrew: And really just moving.

Andrew: Toward with trying to make this leasing process as efficient as possible I do believe that a dose looking at the postal service may bring about some some opportunities.

Andrew: But it's yes, it's yet to be seen and we'll look and we're looking forward to them as as they present themselves.

Andrew: Great Alright, that's all for me thank you.

Jonathan Petersen: Alright, that's all from me. Thank you.

Andrew: Thank you.

Thank you next question comes from the line of.

Steven Dumanski: Next question comes to the line of Steve Dunaski with Jenny Montgomery Scott. Please go ahead. Good morning, gentlemen. Approximately 32% of the portfolio is currently subjected to 3% annual rent escalators. So firstly, congratulations on your diligent efforts in executing these leases, incorporating the increases. Just wanted to see, do you have the potential figure of what is attainable for the overall portfolio to have these annual increases by year end, in terms of a targeted percentage?

Steve do <unk> Janney Montgomery Scott. Please go ahead.

Andrew: Good morning, gentlemen, approximately 32% of the portfolio is currently subject to a 3% annual rent escalators. So firstly congratulations on your diligent efforts in executing these leases incorporating the increases just wanted to see do you have to potential figure what is attainable for the overall portfolio to have these annual increase.

Andrew: By yearend in terms of a targeted percentage.

Andrew: Yeah.

Jeremy Garber: Hi, just to clarify, our lease structure today is 56% of the portfolio when all 2025 and 2026s are executed will contain rent escalations. The 32% number is the percentage of leases that are 10-year in term. Thank you. Thank you for correcting me. I appreciate it. Mr. Janoski, are you done with the question? Yes, yes, that's all. Thank you.

Yeah, Hi, just to clarify.

Andrew: Our lease structure today is 50, 56% of the portfolio. When all 2025 and 2020 six's are executed will contain rent escalations. The 32% number is the percentage of leases are 10 year term.

Speaker Change: Thank you and thank you for correcting I appreciate it.

Mr. Talansky: Mr. Talansky are you done with your question.

Speaker Change: Yes, yes, that's all for me.

Speaker Change: Thank you.

Speaker Change: A reminder to all the participants that do my best Star one to ask a question.

Operator: A reminder to all the participants that you may press star and 1 to ask a question. Once again, a reminder to all the participants that you may press star and 1 to ask a question.

Speaker Change: Okay.

Speaker Change: Once again.

Speaker Change: A reminder to all the participants that do my best starter and wanted to ask a question.

Speaker Change: Okay.

Speaker Change: Next question comes from the line of Barry Oxford.

Barry Oxford: Next question comes from the line of Barry Oxford with Colliers. Please go ahead. Thanks guys.

Collier: Collier. Please go ahead.

Barry Oxford: Oh, Thanks, guys real quick could you talk about the cap rates that you're seeing in the marketplace right now has there been any.

Andrew Spodek: Real quick, could you talk about the cap rates that you're seeing in the marketplace right now? Has there been any real changes or are they kind of holding pretty steady from what you were seeing at the beginning? Appreciate the question, Barry. Cap rates have maintained, for the most part, where they have been. As we've articulated, we're looking to complete the year at or above a 7.5% capitalization rate. So closing Q1 at 7.6 is right within that range, and we expect that to continue. But we're very happy with the conversations we're having and the pipeline and deal flow that we are seeing.

Collier: Real changes.

Collier: Or are they kind of holding pretty steady from what you were seeing at the beginning of the year.

Collier: I appreciate the question Barry Yeah, Yeah cap cap rates have maintained.

Collier: For the most part where they have been as we've articulated we're looking to complete the year at or above 75% capitalization rate.

Collier: So closing Q1 at seven six is right within that range.

Collier: We expect that to continue but we're very happy with that.

Collier: The conversations we're having in the pipeline and deal flow that we are seeing.

Speaker Change: And Andrew I know you said this many times, but you know external factors in the economy generally.

Barry Oxford: And Andrew, I know you've said this many times, but, you know, external factors in the economy generally... don't affect the acquisition volume because people are selling for different reasons. Is it fair to say that that still remains true in regards to tariffs that look... You know, the people who are going to be selling just aren't making decisions. Yeah, I'm happy to say that we're really not affected by tariffs. and sellers, I don't believe, are particularly motivated by that as well. We have seen a big uptick in conversations and people considering selling their properties after the election, but I don't believe it's tied to tariffs or anything of the like.

Speaker Change: Don't affect the acquisition volume because people are selling for different reasons is it is it fair to say that that still remains true in regards to tariffs that look.

Speaker Change: You know the people who are going to be selling just aren't making decisions based on that.

Speaker Change: Yeah, I'm happy to say that we're really not affected by tariffs.

Speaker Change: And sellers I don't believe are particularly motivated by that as well.

Speaker Change: We have seen a big uptick in conversations and people considering selling their properties after the election.

Speaker Change: But I don't believe it's tied to tariffs or anything of the like most of the people that sell it typically are drawn to the liquidity.

Andrew Spodek: Most of the people that sell are typically drawn to the liquidity or a life event or for the people that are interested in the operating partnership units and diversifying themselves in our portfolio. As we said in the earnings call, I think as we've progressed our story, people are seeing the gap between what they're able to accomplish with their properties widening as opposed to what we're able to do within our portfolio and our platform.

Speaker Change: Or a life event or for the people that are interested in the operating partnership units and diversified themselves in our portfolio.

Speaker Change: You know as we said in the earnings call.

Speaker Change: As we progressed our story people are seeing the.

Speaker Change: The gap between what they are able to accomplish with their properties.

Speaker Change: Widening as opposed to what we're able to do within our portfolio and our platform.

Speaker Change: Right, Andrew you mentioned your underwriting and if.

Andrew Spodek: Andrew, you mentioned the underwriting, and if... We were, if. Capital I. were to get into an environment where the government might be reducing their real Footprint, again, capital I. Are you underwriting right now in regards to... taking extra care, for lack of a better word, to make sure that the properties that you're going after and acquiring are. For lack of a better word, mission critical. Yeah, we spend a lot of time, effort, focus on the properties that we buy and choosing them and underwriting them and we continue to do so. You know, we pass on deals every day and so the first and most critical component of everything we buy is our belief that the postal service either needs or wants to be in the facility that we're buying.

Speaker Change: We were yes.

Speaker Change: Capitalized capital left.

Speaker Change: Were to get into an environment, where the government might be reducing their real estate footprint again capitalized capital laugh.

Speaker Change: Are you underwriting right now in regards to <unk>.

Speaker Change: Taking extra care for lack of a better word to make sure that the properties that you're going after in acquiring are filled.

Speaker Change: For lack of a better word mission critical.

Speaker Change: Yeah, we spend a lot of time effort focus.

Speaker Change: Uh huh.

Speaker Change: The properties that we buy in and choosing them and underwriting them and we continue to do so.

Speaker Change: We pass on.

Speaker Change: Fields everyday and so.

Speaker Change: The first the most critical component of everything we buy is our belief that the postal service either needs or wants to be in the facility that we're buying.

Speaker Change: Second to that is the real estate and the value.

Andrew Spodek: Second to that is the real estate and the value. So we definitely are taking that into account but, you know, our numbers are our numbers, right? Having a 99 plus percent retention rate over the 10 plus years really speaks to that and we very strongly believe that, you know, in any version of the postal service that these properties are critical to their delivery business. They need these buildings in order to deliver to the American people, to touch the 169 million delivery points that they touch every day and so we very much view this as critical American infrastructure that we're investing in.

Speaker Change: So we definitely are taking taken that into account, but our numbers are our numbers right, having a 99% retention rate over the 10 plus years.

Speaker Change: Really speaks to that.

Speaker Change: And we very strongly believe that.

Speaker Change: In any version of the postal service that these properties are critical to their delivery business. They.

Speaker Change: They need these buildings in order to deliver to the American people to touch the $169 million delivery points that they touch every day.

Speaker Change: And so we very much view this as critical American infrastructure that we're investing in.

Speaker Change: Great. Thanks for the color guys.

Barry Oxford: Great. Thanks for the call, guys. I appreciate it, Barry. Yep. Thank you.

Speaker Change: I appreciate it Barry.

Speaker Change: Yep.

Speaker Change: Thank you next question comes from the line of Jon Petersen with Jefferies. Please go ahead.

Jonathan Petersen: Next question comes to the line of Jon Petersen with Jefferies. Please go ahead. Great, thanks. Hello again. I just want to follow up on acquisitions. You mentioned one of the acquisitions in OneQ, you used OP units, and it was from a buyer that you'd used OP or seller you'd used OP units for previously. Can you remind us in 2024, like what percent of acquisitions were funded with OP units?

Hello, again, just wanted to follow up on acquisitions, you mentioned one of the acquisitions and <unk> you used O P units and it was run by or that you'd used O. P are salaried used opioids for previously can you remind us in 2020 for like what percent of acquisitions were funded with O P units and I know it's probably.

Andrew Spodek: And I know it's probably an impossible thing to give guidance on, but maybe just some guideposts on how to think about how often you might use OP units on future acquisitions. Sure. So, you know, from our perspective, this currency is very, very valuable. It's valuable because it creates deal flow. And as I said in the script, you know, 75% of the deals that we do are done off market. And a lot of postal owners and sellers are driven to us because we have this currency, even if we don't use it to complete the transaction. On average, we're doing, you know, between 10 and 15% of our deal flow with the use of this currency.

Speaker Change: Impossible thing to give guidance on but maybe just some guideposts on how to think about how often you might use L. P units on future acquisitions.

Speaker Change: Sure. So you know from our perspective.

Speaker Change: Currency is very very valuable.

Speaker Change: It's valuable because it creates deal flow and as I said in the script, 75% of the deals that we do are done off market and a lot of.

Speaker Change: Postal owners and sellers are driven to us because we have this currency, even if we don't use it.

Speaker Change: To complete the transaction.

Speaker Change: On average we're doing you know between 10 and 15%.

Speaker Change: <unk> of our deal flow with the use of this currency very often transactions are done with a portion of cash and a portion of the currency.

Andrew Spodek: Very often, transactions are done with a portion cash and a portion of the currency. It's a very valuable tool for people. It's very flexible and accommodating for estate planning, especially because the average owners in this space are in their 60s to 80s. But we only use the Operating Partnership Unit when it makes sense to us. And that is based on stock price, that is based on the transaction. And so we take all those variables into account when we're deciding whether we're going to transact using Operating Partnership.

Speaker Change: It's a very valuable tool for people that is very flexible and accommodating for estate planning.

Speaker Change: Because the average owners in this space are under 60 to 80.

Speaker Change: But we only use the operating partnership unit when it makes sense to us and that is based on stock price that is based on the transaction.

Speaker Change: So we take all those variables into account when we're deciding whether we're going to transact using operating partnership units.

Speaker Change: Okay.

Jonathan Petersen: All right. Thank you.

Speaker Change: Alright. Thank you that's all.

Jonathan Petersen: That's all. Thank you.

Speaker Change: Thank you John.

Speaker Change: Thank you.

Operator: Ladies and gentlemen, we have reached the end of question and answer session.

Speaker Change: Ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to <unk> for closing comments.

Andrew Spodek: I would now like to turn the floor over to Andrew Spodek for closing comments. Thank you. And on behalf of the entire team, thank you all for your continued support and for taking the time to join us.

Speaker Change: Thank you and on behalf of the entire team. Thank you all for your continued support and for taking the time to join us today.

Andrew Spodek: Have a great day. Thank you.

Speaker Change: Have a great day.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].