POSTAL
REALTY
TRUST
April 28, 2022
Dear Fellow Stockholders:
2021 was an extremely productive year for Postal Realty Trust. We continued to execute on our growth plan, as
the characteristics that first enticed us to start investing in United States Postal Service (“USPS”) assets, decades ago,
remain as relevant as ever today. During the year, we acquired 239 properties within the USPS logistics network for
approximately $118 million, exceeding our $100 million acquisition target for the second consecutive year. We also
take great pride that nearly three-quarters of our 2021 acquisitions were sourced off-market, demonstrating our unique
access in the industry which we have developed over the last 30 years. We also further improved our liquidity position
and financial flexibility throughout the year as we issued growth equity and enhanced our borrowing capacity through
a new $150 million senior unsecured revolving credit facility and a $50 million senior unsecured term loan. These
steps have provided us with the capacity to invest in our platform and effectively scale the business through additional
accretive acquisitions. The success of our investment strategy has resulted in consistent FFO and dividend growth,
and I am pleased that we increased our dividend for the eleventh consecutive quarter since our IPO. I am extremely
proud of the success we had in 2021, and I remain confident in our continued success.
The USPS has proven to be an incredibly stable tenant across every economic cycle. They pay their rent and
pay it on time, they rarely relocate, and they have created an irreplaceable logistics network that includes critical
infrastructure to support the ever-growing eCommerce industry. We have a favorable lease structure in place as the
tenant is responsible for the majority of expenses and the average five-year lease term provides us with the opportunity
to reset rents to market rents at lease renewal. On April 6, 2022, the Postal Service Reform Act of 2022 was signed into
law which will overhaul the USPS’ finances and delivery services, further ensuring its continued endurance. This law
is expected to save the USPS nearly $50 billion over the next decade by reforming health benefits, shifting much of the
retiree benefits to Medicare, and repealing the requirement that the USPS prepay future retirement health benefits. We
are very encouraged by this and believe this law provides further validation of the importance of the USPS to America’s
infrastructure and to our business strategy of aggregating the properties that support these important services.
Our position as a leading consolidator in the industry enables us to take advantage of this large, fragmented
logistics network to build out our pipeline of opportunities in our efforts to maximize long-term value for shareholders.
We continue to see tremendous interest from potential sellers who understand the value proposition in working with
us. In addition to expanding our portfolio of postal assets, we recently acquired Real Estate Asset Counseling, Inc.
(REAC), a highly regarded consulting firm in the postal real estate industry, that brings decades of experience,
relationships, and proprietary data under our umbrella, strengthens our competitive advantage within the industry and
adds additional insight and understanding to our sourcing and underwriting of postal properties. We look forward to
REAC joining our team and contributing value to our consolidation strategy.
Postal Realty Trust is the largest owner of properties leased to the USPS, with about a 5% market share, and
we believe the next top 20 portfolio owners combined only own about an 11% share. With our strong network, we are
well-positioned to find attractive properties in this highly fragmented market. As we grow our portfolio, we continue
to acquire last-mile, flex and industrial assets that we believe are important to the USPS. We target assets across the
entire USPS network, with last-mile and flex properties accounting for the majority of investment volumes, while we
opportunistically acquire industrial assets. Traditionally we have focused on last-mile and flex acquisitions, which we
view as the backbone of the USPS. Of the 239 properties we acquired in 2021, 148 were last-mile, 87 were flex, and
4 were industrial, and as of March 7, 2022, we have acquired 26 last-mile properties and 12 flex properties for nearly
$12 million.
During 2021, we once again collected 100% of our rents, maintained an occupancy rate for our portfolio greater
than 99% and effectively managed our lease expirations for the year. Over the past 10+ years, we and our predecessors
have maintained a historical weighted average lease retention rate north of 98%, demonstrating the importance of these
buildings to the USPS. Since our May 2019 IPO, we have grown our annualized base rent by 348% and our interior
square feet by over five times. Our strong results have led the Board of Directors to approve further increases to our
dividend, which currently annualizes to $0.92 per share, and has increased every quarter since our IPO.
We continue to be well-positioned to execute on our consolidation strategy of USPS assets. Over the last two years,
we have completed over $100 million in annual acquisitions, and while we are seeing cap rate compression from last
year, with our extensive network and robust pipeline, we once again are targeting to achieve over $100 million dollars
in acquisitions for 2022. We thank you for your continued confidence and support, and we look forward to sharing
additional details of our growth and progress throughout the year.
Respectfully,
Andrew Spodek
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file no: 001-38903
POSTAL REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
83-2586114
(IRS Employer
Identification No.)
75 Columbia Avenue
Cedarhurst, NY 11516
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (516) 295-7820
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Class A Common Stock, par value
$0.01 per share
Trading Symbol
PSTL
Name of Each Exchange on Which
Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☒
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate
market value of the registrant’s Class A common stock held by non-affiliates of the registrant was approximately $229.1
million, based on the closing sales price of $18.24 per share as reported on the New York Stock Exchange.
As of March 11, 2022, the registrant had 18,765,423 shares of Class A common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement for the 2022 Annual Meeting of Shareholders (to be filed with the
Securities and Exchange Commission no later than 120 days after the end of the registrant’s fiscal year end) are incorporated by
reference in this Annual Report on Form 10-K in response to Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14.
POSTAL REALTY TRUST, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021
TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
ITEM 1.
BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
PROPERTIES
ITEM 3.
LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART I
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.
RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
PART IV
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of federal securities
laws. These forward-looking statements are included throughout this Annual Report on Form 10-K, including in the sections
entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Business”, and relate to matters such as our industry, business strategy, goals and expectations concerning our market position,
future operations, margins, profitability, capital expenditures, financial condition, liquidity, capital resources, cash flows, results
of operations and other financial and operating information. We have used the words “approximately,” “anticipate,” “assume,”
“believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “outlook,” “plan,”
“potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking
statements in this Annual Report on Form 10-K.
Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions
of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and
we may not be able to realize them. In addition, important factors that could cause actual results to differ materially from such
forward-looking statements include the risk factors in Item 1A. “Risk Factors” and elsewhere in this Annual Report on Form
10-K. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. New risks
and uncertainties arise from time to time, and we cannot predict those events or how they might affect us. We assume no
obligation to update any forward-looking statements after the date of this Annual Report on Form 10-K, except as required by
applicable law. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as
a prediction of actual results.
When we use the terms “we,” “us,” “our,” the “Company” and “our company” in this Annual Report on Form 10-K,
we are referring to Postal Realty Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including
Postal Realty LP, a Delaware limited partnership, of which we are the sole general partner and which we refer to as our
"Operating Partnership.”
All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ
materially from those that we are expecting, including:
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change in the status of the United States Postal Service (the "USPS") as an independent agency of the executive
branch of the U.S. federal government;
change in the demand for postal services delivered by the USPS;
our ability to come to an agreement with the USPS regarding new leases or lease renewals;
the solvency and financial health of the USPS;
defaults on, early terminations of or non-renewal of leases or relocation of postal offices by the USPS;
the competitive market in which we operate;
changes in the availability of acquisition opportunities;
our inability to successfully complete real estate acquisitions or dispositions on the terms and timing we expect, or
at all;
our failure to successfully operate developed and acquired properties;
adverse economic or real estate developments, either nationally or in the markets in which our properties are
located;
decreased rental rates or increased vacancy rates;
change in our business, financing or investment strategy or the markets in which we operate;
fluctuations in interest rates and increased operating costs;
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changes in the method pursuant to which reference rates are determined and the elimination of the London Inter-
Bank Offered Rate ("LIBOR") after June 2023;
general economic conditions (including uncertainty regarding ongoing conflict between Russia and Ukraine and
the related impact on macroeconomic conditions);
financial market fluctuations;
our failure to generate sufficient cash flows to service our outstanding indebtedness;
our failure to obtain necessary outside financing on favorable terms or at all;
failure to hedge effectively against interest rate changes;
our reliance on key personnel whose continued service is not guaranteed;
the outcome of claims and litigation involving or affecting us;
changes in real estate, taxation, zoning laws and other legislation and government activity and changes to real
property tax rates and the taxation of real estate investment trusts (“REITs”) in general;
operations through joint ventures and reliance on or disputes with co-venturers;
cybersecurity threats;
uncertainties and risks related to adverse weather conditions, natural disasters and climate change;
exposure to liability relating to environmental and health and safety matters;
governmental approvals, actions and initiatives, including the need for compliance with environmental
requirements;
lack or insufficient amounts of insurance;
limitations imposed on our business in order to qualify and maintain our status as a REIT and our failure to qualify
or maintain such status;
public health threats such as the coronavirus (COVID-19) pandemic; and
additional factors discussed under the sections captioned Item 1A. “Risk Factors,” Item 7. “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and Item 1. “Business.”
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ITEM 1. BUSINESS
General
PART I
We are an internally managed REIT with a focus on acquiring and managing properties leased primarily to the USPS,
ranging from last mile post offices to larger industrial facilities. We believe that we are the largest owner and manager,
measured by net leasable square footage, of properties that are leased to the USPS.
We were organized in the state of Maryland on November 19, 2018 and commenced operations upon completion of
our initial public offering ("IPO") on May 17, 2019 and the related formation transactions (the "Formation Transactions"). Our
Class A common stock trades on the New York Stock Exchange (the "NYSE") under the symbol “PSTL”.
We elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with our short tax year ended
December 31, 2019.
We conduct our business through a traditional UPREIT structure in which our properties are owned by our Operating
Partnership directly or through limited partnerships, limited liability companies or other subsidiaries. We are the sole general
partner of our Operating Partnership through which our properties are directly or indirectly owned. As of December 31, 2021,
we owned approximately 82.9% of the outstanding common units of limited partnership interest in our Operating Partnership
(the “OP Units”), including long term incentive units of our Operating Partnership (the “LTIP Units”). Our Board of Directors
oversees our business and affairs.
Real Estate Investments
As of December 31, 2021, we had investments of approximately $343.7 million in 966 real estate properties (including
two properties accounted for as financing leases). The properties are located in 49 states, totaling approximately 4.5 million net
leasable interior square feet in the aggregate and were 99.6% occupied as of December 31, 2021 with a weighted average
remaining lease term of approximately four years. As of December 31, 2021, we manage, through our taxable REIT subsidiary
("TRS"), an additional 397 properties owned by our chief executive officer, Andrew Spodek, and his affiliates. We have a right
of first offer to purchase 250 of our 397 managed properties.
The majority of our leases are modified double-net leases, whereby the USPS is responsible for utilities, routine
maintenance and reimbursement of property taxes and the landlord is responsible for insurance, roof and structure. We believe
this structure helps insulate us from increases in certain operating expenses and provides a more predictable cash flow. We
believe the overall opportunity for consolidation that exists within the postal logistics network is very attractive. We continue to
execute our strategy to acquire and consolidate postal properties that we believe will generate strong earnings for our
shareholders.
2021 Highlights
• We collected 100% of our rents and our owned portfolio was 99.6% occupied as of December 31, 2021.
• We acquired 239 properties (including one property accounted for as a financing lease) leased primarily to the
USPS totaling approximately 1.8 million net leasable interior square feet, for approximately $118 million,
excluding closing costs.
• We completed follow-on offerings of 3,737,500 shares of our Class A common stock in January 2021 and
4,887,500 shares of our Class A common stock in November 2021, raising approximately $57.0 million and
$83.1 million in gross proceeds, respectively. We also issued 344,717 shares under our at-the-market equity
offering program ("ATM Program") during 2021, raising approximately $6.9 million in gross proceeds.
•
In August 2021, we entered into a $150.0 million senior unsecured revolving credit facility and a $50.0 million
senior unsecured term loan facility (together, the "2021 Credit Facilities") and paid off our previous revolving
credit facility (the "2019 Credit Facility"). We also entered into an interest rate swap (the "2021 Interest Rate
Swap") that effectively fixed the LIBOR component of the interest rate on $50.0 million portion of the 2021
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Credit Facilities through January 2027. In addition, we repaid two mortgage loans in the aggregate amount of
$13.7 million and amended several other mortgage loans to reduce their interest rates.
Dividends
• We have increased our quarterly dividend from $0.2175 for the fourth quarter 2020 dividend to $0.2275 for the
fourth quarter 2021 dividend. Our dividend per share has increased for the past ten consecutive quarters. Although
we expect to continue our policy of paying regular dividends, we cannot guarantee that we will maintain our
current level of dividends, that we will continue our recent pattern of increasing dividends per share or what our
actual dividend yield will be in any future period.
Tenant Concentration
We acquire and manage postal properties and report our business as a single reportable segment. Our properties are
leased primarily to the USPS. See the discussions under Item 1A. "Risk Factors—Risks Related to the USPS". In this Annual
Report, we make reference to certain financial and operational data in the public reports of the USPS filed with the Postal
Regulatory Commission (the "PRC"), available at www.usps.com or www.prc.gov. Information on, or accessible through, the
USPS’ website or the PRC’s website is not a part of, and is not incorporated into, this Annual Report or any other filing we file
or furnish with the Securities and Exchange Commission (the “SEC”).
Government Regulations
Compliance with various governmental regulations has an impact on our business, including our capital expenditures,
earnings, and competitive position. The impact of these governmental regulations can be material to our business. We incur
costs to monitor and take action to comply with governmental regulations that are applicable to our business, which include,
among others: federal securities laws and regulations; REIT and other tax laws and regulations; environmental and health and
safety laws and regulations; legal requirements for federal government contractors; local zoning, usage and other regulations
relating to real property; and the Americans with Disabilities Act of 1990, as amended (the "ADA").
Our properties must comply with Title III of the ADA to the extent that such properties are “public accommodations”
as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain
public areas of our properties where such removal is readily achievable. We believe the existing properties are in substantial
compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements
of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private
litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our
properties and to make alterations as appropriate in this respect.
Human Capital Resource Management
As of December 31, 2021, we employed 37 full-time employees. Our employees are primarily located at our corporate
office in Cedarhurst, New York. Our employees are not members of any labor union, and we consider our relations with our
employees to be satisfactory. As of December 31, 2021, 35% of our employees, 21% of our named executive officers and key
employees (defined as all employees with a title of vice president and higher) and 20% of the members of our Board of
Directors were female.
We endeavor to maintain workplaces that are free from discrimination or harassment on the basis of color, race, sex,
national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression or any other status
protected by applicable law. The basis for recruitment, hiring, development, training, compensation and advancement at the
Company is qualifications, performance, skills and experience. We believe our employees are fairly compensated, and
compensation and promotion decisions are made without regard to gender, race and ethnicity. Employees are routinely
recognized for outstanding performance.
Covid-19 Health and Safety
In response to the COVID-19 pandemic, we temporarily transitioned most of our employees to remote working,
without significant impact to productivity. We organized training programs to ensure that all employees were prepared to
complete tasks remotely. We have since reopened our corporate office with continued workforce flexibility to promote
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employee safety. At our corporate office, we provide cleaning supplies and facial coverings to all employees and visitors who
chose to work in the office, among other safety measures to help reduce the potential transmission of the disease.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, as a current or former owner of real property,
we may be liable for costs of the removal or remediation of certain hazardous substances, waste or petroleum products at, on, in
or under the properties that we own, including costs for investigation or remediation, natural resource damages or third-party
liability for personal injury or property damage. These laws often impose liability without regard to fault including whether the
owner or operator knew of, or were responsible for, the presence or release of such materials. Some of our properties may be
impacted by contamination arising from current or prior uses of the property or adjacent properties for commercial, industrial or
other purposes.
Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the
restrictions on discharges or other conditions may result in significant unanticipated expenditures or may otherwise adversely
affect the operations of the tenants of our properties, which could materially and adversely affect us. We maintain an insurance
policy for environmental liabilities at all of our properties. However, any potential or existing environmental contamination
liabilities may be in excess of the coverage limits of, or not covered by, such insurance policy. As a result, we may not be aware
of all potential or existing environmental contamination liabilities at the properties in our portfolio. As a result, we could
potentially incur material liability for these issues.
In addition, some of our buildings may contain lead-based paint or asbestos containing materials or may contain or
develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or
property damage or costs for remediation. Indoor air quality issues can also stem from inadequate ventilation, chemical
contamination from indoor or outdoor sources and other biological contaminants such as pollen, viruses and bacteria. Indoor
exposure to lead, asbestos, or airborne toxins or irritants above certain levels can be alleged to cause a variety of adverse health
effects and symptoms, including allergic or other reactions. As a result, the presence of lead, asbestos, mold or other airborne
contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold
or other airborne contaminants from the affected property or increase indoor ventilation. In addition, the presence of lead,
asbestos, mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants or others
if property damage or personal injury occurs. We are not presently aware of any material adverse indoor air quality issues at our
properties.
Availability of Reports Filed with the Securities and Exchange Commission
A copy of this Annual Report on Form 10-K, as well as our quarterly reports on Form 10-Q, current reports on
Form 8-K and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), are available, free of charge, on our Internet website (www.postalrealty.com).
All of these reports are made available on our website as soon as reasonably practicable after they are electronically filed with
or furnished to the SEC. Our Corporate Governance Guidelines and Code of Business Conduct and Ethics and the charters of
the Audit and Corporate Governance and Compensation Committees of our Board of Directors are also available on our website
at https://investor.postalrealtytrust.com/govdocs, and are available in print to any stockholder upon written request to Postal
Realty Trust, Inc. c/o Investor Relations, 75 Columbia Avenue, Cedarhurst, New York 11516. Our telephone number is
(516) 295-7820. The information on or accessible through our website is not, and shall not be deemed to be, a part of this
Annual Report or incorporated into any other filing we file or furnish with the SEC. The SEC also maintains a website that
contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov.
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ITEM 1A. RISK FACTORS
Risk Factor Summary
Risks Related to the USPS
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Our business is substantially dependent on the demand for leased postal properties.
The USPS’ inability to meet its financial obligations may have a material adverse effect on our business.
The USPS has a substantial amount of indebtedness.
The USPS is subject to congressional oversight and regulation by the PRC and other agencies.
Intense competition faced by the USPS.
The USPS’ potential insolvency, inability to pay rent or bankruptcy.
Our properties may have a higher risk of terrorist attacks.
Changes in leadership, structure, operations and strategy within the USPS may disrupt our business.
Litigation involving the USPS may disrupt our business.
Risks Related to Our Business Operations
Concentration of our postal properties in certain regions.
Property vacancies could result in significant capital expenditures and illiquidity.
As of March 11, 2022, the leases at 10 of our properties were expired.
Our use of OP Units as consideration to acquire properties.
Postal properties are illiquid.
Our real estate taxes for properties where we are not reimbursed could increase.
Increases in interest rates or unavailability of debt financing.
Phasing out of LIBOR after June 2023 may affect our financial results.
Failure to comply with covenants in our debt instruments could adversely affect our financial condition.
Failure to hedge effectively against interest rate changes may have a material adverse effect on our business.
Our success depends on key personnel whose continued service is not guaranteed.
Risks associated with joint venture investments.
Our growth depends on external sources of capital.
• We may be unable to acquire and/or manage additional USPS-leased properties at competitive prices or at all.
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• We may be unable to renew leases or sell vacated properties on favorable terms, or at all, as leases expire.
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• Mortgage debt obligations expose us to the possibility of foreclosure.
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• We could incur significant costs and liabilities related to environmental matters.
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Our properties may contain or develop harmful mold or suffer from other air quality issues.
• We are subject to risks from natural disasters and the risks associated with climate change.
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• We may not be able to adapt to potential new business models.
• We have acquired properties that are subject to purchase options in favor of the USPS.
• We may incur goodwill and other intangible asset impairment charges.
• We may have difficulty implementing changes to our information technology systems.
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Our properties may be subject to impairment charges.
Our title insurance policies may not cover all title defects.
Significant costs for complying with various federal, state and local laws, regulations and covenants.
Use of social media may adversely impact our reputation and business.
Risks Related to Our Organizational Structure
• Mr. Spodek and his affiliates own, directly or indirectly, a substantial beneficial interest in our company.
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Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the
interests of holders of units in our Operating Partnership.
Our charter contains certain provisions restricting the ownership and transfer of our stock.
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• We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock
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without stockholder approval.
Certain provisions of the Maryland General Corporation Law could inhibit changes of control.
Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent unsolicited
acquisitions of us.
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Tax protection agreements may limit our ability to sell or otherwise dispose of certain properties and may require
our Operating Partnership to maintain certain debt levels that otherwise would not be required.
Our Board of Directors may change our strategies, policies and procedures without stockholder approval, and we
may become more highly leveraged, which may increase our risk of default under our debt obligations.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
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• We are a holding company with no direct operations, and the interests of our stockholders are structurally
subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries.
Our Operating Partnership may issue additional OP Units to third parties without the consent of our stockholders.
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Risks Related to Our Status as a REIT
Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation.
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Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
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Failure to make required distributions would subject us to federal corporate income tax.
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Complying with REIT requirements may cause us to forego certain opportunities or investments.
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The prohibited transactions tax may limit our ability to dispose of our properties.
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• We could be affected by tax liabilities or earnings and profits of our predecessor.
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There are uncertainties relating to the estimate of the accumulated earnings and profits attributable to United
Postal Holdings, Inc.
A sale of assets acquired as part of the merger between us and United Postal Holdings, Inc. within five years after
the merger would result in corporate income tax.
The ability of our Board of Directors to revoke our REIT qualification without stockholder approval.
Our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if
those transactions are not conducted on arm’s-length terms.
You may be restricted from acquiring or transferring certain amounts of our Class A common stock.
Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular
corporations.
If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to
qualify as a REIT.
To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions or on
unfavorable terms at desired times.
Covenants in our debt instruments may restrict our ability to pay distributions.
New legislation or administrative or judicial action could adversely affect us or our stockholders.
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General Risk Factors
An increase in market interest rates may have an adverse effect on the market price of our securities.
Inflation may adversely affect our financial condition and results of operations.
Changes in accounting pronouncements could adversely impact our reported financial performance.
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• We could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal
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control over financial reporting.
Future offerings of equity securities may adversely affect the market price of our Class A common stock.
The market price of our Class A common stock has been, and may continue to be, volatile and has declined, and
may continue to decline.
Future sales of our Class A common stock, preferred stock, or securities convertible into or exchangeable or
exercisable for our Class A common stock could depress the market price of our Class A common stock.
• We face cybersecurity risks and risks associated with security breaches.
The following risk factors may adversely affect our overall business, financial condition, results of operations, cash flows and
prospects; our ability to make distributions to our stockholders; our access to capital; or the market price of our Class A
common stock, as further described in each risk factor below. In addition to the information set forth herein, in this Annual
Report on Form 10-K, one should carefully review and consider the information contained in our other reports and periodic
filings that we make with the SEC. Those risk factors could materially affect our overall business, financial condition, results of
operations, cash flows and prospects; our ability to make distributions to our stockholders; our access to capital; or the market
price of our Class A common stock. The risks that we describe in our public filings are not the only risks that we face.
Additional risks and uncertainties not presently known to us, or that we currently consider immaterial, also may materially
adversely affect our business, financial condition, results of operations, cash flows and prospects. Additional information
regarding forward-looking statements is included herein.
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Our business is substantially dependent on the demand for leased postal properties.
Risks Related to the USPS
Any significant decrease in the demand for leased postal properties could have a material adverse effect on our
business. The number of retail postal locations nationwide has been decreasing over the prior decade. Additionally, on March
23, 2021, the USPS released a ten-year plan entitled Delivering for America: Our Vision and Ten-Year Plan to Achieve
Financial Sustainability and Service Excellence (the “Ten-Year Plan”), which includes evaluating the facility consolidations
that were deferred in 2015 and potentially consolidating the facilities that remain underutilized. Consolidation of our postal
properties would materially adversely affect our operations. Further reductions in the number of postal properties could result in
entering into leases with the USPS in the future on less favorable terms than current leases, the failure of the USPS to renew
leases or the termination by the USPS of existing leases for our properties and the reduction of the number of acquisition
opportunities available to us. The level of demand for postal properties may be impacted by a variety of factors outside of our
control, including changes in U.S. federal government and USPS policies or funding, changes in population density, the health
and sustainability of local, regional and national economies, the existence of epidemics and pandemics, such as the ongoing
COVID-19 pandemic, and the demand and use of the USPS. Moreover, technological innovations, such as autonomous delivery
devices, may decrease the need for hand delivery or in-person pick up, thereby decreasing the demand for retail post offices. In
addition, package delivery service providers, such as FedEx, Amazon, UPS and DHL, begun implementing autonomous
delivery devices to assist retail companies with same-day and last-mile deliveries, in addition to publicly stating their intention
to expand their last-mile delivery capabilities. The development, implementation and broad adoption of these devices may
decrease the demand for postal services.
The USPS is facing legislative constraints that are hindering its ability to maintain adequate liquidity to sustain its
current operations. If the USPS’ revenues decrease due to reduced demand for postal services, then the USPS may reduce its
number of post office locations.
The USPS’ inability to meet its financial obligations may render it insolvent or increase the likelihood of Congressional or
regulatory reform of the USPS, which may have a material adverse effect on our business and operations.
A significant portion of the USPS’ liabilities consist of unfunded fixed benefits, such as pensions and healthcare, to
retired USPS workers. Although Congress regularly debates the future of the USPS, the USPS is unlikely to be able to retire its
existing liabilities without regulatory or Congressional relief. If the USPS becomes unable to meet its financial obligations,
many of our leases may be vacated by the USPS, which would have a material adverse effect on our business and operations.
Any Congressional or regulatory action that decreases demand by the USPS for leased postal properties would also have a
material adverse effect on our business and operations. We cannot predict whether any currently contemplated reforms or any
reforms pursued by the U.S. federal government will ultimately take effect and, if so, how such reforms would specifically
affect us.
The USPS has a substantial amount of indebtedness.
The USPS has significant outstanding debt obligations to the Federal Financing Bank (the “FFB”). On April 1, 1999,
the USPS entered into a Note Purchase Agreement, as amended (the "NPA"), with the FFB for the purpose of obtaining debt
financing. Under the NPA, FFB is required to purchase notes from the USPS meeting specified conditions, up to the established
maximum amounts, within five business days of delivery. The amount that the USPS borrows under the NPA varies from year
to year depending upon the needs of the organization. Historically, all of the USPS’ outstanding debt has been obtained through
the NPA. The most recent extension to the NPA, however, expired on August 31, 2019. If the USPS cannot reach acceptable
terms with FFB on an extension of the NPA, the USPS would need to seek debt financing through other means, either through
individual agreements with FFB (on terms that may differ from those set forth in the NPA) or from other sources. There can be
no assurance that the USPS will be able to extend the term of the NPA or obtain alternative debt financing on the terms or
timing that it expects, if at all. If the USPS is unable to extend the NPA with the FFB, the USPS may not be able to refinance
debt with the FFB in the future at comparable terms to those currently available.
The USPS also has a significant underfunded Postal Service Retiree Health Benefit Fund (the "PSRHBF") liability,
which the USPS is required to fund in future periods. Additionally, the USPS has underfunded retirement benefits amortization
payable to the Civil Service Retirement System (the "CSRS") and Federal Employees Retirement System (the "FERS") funds,
which the USPS is required to fund in future periods. On March 8, 2022, Congress passed the Postal Service Reform Act,
which may significantly alleviate the obligations of the USPS by repealing the requirement for USPS to pre-fund the PSRHBF,
forgiving the USPS' $57 billion outstanding liability under the PSRHBF and requiring future postal retirees to enroll in
Medicare, although the USPS’ substantial obligations under the NPA and the CSRS and FERS funds remain outstanding.
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The USPS’ significant debt and unpaid retirement obligations have in the past required, and could in the future require,
the USPS to dedicate a substantial portion of its cash flow from operations to payments on debt and retirement obligations, thus
reducing the availability of cash flow to fund operating expenses, including lease payments, working capital, capital
expenditures and other business activities. If the USPS becomes unable to meet its debt and other obligations, the USPS may
reduce its demand for leasing postal properties, which would have a material adverse effect on our business and operations.
The USPS is subject to congressional oversight and regulation by the PRC and other government agencies.
The USPS has a wide variety of stakeholders whose interests and needs are sometimes in conflict. The USPS operates
as an independent establishment of the executive branch of the U.S. government and, as a result, is subject to a variety of
regulations and other limitations applicable to federal agencies. The ability of the USPS to raise rates for its products and
services is subject to the regulatory oversight and approval of the PRC. Limitations on the USPS’ ability to take action could
adversely affect its operating and financial results, and as a result, reduce demand for leasing postal properties.
Furthermore, a change in the structure, mission, or leasing requirements of the USPS, a significant reduction in the
USPS’ workforce, relocation of personnel resources or postal offices, other internal reorganization or a change in the post
offices occupying our properties would affect our lease renewal opportunities and have a material adverse effect on our
business. In addition, any change in the U.S. federal government’s treatment of the USPS as an independent agency, including,
but not limited to, the privatization of all or a portion of the USPS business operations, may have a material adverse effect on
our business.
The business and results of operations of the USPS are significantly affected by competition from both competitors in the
delivery marketplace as well as substitute products and digital communication.
Failure of the USPS to compete effectively and operate efficiently, grow marketing mail and package delivery services
and increase revenue and contribution from other sources will adversely impact the USPS’ financial condition and this adverse
impact will become more substantial over time. The USPS’ marketplace competitors include both local and national providers
of package delivery services. The USPS’ competitors have different cost structures and fewer regulatory restrictions and are
able to offer differing services and pricing, which may hinder the USPS’ ability to remain competitive in these service areas. In
addition, most of the USPS’ competitors have access to capital markets, which allows them greater flexibility in the financing
and expansion of their business. Customer usage of postal services continues to shift to substitute products and digital
communication. The use of e-mail and other forms of electronic communication have reduced first class mail volume, as have
electronic billing and payment. Marketing mail has recently experienced declines due to mailers’ growing use of digital
advertising including digital mobile advertising. The volume of periodicals services continues to decline as consumers
increasingly use electronic media for news and information. The growth in the USPS’ competitive service volumes, such as
Priority Mail, Priority Mail Express, First-Class Package Service, Parcel Select, Parcel Return Service and some types of
International Mail, is largely attributable to certain of the USPS’ largest customers, including UPS, FedEx and Amazon. Each
of these customers is building its own delivery capability that could enable it to divert volume away from the USPS over time.
If these customers divert significant volume away from the USPS, the growth in the USPS’ competitive service volumes may
not continue, and there may be reduced demand for leasing postal properties by the USPS.
The USPS’ potential insolvency, inability to pay rent or bankruptcy would have a material adverse effect on our financial
condition, results of operations, cash flow, cash available for distribution and our ability to service our debt obligations and
could result in our inability to continue as a going concern.
Default by the USPS is likely to cause a significant or complete reduction in the operating cash flow generated by our
properties. There can be no assurance that the USPS will be able to avoid insolvency, make timely rental payments or avoid
defaulting under or terminating its leases. If the USPS defaults, we may experience delays in enforcing our rights as landlord
and may incur substantial costs in protecting our investment. Because we depend on rental payments from the USPS, the
inability of the USPS to make its lease payments could adversely affect us and our ability to make distributions to our
stockholders.
Although we do not believe that bankruptcy protection under the United States bankruptcy code is available to the
USPS, the law is unclear. If the USPS were to file for bankruptcy, we would become a creditor, but we may not be able to
collect all or any of the pre-bankruptcy amounts owed to owe us by the USPS. In addition, if the USPS were to file for
bankruptcy protection, it potentially could terminate its leases with us under federal law, in which event we would have a
general unsecured claim against the USPS that would likely be worth less than the full amount owed to us for the remainder of
the lease term. This would have a severe adverse effect on our business, financial condition and results of operations.
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Implementation of the Ten-Year Plan proposed by the USPS could have a material adverse effect on our operations,
financial position and results of operations.
The USPS has published its Ten-Year Plan to address the challenges of the shift from traditional letter-mail to package
delivery, underperformance in processing, transportation, delivery and retail operations, failure to meet service performance
standards and a perilous and worsening financial situation that has resulted in significant losses. The strategic initiatives are
designed to reverse projected losses and to operate at a positive net income beginning in 2023 or 2024. Retail revenue has
decreased substantially since 2015. The Ten-Year Plan includes realignment, procurement of new facilities, expansion of
existing facilities and consolidation of underused facilities as well as modernization of retail lobbies to enable expanded digital,
small, medium-sized business and government services, which could affect our operations if our postal properties are
consolidated.
The extent to which the implementation of this Ten-Year Plan will affect our business, liquidity, financial condition,
and results of operations will depend on numerous factors that we may not be able to accurately predict or assess. Portions of
the Ten-Year Plan require Congressional approval, which we cannot predict at this time and there will be additional
conversations with stakeholders about implementation and changes to the Ten-Year Plan. USPS’ failure to implement the Ten-
Year Plan or receive Congressional approval may affect its ability to maintain adequate liquidity to sustain its current
operations, which may result in the USPS reducing its number of postal locations and adversely affecting our business and
results of operations.
Because the USPS is an independent agency of the U.S. federal government, our properties may have a higher risk of
terrorist attacks than similar properties leased to non-governmental tenants.
Terrorist attacks may materially adversely affect our operations, as well as directly or indirectly damage our assets,
both physically and financially. Because the USPS is, and is expected to continue to be, an independent agency of the U.S.
federal government, our properties are presumed to have a higher risk of terrorist attack than similar properties that are leased to
non-governmental affiliated tenants. Terrorist attacks, to the extent that these properties are uninsured or underinsured, could
have a material adverse effect on our business, financial condition and results of operations.
The ongoing COVID-19 pandemic and measures being taken to prevent its spread could negatively impact demand for
USPS services and postal properties which could have a material adverse effect on our business, results of operations and
financial condition.
The ongoing COVID-19 pandemic (including new or mutated variants of COVID-19) and measures being taken to
prevent its spread have resulted in, and continue to have, a material and unpredictable effect on the USPS’ operations and
liquidity, including a reduction in foot traffic in many postal properties, volatility in demand for mail services, significant
changes in the mix of mail and packages processed through the USPS’ network and significant additional operating expenses
caused by pandemic-related disruptions, which may adversely affect the USPS’ financial condition, and therefore the demand
for postal properties. Further, although the USPS received a $10 billion funding under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, there can be no assurances that this financing will be sufficient to sustain USPS operations in
light of current shortfalls resulting from reduced mail volumes. Moreover, two related bills proposed to provide the USPS with
alternate funding in the amounts of $25 billion or $10 billion failed to pass in the third quarter of 2020. Any reduction or
permanent changes to mail volume could reduce demand for postal properties by the USPS and materially adversely affect our
result of operations.
In addition, the USPS is dependent on the efforts of its employees, many of whom come into contact with a large
number of individuals on a daily basis. If USPS employees are unwilling or unable to report to work regularly because of the
ongoing COVID-19 pandemic and measures being taken to prevent its spread or USPS services are otherwise diminished as a
result of governmental response to the pandemic, the demand for USPS services or the reputation of the USPS may suffer,
leading to a reduced need for or relocation of postal properties and adversely affecting our business and results of operations.
Changes in leadership, structure, operations and strategy within the USPS may disrupt our business.
In May 2020, the USPS Board of Governors unanimously appointed Louis DeJoy as the Postmaster General. Mr.
DeJoy took office on June 15, 2020. As a part of the USPS' administrative restructuring since Mr. DeJoy’s appointment, the
USPS reassigned or displaced a number of postal executives and employees, instituted a temporary management hiring freeze
and requested early retirement for certain employees not represented by a collective bargaining agreement. Recently, the USPS
also announced a modified organizational structure for the USPS, which is designed to focus on three business operating units:
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(i) retail and delivery; (ii) logistics and processing; and (iii) commerce and business solutions, and centralization of certain
administrative support functions. As part of the modified organizational structure, logistics and mail processing operations will
report into the new Logistics and Processing Operations organization separate from existing area and district reporting
structures. This includes all mail processing facilities and local transportation network offices. These changes are being made in
an effort to reduce costs and it is possible that the USPS will implement additional changes to reduce expenses.
The extent to which these changes, among others, will affect our business, liquidity, financial condition, and results of
operations will depend on numerous evolving factors that we may not be able to accurately predict or assess. The USPS is
subject to legislative and other constraints which may affect its ability to maintain adequate liquidity to sustain its current
operations, which may result in the USPS reducing its number of postal locations and adversely affecting our business and
results of operations.
Litigation involving the USPS may disrupt our business.
As a result of the proposed and executed operational, managerial and strategic changes within the USPS, including the
Ten-Year Plan, the USPS is the focal point of significant public criticism and litigation. As of the date of this report, several
lawsuits have been filed and remain pending against the USPS pertaining to operational change at the USPS, such as higher
rates and slower deliveries for certain services. If, as a result of such criticism or litigation, the USPS suffers reputational or
financial harm or an increase in regulatory scrutiny, the demand for USPS services may decline, which may lead to reduced
demand for USPS properties. The results of these changes or any future changes could lead to additional delays or financing
shortfalls for the USPS.
Risks Related to Our Business and Operations
We may be unable to acquire and/or manage additional USPS-leased properties at competitive prices or at all.
A significant portion of our business plan is to acquire additional properties that are leased to the USPS. There are a
limited number of such properties, and we will have fewer opportunities to grow our investments than REITs that purchase
properties that are leased to a variety of tenants or that are not leased when they are acquired. In addition, the current ownership
of properties leased to the USPS is highly fragmented with the overwhelming majority of owners holding a single property. As
a result, we may need to expend significant resources to complete our due diligence and underwriting process on many
individual properties, thereby increasing our acquisition costs, lengthening the acquisition timeline and possibly reducing the
amount that we are able to pay for a particular property. Accordingly, our plan to grow our business largely by acquiring
additional properties that are leased to the USPS and managing properties leased to the USPS by third parties may not succeed.
We also face significant competition for acquisition opportunities for properties leased to the USPS from other market
participants, including private investment funds, individual investors and others, and, as a result, we may be unable to acquire a
desired property at competitive price, or at all. In addition, because of our public profile as the only publicly traded REIT
dedicated to USPS properties, our operations may generate new interest in USPS-leased properties from other REITs, real
estate companies and other investors with more resources than we have that did not previously focus on investment
opportunities with USPS-leased properties.
We currently have a concentration of postal properties in certain regions and are exposed to changes in regional or local
conditions in these states.
Our business may be adversely affected by regional or local conditions and events in the areas in which we operate,
particularly in Wisconsin, Pennsylvania, Kansas and Alabama, where many of our postal properties are concentrated.
Developments or conditions in these regions that may adversely affect our occupancy levels and renewals, our rental revenues,
our funds from operations or the value of our properties include the following, among others:
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downturns in economic conditions, including as a result of the COVID-19 pandemic;
unforeseen events beyond our control, including, among others, terrorist attacks and travel related health concerns
including pandemics and epidemics;
possible reduction of the USPS workforce or relocation of postal offices by the USPS; and
economic conditions that could cause an increase in our operating expenses, insurance and routine maintenance.
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We may be unable to renew leases or sell vacated properties on favorable terms, or at all, as leases expire, which could
materially adversely affect us.
We cannot assure you that any leases will be renewed or that vacated properties will be sold on favorable terms, or at
all. As of the date of this report, the USPS has vacated one property in our portfolio. For leases which include renewal options
that specify a maximum rate, the renewal may result in below-market lease rates over time. If we are subject to below-market
lease rates on a significant number of our properties, rental rates for our properties decrease, our existing tenants do not renew
their leases or we do not sell vacated properties on favorable terms, our financial condition, results of operations, cash flow,
cash available for distributions and our ability to service our debt obligations could be materially adversely affected.
Property vacancies could result in significant capital expenditures and illiquidity.
The loss of a tenant through lease expiration may require us to spend significant amounts of capital to renovate the
property before it is suitable for a new tenant. Substantially all of the properties we acquire are specifically suited to the
particular business of the USPS and, as a result, if the USPS vacates a property, does not renew its lease or decides to relocate a
postal office to another location, we may be required to renovate the property at substantial costs, decrease the rent we charge or
provide other concessions in order to lease the property to another tenant. In the event we are required or elect to sell the
property, we may have difficulty selling it to a party other than the USPS. This potential illiquidity may limit our ability to
quickly modify our portfolio in response to changes in economic or other conditions, which may materially and adversely affect
us.
As of March 11, 2022, the leases at 10 of our properties were expired and the USPS is occupying such properties as a
holdover tenant. If we are not successful in renewing these expired leases, we will likely experience reduced occupancy,
rental income and net operating income.
As of March 11, 2022, the leases at 10 of our properties (consisting of one property for which the lease expired as of
December 31, 2021 which we acquired in March 2022, and nine properties for which leases expired to date in 2022),
representing approximately 47,000 net leasable interior square feet and $0.4 million in annual contractual rental revenue, were
expired and the USPS is occupying such properties as a holdover tenant. When a lease expires, the USPS becomes a holdover
tenant on a month-to-month basis, typically paying the greater of estimated market rent or the rent amount under the expired
lease. While we currently anticipate that we will execute new leases for all properties that have expired or will expire, there can
be no guarantee that we will be successful in executing new leases, obtaining positive rent renewal spreads or renewing the
leases on terms comparable to those of the expiring leases. Even if we are able to renew these expired leases, the lease terms
may not be comparable to those of the previous leases. If we are not successful, we will likely experience reduced occupancy,
rental income and net operating income, as well as diminished borrowing capacity under our credit facilities, which could have
a material adverse effect on our financial condition, results of operations and ability to make distributions to stockholders.
Our use of OP Units as consideration to acquire properties could result in stockholder dilution and/or limit our ability to sell
such properties.
We have acquired and may continue to acquire properties or portfolios of properties through tax deferred contribution
transactions in exchange for OP Units, which may result in stockholder dilution. This acquisition structure may have the effect
of, among other things, reducing the amount of tax depreciation we could deduct over the tax life of the acquired properties, and
may require that we agree to protect the contributors’ ability to defer recognition of taxable gain through restrictions on our
ability to dispose of the acquired properties and/or the allocation of partnership debt to the contributors to maintain their tax
bases. These restrictions could limit our ability to sell properties at a time, or on terms, that would be favorable absent such
restrictions.
Illiquidity of postal properties could significantly impede our ability to respond to adverse changes in the performance of our
properties and harm our financial condition.
Our ability to promptly sell one or more postal properties in our portfolio in response to changing economic, financial
and investment conditions and conditions of the USPS may be limited. Certain types of real estate and in particular, postal
offices, may have limited alternative uses and thus are relatively illiquid. Return of capital and realization of gains, if any, from
an investment generally will occur upon disposition or refinancing of the underlying property. We may be unable to realize our
investment objectives by sale, other disposition or refinancing at attractive prices within any given period of time or may
otherwise be unable to complete any exit strategy. In particular, our ability to dispose of one or more postal properties within a
specific time period is subject to certain limitations imposed by our tax protection agreements, as well as weakness in or even
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the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers,
changes in national or international economic conditions and changes in laws, regulations or fiscal policies of jurisdictions in
which the property is located.
In addition, the Internal Revenue Code of 1986, as amended (the "Code"), imposes restrictions on a REIT’s ability to
dispose of properties that are not applicable to other types of real estate companies. In particular, the tax laws applicable to
REITs effectively require that we hold our properties for investment, rather than primarily for sale in the ordinary course of
business, further limiting our ability to quickly adjust our portfolio in response to changing economic, financial and investment
conditions and conditions of the USPS.
Our real estate taxes for properties where we are not reimbursed could increase due to property tax rate changes or
reassessment.
Even though we currently qualify as a REIT for U.S. federal income tax purposes, we are required to pay state and
local taxes on some of our properties. The real property taxes on our properties have increased in the past and may increase in
the future as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the
amount of property taxes we pay in the future may increase substantially from what we have paid in the past. If the property
taxes we pay increase, our financial condition, results of operations, cash flows, per share trading price of our Class A common
stock and our ability to satisfy our principal and interest obligations and to make distributions to our stockholders could be
adversely affected.
Increases in interest rates or unavailability of debt financing may make it difficult for us to finance or refinance our debt.
If debt financing, including mortgage loans, is unavailable to us at reasonable rates or at all, we may not be able to
finance the purchase of additional properties or refinance existing debt when it becomes due. If interest rates are higher when
we refinance our existing debt, our income and cash flow could be reduced, which would reduce cash available for distribution
to our stockholders and may hinder our ability to raise more capital by issuing more stock or by borrowing more money. In
addition, to the extent we are unable to refinance our debt when it becomes due, we will have fewer debt guarantee
opportunities available to offer under our tax protection agreements, which could trigger an obligation to indemnify the
protected parties under the tax protection agreements.
Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a
property or group of properties subject to mortgage debt.
Mortgage and other secured debt obligations increase our risk of property losses because defaults on indebtedness
secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing any
loans for which we are in default. Any foreclosure on a mortgaged property or group of properties could adversely affect the
overall value of our portfolio of properties. For tax purposes, a foreclosure on any of our properties that is subject to a
nonrecourse mortgage loan would be treated as a sale of the property for a purchase price equal to the outstanding balance of
the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the
property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could hinder our
ability to meet the REIT distribution requirements imposed by the Code. Foreclosures could also trigger our tax indemnification
obligations under the terms of our tax protection agreements with respect to the sales of certain properties.
The elimination of LIBOR after June 2023 may affect our financial results.
On March 5, 2021, the United Kingdom Financial Conduct Authority ("FCA"), which regulates LIBOR, announced
that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023. The
FCA's announcement coincides with the March 5, 2021 announcement of LIBOR's administrator, ICE Benchmark
Administration Limited ("IBA"), indicating that, as a result of not having access to input data necessary to calculate LIBOR
tenors relevant to us on a representative basis after June 30, 2023, IBA would have to cease publication of such LIBOR tenors
immediately after the last publication on June 30, 2023. In the United States, the Alternative Reference Rates Committee
("ARRC"), a committee of private sector entities with ex-officio official sector members convened by the Federal Reserve
Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (“SOFR”) plus a
recommended spread adjustment as LIBOR's replacement. There are significant differences between LIBOR and SOFR, such
as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR
reflects term rates at different maturities.
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Our 2021 Credit Facilities provide that, on or about the LIBOR cessation date (subject to an early opt-in election),
LIBOR shall be replaced as a benchmark rate in the 2021 Credit Facilities with a new benchmark rate, with such adjustments as
set forth in the 2021 Credit Facilities. We are monitoring and evaluating the risks related to changes in LIBOR availability,
which include potential changes in interest paid on debt and amounts received and paid on the 2021 Interest Rate Swap. In
addition, the value of debt or derivative instruments tied to LIBOR may also be impacted as LIBOR is limited and discontinued
and contracts must be transitioned to a new alternative rate. We are not able to predict when LIBOR will cease to be available
or when there will be enough liquidity in the SOFR markets. If the benchmark rate in our 2021 Credit Facilities is converted to
SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that
are higher than if LIBOR remained available, which could have a material adverse effect on our operating results. Although
SOFR is the ARRC's recommended replacement rate, it is also possible that lenders may instead choose alternative replacement
rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us. It is
not yet possible to predict the magnitude of LIBOR's end on our borrowing costs given the remaining uncertainty about which
rates will replace LIBOR.
Covenants in our debt instruments could adversely affect our financial condition.
Our 2021 Credit Facilities and other debt instruments contain certain customary restrictions, requirements and other
limitations on our ability to incur indebtedness. Under our 2021 Credit Facilities, we must maintain certain ratios, including a
minimum fixed charge coverage ratio, maximum total leverage ratio, minimum tangible net worth, maximum secured leverage
ratio, maximum unsecured leverage ratio, minimum unsecured debt service coverage ratio and maximum secured recourse
leverage ratio. Our ability to borrow under our 2021 Credit Facilities and other debt instruments is subject to compliance with
our financial and other covenants.
Failure to comply with any of the covenants under our 2021 Credit Facilities or other debt instruments could result in a
default under one or more of our debt instruments. In particular, we could suffer a default under a secured debt instrument that
could exceed a cross-default threshold under our 2021 Credit Facilities, causing an event of default thereunder. Under those
circumstances, other sources of capital may not be available to us or be available only on unattractive terms. In addition, if we
breach covenants in any of our debt agreements, the lenders can declare a default and, if the debt is secured, take possession of
the collateral securing the defaulted loan.
Alternatively, even if a secured debt instrument is below the cross-default threshold for non-recourse secured debt
under our 2021 Credit Facilities, a default under such secured debt instrument may still cause a cross default under our 2021
Credit Facilities because such secured debt instrument may not qualify as “non-recourse” under our 2021 Credit Facilities.
Another possible cross default could occur between the credit facilities that we enter into and any senior unsecured notes that
we issue. Any of the foregoing default or cross-default events could cause our lenders to accelerate the timing of payments and/
or prohibit future borrowings, either of which would have a material adverse effect on our business, operations, financial
condition and liquidity.
Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations,
cash flow, cash available for distribution and our ability to service our debt obligations.
Subject to maintaining our qualification as a REIT, we manage our market risk on variable rate debt through the use of
interest rate swaps that fix the rate on all or a portion of our variable rate debt for varying periods up to maturity, such as the
2021 Interest Rate Swap. In the future, we may use other derivative instruments such as interest cap agreements to, in effect,
cap the interest rate on all or a portion of the debt for varying periods up to maturity. These agreements involve risks, such as
the risk that such arrangements would not be effective in reducing our exposure to interest rate changes or that a court could
rule that such an agreement is not legally enforceable. In addition, interest rate hedging can be expensive, particularly during
periods of rising and volatile interest rates. Hedging could increase our costs and reduce the overall returns on our investments.
In addition, while hedging agreements would be intended to lessen the impact of rising interest rates on us, they could also
expose us to the risk that the other parties to the agreements would not perform, we could incur significant costs associated with
the settlement of the agreements or that the underlying transactions could fail to qualify as highly-effective cash flow hedges
under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), Topic 815, Derivatives
and Hedging.
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Our success depends on key personnel whose continued service is not guaranteed, and the loss of one or more of our key
personnel could adversely affect our ability to manage our business and to implement our growth strategies, or could create
a negative perception of our company in the capital markets.
Our continued success and our ability to manage anticipated future growth depend, in large part, upon the efforts of
key personnel, particularly Messrs. Spodek, Garber and Klein who have extensive market knowledge and relationships and
exercise substantial influence over our operational and financing activity. Among the reasons that these individuals are
important to our success is that each has a national or regional industry reputation that attracts business and investment
opportunities and assists us in negotiations with investors, lenders, the USPS and owners of postal properties. If we lose their
services, such relationships could diminish or be adversely affected. Our employment agreements with Messrs. Spodek, Garber
and Klein do not guarantee their continued employment with us.
Many of our other senior executives also have extensive experience and strong reputations in the real estate industry,
which aid us in identifying opportunities, having opportunities brought to us and negotiating. The loss of services of one or
more members of our senior management team, or our inability to attract and retain highly qualified personnel, could adversely
affect our business, diminish our investment opportunities and weaken our relationships with investors, lenders, business
partners, existing and prospective tenants and industry participants, which could materially adversely affect our financial
condition, results of operations, cash flow and the per share trading price of our Class A common stock.
We may be subject to on-going or future litigation, including existing claims relating to the entities that owned the properties
previously and otherwise in the ordinary course of business, which could have a material adverse effect on our financial
condition, results of operations, cash flow and the per share trading price of our Class A common stock.
We may be subject to litigation, including existing claims relating to the entities that owned the properties previously
and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially
significant judgments against us, some of which are not, or cannot be, insured against. We generally intend to vigorously
defend ourselves. However, we cannot be certain of the ultimate outcomes of any currently asserted claims or of those that may
arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments,
or settlements, which, if uninsured, or if the fines, judgments, and settlements and any related expenses exceed insured levels,
could adversely impact our earnings and cash flows, thereby having an adverse effect on our financial condition, results of
operations, cash flow, cash available for distribution and our ability to service our debt obligations. Certain litigation or the
resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could materially
adversely affect our results of operations and cash flows, expose us to increased risks that would be uninsured and/or adversely
impact our ability to attract officers and directors.
Insurance on our properties may not adequately cover all losses and uninsured losses if we experience a substantial or
comprehensive loss of such properties.
Inflation, changes in building codes and ordinances, environmental considerations and other factors, including
terrorism or acts of war, may make any insurance proceeds we receive insufficient to repair or replace a property if it is
damaged or destroyed. In those circumstances, the insurance proceeds received may not be adequate to restore our economic
position with respect to the affected real property and its generation of rental revenue. In addition, in the event that we
experience a substantial or comprehensive loss of one of our properties, we may not be able to rebuild such property to its
existing specifications without significant capital expenditures which may exceed any amounts received pursuant to insurance
policies. Further, reconstruction or improvement of such a property would likely require significant upgrades to meet zoning
and building code requirements. The loss of our capital investment in or anticipated future returns from our properties due to
material uninsured losses could materially and adversely affect us.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-
venturers’ financial condition and disputes between us and our co-venturers.
In the future, we may co-invest with third parties through partnerships, joint ventures or other entities, acquiring non-
controlling interests in and managing the affairs of a property, partnership, joint venture or other entity. With respect to any
such arrangement or any similar arrangement that we may enter into in the future, we may not be in a position to exercise sole
decision-making authority regarding the development, property, partnership, joint venture or other entity. Investments in
partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present where a third party is
not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of
required capital contributions. Partners or co-venturers may have economic or other business interests or goals which are
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inconsistent with our business interests or goals and may be in a position to take actions contrary to our policies or objectives,
and they may have competing interests in our markets that could create conflicts of interest. Such investments may also have
the potential risk of impasses on decisions, such as a sale or financing, because neither we nor the partner(s) or co-venturer(s)
would have full control over the partnership or joint venture. In addition, a sale or transfer by us to a third party of our interests
in the joint venture may be subject to consent rights or rights of first refusal, in favor of our joint venture partners, which would
in each case restrict our ability to dispose of our interest in the joint venture. Where we are a limited partner or non-managing
member in any partnership or limited liability company, if such entity takes or expects to take actions that could jeopardize our
status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. We may, in certain
circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to maintain
our qualification as a REIT or our exclusion or exemption from registration under the Investment Company Act of 1940, as
amended, even if we do not control the joint venture. Disputes between us and partners or co-venturers may result in litigation
or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our
business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting properties owned by the
partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third-
party partners or co-venturers. Our joint ventures may be subject to debt and, during periods of volatile credit markets, the
refinancing of such debt may require equity capital calls.
Competition for skilled personnel could increase our labor costs.
We compete intensely with various real estate and other companies in attracting and retaining qualified and skilled
personnel. We depend on our ability to attract and retain skilled management personnel in order to successfully manage the
day-to-day operations of our company and execute our business plan. As we continue to grow, we may face increased
challenges in hiring and retaining qualified and skilled personnel, especially during periods of labor shortage and intense
competition for talents. Competitive pressures may require that we enhance our pay and benefits package to compete effectively
for such personnel. We may not be able to offset such added costs by increasing the rates we charge the USPS. If there is an
increase in these costs or if we fail to attract and retain qualified and skilled personnel, our business and operating results could
be harmed.
Our growth depends on external sources of capital that are outside of our control and may not be available to us on
commercially reasonable terms or at all, which could limit our ability to, among other things, meet our capital and operating
needs or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.
Depending on our ability to borrow under our 2021 Credit Facilities and other debt instruments, we may pursue
significantly more secured borrowings in the future, although we have not entered into any preliminary or binding
documentation with respect to any such additional secured borrowings and there is no guaranty that any lender will be willing
to lend to us on the terms and timing that we expect, if at all. In order to qualify and maintain our qualification as a REIT, we
are required under the Code to, among other things, distribute annually at least 90% of our REIT taxable income, determined
without regard to the dividends paid deduction and excluding any net capital gains. In addition, we will be subject to income tax
at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital
gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary
capital expenditures, from operating cash flow. Consequently, we rely on third-party sources to fund our capital needs. We may
not be able to obtain such financing on favorable terms or at all and any additional debt we incur will increase our leverage and
likelihood of default. Our access to third-party sources of capital depends, in part, on:
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general market conditions;
the market’s perception of our growth potential;
our current debt levels;
our current and expected future earnings;
our cash flow and cash distributions; and
the market price per share of our Class A common stock.
Historically, the capital markets have been subject to significant disruptions. If we cannot obtain capital from third-
party sources, we may not be able to acquire or develop properties when strategic opportunities exist, meet the capital and
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operating needs of our existing properties, satisfy our debt service obligations or make the cash distributions to our stockholders
necessary to qualify and maintain our qualification as a REIT.
We could incur significant costs and liabilities related to environmental matters.
Under various federal, state and local laws and regulations relating to the environment, as a current or former owner of
real property, we may be liable for costs and damages resulting from the presence or release of hazardous or toxic substances,
waste or petroleum products at, on, in, under or migrating from such property, including costs to investigate, clean up such
contamination and liability for any alleged harm to human health, property or natural resources. Such laws often impose strict
liability without regard to fault, including whether the owner or operator knew of, or was responsible for, the presence of such
contamination, and the liability may be joint and several. These liabilities could be substantial and the cost of any required
investigation, remediation, removal, fines or other costs could exceed the value of the property and/or our aggregate assets. In
addition, the presence of contamination or the failure to remediate contamination at our properties may expose us to third-party
liability for costs of remediation and/or personal or property damage or materially adversely affect our ability to sell, lease or
develop our properties or to borrow using the properties as collateral. In addition, environmental laws may create liens on
contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if
contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which property
may be used or businesses may be operated, and these restrictions may require substantial expenditures. See Item 1. "Business
—Environmental Matters.”
Some of our properties may have been or may be impacted by contamination arising from current or prior uses of the
property, or adjacent properties, for commercial or industrial purposes. Such contamination may arise from spills of petroleum
or hazardous substances or releases from tanks used to store such materials. We may not be aware of all potential or existing
environmental contamination liabilities at the properties in our portfolio. As a result, we could potentially incur material
liability for these issues.
As the owner of the buildings on our properties, we could face liability for the presence of hazardous materials, such as
asbestos or lead, or other adverse conditions, such as poor indoor air quality, in our buildings. Environmental laws govern the
presence, maintenance, and removal of hazardous materials in buildings, and if we do not comply with such laws, we could face
fines for such noncompliance and could be required to abate, remove or otherwise address the hazardous material to achieve
compliance with applicable environmental laws and regulations. Also, we could be liable to third parties, such as occupants or
employees of the buildings, for damages related to exposure to hazardous materials or adverse conditions in our buildings, and
we could incur material expenses with respect to abatement or remediation of hazardous materials or other adverse conditions
in our buildings. If we incur material environmental liabilities in the future, we may find it difficult to sell or lease any affected
properties.
Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for
adverse health effects and costs of remediation.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if
the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins
or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor
sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants
above certain levels can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other
reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us
to undertake a costly remediation program to contain or remove the mold or other airborne contaminants from the affected
property or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could
expose us to liability from the USPS, employees of the USPS or others if property damage or personal injury is alleged to have
occurred.
We are subject to risks from natural disasters, such as earthquakes and severe weather, and the risks associated with climate
change.
Natural disasters and severe weather such as flooding, earthquakes, tornadoes or hurricanes may result in significant
damage to our properties. Many of our properties are located in states like Oklahoma, Texas, Missouri, and Louisiana that
historically have experienced heightened risk for natural disasters like tornados and hurricanes. The extent of our casualty
losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount
of exposure in the affected area. When we have geographic concentration of exposures, a single catastrophe (such as an
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earthquake) or destructive weather event (such as a tornado or hurricane) affecting a region may have a significant negative
effect on our financial condition and results of operations. Our financial results may be adversely affected by our exposure to
losses arising from natural disasters or severe weather.
We also are exposed to risks associated with inclement winter weather, particularly in the Northeast, Mid-Atlantic and
Mid-West, including increased costs for the removal of snow and ice. Inclement weather also could increase the need for
maintenance and repair of our properties.
Lastly, we cannot predict the rate at which climate change will progress. However, the effects of climate change could
have a material adverse effect on our properties, operations and business. To the extent climate change causes changes in
weather patterns, our markets could experience increases in severe weather, including hurricanes, severe winter storms and
tornadoes, and unpredictable weather patterns. These conditions could result in physical damage to our properties or declining
demand for space in our buildings or the inability of us to operate the buildings at all in the areas affected by these conditions.
Climate change also may have indirect adverse effects on our business by increasing the cost of (or making unavailable)
property insurance on terms we find acceptable, increasing the cost of energy, maintenance, repair of water and/or wind
damage, cost of snow removal or related costs at our properties or causing the USPS to relocate its postal offices to other
locations. In recent years, a number of states and municipalities have adopted laws and policies on climate change and emission
reduction targets. Changes in federal, state, and local legislation and regulation based on concerns about climate change could
result in increased capital expenditures on our properties (for example, to improve their energy efficiency and/or resistance to
severe weather) without a corresponding increase in revenue, which may result in adverse impacts to our net income. Should
the impact of climate change be material in nature or occur for lengthy periods of time, our properties, operations or business
would be adversely affected.
Our properties may be subject to impairment charges.
We will assess whether there are any indicators that the value of our properties may be impaired. A property’s value is
considered to be impaired only if the estimated aggregate future cash flows (undiscounted and without interest charges) to be
generated by the property are less than the carrying value of the property. In our estimate of cash flows, we will consider factors
such as expected future operating income, trends and prospects, the effects of demand, competition and other factors. If we are
evaluating the potential sale of an asset or development alternatives, the undiscounted future cash flows analysis will consider
the most likely course of action at the balance sheet date based on current plans, intended holding periods and available market
information. We will be required to make subjective assessments as to whether there are impairments in the value of our
properties. These assessments may be influenced by factors beyond our control, such as early vacating or relocation by a tenant
or damage to properties due to earthquakes, tornadoes, hurricanes and other natural disasters, fire, civil unrest, terrorist acts or
acts of war. These assessments may have a direct impact on our earnings because recording an impairment charge results in an
immediate negative adjustment to earnings. There can be no assurance that we will not take impairment charges in the future
related to the impairment of our properties. Any such impairment could have a material adverse effect on our business, financial
condition and results of operations in the period in which the charge is taken.
Our title insurance policies may not cover all title defects.
Our properties are insured by title policies. We have not, however, obtained new owner’s title insurance policies in
connection with the acquisition of our initial properties in the Formation Transactions and certain acquisitions subsequent to the
Formation Transactions. In some instances, these insurance policies are effective as of the time of the acquisition or later
refinancing. As such, it is possible that there may be title defects that have arisen since such acquisition or refinancing for which
we will have no title insurance coverage. If there were a material title defect related to any of our properties that is not
adequately covered by a title insurance policy, we could lose some or all of our capital invested in and our anticipated profits
from such property.
We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are
applicable to our properties.
Properties are subject to various covenants and federal, state and local laws and regulatory requirements, including
permitting and licensing requirements. Local regulations, including municipal or local ordinances, zoning restrictions and
restrictive covenants imposed by community developers may restrict our use of our properties and may require us to obtain
approval from local officials or restrict our use of our properties and may require us to obtain approval from local officials of
community standards organizations at any time with respect to our properties, including prior to developing or acquiring a
property or when undertaking renovations of any of our existing properties. Among other things, these restrictions may relate to
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fire and safety, seismic or hazardous material abatement requirements. There can be no assurance that existing laws and
regulatory policies will not adversely affect us or the timing or cost of any future development, acquisitions or renovations, or
that additional regulations will not be adopted that increase such delays or result in additional costs. Our growth strategy may
be affected by our ability to obtain permits, licenses and zoning relief.
In addition, federal and state laws and regulations, including laws such as the ADA and the Fair Housing Amendment
Act of 1988 ("FHAA"), impose further restrictions on our properties and operations. Under the ADA and the FHAA, all public
accommodations must meet federal requirements related to access and use by disabled persons. Some of our properties may
currently be in non-compliance with the ADA or the FHAA. If one or more of the properties in our portfolio is not in
compliance with the ADA, the FHAA or any other regulatory requirements, we may incur additional costs to bring the property
into compliance, incur governmental fines, award damages to private litigants or be unable to refinance such properties. In
addition, we do not know whether existing requirements will change or whether future requirements will require us to make
significant unanticipated expenditures that will adversely impact our financial condition, results of operations and cash flow.
We are also subject to compliance with a wide variety of complex legal requirements because we are a federal
government contractor. These laws, which are generally incorporated into our leases with the USPS, regulate how we conduct
business, require us to administer various compliance programs and require us to impose compliance responsibilities on some
of our contractors. Our failure to comply with these laws could subject us to fines, penalties and damages, cause us to be in
default of our leases with the USPS and bar us from entering into future leases with the USPS. There can be no assurance that
these potential costs and losses of revenue will not have a material adverse effect on our results of operations, financial
condition and cash flow.
We have acquired and may continue to acquire properties that are (i) leased to both the USPS and non-postal tenants, (ii)
leased solely to non-postal tenants or (iii) in markets that are new to us, and we may not be able to adapt to these new
business models.
We have acquired and may continue to acquire properties that are (i) leased to both the USPS and non-postal tenants,
(ii) leased solely to non-postal tenants or (iii) in markets that are new to us, and we may not be able to adapt to these new
business models. When we acquire such properties, we may face risks associated with lack of market or tenant knowledge or
understanding of the local economy or operations of the new tenant. Subject to maintaining our qualification as a REIT, we may
also provide other services through our TRS, such as consulting services for postal property owners, to complement our core
business. Additionally, we may face risks associated with forging new business relationships and unfamiliarity with local
government and local or tenant-specific permitting procedures. We work to mitigate such risks through extensive diligence and
research and associations with experienced service providers. However, there can be no guarantee that all such risks will be
eliminated.
We have acquired and may continue to acquire properties that are subject to purchase options in favor of the USPS.
Certain of our leases provide the USPS with the right to purchase the underlying property at fair market value or at
fixed prices as of dates as set forth in the lease agreement. We may in the future acquire additional properties that provide the
USPS with similar purchase options. If the USPS decides to exercise a purchase option, we would lose the right to future rent
from the property. If the purchase price we are entitled to receive is less than the price we paid for the related property, we may
incur losses. We may also not be able to reinvest the purchase price we receive in comparable investments that produce similar
or better returns and, as a result, experience a decline in lease revenues and profitability.
We may incur goodwill and other intangible asset impairment charges, which could adversely affect our earnings and
financial condition.
In accordance with U.S. generally accepted accounting practices ("GAAP"), we are required to assess any goodwill
and indefinite-lived intangible assets assumed in any acquisition transactions, annually, or more frequently whenever events or
changes in circumstances indicate potential impairment, such as changing market conditions or any changes in key
assumptions. If the testing performed indicates that an asset may not be recoverable, we are required to record a non-cash
impairment charge for the difference between the carrying value of the goodwill or indefinite-lived intangible assets and the
implied fair value of the goodwill or intangible assets in the period the determination is made. We also continually evaluate
whether events or circumstances have occurred that indicate the remaining estimated useful lives of definite-lived intangible
assets, excluding goodwill, and other long-lived assets may warrant revision or whether the remaining balance of such assets
may not be recoverable. We use an estimate of the related undiscounted cash flow over the remaining life of such asset in
measuring whether the asset is recoverable. These impairment charges could be significant and could adversely affect our
financial condition, results of operations and cash available for distribution.
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We may have difficulty implementing changes to our information technology systems.
We have made significant investments to update and improve our information technology systems and expect such
investments to continue in order to meet our business needs, including for sourcing acquisition opportunities and managing the
maintenance and repair of our properties. Transitioning to new or upgraded systems can create difficulties, including potential
disruptions to current processes and security complexities. In addition, our information technology systems may require further
modification as we grow and as our business needs change, which could prolong difficulties we experience with transitions.
Such significant investments in our systems may take longer to deploy and cost more than originally planned. In addition, we
may not realize the full benefits we hoped to achieve and we may need to expend significant attention, time and resources to
correct problems or find alternative sources for performing various functions. Difficulties in implementing new or upgraded
information technology systems or significant system failures or delays or the failure to successfully modify our systems and
respond to changes in our business needs could adversely affect our business and results of operations.
Use of social media may adversely impact our reputation and business.
The use of social media platforms, including blogs, social media websites and other forms of internet-based
communication, has become commonplace. Negative commentary regarding us by third parties may be posted on social media
platforms or similar devices at any time and may harm our reputation or business. We also use social media platforms to
disseminate information and source acquisition opportunities. As laws and regulations rapidly evolve to govern the use of these
platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and
regulations in the use of these platforms and devices could adversely impact our business or subject us to fines or other
penalties.
Risks Related to Our Organizational Structure
Mr. Spodek and his affiliates own, directly or indirectly, a substantial beneficial interest in our company on a fully diluted
basis and have the ability to exercise significant influence on our company and our Operating Partnership, including the
approval of significant corporate transactions.
Mr. Spodek and his affiliates held approximately 10.8% of the combined voting power of our outstanding shares of
common stock as of March 11, 2022. Pursuant to his ownership of Class A common stock and Voting Equivalency stock, Mr.
Spodek and his affiliates have the ability to influence the outcome of matters presented to our stockholders, including the
election of our Board of Directors and approval of significant corporate transactions, including business combinations,
consolidations and mergers. Therefore, Mr. Spodek has substantial influence over us and could exercise influence in a manner
that is not in the best interests of our other stockholders. This concentration of voting power might also have the effect of
delaying or preventing a change of control that our stockholders may view as beneficial.
Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of
holders of units in our Operating Partnership, which may impede business decisions that could benefit our stockholders.
Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates,
on the one hand, and our Operating Partnership or any partner thereof, on the other. Our directors and officers have duties to
our company under Maryland law in connection with their management of our company. At the same time, we, as the general
partner of our Operating Partnership, have fiduciary duties and obligations to our Operating Partnership and its limited partners
under Delaware law and the partnership agreement of our Operating Partnership in connection with the management of our
Operating Partnership. Our fiduciary duties and obligations as the general partner of our Operating Partnership may come into
conflict with the duties of our directors and officers to our company. Mr. Spodek owns a significant interest in our Operating
Partnership as a limited partner and may have conflicts of interest in making decisions that affect both our stockholders and the
limited partners of our Operating Partnership.
The partnership agreement provides that, in the event of a conflict between the interests of our Operating Partnership
or any partner, on the one hand, and the separate interests of our company or our stockholders, on the other hand, we, in our
capacity as the general partner of our Operating Partnership, are under no obligation not to give priority to the separate interests
of our company or our stockholders, and that any action or failure to act on our part or on the part of our Board of Directors that
gives priority to the separate interests of our company or our stockholders that does not result in a violation of the contract
rights of the limited partners of the Operating Partnership under its partnership agreement does not violate the duty of loyalty
that we, in our capacity as the general partner of our Operating Partnership, owe to the Operating Partnership and its partners.
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Additionally, the partnership agreement provides that we will not be liable to the Operating Partnership or any partner
for monetary damages for losses sustained, liabilities incurred or benefits not derived by the Operating Partnership or any
limited partner, except for liability for our intentional harm or gross negligence. Our Operating Partnership must indemnify us,
our directors and officers, officers of our Operating Partnership and our designees from and against any and all claims that
relate to the operations of our Operating Partnership, unless (1) an act or omission of the person was material to the matter
giving rise to the action and either was committed in bad faith or was the result of active and deliberate dishonesty, (2) the
person actually received an improper personal benefit in violation or breach of the partnership agreement or (3) in the case of a
criminal proceeding, the indemnified person had reasonable cause to believe that the act or omission was unlawful. Our
Operating Partnership must also pay or reimburse the reasonable expenses of any such person upon its receipt of a written
affirmation of the person’s good faith belief that the standard of conduct necessary for indemnification has been met and a
written undertaking to repay any amounts paid or advanced if it is ultimately determined that the person did not meet the
standard of conduct for indemnification. Our Operating Partnership will not indemnify or advance funds to any person with
respect to any action initiated by the person seeking indemnification without our approval (except for any proceeding brought to
enforce such person’s right to indemnification under the partnership agreement) or if the person is found to be liable to our
Operating Partnership on any portion of any claim in the action.
Our charter contains certain provisions restricting the ownership and transfer of our stock that may delay, defer or prevent a
change of control transaction that might involve a premium price for our Class A common stock or that our stockholders
otherwise believe to be in their best interests.
Our charter contains certain ownership limits with respect to our stock. Our charter, among other restrictions,
prohibits, subject to certain exceptions, the beneficial or constructive ownership by any person of more than 8.5% in value or
number of shares, whichever is more restrictive, of the aggregate outstanding shares of our common stock or more than 8.5% of
the outstanding shares of any class or series of our preferred stock. Our Board of Directors, in its sole and absolute discretion,
may exempt a person, prospectively or retroactively, from this ownership limit if certain conditions are satisfied. This
ownership limit as well as other restrictions on ownership and transfer of our stock in our charter may:
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discourage a tender offer, proxy contest, or other transactions or a change in management or of control that might
result in a premium price for our Class A common stock or that our stockholders otherwise believe to be in their
best interests; and
result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable
beneficiary and, as a result, the forfeiture by the acquirer of certain of the benefits of owning the additional shares.
We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without
stockholder approval.
Our Board of Directors, without stockholder approval, has the power under our charter to amend our charter to
increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we are
authorized to issue; provided that our board may not increase the number of shares of Voting Equivalency stock that we have
authority to issue or reclassify any shares of our capital stock as Voting Equivalency stock without the approval of the holders
of a majority of the outstanding shares of Class A common stock. In addition, under our charter, our Board of Directors,
without stockholder approval, has the power to authorize us to issue authorized but unissued shares of our Class A common
stock or preferred stock and to classify or reclassify any unissued shares of our Class A common stock or preferred stock into
one or more classes or series of stock and set the preference, conversion or other rights, voting powers, restrictions, limitations
as to dividends and other distributions, qualifications or terms or conditions of redemption for such newly classified or
reclassified shares. As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends,
powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our Class A
common stock. Although our Board of Directors has no such intention at the present time, it could establish a class or series of
preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control
that might involve a premium price for our Class A common stock or that our stockholders otherwise believe to be in their best
interests.
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Certain provisions of the Maryland General Corporation Law could inhibit changes of control, which may discourage third
parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price
for our Class A common stock or that our stockholders otherwise believe to be in their best interests.
Certain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of inhibiting a third party
from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the
holders of shares of our Class A common stock with the opportunity to realize a premium over the then-prevailing market price
of such shares, including:
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•
“business combination” provisions that, subject to limitations, prohibit certain business combinations between us
and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the
voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of our then outstanding voting stock at any time within
the two-year period immediately prior to the date in question) for five years after the most recent date on which
the stockholder becomes an interested stockholder, and thereafter imposes certain fair price and/or supermajority
stockholder voting requirements on these combinations; and
“control share” provisions that provide that holders of “control shares” of our company (defined as shares that,
when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three
increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the
direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting
rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative
vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
By resolution of our Board of Directors, we have opted out of the business combination provisions of the MGCL and
provide that any business combination between us and any other person is exempt from the business combination provisions of
the MGCL, provided that the business combination is first approved by our Board of Directors (including a majority of
directors who are not affiliates or associates of such persons). In addition, pursuant to a provision in our bylaws, we have opted
out of the control share provisions of the MGCL. However, our Board of Directors may by resolution elect to opt into the
business combination provisions of the MGCL and we may, by amendment to our bylaws, opt into the control share provisions
of the MGCL in the future.
Certain provisions of the MGCL permit our Board of Directors, without stockholder approval and regardless of what is
currently provided in our charter or bylaws, to implement certain corporate governance provisions, some of which (for example,
a classified board) are not currently applicable to us. If implemented, these provisions may have the effect of limiting or
precluding a third party from making an unsolicited acquisition proposal for us or of delaying, deferring or preventing a change
in control of us under circumstances that otherwise could provide the holders of shares of our Class A common stock with the
opportunity to realize a premium over the then current market price. Our charter contains a provision whereby we elect, at such
time as we become eligible to do so, to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of
vacancies on our Board of Directors.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain types of
actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a
favorable judicial forum for disputes with us or our directors, officers or employees.
Our bylaws generally provide that, unless we consent in writing to the selection of an alternative forum, the Circuit
Court for Baltimore City, Maryland (or in certain circumstances, the United States District Court for the District of Maryland,
Northern Division) shall be the sole and exclusive forum for certain types of actions and proceedings that may be initiated by
our stockholders with respect to our company, our directors, our officers or our employees. This choice of forum provision may
limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or
our directors, officers or employees, which may discourage meritorious claims from being asserted against us and our directors,
officers and employees. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in
respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving
such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. We
adopted this provision because Maryland judges have more experience in dealing with issues of Maryland corporate law than
judges in any other state and we believe it makes it less likely that we will be forced to incur the expense of defending
duplicative actions in multiple forums and less likely that plaintiffs’ attorneys will be able to employ such litigation to coerce us
into otherwise unjustified settlements.
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Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent unsolicited acquisitions
of us.
Provisions in the partnership agreement of our Operating Partnership may delay, or make more difficult, unsolicited
acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals involving
an unsolicited acquisition of us or change of our control, although some of our stockholders might consider such proposals, if
made, desirable. These provisions include, among others:
•
•
•
•
•
redemption rights;
a requirement that we may not be removed as the general partner of our Operating Partnership without our
consent;
transfer restrictions on OP Units;
our ability, as general partner, in some cases, to amend the partnership agreement and to cause the Operating
Partnership to issue units with terms that could delay, defer or prevent a merger or other change of control of us or
our Operating Partnership without the consent of the limited partners; and
the right of the limited partners to consent to direct or indirect transfers of the general partnership interest,
including as a result of a merger or a sale of all or substantially all of our assets, in the event that such transfer
requires approval by our common stockholders.
As of March 11, 2022, Mr. Spodek and his affiliates owned approximately 43.4% of the outstanding OP Units
(including LTIP Units) and approximately 4.3% of the outstanding shares of our Class A common stock and all of the Voting
Equivalency stock, which together represent an approximate 11.4% beneficial economic interest in our Company on a fully
diluted basis.
Tax protection agreements may limit our ability to sell or otherwise dispose of certain properties and may require our
Operating Partnership to maintain certain debt levels that otherwise would not be required to operate our business.
In connection with contributions of properties to our Operating Partnership, our Operating Partnership has entered and
may in the future enter into tax protection agreements under which it agrees to minimize the tax consequences to the
contributing partners resulting from the sale or other disposition of the contributed properties. Tax protection agreements may
make it economically prohibitive to sell any properties that are subject to such agreements even though it may otherwise be in
our stockholders’ best interests to do so. In addition, we may be required to maintain a minimum level of indebtedness
throughout the term of any tax protection agreement regardless of whether such debt levels are otherwise required to operate
our business or provide certain of our contributors the opportunity to guarantee debt or enter into a deficit restoration
obligations upon a future repayment, retirement, refinancing or other reduction (other than scheduled amortization) of currently
outstanding debt prior to the tenth anniversary of the completion of the Formation Transactions. If we fail to make such
opportunities available, we will be required to deliver to each such contributor a cash payment intended to approximate the
contributor’s tax liability resulting from our failure to make such opportunities available to that contributor and the tax
liabilities incurred as a result of such tax protection payment. Nevertheless, we have entered and may in the future enter into tax
protection agreements to assist contributors of properties to our Operating Partnership in deferring the recognition of taxable
gain as a result of and after any such contribution.
Our Board of Directors may change our strategies, policies and procedures without stockholder approval, and we may
become more highly leveraged, which may increase our risk of default under our debt obligations.
Our investment, financing, leverage and distribution policies, and our policies with respect to all other activities,
including growth, capitalization and operations, will be determined exclusively by our Board of Directors, and may be amended
or revised at any time by our Board of Directors without notice to or a vote of our stockholders. This could result in us
conducting operational matters, making investments or pursuing different business or growth strategies than those contemplated
in this report. Further, our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that
we may incur. Our Board of Directors may alter or eliminate our current policy on borrowing at any time without stockholder
approval. If this policy changed, we could become more highly leveraged which could result in an increase in our debt service.
Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including
the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may
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increase our exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to our policies with regards
to the foregoing could materially adversely affect our financial condition, results of operations and cash flow.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Under Maryland law, generally, a director will not be liable if he or she performs his or her duties in good faith, in a
manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like
position would use under similar circumstances. In addition, our charter limits the liability of our directors and officers to us
and our stockholders for money damages, except for liability resulting from:
•
•
actual receipt of an improper benefit or profit in money, property or services; or
active and deliberate dishonesty by the director or officer that was established by a final judgment as being
material to the cause of action adjudicated.
Our charter requires us to indemnify, and advance expenses to, each director and officer, to the maximum extent
permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by
reason of his or her service to us. We have entered into indemnification agreements with each of our executive officers and
directors whereby we will indemnify our directors and executive officers to the fullest extent permitted by Maryland law
against all expenses and liabilities incurred in their capacity as an officer and/or director, subject to limited exceptions. As a
result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist
absent the current provisions in our charter or that might exist with other companies.
We are a holding company with no direct operations and, as such, we rely on funds received from our Operating
Partnership to pay liabilities, and the interests of our stockholders are structurally subordinated to all liabilities and
obligations of our Operating Partnership and its subsidiaries.
We are a holding company and conduct substantially all of our operations through our Operating Partnership. We do
not have, apart from an interest in our Operating Partnership, any independent operations. As a result, we rely on cash
distributions from our Operating Partnership to pay any dividends we declare on shares of our Class A common stock. We also
rely on distributions from our Operating Partnership to meet any of our obligations, including any tax liability on taxable
income allocated to us from our Operating Partnership. In addition, because we are a holding company, your claims as a
stockholder will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed
money) of our Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or
reorganization, our assets and those of our Operating Partnership and its subsidiaries will be available to satisfy the claims of
our stockholders only after all of our and our Operating Partnership’s and its subsidiaries’ liabilities and obligations have been
paid in full.
Our Operating Partnership may issue additional OP Units to third parties without the consent of our stockholders, which
would reduce our ownership percentage in our Operating Partnership and could have a dilutive effect on the amount of
distributions made to us by our Operating Partnership and, therefore, the amount of distributions we can make to our
stockholders.
As of March 11, 2022, approximately 18.0% of the outstanding OP Units (including the LTIP Units) of our Operating
Partnership were held by third parties. We may, in connection with our acquisition of properties or otherwise, continue to issue
additional OP Units to third parties. Such issuances would reduce our ownership percentage in our Operating Partnership and
could affect the amount of distributions made to us by our Operating Partnership and, therefore, the amount of distributions we
can make to our stockholders. Holders of OP Units do not have any voting rights with respect to any such issuances or other
partnership level activities of our Operating Partnership.
Risks Related to Our Status as a REIT
Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially
reduce funds available for distributions to our stockholders.
We have elected and intend to continue to operate in a manner that will allow us to qualify to be taxed as a REIT under
Sections 856-860 of the Code commencing with our short taxable year ended December 31, 2019. Qualification as a REIT
involves the application of highly technical and complex tax rules, for which there are only limited judicial and administrative
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interpretations. The fact that we hold substantially all our assets through a partnership further complicates the application of the
REIT requirements. Even a seemingly minor technical or inadvertent mistake could jeopardize our REIT status. Our REIT
status depends upon various factual matters and circumstances that may not be entirely within our control. Moreover, our
qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating
results, certain qualification tests set forth in the federal tax laws. For example, in order to qualify as a REIT, at least 95% of
our gross income in any year must be derived from qualifying sources, such as rents from real property, and we must satisfy a
number of requirements regarding the composition of our assets. Also, we must make distributions to stockholders aggregating
annually at least 90% of our REIT taxable income, excluding net capital gains. No assurances can be given that our actual
results of operations for any particular taxable year will satisfy such requirements. In addition, new legislation, regulations,
administrative interpretations or court decisions, each of which could have retroactive effect, may make it more difficult or
impossible for us to qualify as a REIT, or could reduce the desirability of an investment in a REIT relative to other investments.
We have not requested and do not plan to request a ruling from the Internal Revenue Services (the "IRS") that we qualify as a
REIT, and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. Accordingly, we cannot
be certain that we will be successful in qualifying as a REIT.
If we fail to maintain our qualification as a REIT in any taxable year, we will face serious tax consequences that will
substantially reduce the funds available for distributions to our stockholders because:
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•
•
we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and
would be subject to federal income tax at regular corporate rates;
we could be subject to increased state and local taxes; and
unless we are entitled to relief under certain federal income tax laws, we could not re-elect REIT status until the
fifth calendar year after the year in which we failed to qualify as a REIT.
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions to our stockholders. As
a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital,
and it would adversely affect the value of our Class A common stock.
Even if we qualify as a REIT, we may be subject to some U.S. federal, state and local income, property and excise
taxes on our income or property and, in certain cases, a 100% penalty tax, in the event we sell property that we hold primarily
for sale to customers in the ordinary course of business. In addition, our TRSs are subject to tax as regular corporations in the
jurisdictions in which they operate.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
Even if we qualify for taxation as a REIT, we may be subject to certain federal, state and local taxes on our income and
assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure,
and state or local income, property and transfer taxes. In addition, under new partnership audit procedures applicable beginning
in 2018, our Operating Partnership and any other partnership that we may own in the future may be liable at the entity level for
any tax assessed under those procedures. Also, our TRS will be subject to regular corporate federal, state and local taxes. Any
of these taxes would decrease cash available for distributions to stockholders.
Failure to make required distributions would subject us to federal corporate income tax.
We have operated and intend to continue to operate so as to qualify as a REIT for federal income tax purposes. In
order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without
regard to the dividends paid deduction and excluding any net capital gains, each year to our stockholders. To the extent that we
satisfy this distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal
corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% non-deductible excise tax if
the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under the
Code. Differences in timing between the recognition of income and the related cash receipts, limitations on our ability or the
ability of our subsidiaries to deduct interest expense from borrowings under Section 163(j) of the Code or the effect of required
debt amortization payments could require us to borrow or raise capital on terms we regard as unfavorable, or sell assets at prices
or at times we regard as unfavorable to distribute out enough of our taxable income to satisfy the distribution requirement and
to avoid corporate income tax and the 4% nondeductible excise tax in a particular year.
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Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise
attractive investments.
To maintain qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning,
among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our
stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we
might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.
In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of
cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other
than government securities, securities of TRSs and qualified real estate assets) generally cannot include more than 10% of the
outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one
issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs
and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total
assets can be represented by the securities of one or more TRSs. If we fail to comply with these requirements at the end of any
calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory
relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be
required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts
available for distribution to our stockholders.
The prohibited transactions tax may limit our ability to dispose of our properties.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are
sales or other dispositions of property other than foreclosure property, held primarily for sale to customers in the ordinary
course of business. We may be subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real
property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is
available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be
characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to
engage in certain sales of our properties or may conduct such sales through our TRS, which would be subject to federal and
state income taxation.
We could be affected by tax liabilities or earnings and profits of our predecessor.
A portion of our predecessor, United Postal Holdings, Inc. ("UPH"), that was taxable as a C corporation merged into
us as a part of Formation Transactions. As a result of the merger, any unpaid tax liabilities of such taxable C corporation were
transferred to us. Under an indemnification agreement, Mr. Spodek and his affiliates are required to make a payment to us in the
event that there is a final determination of any such tax liabilities. If Mr. Spodek and his affiliates do not make such payment,
we would be responsible for paying such tax liabilities, which would decrease cash available for distributions to stockholders.
There are uncertainties relating to the estimate of the accumulated earnings and profits attributable to United Postal
Holdings, Inc.
Because a portion of our predecessor, UPH, was a C corporation, to qualify as a REIT, we were required to distribute
to our stockholders prior to the end of the taxable year ended December 31, 2019 all of UPH’s accumulated earnings and profits
attributable taxable years prior to the Formation Transactions. Based on an earnings and profits study we obtained from an
accounting firm, we do not believe that we had any accumulated earnings and profits attributable to UPH. While we believe that
we satisfied the requirements relating to the distribution of UPH’s earnings and profits, the determination of the amount of
accumulated earnings and profits attributable to UPH is a complex factual and legal determination. There are substantial
uncertainties relating to the computation of our accumulated earnings and profits attributable to UPH, including our
interpretation of the applicable law differently from the IRS. In addition, the IRS could, in auditing UPH’s tax years through the
effective date of the merger with us, successfully assert that our taxable income should be increased, which could increase our
earnings and profits attributable to UPH. Although there are procedures available to cure a failure to distribute all of our non-
REIT earnings and profits, we cannot determine now whether we will be able to take advantage of them or the economic impact
to us of doing so. If it is determined that we had undistributed non-REIT earnings and profits as of the end of any taxable year
in which we elect to qualify as a REIT, and we are unable to cure the failure to distribute such earnings and profits, then we
would fail to qualify as a REIT under the Code.
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A sale of assets acquired as part of the merger between us and UPH within five years after the merger would result in
corporate income tax, which would reduce the cash available for distribution to our stockholders.
If we sell any asset that we acquired as part of the merger between us and UPH within five years after the merger and
recognize a taxable gain on the sale, we will be taxed at the highest corporate rate on an amount equal to the lesser of:
•
•
the amount of gain that we recognize at the time of the sale; or
the amount of gain that we would have recognized if we had sold the asset at the time of the merger for its then
fair market value.
This rule potentially could inhibit us from selling assets acquired as part of the merger within five years after the
merger.
The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse
consequences to our stockholders.
Our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the
approval of our stockholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we
cease to qualify as a REIT, we would become subject to federal income tax on our taxable income and would no longer be
required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return
to our stockholders.
Our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those
transactions are not conducted on arm’s-length terms.
Overall, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs. In
addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is
subject to an appropriate level of corporate taxation and, in certain circumstances, other limitations on deductibility may apply.
The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on
an arm’s-length basis.
Our TRS will be subject to applicable federal, foreign, state and local income tax on its taxable income, and its after-
tax net income will be available for distribution to us but is not required to be distributed to us. We believe that the aggregate
value of the stock and securities of our TRS will be less than 20% of the value of our total assets (including our TRS stock and
securities). Furthermore, we will monitor the value of our respective investments in our TRS for the purpose of ensuring
compliance with TRS ownership limitations and will structure our transactions with our TRS on terms that we believe are arm’s
length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to
comply with the 20% limitation discussed above or to avoid application of the 100% excise tax.
You may be restricted from acquiring or transferring certain amounts of our Class A common stock.
The restrictions on ownership and transfer in our charter may inhibit market activity in our capital stock and restrict
our business combination opportunities.
In order to maintain our qualification as a REIT for each taxable year, five or fewer individuals, as defined in the
Code, may not own, beneficially or constructively, more than 50% in value of our issued and outstanding stock at any time
during the last half of a taxable year. Attribution rules in the Code determine if any individual or entity beneficially or
constructively owns our capital stock under this requirement. Additionally, at least 100 persons must beneficially own our
capital stock during at least 335 days of a taxable year for each taxable year. To help ensure that we meet these tests, our charter
restricts the acquisition and ownership of shares of our capital stock.
Our charter, with certain exceptions, authorizes our Board of Directors to take such actions as are necessary to
preserve our qualification as a REIT. Unless exempted by our Board of Directors, our charter prohibits any person, other than
Mr. Spodek, from beneficially or constructively owning more than 8.5% in value or number of shares, whichever is more
restrictive, of the aggregate outstanding shares of our common stock or more than 8.5% in value of the outstanding shares of
any class or series of our preferred stock. Our charter permits Mr. Spodek to own up to 15.0% in value or number of shares,
whichever is more restrictive, of our outstanding shares of common stock. Our Board of Directors may not grant an exemption
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from this restriction to any proposed transferee whose ownership would result in our failing to qualify as a REIT. This as well
as other restrictions on transferability and ownership will not apply, however, if our Board of Directors determines that it is no
longer in our best interests to continue to qualify as a REIT.
Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular
corporations.
Qualified dividend income payable to U.S. stockholders that are individuals, trusts and estates is subject to the reduced
maximum tax rate applicable to capital gains. Dividends payable by REITs, however, generally are not eligible for the reduced
qualified dividend rates. For taxable years beginning before January 1, 2026, non-corporate taxpayers may deduct up to 20% of
certain pass-through business income, including “qualified REIT dividends” (generally, dividends received by a REIT
shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations.
Although the reduced federal income tax rate applicable to qualified dividend income does not adversely affect the taxation of
REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate dividends could cause investors
who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the
stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including
our Class A common stock. Tax rates could be changed in future legislation.
If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as
a REIT and suffer other adverse consequences.
We believe that our Operating Partnership has been and will be treated as a partnership for federal income tax
purposes. As a partnership, our Operating Partnership generally will not be subject to federal income tax on its income. Instead,
each of its partners, including us, will be allocated, and may be required to pay tax with respect to, its share of our Operating
Partnership’s income. We cannot assure you, however, that the IRS will not challenge the status of our Operating Partnership or
any other subsidiary partnership in which we own an interest as a partnership for federal income tax purposes, or that a court
would not sustain such a challenge. If the IRS were successful in treating our Operating Partnership or any such other
subsidiary partnership as an entity taxable as a corporation for federal income tax purposes, we would fail to meet the gross
income tests and certain of the asset tests applicable to REITs and, accordingly, we would likely cease to qualify as a REIT.
Also, the failure of our Operating Partnership or any subsidiary partnerships to qualify as a partnership could cause it to become
subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt
service and for distribution to its partners, including us.
To maintain our REIT status, we may be forced to borrow funds during unfavorable market conditions, and the
unavailability of such capital on favorable terms at the desired times, or at all, may cause us to curtail our investment
activities or dispose of assets at inopportune times and/or on unfavorable terms, which could materially adversely affect our
financial condition, results of operations and cash flow.
In order to qualify as a REIT, we generally must distribute to our stockholders, on an annual basis, at least 90% of our
“REIT taxable income,” determined without regard to the deduction for dividends paid and excluding net capital gains. In
addition, we will be subject to U.S. federal income tax at the regular corporate rate to the extent that we distribute less than
100% of our net taxable income (including net capital gains) and will be subject to a 4% non-deductible excise tax on the
amount by which our distributions in any calendar year are less than a minimum amount specified under U.S. federal income
tax laws. We intend to continue to distribute our net income to our stockholders in a manner intended to satisfy the REIT 90%
distribution requirement and to avoid U.S. federal income tax and the 4% non-deductible excise tax.
In addition, from time to time our taxable income may exceed our net income as determined by GAAP. This may
occur, for instance, because realized capital losses are deducted in determining our GAAP net income, but may not be
deductible in computing our taxable income. In addition, we may incur non-deductible capital expenditures or be required to
make debt or amortization payments. As a result of the foregoing, we may generate less cash flow than taxable income in a
particular year and we may incur U.S. federal income tax and the 4% non-deductible excise tax on that income if we do not
distribute such income to stockholders in that year. In that event, we may be required to (i) use cash reserves, (ii) incur debt at
rates or times that we regard as unfavorable, (iii) sell assets in adverse market conditions, (iv) distribute amounts that would
otherwise be invested in future acquisitions, capital expenditures or repayment of debt, or (v) make a taxable distribution of our
shares as part of a distribution in which stockholders may elect to receive our shares or (subject to a limit measured as a
percentage of the total distribution) cash in order to satisfy the REIT 90% distribution requirement and to avoid U.S. federal
income tax and the 4% non-deductible excise tax in that year. These alternatives could increase our costs or reduce our equity.
26
Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect our business,
financial condition and results of operations.
Covenants in our agreements for our credit facilities or other borrowings may restrict our ability to pay distributions which
could cause us to fail to qualify as a REIT.
In order to maintain our qualification as a REIT, we are generally required under the Code to distribute annually at
least 90% of our net taxable income, determined without regard to the deduction for dividends paid and excluding any net
capital gains. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than
100% of our net taxable income, including any net capital gains. Under agreements for our credit facilities or other borrowings,
we may be subject to various financial covenants that may inhibit our ability to make distributions to our stockholders, which
could restrict us from making sufficient distributions to maintain our REIT status.
New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could adversely
affect us or our stockholders.
The federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or
administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal
income tax rules dealing with REITs constantly are under review by persons involved in the legislative process, the IRS and the
U.S. Treasury Department, which could result in statutory changes as well as frequent revisions to regulations and
interpretations. In addition, several proposals have been made that would make substantial changes to the federal income tax
laws generally. We cannot predict whether any of these proposed changes will become law. We and our stockholders could be
adversely affected by any recent change in, or any new federal income tax law, regulation or administrative interpretation.
General Risk Factors
An increase in market interest rates may have an adverse effect on the market price of our securities.
One of the factors that investors may consider in deciding whether to buy or sell our securities is our dividend rate as a
percentage of our share or unit price, relative to market interest rates. If market interest rates increase, prospective investors
may desire a higher dividend or interest rate on our securities or seek securities paying higher dividends or interest. The market
price of our Class A common stock likely will be based primarily on the earnings and return that we derive from our
investments and income with respect to our properties and our related distributions to stockholders, and not from the market
value or underlying appraised value of the properties or investments themselves. As a result, interest rate fluctuations and
capital market conditions can affect the market price of our Class A common stock. For instance, if interest rates rise without an
increase in our dividend rate, the market price of our Class A common stock could decrease because potential investors may
require a higher dividend yield on our Class A common stock as market rates on interest-bearing securities, such as bonds, rise.
In addition, rising interest rates would result in increased interest expense on our variable rate debt, thereby adversely affecting
cash flow and our ability to service our indebtedness and pay dividends.
Inflation may adversely affect our financial condition and results of operations.
An increase in inflation could have an adverse impact on our operating and general and administrative expenses,
interest expense and real estate acquisition costs. During inflationary periods, these costs could increase at a rate higher than our
rental revenue. Inflation could also have an adverse effect on consumer spending, which could adversely impact demand for
postal services and therefore the demand for postal properties. Periodic rental increases through lease renewal may not
adequately protect us from the impact of inflation. If our operating and other expenses are increasing faster than anticipated due
to inflation, our financial condition, results of operations, cash flow, cash available for distributions and our ability to service
our debt obligations could be materially adversely affected.
Changes in accounting pronouncements could adversely impact our reported financial performance.
Accounting policies and methods are fundamental to how we record and report our financial condition and results of
operations. From time to time the Financial Accounting Standards Board and the SEC, which create and interpret appropriate
accounting standards, may change the financial accounting and reporting standards or their interpretation and application of
these standards that govern the preparation of our financial statements. These changes could have a material impact on our
27
reported financial condition and results of operations. In some cases, we could be required to apply a new or revised standard
retroactively, resulting in reclassifying or restating prior period financial statements.
We could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over
financial reporting.
Our disclosure controls and procedures and internal control over financial reporting may not prevent all errors,
misstatements or misrepresentations. There can be no guarantee that our internal control over financial reporting will be
effective in accomplishing all control objectives all of the time. Deficiencies in our internal controls over financial reporting
that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements
or otherwise adversely impact our financial condition, results of operations, cash flows, or the market price of our Class A
common stock and our ability to satisfy our debt service obligations and to pay dividends and distributions to the holders of our
Class A common stock.
Future offerings of equity securities, which would dilute our existing stockholders and may be senior to our Class A
common stock for the purposes of dividend distributions, may adversely affect the market price of our Class A common
stock.
In the future, we may attempt to increase our capital resources by making additional offerings of equity securities,
including classes of preferred or common stock. Additional equity offerings may dilute the holdings of our existing
stockholders or reduce the market price of our Class A common stock, or both. Preferred stock could have a preference on
liquidating distributions or a preference on dividend payments that could limit our ability to make a dividend distribution to the
holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions
and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus,
our stockholders bear the risk of our future offerings reducing the market price of our Class A common stock and diluting their
holdings in us.
The market price of our Class A common stock has been, and may continue to be, volatile and has declined, and may
continue to decline, which may result in a substantial or complete loss of your investment in our Class A common stock.
The stock markets have previously and recently experienced significant price and volume fluctuations. As a result, the
market price of our Class A common stock has been and could be similarly volatile in the future, and investors in our Class A
common stock may experience a decrease in the value of their investments, including decreases unrelated to our operating
performance or prospects. The market price of our Class A common stock could be subject to wide fluctuations in response to a
number of factors, including:
•
•
•
•
•
•
•
•
•
•
our operating performance and the performance of other similar companies;
the operating performance of the USPS;
actual or anticipated differences in our operating results;
changes in our revenues or earnings estimates or recommendations by securities analysts;
publication of research reports about us or our industry by securities analysts;
additions and departures of key personnel;
strategic decisions by us or our competitors, such as mergers and acquisitions, divestments, spin-offs, joint
ventures, strategic investments or changes in business strategy;
the passage of legislation or other regulatory developments or executive policies that adversely affect us or our
industry;
speculation in the press or investment community;
actions by institutional stockholders;
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•
•
•
•
changes in accounting principles;
terrorist acts;
general market conditions, including factors unrelated to our performance; and
pandemics and epidemics, such as the COVID-19 pandemic, and the related governmental and economic
responses thereto.
In the past, securities class action litigation has often been instituted against companies following periods of volatility
in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.
Future sales of our Class A common stock, preferred stock, or securities convertible into or exchangeable or exercisable for
our Class A common stock could depress the market price of our Class A common stock.
We cannot predict whether future sales of our Class A common stock, preferred stock, or securities convertible into or
exchangeable or exercisable for our Class A common stock or the availability of these securities for resale in the open market
will decrease the market price of our Class A common stock. Sales of a substantial number of these securities in the public
market, including sales upon the redemption of OP Units, or the perception that these sales might occur, may cause the market
price of our common shares to decline and you could lose all or a portion of your investment. Future issuances of our Class A
common stock, preferred stock, or other securities convertible into or exchangeable or exercisable for our Class A common
stock, including, without limitation, OP Units, in connection with property, portfolio or business acquisitions and issuances of
equity-based awards to participants in our 2019 Equity Incentive Plan, could have an adverse effect on the market price of our
Class A common stock. Future issuances of these securities also could adversely affect the terms upon which we obtain
additional capital through the sale of equity securities. In addition, future sales or issuances of our Class A common stock may
be dilutive to existing stockholders.
We face cybersecurity risks and risks associated with security breaches which have the potential to disrupt our operations,
cause material harm to our financial condition, result in misappropriation of assets, compromise confidential information
and/or damage our business relationships and can provide no assurance that the steps we and our service providers take in
response to these risks will be effective.
We face cybersecurity risks and risks associated with security breaches or disruptions, such as through cyber-attacks or
cyber intrusions over the Internet, malware, computer viruses, attachments to emails, social engineering and phishing schemes
or persons inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber
intrusions, including by computer hackers, nation-state affiliated actors, and cyber terrorists, has generally increased as the
number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. These incidents
may result in disruption of our operations, material harm to our financial condition, cash flows and the market price of our
common shares, misappropriation of assets, compromise or corruption of confidential information collected in the course of
conducting our business, liability for stolen information or assets, increased cybersecurity protection and insurance costs,
regulatory enforcement, litigation and damage to our stakeholder relationships. These risks require continuous and likely
increasing attention and other resources from us to, among other actions, identify and quantify these risks, upgrade and expand
our technologies, systems and processes to adequately address them and provide periodic training for our employees and
contractors to assist them in detecting phishing, malware and other schemes. Such attention diverts time and other resources
from other activities and there is no assurance that our efforts will be effective. Additionally, we rely on third-party service
providers in our conduct of day-to-day property management, leasing and other activities at our properties and we can provide
no assurance that the networks and systems that our third-party vendors have established or used will be effective.
In the normal course of business, we and our service providers (including service providers engaged in providing
property management, leasing, accounting and/or payroll services) collect and retain certain personal information provided by
our tenants, employees and vendors. We also rely extensively on computer systems to process transactions and manage our
business. We can provide no assurance that the data security measures designed to protect confidential information on our
systems established by us and our service providers will be able to prevent unauthorized access to this personal information. We
maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business, or
reputational losses that may result from an interruption or breach of our systems. In response to the pandemic, some of our
employees work remotely, which could introduce additional cybersecurity risks. There can be no assurance that our efforts to
maintain the security and integrity of the information we and our service providers collect and our and their computer systems
will be effective or that attempted security breaches or disruptions would not be successful or damaging with the potential for
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disruption in our operations, material harm to our financial condition, cash flows and the market price of our common shares,
increased cybersecurity protection and insurance costs, regulatory enforcement, litigation and damage to our stakeholder
relationships.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of December 31, 2021, we owned a portfolio of 966 properties located in 49 states comprising approximately of 4.5
million net leasable interior square feet. Our properties are leased primarily to the USPS. The following map shows our
footprint of owned properties as of December 31, 2021.
Information regarding our properties as of December 31, 2021 are included in Item 15. “Exhibits and Financial
Statement Schedules—Schedule III. Real Estate and Accumulated Depreciation” of this Annual Report on Form 10-K.
Scheduled Lease Expirations
As of December 31, 2021, the weighted average remaining years to maturity pursuant to our leases with the USPS was
approximately four years, with expirations through 2031, assuming tenants do not exercise any existing renewal, termination or
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purchase options. The table below details scheduled lease expirations, as of December 31, 2021, for our properties for the
periods indicated.
Year
2021(2)
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Totals
Explanatory Notes:
Number of
Leases
Expiring
Total Lease
Square Footage
%
Amount
Annualized Lease
Revenue(1)
Amount
%
19
83
70
80
188
168
239
57
55
8
1
45,869
380,793
554,500
325,138
1.0 % $
458,213
8.5 %
3,317,315
12.4 %
3,416,028
7.3 %
3,534,214
1,153,883
25.9 %
7,923,837
802,595
785,719
201,279
180,973
26,110
2,435
18.0 %
7,130,274
17.6 %
6,133,577
4.5 %
2,118,034
4.1 %
1,782,146
0.6 %
0.1 %
258,262
20,400
1.2 %
9.2 %
9.5 %
9.8 %
22.0 %
19.7 %
17.0 %
5.9 %
4.9 %
0.7 %
0.1 %
968
4,459,294
100.0 % $ 36,092,300
100.0 %
(1) Expiring rent is calculated based on the final month of the expiring lease and then annualized.
(2) Includes approximately 43,000 of interior lease square footage and annualized lease revenue of $0.4 million occupied by
month-to-month holdover leases or leases that expired during the year ended December 31, 2021.
ITEM 3. LEGAL PROCEEDINGS
We and our subsidiaries are, from time to time, parties to litigation arising from the ordinary course of their business.
We are not presently subject to any material litigation nor, to our knowledge, is any other litigation threatened against us, other
than routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business,
some of which are expected to be covered by liability insurance and all of which collectively are not expected to have a material
adverse effect on our liquidity, results of operations or business or financial condition.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A common stock trades on the NYSE under the symbol “PSTL”. As of March 11, 2022, there were
18,765,423 shares of Class A common stock issued and outstanding and three stockholders of record. This number of
stockholders of record does not represent the actual number of beneficial owners of our Class A common stock because shares
of our Class A common stock are frequently held in “street name” by securities dealers and others for the benefit of beneficial
owners who may vote the shares.
In addition, as of March 11, 2022, there were 27,206 shares of Voting Equivalency stock issued and outstanding and
4,145,591 OP Units and LTIP units held by limited partners other than the Company outstanding. All shares of Voting
Equivalency stock issued and outstanding are held by Mr. Spodek and his affiliates. No public trading market exists for such
shares.
We intend to continue to declare quarterly dividends on our Class A common stock. The actual amount and timing of
dividends, however, will be at the discretion of our Board of Directors and will depend upon our financial condition in addition
to the requirements of the Code, and no assurance can be given as to the amounts or timing of future distributions.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by Item 5 is incorporated by reference to our Definitive Proxy Statement for our 2022 annual
stockholders’ meeting.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis is based on, and should be read in conjunction with, the Consolidated Financial
Statements and the related notes thereto of the Company as of and for the years ended December 31, 2021 and December 31,
2020.
Prior to the closing of our IPO on May 17, 2019, Andrew Spodek, our chief executive officer and a member of our
Board of Directors, directly or indirectly controlled 190 properties owned by the Predecessor that were contributed as part of
the Formation Transactions. Of these 190 properties, 140 were held indirectly by our Predecessor through a series of holding
companies, which we refer to collectively as “UPH Entities.” The remaining 50 properties were owned by Mr. Spodek through
12 limited liability companies and one limited partnership, which we refer to collectively as the “Spodek LLCs.” References to
our Predecessor consist of UPH Entities, the Spodek LLCs and Nationwide Postal Management, Inc., a property management
company whose management business we acquired in the Formation Transactions, collectively.
This management’s discussion and analysis of financial condition and results of operations contains forward-looking
statements that involve risks, uncertainties and assumptions. See “Cautionary Statement Regarding Forward-Looking
Statements” for a discussion of the risks, uncertainties and assumptions associated with those statements. Our actual results
may differ materially from those expressed or implied in the forward-looking statements as a result of various factors,
including, but not limited to, those in Item 1A. “Risk Factors” and included in other portions of this report.
Overview
Company
We were formed as a Maryland corporation on November 19, 2018 and commenced operations upon completion of
our IPO and the related Formation Transactions. We conduct our business through a traditional UPREIT structure in which our
properties are owned by our Operating Partnership directly or through limited partnerships, limited liability companies or other
subsidiaries. For the year ended December 31, 2021, we acquired 239 properties (including one property accounted for as a
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financing lease) leased primarily to the USPS for approximately $118 million, excluding closing costs. As of December 31,
2021, our portfolio consists of 966 owned properties, located in 49 states and comprising approximately 4.5 million net leasable
interior square feet.
We are the sole general partner of our Operating Partnership through which our properties are directly or indirectly
owned. As of March 11, 2022, we owned approximately 82.0% of our outstanding OP Units, including LTIP Units. Our Board
of Directors oversees our business and affairs.
Follow-On Equity Offerings and ATM Program
On December 14, 2020, we entered into separate open market sale agreements for our ATM Program with each of
Jefferies LLC, Stifel, Nicolaus & Company, Incorporated, BMO Capital Markets Corp., Janney Montgomery Scott LLC and
D.A. Davidson & Co. (“D.A. Davidson”), pursuant to which we may offer and sell, from time to time, shares of our Class A
common stock having an aggregate sales price of up to $50.0 million. On May 14, 2021, we delivered to D.A. Davidson a
notice of termination of the open market sale agreement with D.A. Davidson, which termination became effective May 14,
2021. During the year ended December 31, 2021, 344,717 shares were issued under the ATM Program, raising approximately
$6.9 million in gross proceeds. As of December 31, 2021, we had approximately $43.1 million of availability remaining under
the ATM Program.
On January 11, 2021, we priced a public offering of 3.25 million shares of our Class A common stock (the “January
Follow-on Offering”) at $15.25 per share. On January 11, 2021, the underwriters purchased the full allotment of 487,500 shares
pursuant to a 30-day option at $15.25 per share (the “January Additional Shares”). The January Follow-on Offering, including
the January Additional Shares, closed on January 14, 2021 resulting in $57.0 million in gross proceeds, and approximately
$53.9 million in net proceeds after deducting approximately $3.1 million in underwriting discounts and before giving effect to
$0.3 million in other expenses relating to the January Follow-on Offering.
On November 16, 2021, we priced a public offering of 4.25 million shares of our Class A common stock (the
“November Follow-on Offering”) at $17.00 per share. On November 16, 2021, the underwriters purchased the full allotment of
637,500 shares pursuant to a 30-day option at $17.00 per share (the “November Additional Shares”). The November Follow-on
Offering, including the November Additional Shares, closed on November 19, 2021 resulting in $83.1 million in gross
proceeds, and approximately $79.0 million in net proceeds after deducting approximately $4.1 million in underwriting
discounts and before giving effect to $0.2 million in other expenses relating to the November Follow-on Offering.
Executive Overview
We are an internally managed REIT with a focus on acquiring and managing properties leased primarily to the USPS,
ranging from last mile post offices to larger industrial facilities. We believe the overall opportunity for consolidation that exists
within the postal logistics network is very attractive. We continue to execute our strategy to acquire and consolidate postal
properties that we believe will generate strong earnings for our shareholders.
Geographic Concentration
As of December 31, 2021, we owned a portfolio of 966 properties located in 49 states leased primarily to the USPS.
For the year ended December 31, 2021, approximately 18.3% of our total of rental income was concentrated in Pennsylvania.
Emerging Growth Company
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act"), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to
other public companies that are not “emerging growth companies,” including not being required to comply with the auditor
attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
In addition, the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised
accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until
those standards would otherwise apply to private companies. We have availed ourselves of these exemptions; although, subject
33
to certain restrictions, we may elect to stop availing ourselves of these exemptions in the future even while we remain an
“emerging growth company.”
We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during
which our total annual revenue equals or exceeds $1.07 billion (subject to periodic adjustment for inflation), (ii) the last day of
the fiscal year following the fifth anniversary of our IPO, (iii) the date on which we have, during the previous three-year period,
issued more than $1.0 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer”
under the Exchange Act.
We are also a “smaller reporting company” as defined in Regulation S-K under the Securities Act and have elected to
take advantage of certain scaled disclosures available to smaller reporting companies. We may continue to be a smaller
reporting company even after we are no longer an “emerging growth company.”
We elected to be treated as a REIT under the Code beginning with our short taxable year ending December 31, 2019.
As long as we qualify as a REIT, we generally will not be subject to federal income tax to the extent that we distribute our
taxable income for each tax year to our stockholders.
Factors That May Influence Future Results of Operations
The USPS
We are dependent on the USPS’ financial and operational stability. The USPS is currently facing a variety of
circumstances that are threatening its ability to fund its operations and other obligations as currently conducted without
intervention by the federal government. The USPS is constrained by laws and regulations that restrict revenue sources and
pricing, mandate certain expenses and cap its borrowing capacity. As a result, among other consequences, the USPS is unable
to fund its mandated expenses and continues to be subject to mandated payments to its retirement system and health benefits.
While the USPS has undertaken, and proposes to undertake, a number of operational reforms and cost reduction measures,
including those outlined in its Ten-Year Plan, the USPS has taken the position such measures alone will not be sufficient to
maintain its ability to meet all of its existing obligations when due or allow it to make the critical infrastructure investments that
have been deferred in recent years. These measures have also led to significant criticism and litigation, which may result in
reputational or financial harm or increased regulatory scrutiny of the USPS or reduced demand for its services. The ongoing
COVID-19 pandemic (including new or mutated variants of COVID-19) and measures being taken to prevent its spread also
continue to have a material and unpredictable effect on the USPS’ operations and liquidity, including volatility in demand for
mail services, significant changes in the mix of mail and packages processed through the USPS’ network and significant
additional operating expenses caused by pandemic-related disruptions. Further, although the USPS received a $10 billion
funding under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, there can be no assurances that this financing
will be sufficient to sustain USPS operations in light of current shortfalls. If the USPS becomes unable to meet its financial
obligations or its revenue declines due to reduced demand for its services, the USPS may reduce its demand for leasing postal
properties, which would have a material adverse effect on our business and operations. For additional information regarding the
risks associated with the USPS, see the section entitled Item 1A. "Risk Factors—Risks Related to the USPS".
Revenues
We derive revenues primarily from rent and tenant reimbursements under leases with the USPS for our properties, and
fee and other from the management agreements with respect to the postal properties owned by Mr. Spodek and his affiliates
managed by PRM, our TRS, and income recognized from properties accounted for as financing leases. Rental income
represents the lease revenue recognized under leases primarily with the USPS which includes the impact of above and below
market lease intangibles as well as tenant reimbursements for payments made by our tenants under the leases to reimburse us
for the majority of real estate taxes paid at each property. Fee and other principally represent (i) revenue PRM received from
postal properties owned by Mr. Spodek and his affiliates pursuant to the management agreements and is a percentage of the
lease revenue for the managed property and (ii) income recognized from properties accounted for as financing leases. As of
December 31, 2021, properties leased to our tenants had an average remaining lease term of approximately four years. Factors
that could affect our rental income and fee and other in the future include, but are not limited to: (i) our ability to renew or
replace expiring leases and management agreements; (ii) local, regional or national economic conditions; (iii) an oversupply of,
or a reduction in demand for, postal space; (iv) changes in market rental rates; (v) changes to the USPS’ current property
leasing program or form of lease; and (vi) our ability to provide adequate services and maintenance at our properties and
managed properties.
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Operating Expenses
We lease our properties primarily to the USPS. The majority of our leases are modified double-net leases, whereby the
tenant is responsible for utilities, routine maintenance and reimbursement of property taxes and the landlord is responsible for
insurance, roof and structure. Thus, an increase in costs related to the landlord’s responsibilities under these leases could
negatively influence our operating results. Refer to “Lease Renewal” below for further discussion.
Operating expenses generally consist of real estate taxes, property operating expenses, which consist of insurance,
repairs and maintenance (other than those for which the tenant is responsible), property maintenance-related payroll and
depreciation and amortization. Factors that may affect our ability to control these operating costs include but are not limited to:
the cost of periodic repair, renovation costs, the cost of re-leasing space, inflation and the potential for liability under applicable
laws. Recoveries from the tenant are recognized as revenue on an accrual basis over the periods in which the related
expenditures are incurred. Tenant reimbursements and operating expenses are recognized on a gross basis, because (i)
generally, we are the primary obligor with respect to the real estate taxes and (ii) we bear the credit risk in the event the tenant
does not reimburse the real estate taxes.
The expenses of owning and operating a property are not necessarily reduced when circumstances, such as market
factors and competition, cause a reduction in income from the property. If revenues drop, we may not be able to reduce our
expenses accordingly. Costs associated with real estate investments generally will not be materially reduced even if a property
is not fully occupied or other circumstances cause our revenues to decrease. As a result, if revenues decrease in the future, static
operating costs may adversely affect our future cash flow and results of operations.
General and Administrative
General and administrative expense represents personnel costs, professional fees, legal fees, insurance, consulting fees,
information technology costs and other expenses related to our day-to-day activities of being a public company. While we
expect that our general and administrative expenses will continue to rise as our portfolio grows, we expect that such expenses as
a percentage of our revenues will decrease over time due to efficiencies and economies of scale.
Equity-Based Compensation Expense
All equity-based compensation expense is recognized in our Consolidated Statements of Operations and
Comprehensive Income (Loss) as components of general and administrative expense and property operating expenses. We issue
share-based awards to align our directors' and employees’ interests with those of our investors.
Depreciation and Amortization
Depreciation and amortization expense relates primarily to depreciation on our properties and capital improvements to
such properties and the amortization of certain lease intangibles.
Other Income
Other income relates primarily to insurance recoveries related to property damage claims.
Indebtedness and Interest Expense
On September 27, 2019, we entered into a credit agreement, as amended, which provided for a senior revolving credit
facility (the “2019 Credit Facility”) with revolving commitments in an aggregate principal amount of $100.0 million and the
option to increase the aggregate lending commitments under the agreement by up to $100.0 million.
On August 9, 2021, we entered into a $150.0 million senior unsecured revolving credit facility (the "2021 Revolving
Credit Facility") and a $50.0 million senior unsecured term loan facility (the "2021 Term Loan"). In connection with entering
into the 2021 Credit Facilities, we terminated the 2019 Credit Facility and paid off the outstanding loans thereunder.
We intend to use the 2021 Credit Facilities for working capital purposes, which may include repayment of mortgage
indebtedness, property acquisitions and other general corporate purposes. We amortize on a non-cash basis the deferred
financing costs associated with our debt to interest expense using the straight-line method, which approximates the effective
35
interest rate method over the terms of the related loans. Any changes to the debt structure, including debt financing associated
with property acquisitions, could materially influence the operating results depending on the terms of any such indebtedness.
Income Tax Benefit (Expense)
As a REIT, we generally will not be subject to federal income tax on our net taxable income that we distribute
currently to our stockholders. Under the Code, REITs are subject to numerous organizational and operational requirements,
including a requirement that they distribute each year at least 90% of their REIT taxable income, determined without regard to
the deduction for dividends paid and excluding any net capital gains. If we fail to qualify for taxation as a REIT in any taxable
year and do not qualify for certain statutory relief provisions, our income for that year will be taxed at regular corporate rates,
and we would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to
qualify as a REIT. Even though we qualify as a REIT for federal income tax purposes, we may still be subject to state and local
taxes on our income and assets and to federal income and excise taxes on our undistributed income. Additionally, any income
earned by PRM and any other TRS we form in the future will be subject to federal, state and local corporate income tax.
Lease Renewal
As of March 11, 2022, the leases at 10 of our properties, representing approximately 47,000 net leasable interior
square feet and $0.4 million in annual contractual rental revenue, were expired and the USPS was occupying such properties as
a holdover tenant. See Item 2. "Properties—Lease Expiration Schedule”. As of the date of this report, the USPS had not vacated
or notified us of its intention to vacate any of these properties. When a lease expires, the USPS becomes a holdover tenant on a
month-to-month basis typically paying the greater of estimated market rent or the rent amount under the expired lease. While
we currently anticipate that we will execute new leases for all properties that have expired or will expire, there can be no
guarantee that we will be successful in executing new leases, obtaining positive rent renewal spreads or renewing the leases on
terms comparable to those of the expiring leases. Even if we are able to renew these expired leases, the lease terms may not be
comparable to those of the previous leases. If we are not successful, we will likely experience reduced occupancy, rental
income and net operating income, as well as diminished borrowing capacity under our credit facilities, which could have a
material adverse effect on our financial condition, results of operations and ability to make distributions to stockholders.
Results of Operations
Comparison of the years ended December 31, 2021 and December 31, 2020
36
(Amounts in thousands)
Revenues
Rental income
Fee and other
Total revenues
Operating expenses
Real estate taxes
Property operating expenses
General and administrative
Depreciation and amortization
Total operating expenses
For the Year Ended
December 31,
2021
2020
$ Change
% Change
$
38,276 $
1,662
39,938
23,315 $
1,129
24,444
14,961
533
15,494
5,399
3,987
10,643
13,990
34,019
3,095
1,924
8,230
9,163
22,412
2,304
2,063
2,413
4,827
11,607
64 %
47 %
63 %
74 %
107 %
29 %
53 %
52 %
Income from operations
5,919
2,032
3,887
191 %
Other income
401
231
170
74 %
Interest expense, net
Contractual interest expense
Write-off and amortization of deferred financing fees
Loss on early extinguishment of debt
Interest income
Total interest expense, net
(2,739)
(714)
(202)
2
(3,653)
(2,346)
(472)
—
3
(2,815)
Income (loss) before income tax expense
Income tax expense
Net income (loss)
2,667
(111)
2,556 $
(552)
(89)
(641) $
$
(393)
(242)
(202)
(1)
(838)
3,219
(22)
3,197
17 %
51 %
100 %
(33) %
30 %
(583) %
25 %
(499) %
Revenues
Rental income – Rental income includes net rental income as well as the recovery of certain operating costs and
property taxes from tenants. Rental income increased by $15.0 million to $38.3 million for the year ended December 31, 2021
from $23.3 million for the year ended December 31, 2020 primarily due to the volume of our acquisitions.
Fee and other - Fee and other increased by $0.5 million to $1.7 million for the year ended December 31, 2021 from
$1.1 million for the year ended December 31, 2020 primarily due to higher management fees, income recognized from
properties accounted for as financing leases and miscellaneous income.
Operating Expenses
Real estate taxes – Real estate taxes increased by $2.3 million to $5.4 million for the year ended December 31, 2021
from $3.1 million for the year ended December 31, 2020 primarily due to the volume of our acquisitions.
Property operating expenses – Property operating expenses increased by $2.1 million to $4.0 million for the year
ended December 31, 2021 from $1.9 million for the year ended December 31, 2020. Property management expenses are
included within property operating expenses and increased by $0.7 million to $1.5 million for the year ended December 31,
2021 from $0.8 million for the year ended December 31, 2020, due to expanding our property management staff as a result of
our continued growth as well as an increase in equity-based compensation expense related to awards that have been granted to
our property management employees throughout 2020 and 2021. The remainder of the increase of $1.4 million is related to
expenses related to repairs and maintenance and insurance, which increase is primarily due to the volume of our acquisitions.
37
General and administrative – General and administrative expenses increased by $2.4 million to $10.6 million for the
year ended December 31, 2021 from $8.2 million for the year ended December 31, 2020, primarily due to expanding our staff
as a result of our continued growth as well as an increase in equity-based compensation expense related to awards that have
been granted to our employees throughout 2020 and 2021.
Depreciation and amortization – Depreciation and amortization expense increased by $4.8 million to $14.0 million for
the year ended December 31, 2021 from $9.2 million for the year ended December 31, 2020 primarily due to the volume of our
acquisitions.
Other Income
Other income primarily includes insurance recoveries related to property damage claims. Other income increased by
$0.2 million to $0.4 million for the year ended December 31, 2021 from $0.2 million for the year ended December 31, 2020,
primarily due to higher insurance recoveries.
Total Interest Expense, Net
During the year ended December 31, 2021, we incurred total interest expense, net of $3.7 million compared to $2.8
million for the year ended December 31, 2020. The increase in interest expense was primarily related to the loss on early
extinguishment of debt of $0.2 million incurred in connection with the pay down of two mortgage financings during the year
ended December 31, 2021 and higher amount of borrowings under our 2021 Credit Facilities and, prior to its termination, our
2019 Credit Facility.
Income Tax Expense
Income tax expense increased by $0.02 million to $0.1 million for the year ended December 31, 2021 from $0.1
million for the year ended December 31, 2020, primarily due to an increase in expense related to PRM during 2021.
Cash Flows
Comparison of the year ended December 31, 2021 and the year ended December 31, 2020
We had $5.9 million of cash and $1.2 million of escrows and reserves as of December 31, 2021 compared to $2.2
million of cash and $1.1 million of escrows and reserves as of December 31, 2020.
Cash flow from operating activities – Net cash provided by operating activities increased by $7.7 million to $17.1
million for the year ended December 31, 2021 compared to $9.4 million for the year ended December 31, 2020. The increase is
primarily due to the volume of our acquisitions, all of which have generated additional rental income and related changes in
working capital.
Cash flow from investing activities – Net cash used in investing activities of $106.7 million for the year ended
December 31, 2021 primarily consisted of $91.4 million of acquisitions and capital improvements and $15.7 million of
investment in a financing lease, offset by $1.2 million of insurance proceeds that were received. Net cash used in investing
activities for the year ended December 31, 2020 primarily consisted of $125.6 million of acquisitions and capital improvements
and investment in a financing lease.
Cash flow from financing activities – Net cash provided by financing activities decreased by $13.5 million to
$93.4 million for the year ended December 31, 2021 compared to $106.8 million provided by the year ended December 31,
2020. The decrease was primarily related to increased payment of dividends and distributions and the pay down of secured
borrowings and the 2019 Credit Facility in connection with entering into the 2021 Credit Facilities during the year ended
December 31, 2021, offset by borrowings under the 2021 Credit Facilities and net proceeds from issuance of Class A common
stock during the year ended December 31, 2021.
Liquidity and Capital Resources
Analysis of Liquidity and Capital Resources
We had approximately $5.9 million of cash and $1.2 million of escrows and reserves as of December 31, 2021.
38
On August 9, 2021, we entered into the 2021 Credit Facilities, which include the $150.0 million 2021 Revolving
Credit Facility and the $50.0 million 2021 Term Loan, with Bank of Montreal, as administrative agent, and BMO Capital
Markets Corp., People’s United Bank, National Association, JPMorgan Chase Bank, N.A. and Truist Securities, Inc. as joint
lead arrangers and joint book runners. Additional participants in the 2021 Credit Facilities include Stifel Bank & Trust and
TriState Capital Bank. In connection with entering into the 2021 Credit Facilities, we terminated the 2019 Credit Facility and
paid off the outstanding loans thereunder. As of December 31, 2021, we had $63.0 million of aggregate principal amount
outstanding under our 2021 Credit Facilities, with $50.0 million drawn on the 2021 Term Loan and $13.0 million drawn on the
2021 Revolving Credit Facility.
The 2021 Credit Facilities include an accordion feature which will permit us to borrow up to an additional $150.0
million under the 2021 Revolving Credit Facility and 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.
Borrowings under the 2021 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 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 a consolidated leverage ratio. With
respect to the 2021 Revolving Credit Facility, we 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 2021 Credit Facilities are guaranteed, jointly and severally, by us and certain of our indirect subsidiaries and
contain customary covenants that, among other things, restrict, subject to certain exceptions, our ability to incur indebtedness,
grant liens on assets, make certain types of investments, engage in acquisitions, mergers or consolidations, sell assets, enter into
certain transactions with affiliates and pay dividends or make distributions. The 2021 Credit Facilities require compliance with
consolidated financial maintenance covenants to be tested quarterly, including a minimum fixed charge coverage ratio,
maximum total leverage ratio, minimum tangible net worth, maximum secured leverage ratio, maximum unsecured leverage
ratio, minimum unsecured debt service coverage ratio and maximum secured recourse leverage ratio. The 2021 Credit Facilities
also contain certain customary events of default, including the failure to make timely payments under the 2021 Credit Facilities,
any event or condition that makes other material indebtedness due prior to its scheduled maturity, the failure to satisfy certain
covenants and specified events of bankruptcy and insolvency. As of December 31, 2021, we were in compliance with all of the
2021 Credit Facilities’ debt covenants.
In addition, on August 9, 2021, we entered into the 2021 Interest Rate Swap that effectively fixed the LIBOR
component of the interest rate on $50.0 million portion of the 2021 Credit Facilities through January 2027. The 2021 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 December 31, 2021.
On March 5, 2021, the Financial Conduct Authority announced that U.S. Dollar LIBOR will no longer be published
after June 30, 2023. This announcement has several implications, including setting the spread that may be used to automatically
convert contracts from LIBOR to the SOFR. The 2021 Credit Facilities provide that, on or about the LIBOR cessation date
(subject to an early opt-in election), LIBOR shall be replaced as a benchmark rate in the 2021 Credit Facilities with a new
benchmark rate, with such adjustments as set forth in the 2021 Credit Facilities. We are not able to predict when LIBOR will
cease to be available or when there will be enough liquidity in the SOFR markets. We are monitoring and evaluating the risks
related to changes in LIBOR availability, which include potential changes in interest paid on debt and amounts received and
paid on the 2021 Interest Rate Swap. In addition, the value of debt or derivative instruments tied to LIBOR may also be
impacted as LIBOR is limited and discontinued and contracts must be transitioned to a new alternative rate.
Our short-term liquidity requirements primarily consist of operating expenses and other expenditures associated with
our properties, distributions to our limited partners and distributions to our stockholders required to qualify for REIT status,
capital expenditures and, potentially, acquisitions. We expect to meet our short-term liquidity requirements through net cash
provided by operations, cash, borrowings under our 2021 Credit Facilities and the potential issuance of securities.
Our long-term liquidity requirements primarily consist of funds necessary for the repayment of debt at maturity,
property acquisitions and non-recurring capital improvements. We expect to meet our long-term liquidity requirements with net
cash from operations, long-term indebtedness including our 2021 Credit Facilities and mortgage financing, the issuance of
equity and debt securities and proceeds from select sales of our properties. We also may fund property acquisitions and non-
recurring capital improvements using our 2021 Credit Facilities pending permanent property-level financing.
39
We believe we have access to multiple sources of capital to fund our long-term liquidity requirements, including the
incurrence of additional debt and the issuance of additional equity securities. However, in the future, there may be a number of
factors that could have a material and adverse effect on our ability to access these capital sources, including unfavorable
conditions in the overall equity and credit markets, our degree of leverage, our unencumbered asset base, borrowing restrictions
imposed by our lenders, general market conditions for REITs, our operating performance, liquidity and market perceptions
about us. The success of our business strategy will depend, to a significant degree, on our ability to access these various capital
sources. In addition, we continuously evaluate possible acquisitions of postal properties, which largely depend on, among other
things, the market for owning and leasing postal properties and the terms on which the USPS will enter into new or renewed
leases.
To maintain our qualification as a REIT, we must make distributions to our stockholders aggregating annually at least
90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding capital gains. As
a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities
that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will
need to find alternative ways to fund those needs. Such alternatives may include, among other things, divesting ourselves of
properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring
indebtedness or issuing equity securities in public or private transactions, the availability and attractiveness of the terms of
which cannot be assured.
Consolidated Indebtedness
As of December 31, 2021, we had approximately $96.2 million of outstanding consolidated principal indebtedness.
The following table sets forth information as of December 31, 2021 and 2020 with respect to our outstanding indebtedness:
Amount
Outstanding
as of
December 31,
2021
Amount
Outstanding
as of
December 31,
2020
Interest
Rate
as of
December 31,
2021
Maturity Date
Revolving Credit Facility(1):
2021 Revolving Credit Facility
2019 Credit Facility
$
13,000 $
—
—
78,000
2021 Term Loan
Secured Borrowings:
Vision Bank(3)
First Oklahoma Bank(4)
Vision Bank – 2018(5)
Seller Financing(6)
First Oklahoma Bank – April 2020(7)
First Oklahoma Bank – June 2020(8)
AIG – December 2020(9)
Total Principal
$
Explanatory Notes:
50,000
—
1,409
349
844
366
—
—
30,225
96,193 $
1,459
364
869
445
4,522
9,152
30,225
125,036
LIBOR+150
bps(2)
—
LIBOR+145
bps(2)
January 2026
—
January 2027
3.69 %
3.63 %
3.69 %
6.00 %
—
—
2.80 %
September 2041
December 2037
September 2041
January 2025
—
—
January 2031
(1) See above under "—Analysis of Liquidity and Capital Resources" for details regarding the 2021 Credit Facilities. During
the years ended December 31, 2021 and 2020, we incurred $0.1 million and $0.3 million, respectively, of unused facility
fees related to the 2019 Credit Facility and the 2021 Revolving Credit Facility.
(2) Based upon the one-month U.S. Dollar LIBOR rate.
(3) Five properties are collateralized under this loan as of December 31, 2021. Mr. Spodek also provided a personal
guarantee of payment for the entire outstanding amount thereunder as of December 31, 2020 and for 50.0% of the
outstanding amount thereunder as of December 31, 2021. On September 30, 2021, we amended this loan to extend its
maturity to September 2041 and reduce its interest rate to 3.69% fixed for five years with interest payments only, then
40
adjusting every subsequent five year period thereafter with principal and interest payments to the rate based on the five-
year weekly average yield on United States Treasury securities adjusted to a constant maturity of five years, as made
available to the Board of Governors of the Federal Reserve System (the "Five-Year Treasury Rate"), plus a margin of
2.75%, with a minimum annual rate of 2.75%.
(4) The loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by Mr. Spodek.
On July 23, 2021, we amended this loan to reduce its interest rate to 3.625% fixed for five years, then adjusting annually
thereafter to a variable annual rate of Wall Street Journal Prime Rate ("Prime") with a minimum annual rate of 3.625%.
(5) The loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by Mr. Spodek. On
September 30, 2021, we amended this loan to extend its maturity to September 2041 and reduce its interest rate to 3.69%
fixed for 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 Treasury Rate, plus a margin of 2.75%, with a minimum annual
rate of 2.75%.
(6) In connection with the acquisition of a property, we 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.
(7) In connection with the purchase of a 13-property portfolio, we obtained $4.5 million of mortgage financing, at a fixed
interest rate of 4.25% with interest only for the first 18 months, which would have reset in November 2026 to the greater of
Prime or 4.25%. On February 3, 2021, we fully repaid this mortgage financing and wrote off $0.06 million of deferred
financing to costs to loss on early extinguishment of debt for the year ended December 31, 2021.
(8) The loan was collateralized by first mortgage liens on 22 properties. Interest rates would have reset in January 2027 to the
greater of Prime or 4.25%. On February 3, 2021, we fully repaid this mortgage financing and wrote off $0.15 million of
deferred financing to costs to loss on early extinguishment of debt for the year ended December 31, 2021.
(9) The loan is secured by a first mortgage lien on an industrial property located in Warrendale, Pennsylvania. The loan has a
fixed interest rate of 2.80% with interest-only payments for the first five years and fixed payments of principal and interest
thereafter based on a 30-year amortization schedule.
Secured Borrowings as of December 31, 2021
As of December 31, 2021, we had approximately $33.2 million of secured borrowings outstanding, all of which is
currently fixed-rate debt with a weighted average interest rate of 2.90% per annum. During the year ended December 31, 2021,
we repaid two mortgage loans in the aggregate amount of $13.7 million and amended several other mortgage loans to reduce
their interest rates.
Contractual Obligations and Other Long-Term Liabilities
The following table provides information with respect to our commitments as of December 31, 2021, including any
guaranteed or minimum commitments under contractual obligations.
Contractual Obligations
2021 Credit Facilities
Payments Due by Period
Total
2022
2023 to 2024
2025 to 2026
More than
five years
$
63,000 $
— $
— $
13,000 $
Principal payments on mortgage loans
Interest payments(1)
Operating lease obligations(2)
Total
33,193
16,556
1,784
114,533 $
$
100
2,617
227
2,944 $
217
5,216
761
4,696
342
5,775 $
70
18,527 $
50,000
32,115
4,027
1,145
87,287
Explanatory Notes:
(1) The amounts shown relate to (i) the 2021 Revolving Credit Facility based on the outstanding balance and interest rate in
effect as of December 31, 2021 and assuming an unused facility fee under the 2021 Revolving Credit Facility through the
41
remainder of the term based on such outstanding balance, (ii) the 2021 Term Loan based on the interest rate fixed through
the 2021 Interest Rate Swap and outstanding balance as of December 31, 2021 and (iii) the mortgage loans based on the
outstanding balance and interest rate in effect as of December 31, 2021.
(2) Operating lease obligations relate to the lease for our corporate headquarters and four ground leases at certain of our
properties.
Dividends
To qualify and maintain our qualification as a REIT, we are required to pay dividends to stockholders at least equal to
90% of our REIT taxable income determined without regard to the deduction for dividends paid and excluding net capital gains.
During the year ended December 31, 2021, we paid cash dividends of $0.885 per share.
Subsequent Events
2022 Financing Activity
We had net credit facility activity of $15.0 million during the period subsequent to December 31, 2021. As of the date
of this report, we had $78.0 million drawn on the 2021 Credit Facilities, with $50.0 million drawn on the 2021 Term Loan and
$28.0 million drawn on the 2021 Revolving Credit Facility.
2022 Real Estate Acquisitions
Subsequent to December 31, 2021, we have acquired 39 properties in individual or small portfolio transactions for
approximately $11.8 million, excluding closing costs, some of which include OP Units as part of the consideration.
Dividends
Our Board of Directors approved, and on February 1, 2022, we declared a fourth quarter common stock dividend of
$0.2275 per share which was paid on February 28, 2022 to stockholders of record on February 15, 2022.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the historical
consolidated financial statements of the Company that have been prepared in accordance with GAAP. The preparation of these
financial statements requires us to exercise our best judgment in making estimates that affect the reported amounts of assets,
liabilities, revenues and expenses. Set forth below is a summary of accounting policies and estimates that we believe are critical
to the preparation of our Consolidated Financial Statements. We believe that all of the decisions and assessments applied were
reasonable at the time made, based upon information available to us at that time. Due to the inherently judgmental nature of the
various projections and assumptions used, and unpredictability of economic and market conditions, actual results may differ
from estimates, and changes in estimates and assumptions could have a material effect on our financial statements in the future.
Our accounting policies and estimates are more fully discussed in Note 2. Summary of Significant Accounting Policies in the
Notes to the Consolidated Financial Statements.
Investments in Real Estate
Upon the acquisition of real estate, the purchase price is allocated based upon the relative fair value of the assets
acquired and liabilities assumed. The allocation of the purchase price to the relative fair value of the tangible assets of an
acquired property is derived by valuing the property as if it were vacant. All real estate acquisitions in the periods presented
qualified as asset acquisitions and, as such, acquisition-related fees and acquisition-related expenses related to these asset
acquisitions are capitalized as part of the acquisition.
Investments in real estate generally include land, buildings, tenant improvements and identified intangible assets, such
as in-place lease intangibles and above or below-market lease intangibles. Direct and certain indirect costs clearly associated
with the development, construction, leasing or expansion of real estate assets are capitalized as a cost of the property. Repairs
and maintenance costs are expensed as incurred.
42
Revenue Recognition
We have operating lease agreements with tenants, some of which contain provisions for future rental increases. Rental
income is recognized on a straight-line basis over the term of the lease. In addition, certain lease agreements provide for
reimbursements from tenants for real estate taxes and other recoverable costs, which are recorded on an accrual basis as part of
“Rental income” in our Consolidated Statements of Operations and Comprehensive Income (Loss).
Fee and other primarily consist of property management fees and income recognized from properties accounted for as
financing leases. The management fees arise from contractual agreements with entities that are affiliated with our chief
executive officer. Management fee income is recognized as earned under the respective agreements. Revenue from direct
financing leases is recognized over the lease term using the effective interest rate method. At lease inception, we record an asset
within investments on the Consolidated Balance Sheets, which represents our net investment in the direct financing lease. This
initial net investment is determined by aggregating the total future minimum lease payments attributable to the direct financing
lease and the estimated residual value of the property, if any, less unearned income. Over the lease term, the investment in the
direct financing lease is reduced and income is recognized as revenue in “Fee and other” in the Consolidated Statements of
Operations and Comprehensive Income (Loss) and produces a constant periodic rate of return on the investment in financing
leases, net.
Impairment
The carrying value of real estate investments and related intangible assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the
carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an
undiscounted basis. An impairment loss is measured based on the excess of the asset’s carrying amount over its estimated fair
value. Impairment analyses will be based on current plans, intended holding periods and available market information at the
time the analyses are prepared. If estimates of the projected future cash flows, anticipated holding periods or market conditions
change, the evaluation of impairment losses may be different and such differences may be material. The evaluation of
anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital
requirements that could differ materially from actual results.
New Accounting Pronouncements
For a discussion of our adoption of new accounting pronouncements, please see Note 2. Summary of Significant
Accountant Policies in the Notes to the Consolidated Financial Statements.
Inflation
Because most of our leases provide for fixed annual rental payments without annual rent escalations, our rental
revenues are fixed while our property operating expenses are subject to inflationary increases. A majority of our leases provide
for tenant reimbursement of real estate taxes and thus the tenant must reimburse us for real estate taxes. We believe that if
inflation increases expenses over time, increases in lease renewal rates will materially offset such increase.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and interest rates. Our future earnings, cash flows
and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Our primary market risk
results from our indebtedness, which bears interest at both fixed and variable rates. As of December 31, 2021, our indebtedness
was approximately $96.2 million, consisting of approximately $63.0 million of variable-rate debt and approximately $33.2
million of fixed-rate debt. Of the $63.0 million variable-rate debt, $50.0 million relates to the 2021 Term Loan against which
we have applied the 2021 Interest Rate Swap. When factoring in the 2021 Term Loan as fixed-rate debt through the 2021
Interest Rate Swap, as of December 31, 2021, approximately $13.0 million of our indebtedness was variable-rate debt and
approximately $83.2 million was fixed-rate debt. Assuming no increase in the amount of our outstanding variable-rate
indebtedness, if the one-month U.S. Dollar LIBOR were to increase or decrease by 0.50%, our cash flows would decrease or
increase by approximately $0.07 million on an annualized basis.
Subject to maintaining our status as a REIT for federal income tax purposes, we manage our market risk on variable
rate debt through the use of interest rate swaps that fix the rate on all or a portion of our variable rate debt for varying periods
up to maturity, such as the 2021 Interest Rate Swap. In the future, we may use other derivative instruments such as interest cap
43
agreements to, in effect, cap the interest rate on all or a portion of the debt for varying periods up to maturity. This in turn,
reduces the risks of variability of cash flows created by variable rate debt and mitigates the risk of increases in interest rates.
Our objective when undertaking such arrangements will be to reduce our floating rate exposure. However, we provide no
assurance that our efforts to manage interest rate volatility will successfully mitigate the risks of such volatility in our portfolio
and we do not intend to enter into hedging arrangements for speculative purposes.
44
POSTAL REALTY TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
Report of Independent Registered Public Accounting Firm (BDO USA, LLP; New York, New York, PCAOB
ID# 243)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31,
2021 and 2020
Consolidated Statements of Changes in Equity (Deficit) for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
Schedule III – Real Estate and Accumulated Depreciation
Page
F-2
F-3
F-4
F-5
F-6
F-8
47
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Postal Realty Trust, Inc.
Cedarhurst, NY
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Postal Realty Trust, Inc. (the "Company") as of December
31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), changes in equity
(deficit), and cash flows for the years then ended, and the related notes and financial statement schedule listed in the
the
accompanying
consolidated financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
the “consolidated financial statements”). In our opinion,
index (collectively referred
to as
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Company's auditor since 2017.
New York, New York
March 11, 2022
F-2
Item 1. Financial Statements
PART I. FINANCIAL INFORMATION
POSTAL REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value and share data)
Assets
Investments:
Real estate properties, at cost:
Land
Building and improvements
Tenant improvements
Total real estate properties, at cost
Less: Accumulated depreciation
Total real estate properties, net
Investment in financing leases, net
Total real estate investments
Cash
Escrow and reserves
Rent and other receivables
Prepaid expenses and other assets, net
Deferred rent receivable
In-place lease intangibles, net
Above market leases, net
Total Assets
Liabilities and Equity
Liabilities:
Term loan, net
Revolving credit facility
Secured borrowings, net
Accounts payable, accrued expenses and other
Below market leases, net
Total Liabilities
Commitments and Contingencies
Equity:
Class A common stock, par value $0.01 per share; 500,000,000 shares authorized,
18,564,421 and 9,437,197 shares issued and outstanding as of December 31, 2021 and
December 31, 2020, respectively
Class B common stock, par value $0.01 per share; 27,206 shares authorized: 27,206
shares issued and outstanding as of December 31, 2021 and December 31, 2020
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total Stockholders’ Equity
Operating Partnership unitholders’ non-controlling interests
Total Equity
Total Liabilities and Equity
December 31,
2021
December 31,
2020
$
$
$
$
64,538 $
278,396
5,431
348,365
(20,884)
327,481
16,213
343,694
5,857
1,169
4,172
7,511
666
14,399
249
377,717 $
46,303
196,340
4,428
247,071
(13,215)
233,856
515
234,371
2,212
1,059
3,521
4,434
216
13,022
50
258,885
49,359 $
13,000
32,990
8,225
8,670
112,244
—
78,000
46,629
5,891
8,726
139,246
186
95
—
237,969
(18,879)
766
220,042
45,431
265,473
377,717 $
—
100,812
(8,917)
—
91,990
27,649
119,639
258,885
The accompanying notes are an integral part of these consolidated financial statements.
F-3
POSTAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
Revenues:
Rental income
Fee and other
Total revenues
Operating expenses:
Real estate taxes
Property operating expenses
General and administrative
Depreciation and amortization
Total operating expenses
Income from operations
Other income
Interest expense, net:
Contractual interest expense
Write-off and amortization of deferred financing fees
Loss on early extinguishment of debt
Interest income
Total interest expense, net
Income (loss) before income tax expense
Income tax expense
Net income (loss)
Net (income) loss attributable to Operating Partnership unitholders’ non-
controlling interests
Net income (loss) attributable to common stockholders
Net income (loss) per share:
Basic and Diluted
Weighted average common shares outstanding:
Basic and Diluted
Comprehensive income (loss):
Net income (loss)
Unrealized gain on financial instrument
Comprehensive income (loss)
Comprehensive (income) loss attributable to Operating Partnership unitholders’ non-
controlling interests
Comprehensive income (loss) attributable to common stockholders
For the Year Ended
December 31,
2021
2020
$
38,276 $
1,662
39,938
5,399
3,987
10,643
13,990
34,019
23,315
1,129
24,444
3,095
1,924
8,230
9,163
22,412
5,919
2,032
401
231
(2,739)
(714)
(202)
2
(2,346)
(472)
—
3
(3,653)
(2,815)
2,667
(111)
2,556
(501)
(552)
(89)
(641)
289
$
$
2,055 $
(352)
0.10 $
(0.10)
13,689,251
7,013,621
$
2,556 $
960
3,516
(695)
2,821 $
$
(641)
—
(641)
289
(352)
The accompanying notes are an integral part of these consolidated financial statements.
F-4
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POSTAL REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
For the Year Ended
December 31,
2021
2020
$
2,556 $
(641)
Depreciation
Amortization of in-place intangibles
Write-off and amortization of deferred financing costs
Amortization of above/below market leases
Amortization of intangible liability
Equity based compensation
Reclassification of cumulative dividends paid on forfeited awards
Other
Loss on early extinguishment of debt
Deferred rent receivable
Deferred rent expense payable
Changes in assets and liabilities:
Rent and other receivables
Prepaid expenses and other assets
Accounts payable, accrued expenses and other
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of real estate
Investment in financing leases
Repayment of financing leases
Escrows for acquisition and construction deposits
Insurance proceeds related to property damage claims
Capital improvements
Other investing activities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from secured borrowings
Repayments of secured borrowings
Proceeds from term loan
Proceeds from revolving credit facility
Repayments of revolving credit facility
Proceeds from other financing activity
Repayments from other financing activity
Net proceeds from issuance of shares
Debt issuance costs
Proceeds from issuance of ESPP shares
Shares withheld for payment of taxes on restricted share vesting
Other financing activities
Distributions and dividends
Net cash provided by financing activities
Net increase (decrease) in Cash and Escrows and Reserves
Cash and Escrows and Reserves at the beginning of period
Cash and Escrow and Reserves at the end of period
Supplemental Disclosure of Non-Cash Investing and Financing Activities
OP Units issued for property acquisitions
Reallocation of non-controlling interest
F-6
7,718
6,272
714
(1,599)
(23)
3,720
—
58
202
(450)
12
(1,079)
(2,104)
1,098
17,095
(89,464)
(15,707)
19
(487)
1,151
(1,900)
(337)
(106,725)
$
—
(13,845)
50,000
139,000
(204,000)
—
(53)
138,795
(1,346)
127
(242)
(10)
(15,041)
93,385
3,755
3,271
7,026 $
4,492
4,671
472
(1,262)
(11)
2,356
13
—
—
(183)
17
(1,811)
(563)
1,847
9,397
(124,160)
(517)
2
(470)
—
(970)
(37)
(126,152)
43,899
(110)
—
112,000
(88,000)
557
(504)
48,521
(1,164)
94
(206)
—
(8,245)
106,842
(9,913)
13,184
3,271
$
$
$
15,511 $
3,436 $
7,922
580
Right of use assets
Unrealized gain (loss) on interest rate swaps, net
Reclassification of acquisition deposits included in prepaid expenses and other assets
Accrued capital expenditures included in accounts payable and accrued expenses
Accrued costs of capital included in accounts payable and accrued expenses
Reclassification of cost of capital included in prepaid expenses and other assets
Accrued taxes withheld included in accounts payable and accrued expenses
Write-off of fixed assets no longer in service
$
$
$
$
$
$
$
$
1,071 $
960 $
792 $
660 $
198 $
137 $
99 $
40 $
—
—
—
192
—
—
—
86
The accompanying notes are an integral part of these consolidated financial statements.
F-7
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Description of Business
Postal Realty Trust, Inc. (the “Company” “we”, “us”, or “our”) was organized in the state of Maryland on
November 19, 2018. On May 17, 2019, the Company completed its initial public offering (“IPO”) of the Company’s Class A
common stock, par value $0.01 per share (the “Class A common stock”). The Company contributed the net proceeds from the
IPO to Postal Realty LP, a Delaware limited partnership (the “Operating Partnership”), in exchange for common units of
limited partnership interest in the Operating Partnership (the “OP Units”). Both the Company and the Operating Partnership
commenced operations upon completion of the IPO and certain related formation transactions (the “Formation Transactions”).
Prior to the completion of the IPO and the Formation Transactions, the Company had no operations.
The Company’s interest in the Operating Partnership entitles the Company to share in distributions from, and
allocations of profits and losses of, the Operating Partnership in proportion to the Company’s percentage ownership of OP
Units. As the sole general partner of the Operating Partnership, the Company has the exclusive power under the partnership
agreement to manage and conduct the Operating Partnership’s business, subject to limited approval and voting rights of the
limited partners. As of December 31, 2021, the Company held an approximately 82.9% 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.
The Company's predecessor (the “Predecessor”) was a combination of limited liability companies (the “LLCs”), one
C-Corporation (“UPH”), one S-Corporation (“NPM”) and one limited partnership. The entities that comprised the Predecessor
were majority owned and controlled by Mr. Spodek and his affiliates and were acquired by contribution to, or merger with, the
Company and the Operating Partnership.
The Predecessor did not represent a legal entity. The Predecessor and its related assets and liabilities were under
common control and were contributed to the Operating Partnership in connection with the Company’s IPO.
As of December 31, 2021, the Company owned a portfolio of 966 properties located in 49 states. The Company's
properties are leased primarily to a single tenant, the United States Postal Service (the "USPS").
In addition, through its taxable REIT subsidiary (“TRS”), Postal Realty Management TRS, LLC (“PRM”), the
Company provides fee-based third party property management services for an additional 397 postal properties, which are
owned by Mr. Spodek and his affiliates.
Pursuant to the Company’s articles of amendment and restatement, 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 “Class B
common stock” or “Voting Equivalency stock”), and up to 100,000,000 shares of preferred stock.
The Company believes it has been organized in conformity with, and has operated in a manner that has enabled it to
meet, the requirements for qualification as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as
amended (the “Code”), and the Company elected to be taxed as a REIT under the Code commencing with the Company's short
taxable year ended December 31, 2019. As a REIT, the Company generally will not be subject to federal income tax to the
extent that it distributes its REIT taxable income for each tax year to its stockholders. REITs are subject to a number of
organizational and operational requirements.
Pursuant to the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company qualifies as an emerging growth
company (“EGC”). An EGC may choose, as the Company has done, to take advantage of the extended private company
transition period provided for complying with new or revised accounting standards that may be issued by the Financial
Accounting Standards Board (“FASB”) or the Securities and Exchange Commission (the “SEC”).
F-8
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements include the financial position and results of operations of the
Company, the Operating Partnership and its wholly owned subsidiaries.
The Company consolidates the Operating Partnership, a VIE in which the Company is considered the primary
beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the
entity’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE
that could be significant to the VIE.
A non-controlling interest is defined as the portion of the equity in an entity not attributable, directly or indirectly, to
the Company. Non-controlling interests are required to be presented as a separate component of equity in the Consolidated
Balance Sheets. Accordingly, the presentation of net income (loss) reflects the income attributed to controlling and non-
controlling interests.
Use of Estimates
The preparation of financial statements in conformity with the U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Although
management believes its estimates are reasonable, actual results could differ from those estimates.
Offering and Other Costs
Offering costs are recorded in “Total Stockholders’ Equity” in the Consolidated Balance Sheets as a reduction of
additional paid-in capital.
Segment Reporting
The Company leases its properties primarily to the USPS and reports its business as a single reportable segment.
Investments in Real Estate
Upon the acquisition of real estate, the purchase price is allocated based upon the relative fair value of the assets
acquired and liabilities assumed. The allocation of the purchase price to the relative fair value of the tangible assets of an
acquired property is derived by valuing the property as if it were vacant. All real estate acquisitions in the periods presented
qualified as asset acquisitions and, as such, acquisition-related fees and acquisition-related expenses related to these asset
acquisitions are capitalized as part of the acquisition.
Investments in real estate generally include land, buildings, tenant improvements and identified intangible assets, such
as in-place lease intangibles and above or below-market lease intangibles. Direct and certain indirect costs clearly associated
with the development, construction, leasing or expansion of real estate assets are capitalized as a cost of the property. Repairs
and maintenance costs are expensed as incurred.
Depreciation or amortization expense is computed using the straight-line method based upon the following estimated
useful lives:
Buildings and improvements
Equipment and fixtures
Tenant improvements
In-place lease value
Years
15 to 40
5 to 10
Shorter of useful life or applicable lease term
Remaining non-cancellable term of the in-place lease
F-9
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The acquired above or below-market lease intangibles are amortized to “Rental income” over the applicable lease
term, inclusive of any option periods for below-market leases.
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 “2021 Credit Facilities”), established under a credit
agreement dated as of August 9, 2021 (the “2021 Credit Agreement”), 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 Company’s previous revolving credit facility (the “2019 Credit Facility”), which was established under a
credit agreement dated as of September 27, 2019, as amended, and terminated on August 9, 2021, and the revolving credit
facility component (the "2021 Revolving Credit Facility") of the 2021 Credit Facilities are deferred and amortized as an
increase to interest expense over the terms of the 2019 Credit Facility and the 2021 Revolving Credit Facility, respectively, and
are included in “Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s presentation.
Cash and Escrows and Reserves
Cash includes unrestricted cash with a maturity of three months or less. Escrows and reserves consist of restricted
cash. The following table provides a reconciliation of cash and escrows and reserves reported within the Consolidated Balance
Sheets and Consolidated Statements of Cash Flows:
Cash
Escrows and reserves:
Maintenance reserve
Real estate tax reserve
ESPP reserve
Cash and escrows and reserves
Revenue Recognition
As of
December 31,
2021
December 31,
2020
(in thousands)
5,857 $
827
250
92
7,026 $
2,212
696
304
59
3,271
$
$
The Company has operating lease agreements with tenants, some of which contain provisions for future rental
increases. Rental income is recognized on a straight-line basis over the term of the lease. In addition, certain lease agreements
provide for reimbursements from tenants for real estate taxes and other recoverable costs, which are recorded on an accrual
basis as part of “Rental income” in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Fee and other primarily consist of property management fees and income recognized from properties accounted for as
financing leases. The management fees arise from contractual agreements with entities that are affiliated with the Company’s
chief executive officer ("CEO"). Management fee income is recognized as earned under the respective agreements. Revenue
from direct financing leases is recognized over the lease term using the effective interest rate method. At lease inception, the
Company records an asset within investments on the Consolidated Balance Sheets, which represents the Company’s net
investment in the direct financing lease. This initial net investment is determined by aggregating the total future minimum lease
payments attributable to the direct financing lease and the estimated residual value of the property, if any, less unearned
income. Over the lease term, the investment in the direct financing lease is reduced and income is recognized as revenue in “Fee
and other” in the Consolidated Statements of Operations and Comprehensive Income (Loss) and produces a constant periodic
rate of return on the investment in financing leases, net.
F-10
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Income Taxes
As a REIT, the Company is generally not subject to federal corporate income tax on the net income (loss) that the
Company distributes to its shareholders. The Operating Partnership which holds the Company's properties is a partnership for
U.S. federal income tax purposes and is not subject to U.S. federal income taxes as the revenues and expenses pass through to
the respective owners where they are taxed. The states and cities in which the Operating Partnership operates generally follows
the U.S. federal income tax treatment.
A valuation allowance is established for deferred tax assets when management anticipates that it is more likely than
not that all, or a portion, of these assets would not be realized. In determining whether a valuation allowance is warranted, all
positive and negative evidence and all sources of taxable income such as prior earnings history, expected future earnings,
carryback and carryforward periods and tax strategies are considered to estimate if sufficient future taxable income will be
generated to realize the deferred tax asset. The assessment of the adequacy of a valuation allowance is based on estimates of
taxable income by jurisdiction and the period over which deferred tax assets will be recoverable.
The tax effects of uncertain tax positions taken or expected to be taken in income tax returns are recognized only if
they are “more likely-than-not” to be sustained on examination by the taxing authorities based on the technical merits as of the
reporting date. The tax benefits recognized in the financial statements from such positions are measured based on the largest
benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The Company recognizes
estimated accrued interest and penalties related to uncertain tax positions in income tax expense.
Fair Value of Financial Instruments
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 December 31, 2021 and 2020. 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 December 31, 2021 and 2020 due to their short maturities.
As of December 31, 2021 and 2020, the Company had investment in direct financing leases, net with a carrying value
of $16.2 million and $0.5 million, respectively, net and effective interest rates ranging from 6.48% to 7.89%. The carrying
value of the investment in financing leases approximated their fair market value as of December 31, 2021 and 2020. 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 2019 Credit Facility and 2021 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 $32.1 million and $47.1 million as compared to the principal balance of $33.2 million and $47.0
million as of December 31, 2021 and 2020, 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). The fair value of these financial instruments was
determined by using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans
with similar terms and maturities. 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 one interest rate swap derivative instrument entered into on August 9,
2021 in connection with the 2021 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 December 31,
2021, the fair value of the Company’s interest rate swap derivative instrument was approximately $1.0 million, included in
“Prepaid expenses and other assets, net” on the Consolidated Balance Sheets.
F-11
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Disclosure about fair value of assets and liabilities is based on pertinent information available to management as of
December 31, 2021 and 2020. 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 December 31,
2021 and current estimates of fair value may differ significantly from the amounts presented herein.
Derivative Instruments and Hedging Activities
In accordance with ASC 815, Derivatives and Hedging, the Company records all derivative instruments on the
Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended
use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge
accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives
designated and qualifying as a hedge of the exposure to variability in expected future cash flows are considered cash flow
hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging
instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged
risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may
enter into derivative contracts that are intended to economically hedge certain of its risk, even though hedge accounting does
not apply or the Company elects not to apply hedge accounting.
See Note 6. Derivatives and Hedging Activities for further details.
Impairment
The carrying value of real estate investments and related intangible assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment exists when the
carrying amount of an asset exceeds the aggregate projected future cash flows over the anticipated holding period on an
undiscounted basis. An impairment loss is measured based on the excess of the asset’s carrying amount over its estimated fair
value. Impairment analyses will be based on current plans, intended holding periods and available market information at the
time the analyses are prepared. If estimates of the projected future cash flows, anticipated holding periods or market conditions
change, the evaluation of impairment losses may be different and such differences may be material. The evaluation of
anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates and capital
requirements that could differ materially from actual results. No impairments were recorded during the years ended
December 31, 2021 and 2020.
Concentration of Credit Risks
As of December 31, 2021, the Company’s properties were leased primarily to a single tenant, the USPS. For the year
ended December 31, 2021, approximately 18.3% of the Company's total rental income, or $7.0 million, was concentrated in
Pennsylvania. For the year ended December 31, 2020, approximately 10.7% of the Company's total rental income, or $2.5
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.
The Company has deposited cash and maintains its bank deposits with large financial institutions in amounts that, from
time to time, exceed federally insured limits. The Company has not experienced any losses in such accounts.
Non-controlling Interests
Non-controlling interests in the Company represent OP Units held by the Predecessor’s prior investors and certain
sellers of properties to the Company and LTIP Units held by the Company’s CEO and the Company's Board of Directors. See
Note 11. Stockholder’s Equity for further details.
Equity Based Compensation
The Company accounts for equity-based compensation in accordance with ASC Topic 718 Compensation – Stock
Compensation, which requires the Company to recognize an expense for the grant date fair value of equity-based awards.
Equity-classified stock awards granted to employees and non-employees that have a service condition and/or a market condition
F-12
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 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. For awards
with a market condition, compensation cost is not reversed if a market condition is not met so long as the requisite service has
been rendered, as a market condition does not represent a vesting condition.
See Note 11. Stockholder’s Equity for further details.
Insurance Accounting
The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property
damage and business interruption. The Company records the estimated amount of expected insurance proceeds for property
damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses
incurred when the amount is determinable and approved by 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. 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 (loss) per share based upon the weighted average shares outstanding less issued
and outstanding non-vested shares of Class A common stock. As of December 31, 2021 and 2020, the Company had unvested
restricted shares of Class A common stock, LTIP Units and 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. See Note 10. Earnings Per Share for further details.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-2, Leases; in July 2018, the FASB issued ASU 2018-10, Codification
Improvements to Topic 842, Leases, and ASU 2018-11, Leases — Targeted Improvements; and in December 2018, the FASB
issued ASU 2018-20, Narrow-Scope Improvements for Lessors. This group of ASUs is collectively referred to as Topic 842.
Topic 842 supersedes the existing standards for lease accounting (Topic 840, Leases). Topic 842 was effective for the Company
on January 1, 2021 as a result of its classification as an EGC.
The Company elected to utilize the following practical expedients provided by Topic 842, including: the package of
practical expedients that allows an entity not to reassess upon adoption (i) whether an expired or existing contract contains a
lease, (ii) whether a lease classification related to expired or existing lease arrangements, and (iii) whether costs incurred on
expired or existing leases qualify as initial direct costs, and as a lessor, the practical expedient not to separate certain non-lease
components, such as common area maintenance, from the lease component if the timing and pattern of transfer are the same for
the non-lease component and associated lease component, and the lease component would be classified as an operating lease if
accounted for separately.
Topic 842 requires lessees to record most leases on their balance sheet through a right-of-use (“ROU”) model, in
which a lessee records a ROU asset and a lease liability on their balance sheet. Leases that are less than 12 months do not need
to be accounted for under the ROU model. Lessees will account for leases as financing or operating leases, with the
classification affecting the timing and pattern of expense recognition in the income statement. Lease expense will be recognized
based on the effective interest method for leases accounted for as finance leases and on a straight-line basis over the term of the
lease for leases accounted for as operating leases.
F-13
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The accounting by a lessor under Topic 842 is largely unchanged from that of Topic 840. Under Topic 842, lessors
will continue to account for leases as a sales-type, direct-financing, or operating. A lease will be treated as a sale if it is
considered to transfer control of the underlying asset to the lessee. A lease will be classified as direct-financing if risks and
rewards are conveyed without the transfer of control. Otherwise, the lease is treated as an operating lease. Topic 842 requires
accounting for a transaction as a financing in a sale leaseback in certain circumstances, including when the seller-lessee is
provided an option to purchase the property from the landlord at the tenant’s option. Topic 842 also includes the concept of
separating lease and non-lease components. Under Topic 842, non-lease components, such as common area maintenance,
would be accounted for under Topic 606 and separated from the lease payments. However, the Company elected the lessor
practical expedient allowing the Company to not separate these components when certain conditions are met. With this election,
the Company combined tenant reimbursements with rental income on its Consolidated Statements of Operations and
Comprehensive Income (Loss) for the period beginning with the three months ended March 31, 2021. Upon adoption of the
standard, the Company’s comparative statement of operations have been reclassified to conform to the new single component
presentation of rental revenues and tenant reimbursements, classified within rental income in the Consolidated Statements of
Operations and Comprehensive Income (Loss).
During the year ended December 31, 2021, the Company recorded an operating ROU asset and a related operating
lease liability, each totaling approximately $1.2 million, related to one office lease and four ground leases. The ROU lease asset
is included in “Prepaid expenses and other assets, net” and the operating lease liability is included in “Accounts payable,
accrued expenses and other” on the Consolidated Balance Sheets.
Future Application of Accounting Standards
In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments and in November 2018 issued ASU No. 2018-19, Codification
Improvements to Topic 326, Financial Instruments - Credit Losses. The guidance changes how entities will measure credit
losses for most financial assets and certain other instruments that are not measured at fair value through net income. The
guidance replaces the current ‘incurred loss’ model with an ‘expected loss’ approach. The Company will also be required to
disclose information about how it developed the allowances, including changes in the factors that influenced the Company’s
estimate of expected credit losses and the reasons for those changes. ASU No. 2018-19 excludes operating lease receivables
from the scope of this guidance. This guidance will be effective for the Company on January 1, 2023 as a result of its
classification as an EGC. The Company is currently in the process of evaluating the impact the adoption of the guidance will
have on its consolidated financial statements.
Note 3. Real Estate Acquisitions
The following tables summarizes the Company’s acquisitions for the years ended December 31, 2021 and 2020. 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
2021
March 31, 2021(3)
June 30, 2021(4)
September 30, 2021(5)
December 31, 2021(6)
Three Months Ended
2020
March 31, 2020(9)(10)(11)
June 30, 2020(12)
September 30, 2020 (13)
December 31, 2020 (14)
Total
Number of
Properties
Land
Building and
Improvements
Tenant
Improvements
In-place
lease
intangibles
Above-
market
leases
Below-
market
leases
Other(1)
Total(2)
54
71
59
54
$
3,493
$
19,793
$
5,364
3,333
6,096
23,550
15,314
21,031
428
268
147
186
$
2,201
$
2,207
1,368
1,750
238
$
18,286
$
79,688
$
1,029
$
7,526
$
51
28
32
123
234
$
(474) $
723
$
(156)
(581)
(371)
(5)
24
(157)
26,215
31,256
19,637
28,658
$
(1,582) $
585
$
105,766
Number of
Properties
Land
Building and
Improvements
Tenant
Improvements
In-place
lease
intangibles
Above-
market
leases
Below-
market
leases
Other (7)
Total (8)
$
4,826
$
24,573
$
294
$
2,477
$
7
$
(1,616) $
(34) $
30,527
83
19
122
36
2,555
6,075
7,699
7,344
19,426
51,059
55
317
1,201
693
2,301
4,627
260
$
21,155
$
102,402
$
1,867
$
10,098
$
F-14
—
37
—
44
(39)
(1,068)
(680)
—
(33)
—
10,608
27,055
63,906
$
(3,403) $
(67) $
132,096
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Explanatory Notes:
(1) Represents an insurance receivable assigned to the Company related to a property in a small portfolio that was destroyed
by arson prior to acquisition by the Company during the three months ended March 31, 2021. The Company completed
rebuilding such property which remained under lease to the USPS in the three months ended December 31, 2021 primarily
using the insurance proceeds assigned by the seller to the Company. The insurance proceeds were received in April 2021.
Also includes an intangible liability related to an unfavorable operating lease on a property acquired during the three
months ended June 30, 2021 that is included in “Accounts payable, accrued expenses and other” on the Consolidated
Balance Sheets. During the three months ended September 30, 2021, includes a below-market ground lease intangible
asset. During the three months ended December 31, 2021, includes an intangible liability related to unfavorable operating
leases on two properties that is included in “Accounts Payable, accrued expenses and other” on the Consolidated Balance
Sheets.
(2) Includes closing costs of $0.5 million for the three months ended March 31, 2021, $0.9 million for the three months ended
June 30, 2021, $0.5 million for the three months ended September 30, 2021 and $0.8 million for the three months ended
December 31, 2021.
(3) Includes the acquisition of 54 properties in various states in individual or portfolio transactions for approximately
$26.2 million, including closing costs, which was funded with borrowings under the 2019 Credit Facility.
(4) Includes the acquisition of 71 properties in various states in individual or portfolio transactions for approximately
$31.3 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash
consideration (valued at approximately $9.0 million using the share price of Class A common stock on the date of each
issuance of such OP Units) and borrowings under the 2019 Credit Facility.
(5) Includes the acquisition of 59 properties in various states in individual or portfolio transactions for approximately
$19.6 million, including closing costs, which was funded with both the issuance of OP Units to the sellers as non-cash
consideration (valued at approximately $6.5 million using the share price of Class A common stock on the date of each
issuance of such OP Units) and borrowings under the 2021 Credit Facilities and, prior to its termination, the 2019 Credit
Facility.
(6) Includes the acquisition of 54 properties in various states in individual or portfolio transactions for approximately
$28.7 million, including closing costs, which was funded with borrowings under the 2021 Credit Facilities. In addition, the
Company closed on one property accounted for as a direct financing lease and is included in “Investment in financing
leases, net” on the Consolidated Balance Sheets.
(7) Includes an intangible liability related to unfavorable operating leases on three properties that is included in “Accounts
Payable, accrued expenses and other” on the Consolidated Balance Sheets.
(8) Includes closing costs of $0.3 million for the three months ended March 31, 2020, $0.2 million for the three months ended
June 30, 2020, $0.8 million for the three months ended September 30, 2020 and $1.3 million for the three months ended
December 31, 2020.
(9) Includes the acquisition of a 21-property portfolio leased to the USPS for approximately $13.6 million, including closing
costs, which was partially funded with the issuance of OP Units to the sellers as non-cash consideration (valued at
approximately $7.9 million using the share price of Class A common stock on the date of each issuance of such OP Units).
(10) Includes the acquisition of a 42-property portfolio leased to the USPS. The aggregate purchase price of such portfolio was
approximately $8.8 million, including closing costs, which was funded with borrowings under the 2019 Credit Facility.
(11) Includes the acquisition of 20 properties in individual or smaller portfolio transactions for approximately $8.1 million,
including closing costs.
(12) Includes the acquisition of a 13-property portfolio leased to the USPS in various states for approximately $7.2 million,
including closing costs. In addition, the Company purchased six properties in individual or smaller portfolio transactions
for approximately $3.4 million, including closing costs.
F-15
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(13) Includes the acquisition of 122 properties in various states in individual or portfolio transactions for approximately $27.1
million, including closing costs, which was funded with borrowings under the 2019 Credit Facility. In addition, the
Company closed on one property which is a direct financing lease and is included in “Investment in financing leases, net”
on the Consolidated Balance Sheets.
(14) Includes the acquisition of 35 properties in various states in individual or portfolio transactions for approximately $16.3
million, including closing costs, which was funded with borrowings under the 2019 Credit Facility. In addition, the
Company acquired an industrial property (“Industrial Facility”) for a total of $47.6 million, including closing costs,
primarily leased to the USPS. The property was initially funded with borrowings under the 2019 Credit Facility. Refer to
Note 5. Debt for a discussion of the subsequent property level financing related to the acquisition.
Note 4. Intangible Assets and Liabilities
The following table summarizes the Company's intangible assets and liabilities:
As of
December 31, 2021:
In-place lease intangibles
Above-market leases
Below-market leases
December 31, 2020:
In-place lease intangibles
Above-market leases
Below-market leases
Gross Asset
(Liability)
Accumulated
(Amortization)/
Accretion
(in thousands)
Net
Carrying
Amount
$
$
31,814 $
319
(13,654)
(17,415) $
(70)
4,984
14,399
249
(8,670)
24,165 $
85
(12,076)
(11,143) $
(35)
3,350
13,022
50
(8,726)
Amortization of in-place lease intangibles was $6.3 million and $4.7 million for the years ended December 31, 2021
and 2020, respectively. This amortization is included in “Depreciation and amortization” in the Consolidated Statements of
Operations and Comprehensive Income (Loss).
Amortization of acquired above market leases was $0.03 million and $0.02 million for the years ended December 31,
2021 and 2020, respectively, and is included in “Rental income” on the Consolidated Statements of Operations and
Comprehensive Income (Loss). Amortization of acquired below market leases was $1.6 million and $1.3 million for the years
ended December 31, 2021 and 2020, respectively, and is included in “Rental income” in the Consolidated Statements of
Operations and Comprehensive Income (Loss).
As of December 31, 2021, the weighted average amortization period for the Company’s intangible assets was
approximately 3.4 years, 4.0 years and 7.9 years for in-place lease intangibles, above-market leases and below-market leases,
respectively.
Future amortization/accretion of these intangibles is below (in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
In-place lease
intangibles
Above-market
leases
Below-market
leases
$
$
5,463 $
3,734
2,595
1,529
796
282
14,399 $
71 $
67
50
41
20
—
249 $
(1,621)
(1,256)
(1,071)
(896)
(728)
(3,098)
(8,670)
F-16
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 5. Debt
The following table summarizes the Company’s indebtedness as of December 31, 2021 and December 31, 2020
(dollars in thousands):
Revolving Credit Facility(1):
2021 Revolving Credit Facility
2019 Credit Facility
2021 Term Loan
Secured Borrowings:
Vision Bank(3)
First Oklahoma Bank(4)
Vision Bank – 2018(5)
Seller Financing(6)
First Oklahoma Bank – April 2020(7)
First Oklahoma Bank – June 2020(8)
AIG – December 2020(9)
Total Principal
Outstanding
Balance as of
December 31,
2021
Outstanding
Balance as of
December 31,
2020
Interest Rate at
December 31,
2021
Maturity Date
$
13,000 $
—
LIBOR+150 bps(2)
January 2026
—
50,000
1,409
349
844
366
—
—
30,225
96,193
78,000
—
—
—
LIBOR+145 bps(2)
January 2027
1,459
364
869
445
4,522
9,152
30,225
125,036
3.69 % September 2041
3.63 % December 2037
3.69 % September 2041
6.00 %
January 2025
—
—
—
—
2.80 %
January 2031
Unamortized deferred financing costs
(844)
(407)
Total Debt
$
95,349 $
124,629
Explanatory Notes:
(1) On September 27, 2019, the Company entered into the 2019 Credit Facility, which provided for revolving commitments in
an aggregate principal amount of $100.0 million with an accordion feature that permitted the Company to borrow up to an
additional $100.0 million for an aggregate total of $200.0 million.
On August 9, 2021, the Company entered into the 2021 Credit Facilities, which include the $150.0 million 2021 Revolving
Credit Facility and the $50.0 million 2021 Term Loan. In connection with entering into the 2021 Credit Facilities, the
Company terminated the 2019 Credit Facility and paid off the outstanding loans thereunder. The 2021 Credit Facilities
include an accordion feature which will permit the Company to borrow up to an additional $150.0 million under the 2021
Revolving Credit Facility and 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. Borrowings
under the 2021 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 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. 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 2021 Credit Facilities contain a number of customary financial and non-financial
covenants.
In addition, 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 portion of the 2021 Credit Facilities through January 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
December 31, 2021. See Note 6. Derivatives and Hedging Activities below for further details.
F-17
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
During the years ended December 31, 2021 and 2020, the Company incurred $0.1 million and $0.3 million, respectively, of
unused facility fees related to the 2019 Credit Facility and the 2021 Revolving Credit Facility. As of December 31, 2021,
the Company was in compliance with all of the 2021 Credit Facilities’ debt covenants.
(2) Based upon the one-month U.S. Dollar LIBOR rate.
(3) Five properties are collateralized under this loan as of December 31, 2021. Mr. Spodek also provided a personal
guarantee of payment for the entire outstanding amount thereunder as of December 31, 2020 and for 50.0% of the
outstanding amount thereunder as of December 31, 2021. On September 30, 2021, the Company amended this loan to
extend its maturity to September 2041 and reduce its interest rate to 3.69% fixed for 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%.
(4) The loan is collateralized by first mortgage liens on four properties and a personal guarantee of payment by Mr. Spodek.
On July 23, 2021, the Company amended this loan to reduce its interest rate to 3.625% fixed for five years, then adjusting
annually thereafter to a variable annual rate of Wall Street Journal Prime Rate ("Prime") with a minimum annual rate of
3.625%.
(5) The loan is collateralized by first mortgage liens on one property and a personal guarantee of payment by Mr. Spodek. On
September 30, 2021, the Company amended this loan to extend its maturity to September 2041 and reduce its interest rate
to 3.69% fixed for 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 Treasury Rate, plus a margin of 2.75%, with a minimum
annual rate of 2.75%.
(6) In connection with the acquisition of a property, the Company obtained seller financing secured by the property in the
amount of $0.4 million requiring five annual payments of principal and interest of $0.1 million with the first installment
due on January 2, 2021 based on a 6.0% interest rate per annum through January 2, 2025.
(7) In connection with the purchase of a 13-property portfolio, the Company obtained $4.5 million of mortgage financing, at a
fixed interest rate of 4.25% with interest only for the first 18 months, which would have reset in November 2026 to the
greater of Prime or 4.25%. On February 3, 2021, the Company fully repaid this mortgage financing and wrote off $0.06
million of deferred financing to costs to loss on early extinguishment of debt for the year ended December 31, 2021. See the
Consolidated Statements of Operations and Comprehensive Income (Loss).
(8) The loan was collateralized by first mortgage liens on 22 properties. Interest rates would have reset in January 2027 to the
greater of Prime or 4.25%. On February 3, 2021, the Company fully repaid this mortgage financing and wrote off $0.15
million of deferred financing to costs to loss on early extinguishment of debt for the year ended December 31, 2021. See the
Consolidated Statements of Operations and Comprehensive Income (Loss).
(9) The loan is secured by a first mortgage lien on the Industrial Facility. 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 December 31, 2021 and 2020 was 6.5 years
and 6.6 years, respectively.
Cash paid for interest during the years ended December 31, 2021 and 2020 was $2.7 million and $2.3 million,
respectively.
F-18
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The scheduled principal repayments of indebtedness as of December 31, 2021 are as follows (in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
Amount
100
106
111
118
13,643
82,115
96,193
$
$
F-19
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 6. Derivatives and Hedging Activities
As disclosed above in Note 5. Debt, the Company entered into one interest rate swap derivative instrument on August
9, 2021 in connection with its 2021 Credit Facilities, which fixed the LIBOR component of the interest rate on $50.0 million
portion of the 2021 Credit Facilities through January 29, 2027. The interest rate swap was initially applied to the $50.0 million
2021 Term Loan, fixing the interest rate for the 2021 Term Loan at 2.291% as of December 31, 2021.
The Company’s objectives in using the interest rate derivative 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 swap as part of its
interest rate risk management strategy. The interest rate swap is designated as a cash flow hedge, with its gain or loss recorded
in “Accumulated other comprehensive income” in the Consolidated Statements of Operations and Comprehensive Income
(Loss) and subsequently reclassified into interest expense as interest payments are made on the Company’s 2021 Credit
Facilities. During the next twelve months, the Company estimates that an additional $0.2 million will be reclassified from
“Accumulated other comprehensive income” as an increase 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 in the Consolidated
Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2021.
Derivatives in Cash Flow Hedging Relationships (Interest Rate Swaps)
Amount of gain recognized on derivative in "Accumulated other comprehensive income"
Amount of (loss) reclassified from "Accumulated other comprehensive income" into
interest expense
Twelve Months Ended
December 31,
2021
$809
$(151)
Interest expense, net presented in the Consolidated Statements of Operations and Comprehensive Income (Loss), in
which the effects of cash flow hedges are recorded, totaled $3.7 million and $2.8 million for the years ended December 31,
2021 and 2020, respectively.
As of December 31, 2021, 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 December 31, 2021, it could
have been required to settle its obligations under the agreements at their termination value.
F-20
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 7. Leases
Lessor Accounting
As of December 31, 2021, 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 December 31, 2021 as discussed
below. Certain leases contain renewal, termination and/or purchase options exercisable at the lessee’s election. Therefore, such
options are only recognized once they are deemed reasonably certain, typically at the time the option is exercised. All of the
Company’s leases are operating leases with the exception of two that are direct financing leases. The Company’s operating
leases and direct financing leases are described below.
Rental income related to the Company’s leases is recognized on a straight-line basis over the remaining lease term.
The Company’s total revenue includes fixed base rental payments provided under the lease and variable payments which
principally consist of tenant expense reimbursements for certain property operating expenses, including real estate taxes. The
Company elected the practical expedient to account for its lease and non-lease components as a single combined operating lease
component under Topic 842. As a result, rental income and tenant reimbursements were aggregated into a single line within
rental income in the Consolidated Statements of Operations and Comprehensive Income (Loss).
The following table represents rental revenue that the Company recognized related to its operating leases (in
thousands):
Fixed payments
Variable payments
Twelve Months Ended
December 31,
2021
2020
$
$
32,769 $
5,507
38,276 $
20,269
3,046
23,315
Future minimum lease payments to be received as of December 31, 2021 under non-cancellable operating leases for
the next five years and thereafter are as follows (in thousands):(1)
Year Ending December 31,
2022(2)
2023
2024
2025
2026
Thereafter
Total
Explanatory Notes:
Amount
33,662
31,263
27,256
22,147
15,180
12,414
141,922
$
$
(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 December 31, 2021, the leases at 16 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. Subsequent to December 31, 2021, the Company executed all leases for these properties.
Purchase Option Provisions
As of December 31, 2021, operating leases for 46 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
F-21
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
agreement. As of December 31, 2021, 42 of these properties acquired for an aggregate purchase price of approximately
$24.9 million had an aggregate purchase option price of approximately $30.6 million and the remaining four properties
acquired for an aggregate purchase price of approximately $6.8 million had purchase options exercisable at fair market value.
Direct Financing Leases
As of 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 December 31, 2021 and 2020 are summarized in the table below (in thousands):
Total minimum lease payment receivable
Less: unearned income
Investment in financing leases, net
As of December 31,
2020
2021
$
$
34,352 $
(18,139)
16,213 $
1,010
(495)
515
Revenue earned under direct financing leases for the years ended December 31, 2021 and 2020 were $0.2 million and
$0.02 million, respectively, which is recorded in "Fee and other" in the Consolidated Statements of Operations and
Comprehensive Income (Loss).
Future lease payments to be received under the Company’s direct financing leases as of December 31, 2021 for the
next five years and thereafter are as follows (in thousands):
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total
Lessee Accounting
Amount
1,137
1,137
1,137
1,137
1,137
28,667
34,352
$
$
As a lessee, the Company has ground and office leases which were classified as operating leases. On January 1, 2021
the Company adopted Topic 842 and recognized ROU assets of $1.2 million and lease liabilities of $1.2 million.
As of December 31, 2021, these leases had remaining terms, including renewal options, of two to 51 years and a
weighted average remaining lease term of 21.9 years. Operating ROU assets and lease liabilities are included in “Prepaid
expenses and other assets, net” and “Accounts payable, accrued expense and other” on the Consolidated Balance Sheets as
follows (in thousands):
ROU asset – operating leases
Lease liability – operating leases
As of
December 31,
2021
$
$
1,058
1,071
The difference between the recorded ROU assets and lease liabilities is mainly due to the reclassification of the below
market ground lease intangible asset which was included within the ROU assets recognized upon transition.
Operating lease assets and liabilities are measured at the commencement date based on the present value of future
lease payments. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing
F-22
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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.
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 twelve months ended December 31, 2021 and 2020 was $0.2 million and
$0.1 million, respectively.
Future minimum lease payments to be paid by the Company as a lessee for operating leases as of December 31, 2021
for the next five years and thereafter are as follows (in thousands):
2022
2023
2024
2025
2026
Thereafter
Total future minimum lease payments
Interest discount
Total
$
$
$
227
233
109
35
35
1,145
1,784
(713)
1,071
Future minimum ground lease payments under Topic 840 as of December 31, 2020 were as follows (in thousands):
Year Ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total
24
24
24
24
26
1,155
1,277
Amount
$
$
Future minimum office lease payments under Topic 840 as of December 31, 2020 were as follows (in thousands):
Year Ending December 31,
2021
2022
2023
2024
Total
Impact of COVID-19
Amount
$
$
189
195
200
76
660
On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) pandemic
which has been ongoing. The resulting restrictions on travel and quarantines imposed have had a negative impact on the U.S.
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 year ended December 31, 2021, the Company received 100% of its rents and
the Company believes there was no material impact caused by COVID-19 on the Company.
F-23
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 8. Income Taxes
TRS
In connection with the IPO, the Company and PRM jointly elected to treat PRM as a TRS. PRM performs
management services, including for properties the Company does not own. PRM generates income, resulting in federal and
state corporate income tax liability for PRM. For the years ended December 31, 2021 and 2020, income tax expense related to
PRM was $0.1 million and $0.1 million, respectively.
Other
As of December 31, 2021 and 2020, the Company’s consolidated balance sheets reflect a liability for unrecognized tax
benefits in the amounts of $0.2 million and $0.4 million, respectively, primarily related to the utilization of certain loss
carryforwards by UPH through May 16, 2019. For the years ended December 31, 2021 and 2020, the Company has accrued
interest and penalties of $0.04 million and $0.07 million, respectively. These balances are included in the Consolidated Balance
Sheets in "Accounts payable, accrued expenses and other liabilities". As of December 31, 2021, the Company estimates that
unrecognized tax benefits may decrease by approximately $0.2 million within twelve months of the balance sheet date due to
expiring statutes of limitation. In connection with the IPO, the Company recorded an indemnification asset for the unrecognized
tax benefits due to an agreement from the indirect sole shareholder of UPH to reimburse the Company for such benefits.
Accordingly, the Company’s unrecognized tax benefits, if recognized, would result in a decrease to the indemnification asset
and have no impact on the effective tax rate. During the years ended December 31, 2021 and 2020, the Company reversed
$0.2 million and $0.1 million, respectively, of unrecognized tax benefits inclusive of interest and penalties due to the expiration
of statute of limitations, with an offsetting adjustment to the indemnification asset.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
For the Years Ended
December 31,
2021
2020
Gross unrecognized tax benefits, beginning of year
Additions based on tax positions taken in the current year
Reductions to unrecognized tax benefits as a result of a lapse of the applicable statute of
limitations
Increases based on tax positions taken in prior periods
Decreases based on tax positions taken in prior periods
Total
$
$
364 $
—
(176)
—
—
188 $
488
—
(96)
—
(28)
364
The Company and PRM are subject to examinations by federal and state and local tax authorities beginning with the
short tax year ended December 31, 2019. UPH was subject to examinations by federal tax authorities for tax years 2018 through
2019.
Cash paid for taxes for each of the years ended December 31, 2021 and 2020 was $0.1 million and $0.1 million,
respectively.
On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (the
“CARES Act”). The CARES Act was enacted to provide economic relief to companies and individuals in response to the
COVID-19 pandemic. Included in the CARES Act are tax provisions which increase allowable interest expense deductions for
2019 and 2020 and increase the ability for taxpayers to use net operating losses. These provisions did not result in a material
impact to the Company’s taxable income or tax liabilities.
F-24
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 9. Related Party Transactions
Management Fee Income
PRM recognized management fee income of $1.3 million and $1.1 million for the year ended December 31, 2021 and
2020, 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 (Loss). Accrued management fees
receivable of $0.3 million and $0.3 million as of December 31, 2021 and 2020, respectively, are included in “Rents and other
receivables” on the Consolidated Balance Sheets.
Related Party Lease
On May 17, 2019, the Company entered into a lease for office space in Cedarhurst, New York with an entity affiliated
with the Company’s CEO (the “Office Lease”). Pursuant to the Office Lease, the monthly rent is $15,000 subject to escalations.
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 the years ended December 31, 2021 and 2020 was $0.2 million and $0.2 million,
respectively, and was recorded in “General and administrative expenses” in the Consolidated Statements of Operations and
Comprehensive Income (Loss). The Company determined this Office Lease was an operating lease. For further details, see Note
7. Leases.
Transfer of Real Property
On May 28, 2020, the Company completed the separation of deed and transfer of the real property attributable to a de
minimis non-postal tenant that shares space in a building leased to the USPS. At the time of the IPO a property located in
Milwaukee, WI, a portion of which is leased to the USPS, was contributed to the Company. It was intended that the non-postal
portion of the property would revert back to an entity affiliated with Mr. Spodek once a separation of the deed was
completed. The portion of the property leased to the USPS remains owned by a wholly owned subsidiary of the Operating
Partnership. The independent members of the Company's Board of Directors ratified the no consideration transfer.
Guarantees
As disclosed above in Note 5. Debt, Mr. Spodek personally guaranteed a portion of or the entire amount outstanding
under the Company's loans with First Oklahoma Bank and Vision Bank, totaling $1.9 million and $2.7 million as of
December 31, 2021 and December 31, 2020, respectively. As a guarantor, Mr. Spodek’s interests with respect to the amount of
debt he is guaranteeing (and the terms of any repayment or default) may not align with the Company's interests and could result
in a conflict of interest.
Share Purchase
On November 16, 2021, Mr. Spodek acquired 58,823 shares of the Company's Class A common stock at a price of
$17.00 per share as a part of the Company's November Follow-on Offering (as defined below).
Note 10. Earnings Per Share
Earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to common stockholders by the
weighted average number of shares outstanding for the period.
The following table presents a reconciliation of income (loss) from operations used in the basic and diluted EPS
calculations (dollars in thousands, except share and per share data).
F-25
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Numerator for earnings per share – basic and diluted:
Net income (loss) attributable to common stockholders
Less: Income attributable to participating securities
Numerator for earnings per share — basic and diluted
Denominator for earnings per share – basic and diluted(1)
Basic and diluted earnings per share
Explanatory Note:
For the Years Ended
December 31,
2021
2020
$
$
$
2,055 $
(658)
1,397 $
13,689,251
0.10 $
(352)
(346)
(698)
7,013,621
(0.10)
(1) For the year ended December 31, 2021, 302,552 restricted shares of Class A common stock, 85,386 restricted stock units
(“RSUs”), 3,472,221 OP Units and 375,264 LTIP Units would not be dilutive and were not included in the computation of
diluted EPS. For the year ended December 31, 2020, 218,613 restricted shares of Class A common stock, 62,096 RSUs,
2,640,795 OP Units and 209,008 LTIP Units would not be dilutive and were not included in the computation of diluted
EPS. 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 December 31, 2021 and 2020, 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 would have no net
impact on the determination of diluted earnings per share.
Note 11. 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 Follow-on Offering”) at $15.25 per share. On January 11, 2021, the underwriters purchased the full allotment of
487,500 shares pursuant to a 30-day option at $15.25 per share (the “January Additional Shares”). The January Follow-on
Offering, including the January Additional Shares, closed on January 14, 2021 resulting in $57.0 million in gross proceeds, and
approximately $53.9 million in net proceeds after deducting approximately $3.1 million in underwriting discounts and before
giving effect to $0.3 million in other expenses relating to the January Follow-on Offering.
On November 16, 2021, the Company priced a public offering of 4.25 million shares of its Class A common stock (the
“November Follow-on Offering”) at $17.00 per share. On November 16, 2021, the underwriters purchased the full allotment of
637,500 shares pursuant to a 30-day option at $17.00 per share (the “November Additional Shares”). The November Follow-on
Offering, including the November Additional Shares, closed on November 19, 2021 resulting in $83.1 million in gross
proceeds, and approximately $79.0 million in net proceeds after deducting approximately $4.1 million in underwriting
discounts and before giving effect to $0.2 million in other expenses relating to the November Follow-on Offering.
ATM Program
On December 14, 2020, the Company entered into separate open market sale agreements for its at-the-market offering
program (the "ATM Program") with each of Jefferies LLC, Stifel, Nicolaus & Company, Incorporated, BMO Capital Markets
Corp., Janney Montgomery Scott LLC and D.A. Davidson & Co. (“D.A. Davidson”), pursuant to which the Company may
offer and sell, from time to time, shares of the Company’s Class A common stock having an aggregate sales price of up to $50.0
million. On May 14, 2021, the Company delivered to D.A. Davidson a notice of termination of the open market sale agreement
with D.A. Davidson, which termination became effective May 14, 2021.
The following table summarizes the activity under the ATM Program for the periods presented (dollars and shares
issued in thousands, except per share amounts). During the year ended December 31, 2021, 344,717 shares were issued under
the ATM Program. As of December 31, 2021, the Company had approximately $43.1 million remaining that may be issued
under the ATM Program.
F-26
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Shares issued
Gross proceeds
Fees and issuance costs
Net proceeds
Average gross sales price per share
Dividends
Year Ended
December 31, 2021
$
$
$
345
6,894
432
6,462
20.00
During the year ended December 31, 2021, the Company's Board of Directors approved and the Company declared
and paid dividends of $15.0 million to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and
LTIP unitholders, or $0.885 per share or unit, as shown in the table below.
Declaration Date
January 29, 2021
April 30, 2021
July 27, 2021
November 4, 2021
Record Date
February 12, 2021
May 14, 2021
August 13, 2021
November 15, 2021
Date Paid
February 26, 2021
May 28, 2021
August 27, 2021
November 30, 2021
Amount Per Share or Unit
0.2175
$
0.2200
$
0.2225
$
0.2250
$
During the year ended December 31, 2020, the Company's Board of Directors approved and the Company declared
and paid dividends of $8.2 million to Class A common stockholders, Voting Equivalency stockholders, OP unitholders and
LTIP unitholders, or $0.79 per share or unit, as shown in the table below.
Declaration Date
January 30, 2020
April 30, 2020
July 30, 2020
Record Date
February 14, 2020
May 11, 2020
August 14, 2020
Date Paid
Amount Per Share or Unit
February 28, 2020
May 29, 2020
August 31, 2020
$
$
$
$
0.1700
0.2000
0.2050
0.2150
October 30, 2020
November 16, 2020
November 30, 2020
Non-controlling Interests
Non-controlling interests in the Company represent OP Units held by the Predecessor’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 year ended December 31, 2021, the Company
issued 137,259 LTIP Units in February 2021 to the Company's CEO for his 2020 incentive bonus, his election to defer 100% of
his 2021 annual salary and for long term incentive compensation and issued 28,997 LTIP Units in June 2021 to the Board of
Directors for their annual retainers as compensation for their services as directors. In addition, during the years ended
December 31, 2021 and 2020, the Company issued 831,426 and 483,333 OP Units, respectively, to certain contributors in
connection with portfolio acquisitions.
As of December 31, 2021 and December 31, 2020, non-controlling interests consisted of 3,472,221 OP Units and
375,265 LTIP Units and 2,640,795 OP Units and 209,009 LTIP Units, respectively. This represented approximately 17.1% and
23.1% of the outstanding Operating Partnership units as of December 31, 2021 and 2020, respectively. Operating Partnership
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, 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.
F-27
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
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 “Equity Incentive Plan” or the “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. On April 27, 2020, the Board of
Directors amended the Plan to increase the total number of shares of Class A common stock that may be issued under the Plan
(the “Plan Pool”) from 541,584 shares to 1,291,584 shares. The stockholders approved such amendment on June 26, 2020. As
of December 31, 2021, the remaining shares available under the Plan for future issuance was 511,969. On April 27, 2021, the
Board of Directors further amended the Plan to provide for an automatic increase annually in the Plan Pool starting from
January 1, 2022, allowing the Plan Pool to equal to 10% of the Company’s fully diluted shares (including securities convertible
into shares of the Class A common stock) outstanding on the last day of the immediately preceding fiscal year. The
stockholders approved such amendment on June 18, 2021. 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 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 December 31, 2021 represents unvested restricted shares of Class A common stock
and LTIP Units and RSUs that are outstanding, whether vested or not:
Restricted
Shares (1)(2)
LTIP
Units (3)
RSUs (4)
Total
Shares
Weighted
Average
Grant Date
Fair Value
Outstanding, as of January 1, 2021
Granted
Vesting of restricted shares (5)
Forfeited
Outstanding, as of December 31, 2021
218,613
156,754
(71,491)
(1,324)
302,552
209,009
166,256
62,096
76,828
489,718 $
399,838 $
—
(10,171)
(81,662) $
—
375,265
—
128,753
(1,324) $
806,570 $
15.33
16.31
15.00
16.60
15.71
Explanatory Notes:
(1) Represents restricted shares awards included in Class A common stock.
(2) The time-based restricted share awards granted to the Company's officers and employees typically vest in three annual
installments or cliff vest at the end of eight years. The time-based restricted share awards granted to the Company's
independent directors vest over three years. 6,931 shares of Class A common stock were issued to a consultant under the
consultancy agreement with the Company.
(3) Includes 346,268 LTIP Units to the Company’s CEO that vest over eight years and 28,997 LTIP Units to the Company's
independent directors that vest over three years or cliff vest at the end of three years.
(4) Includes 46,714 RSUs granted to certain officers and employees of the Company during the year ended December 31, 2021
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, 2023.
The number of market-based RSUs is based on the number of shares issuable upon achievement of the market-based metric
at target. Also, includes 26,997 time-based RSUs issued for 2020 incentive bonuses to certain employees that vested fully
on February 11, 2021, the date of grant, and 3,117 time-based RSUs granted to certain employees for their election to
defer 2021 salary that vest on December 31, 2021. RSUs reflect the right to receive shares of Class A common stock,
subject to the applicable vesting criteria.
F-28
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(5) Includes 54,295 of restricted shares that vested and 17,196 shares of restricted shares that were withheld to satisfy
minimum statutory withholding requirements.
In January 2022, the Company issued 100,850 LTIP Units to the Company’s CEO for his 2021 incentive bonus and his
election to defer 100% of his 2022 annual salary, 46,161 restricted shares of Class A common stock to the Company’s president
for his 2021 incentive bonus and 43,343 restricted shares of Class A common stock to the Company's Chief Financial Officer
for his 2021 incentive bonus and his election to defer a portion of his 2022 annual salary. In addition, in January 2022, the
Company issued 37,299 restricted shares of Class A common stock for annual grants to employees and consultants and 43,848
RSUs and 42,838 restricted shares of Class A common stock to other employees for their 2021 incentive bonus and election by
an employee to defer a portion of 2022 annual salary. RSUs reflect the right to receive shares of Class A common stock. RSUs
issued for 2021 incentive bonuses vested fully on the date of grant. RSUs issued in lieu of deferral of 2022 annual salary will
cliff vest on December 31, 2022. LTIP Units issued to the Company’s CEO and restricted shares of Class A common stock
issued to the president and Chief Financial Officer in lieu of cash compensation will cliff vest on the eighth anniversary of
February 1, 2022. Certain restricted shares of Class A common stock issued to employees and consultants will vest in three
equal, annual installments on each of the first three anniversaries of February 1, 2022, while other restricted shares of Class A
common stock issued to employees in lieu of cash compensation will cliff vest on the third or eighth anniversary of February 1,
2022.
In addition, in January 2022, the Company issued an aggregate of 17,539 LTIP Units, 29,467 of restricted shares of
Class A common stock and 47,007 RSUs to certain officers of the Company. The LTIP Units and restricted shares of Class A
common stock will vest in three equal, annual installments over the approximately three-year period ending December 31,
2024, subject to continued employment with the Company. The RSUs are market-based awards and are subject to the
achievement of performance-based 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. Such
RSU recipients may earn up to 150% of the RSUs that were issued. Upon vesting pursuant to the terms of the RSUs, the RSUs
that vest will be settled in shares of Class A common stock and the recipients will be entitled to receive the distributions that
would have been paid with respect to a share of Class A common stock (for each share that vests) on or after the date the RSUs
were initially granted.
During the years ended December 31, 2021 and 2020, the Company recognized compensation expense of $3.6 million
and $2.4 million, respectively, related to all awards.
The fair value of restricted shares that vested during the years ended December 31, 2021 and 2020 was $1.6 million
and $1.1 million, respectively. The weighted average grant date fair value for awards issued in 2021 and 2020 was $16.31 and
$14.20, respectively. As of December 31, 2021, there was $8.1 million of total unrecognized compensation cost related to
unvested awards, which is expected to be recognized over a weighted average period of 4.43 years.
Employee Stock Purchase Plan
In connection with the IPO, the Company established the Postal Realty Trust, Inc. 2019 Employee Stock Purchase
Plan (“ESPP”), which allows the Company’s employees to purchase shares of the Company’s Class A common stock at a
discount. A total of 100,000 shares of Class A common stock are reserved for sale and authorized for issuance under the ESPP.
The Code permits the Company to provide up to a 15% discount on the lesser of the fair market value of such shares of stock at
the beginning of the offering period and the close of the offering period. As of December 31, 2021 and 2020, 16,293 and 7,189
shares have been issued under the ESPP since commencement, respectively. During each of the years ended December 31,
2021 and 2020, the Company recognized compensation expense of $0.02 million.
Note 12. Commitments and Contingencies
As of December 31, 2021, 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.
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
F-29
POSTAL REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
the transactions contemplated by such contracts on time, or that the Company will consummate any transaction contemplated
by any definitive contract.
Note 13. Subsequent Events
The Company's Board of Directors approved, and on February 1, 2022, the Company declared a fourth quarter
common stock dividend of $0.2275 per share which is payable on February 28, 2022 to stockholders of record as of
February 15, 2022.
As of March 11, 2022, the Company had $78.0 million drawn on the 2021 Credit Facilities, with a $50.0 million
drawn on the 2021 Term Loan and $28.0 million drawn on the 2021 Revolving Credit Facility.
On March 4, 2022, the Company acquired a postal real estate consulting business and its employees through the
issuance of 79,794 OP Units and $225,000 in cash to complement the Company's core business of acquiring, managing,
servicing and being a consolidator of postal properties.
As of March 11, 2022 and during the period subsequent to December 31, 2021, the Company closed on the
acquisitions of 39 properties for approximately $11.8 million, excluding closing costs, some of which include OP Units as part
of the consideration.
As of March 11, 2022 and during the period subsequent to December 31, 2021, the Company had entered into
definitive agreements to acquire 12 properties for approximately $13.5 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. However, the Company can provide no assurances that the properties will be
consummated on the terms of timeframe described herein, or at all.
F-30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act, that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is
processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that
such information is accumulated and communicated to management, including our Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions
regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that
any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
We have carried out an evaluation, under the supervision and with the participation of management, including our
Principal Executive Officer and Principal Financial Officer, regarding the effectiveness of our disclosure controls and
procedures as of December 31, 2021, the end of the period covered by this Annual Report on Form 10-K. Based on the
foregoing, our Principal Executive Officer and Principal Financial Officer have concluded, as of December 31, 2021, that our
disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or
submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the
SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Principal Executive Officer
and Principal Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management, including our Principal Executive Officer and Principal Financial Officer, is responsible for
establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Principal
Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the original framework in Internal Control - Integrated Framework issued in 2013 by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in
Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was
effective as of December 31, 2021.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
44
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by Item 10 is incorporated by reference to our definitive Proxy Statement for our 2022
annual stockholders’ meeting.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to our definitive Proxy Statement for our 2022
annual stockholders’ meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference to our definitive Proxy Statement for our 2022
annual stockholders’ meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference to our definitive Proxy Statement for our 2022
annual stockholders’ meeting.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated by reference to our definitive Proxy Statement for our 2022
annual stockholders’ meeting.
45
PART IV
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(1) Financial Statements
Our consolidated financial statements and notes thereto, together with the Reports of Independent Registered Public
Accounting Firm are included in Item 8 of this Annual Report on Form 10-K commencing on page F-1.
(2) Financial Statement Schedules
Our financial statement schedules are included in Item 8 of this Annual Report on Form 10-K commencing on page
F-1.
(3) Exhibits
A list of exhibits to this Annual Report on Form 10-K is set forth on the Index to Exhibits commencing on page 49 and
is incorporated herein by reference.
46
Postal Realty Trust, Inc.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 2021
State
Number of
Properties (1)
Encumbrances
Land
Buildings &
Improvements
Initial Cost to Company
Cost
Capitalized
Subsequent to
Acquisition
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New
Hampshire
New Jersey
New Mexico
New York
North
Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South
Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
12
1
1
22
19
18
6
1
15
24
1
9
48
21
24
25
7
27
40
6
15
44
36
15
30
12
17
4
7
4
4
35
31
18
24
41
1
76
14
17
15
53
1
10
17
7
17
70
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
349
—
—
—
—
—
—
—
—
—
—
—
844
—
—
31,634
366
—
—
—
—
—
—
—
—
—
—
1,720
15
181
1,282
6,629
1,214
714
181
2,814
839
1,810
61
1,057
890
726
921
175
1,614
1,281
786
2,458
2,998
650
889
1,152
381
96
485
417
226
328
2,962
3,571
205
2,402
1,357
480
8,277
1,088
291
1,375
2,549
73
611
1,059
456
365
2,406
21
9,342
51
703
4,229
12,524
9,587
3,226
436
6,763
3,383
1,447
749
6,194
5,455
5,056
8,556
1,448
5,937
4,033
1,399
8,399
9,934
5,828
3,755
5,378
2,892
1,696
2,314
1,185
818
555
9,118
11,808
1,914
8,632
6,429
597
61,295
2,997
1,932
4,252
11,095
813
1,668
4,494
1,341
3,006
15,255
160
26
—
—
—
—
48
—
—
50
50
0
—
137
100
104
5
—
53
63
22
84
276
43
118
195
94
31
—
8
16
—
158
58
—
67
166
—
249
1,082
—
28
288
—
—
17
—
6
206
—
Gross Amount Carried at Close of Period (2)
Land
Buildings &
Improvements
1,720
15
181
1,282
6,629
1,214
714
181
2,814
839
1,810
61
1,057
890
726
921
175
1,614
1,281
786
2,458
2,998
650
889
1,152
381
96
485
417
226
328
2,962
3,571
205
2,402
1,357
480
8,277
1,088
291
1,375
2,549
73
611
1,059
456
365
2,406
21
9,368
51
703
4,229
12,524
9,636
3,226
436
6,809
3,433
1,447
749
6,331
5,555
5,160
8,561
1,448
5,989
4,096
1,422
8,483
10,170
5,871
3,873
5,573
2,986
1,727
2,314
1,193
835
555
9,278
11,868
1,914
8,699
6,543
597
61,544
4,075
1,932
4,280
11,385
813
1,668
4,511
1,341
3,012
15,454
160
Total
11,088
66
884
5,511
19,153
10,850
3,940
617
9,623
4,272
3,257
810
7,388
6,445
5,886
9,482
1,623
7,603
5,377
2,208
10,941
13,168
6,521
4,762
6,725
3,367
1,823
2,799
1,610
1,061
883
12,240
15,439
2,119
11,101
7,900
1,077
69,821
5,163
2,223
5,655
13,934
886
2,279
5,570
1,797
3,377
17,860
181
Accumulated
Depreciation
Date Acquired
352
2013-2021
7
14
626
351
563
212
20
282
277
22
243
400
295
250
347
167
656
307
97
2018
2021
2013-2021
2019-2021
2019-2021
2013-2021
2020
2013-2021
2013-2021
2021
2013
2013-2021
2019-2021
2013-2021
2013-2021
2013-2021
2013-2021
2013-2020
2013-2021
1,730
2007-2021
664
373
352
348
193
91
48
49
35
42
2011-2021
2013-2021
2013-2021
2013-2021
2013-2021
2013-2021
2013-2021
2019-2021
2019-2021
2019-2021
348
2019-2021
685
160
719
2013-2021
2013-2021
2006-2021
1,036
2013-2021
29
2020
3,211
2005-2021
139
156
532
2019-2021
2013-2021
2013-2021
2,257
2005-2021
45
102
184
97
79
2020
2019-2021
2019-2021
2013-2021
2019-2021
1,641
2005-2021
51
2013
Depreciable
Life
(Yrs) (3)
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
964
$
33,193
$
64,538
$
280,078
$
3,848
$
64,538
$
283,827
$
348,365
$
20,884
Explanatory Notes:
(1) Excludes two properties accounted for as direct financing leases.
(2) The aggregate cost for Federal Income Tax purposes was approximately $353.8 million as of December 31, 2021.
(3) Estimated useful life for buildings.
47
The following table reconciles real estate for the years ended December 31, 2021 and 2020:
Beginning Balance
Acquisitions
Capital Improvements
Write-offs
Other
Ending Balance
Explanatory Note:
For the Years Ended
December 31,
2021
2020
$
247,072 $
99,006
2,492
(37)
(168)
120,584
125,423
1,151
(86)
—
$
348,365 $
247,072
(1) Other includes reclassification adjustments.
The following table reconciles accumulated depreciation for the years ended December 31, 2021 and 2020:
Beginning Balance
Depreciation expense
Write-offs
Ending Balance
For the Years Ended
December 31,
2021
2020
$
$
(13,215) $
(7,706)
37
(20,884) $
(8,814)
(4,487)
86
(13,215)
48
Exhibit
Number
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
EXHIBIT INDEX
Description
Articles of Amendment and Restatement of the Company, dated as of May 15, 2019 (incorporated by reference to Exhibit 3.1
to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).
Amended and Restated Bylaws of the Company, effective as of May 15, 2019 (incorporated by reference to Exhibit 3.2 to the
Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).
Form of Certificate of Class A Common Stock of the Company (incorporated by reference to Exhibit 4.1 to the Company’s
Registration Statement on Form S-11/A filed on May 7, 2019).
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (incorporated
by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed with the Commission on March 27, 2020).
First Amended and Restated Agreement of Limited Partnership of the Postal Realty LP, dated May 16, 2019 (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).
Postal Realty Trust, Inc. Amended and Restated Alignment of Interest Program (incorporated by reference to Exhibit 10.1 to
the Company’s Current Report on Form 8-K filed on April 29, 2020).†
Representation, Warranty and Indemnity Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty
LP and Andrew Spodek (incorporated by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q filed
on June 27, 2019).†
Tax Indemnification Agreement, dated as of May 14, 2019, by and among the Company, United Properties Holding, Inc.,
United Post Office Investments, Inc. and Andrew Spodek (incorporated by reference to Exhibit 10.15 to the Company’s
Quarterly Report on Form 10-Q filed on June 27, 2019).†
Form of Right of First Offer Agreement (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement
on Form S-11/A filed on May 7, 2019).†
Tax Protection Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP, Andrew Spodek,
Tayaka Holdings, LLC and IDJ Holdings, LLC (incorporated by reference to Exhibit 10.17 to the Company’s Quarterly
Report on Form 10-Q filed on June 27, 2019).†
Tax Protection Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP and Nationwide Postal
Management Holdings, Inc. (incorporated by reference to Exhibit 10.18 to the Company’s Quarterly Report on Form 10-Q
filed on June 27, 2019).†
Tax Protection Agreement, dated as of May 14, 2019, by and among the Company, Postal Realty LP and Unlimited Postal
Holdings LP (incorporated by reference to Exhibit 10.19 to the Company’s Quarterly Report on Form 10-Q filed on June 27,
2019).†
Form of Third Party Management Agreement (incorporated by reference to Exhibit 10.11 of the Company’s Registration
Statement on Form S-11/A filed on May 7, 2019).
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Patrick Donahue (incorporated by
reference to Exhibit 10.21 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Anton Feingold (incorporated by
reference to Exhibit 10.22 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Jeremy Garber (incorporated by
reference to Exhibit 10.23 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Jane Gural-Senders (incorporated
by reference to Exhibit 10.24 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Barry Lefkowitz (incorporated by
reference to Exhibit 10.25 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Andrew Spodek (incorporated by
reference to Exhibit 10.26 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Indemnification Agreement, dated as of January 1, 2021, by and between the Company and Robert B. Klein (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 13, 2021).†
Indemnification Agreement, dated as of May 17, 2019, by and between the Company and Matt Brandwein (incorporated by
reference to Exhibit 10.27 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Employment Agreement, dated June 26, 2019, by and between the Company and Andrew Spodek (incorporated by reference
to Exhibit 10.28 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Employment Agreement, dated June 26, 2019, by and between the Company and Jeremy Garber (incorporated by reference to
Exhibit 10.29 to the Company’s Quarterly Report on Form 10-Q filed on June 27, 2019).†
Employment Agreement, dated December 30, 2020, by and between the Company and Robert B. Klein (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 4, 2021).†
2019 Equity Incentive Plan of the Company (incorporated by reference to Exhibit 10.2 to the Company’s Registration
Statement on Form S-11/A filed on May 7, 2019).†
Amendment No. 1 to the Postal Realty Trust, Inc. 2019 Equity Incentive Plan, effective as of June 26, 2020 (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 1, 2020).†
Amendment No. 2 to the Postal Realty Trust, Inc. 2019 Equity Incentive Plan, effective as of June 18, 2021 (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 21, 2021).†
Form of 2019 Equity Incentive Plan Stock Award Agreement and Notice (incorporated by reference to Exhibit 10.5 of the
Company’s Registration Statement on Form S-11/A filed on May 7, 2019).†
49
Exhibit
Number
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
21.1
23.1
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
104
Description
Form of 2019 Employee Stock Purchase Plan of the Company (incorporated by reference to Exhibit 10.4 to the Company’s
Registration Statement on Form S-11/A filed on May 7, 2019).†
Form of LTIP Unit Vesting Agreement (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement
on Form S-11/A filed on May 7, 2019).†
Credit Agreement, dated August 9, 2021, by and among Postal Realty LP, the Company, the certain subsidiaries from time to
time party thereto as guarantors, and Bank of Montreal, as administrative agent, and the several banks and financial
institutions party thereto as lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
filed on August 10, 2021).
Form of Open Market Sale Agreement (incorporated by reference to Exhibit 1.1 to the Company’s Current Report on Form 8-
K filed on December 14, 2020).
Open-End Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment of Leases and Rents, dated as
of December 18, 2020, by and among Thorn Hill Postal Realty Holdings LLC, The United States Life Insurance Company in
the City of New York and National Union Fire Insurance Company of Pittsburgh, PA (incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K filed on December 21, 2020).
Promissory Note (USLIC), dated December 18, 2020, made by Thorn Hill Postal Realty Holdings LLC to The United States
Life Insurance Company in the City of New York (incorporated by reference to Exhibit 10.2 to the Company’s Current
Report on Form 8-K filed on December 21, 2020).
Promissory Note (USLIC – Fortitude), dated December 18, 2020, made by Thorn Hill Postal Realty Holdings LLC to The
United States Life Insurance Company in the City of New York (incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on December 21, 2020).
Promissory Note (NUFIC), dated December 18, 2020, made by Thorn Hill Postal Realty Holdings LLC to National Union
Fire Insurance Company of Pittsburgh, PA (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on
Form 8-K filed on December 21, 2020).
Suretyship Agreement, dated December 18, 2020, in favor of The United States Life Insurance Company in the City of New
York and National Union Fire Insurance Company of Pittsburgh, PA (incorporated by reference to Exhibit 10.5 to the
Company’s Current Report on Form 8-K filed on December 21, 2020).
Subsidiaries of the Company.*
Consent of BDO USA, LLP.*
Certification of Annual Report by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Annual Report by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
INSTANCE DOCUMENT**
SCHEMA DOCUMENT**
CALCULATION LINKBASE DOCUMENT**
LABELS LINKBASE DOCUMENT**
PRESENTATION LINKBASE DOCUMENT**
DEFINITION LINKBASE DOCUMENT**
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
_______________________
*
Filed herewith
† Compensatory plan or arrangement
** Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL
(eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations
and Comprehensive Income (Loss); (iii) Consolidated Statements of Changes in Equity (Deficit); (iv) Consolidated
Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.
ITEM 16. FORM 10-K SUMMARY
None.
50
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 11, 2022
By:
POSTAL REALTY TRUST, INC.
/s/ Andrew Spodek
Andrew Spodek
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Andrew Spodek
Andrew Spodek
/s/ Robert B. Klein
Robert B. Klein
/s/ Matt Brandwein
Matt Brandwein
/s/ Patrick Donahoe
Patrick Donahoe
/s/ Barry Lefkowitz
Barry Lefkowitz
/s/ Jane Gural-Senders
Jane Gural-Senders
/s/ Anton Feingold
Anton Feingold
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer)
March 11, 2022
March 11, 2022
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
March 11, 2022
Independent Director, Chair of
Board of Directors
March 11, 2022
Independent Director
March 11, 2022
Independent Director
March 11, 2022
Independent Director
March 11, 2022
51