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Greetings, and welcome to Postal Realty Trust Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jordan Cooperstein, Vice President of FP&A Capital Markets. Welcome, Jordan.

Thank you, and good morning, everyone. Welcome to Postal Realty Trust's Third Quarter 2025 Earnings Conference Call. On the call today, we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President; Steve Bakke, Chief Financial Officer; and Matt Brandwein, Chief Accounting Officer. Please note the company may use forward-looking statements on this conference call, which are statements that are not historical facts and are considered forward-looking. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, but not limited to, those contained in the company's latest 10-K and its other regulatory filings. The company does not assume and specifically disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, on this conference call, the company may refer to certain non-GAAP financial measures, such as funds from operations, adjusted funds from operations, adjusted EBITDA and net debt. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP measures in the company's earnings release and supplemental materials. With that, I will now turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust.

Good morning, and thanks for joining us today. Our strong third quarter results build on the last several quarters' momentum as we continue to solidify our position as the leading owner of U.S. postal real estate. Our team remains highly focused on 3 areas of our business to create value for shareholders. First, driving organic growth within our portfolio through programmatic leasing with the Postal Service; second, sourcing and executing postal property acquisitions that are accretive day 1 to per share earnings and which become significantly more accretive over time. And third, deepening our access to capital to fund accretive growth. These 3 pillars form the foundation of our high-quality portfolio leased to the Postal Service, which provides a critical universal service to all Americans that is mandated in the constitution. This service was not interrupted during the most recent federal government shutdown and our rental payments have been unaffected. As we like to remind investors, lease expenses represent only 1.5% of the Postal Services total operating budget, and these real estate locations are the backbone of their entire delivery network, enabling it to provide universal service across 169 million delivery points nationwide. Turning to third quarter results. The team's success executing on the aforementioned 3 pillars resulted in the company reporting AFFO of $0.33 per share or growth of 10% compared to last year. In addition, we are increasing 2025 AFFO guidance by $0.06, which represents annual growth of 13% at the midpoint. Looking at per share AFFO growth from 2022 through 2025, our guidance implies compound annual growth of 9% over the 3-year period. Starting with leasing, we have worked with the Postal Service to create a highly efficient and repeatable framework to negotiate, process and execute new leases across both our existing portfolio and future acquisitions. This approach has yielded important benefits for both parties. For Postal Realty, this framework has improved the predictability of our long-term revenue growth with our new leases offering a mix of 10-year term and 3% annual rent escalations. We are also now able to anticipate rental rate timing and ranges for future lease commencements further in advance than ever before. Starting this year, greater revenue visibility enabled us to provide annual AFFO per share guidance to investors for the first time, and we will do so again for 2026 on our fourth quarter call. Another benefit of this efficient programmatic leasing approach is that paired with our unmatched ability to manage, operate and administer a diverse portfolio of over 2,200 postal properties nationally. We serve as a highly responsive single contact point for the Postal Service. Based on our success advancing our new leasing approach and driving property operating efficiencies, we are updating our 2025 same-store cash NOI guidance to a range of 8.5% to 9.5% from our prior guidance of 7% to 9%. Moving to external growth. We were active in the quarter, completing $42.3 million of acquisitions at a weighted average cash cap rate of 7.7%. This brings closed volume through October 17 to just over $100 million. Based on this and on what we see in the pipeline for the remainder of the year, we are now guiding 2025 acquisitions to meet or exceed $110 million. A highlight of our third quarter activity was the acquisition of a high-quality flex property at a prime location in Newtonville, Massachusetts, an affluent suburb just west of Boston. Consistent with the 75% of our portfolio that has been internally sourced, this was an off-market opportunity that came through a relationship formed over many years. We were able to purchase this property accretively using a mix of debt and equity capital. We closed on the property for $23.5 million. The initial cash cap rate is 7.6% and will increase to 8.3% in 3 years. When our cost of capital aligns with an opportunity, we are prepared to move thoughtfully and efficiently to add strong assets to our portfolio. Our capital allocation approach generates accretion day 1 and enables us to make progress on 2 important long-term goals. The first is to deliver increasing value to the U.S. Postal Service as an efficient single point of contact for their real estate needs. The second is to drive consistent, healthy organic growth for shareholders by finding mark-to-market opportunities, coupled with enhancing leases with both annual rent escalators and extending their length. Acquisitions have and will continue to be a critical part of our long-term value creation strategy. Lastly, I would like to address a key addition to our leadership team that we announced in late September. As of October 27, Steve Bakke has now officially stepped into the role of Chief Financial Officer. I can tell you his contributions have been immediate. Steve joins us from Realty Income, where he was SVP of Corporate Finance. His deep perspective in capital markets, corporate finance and strategy will help further Postal Realty's mission. In addition, Steve is energized and committed to ensure the research community and our current and future investors understand the simplicity, visibility and earnings power of Postal Realty Trust. We are very excited to welcome Steve, and I will now turn the call over to him to go through our third quarter financial results.

Thank you, Andrew. I'm excited to be part of the team and contribute to the growth opportunity here. Before discussing the results, I want to take a moment to outline why I am so excited to join the team at Postal Realty. Within the REIT industry, Postal Realty is part of a group of companies that operate in highly specialized real estate segments. They apply unique industry knowledge accrued over decades across all facets of leasing, operating and most importantly, acquiring assets that are both stable and growth-oriented. I believe Postal Realty's results the past few years are making it apparent that we have a durable cash flow stream backed by a creditworthy tenant with a 250-year operating history, a portfolio that delivers robust organic growth and a disciplined acquisition strategy with a large addressable market. With access to multiple forms of debt, a public equity currency and continued use of OP units for owners seeking to join our platform, Postal Realty stands out amongst competitors in this segment for its access to both capital and strategic flexibility. I look forward to meeting many of you in the coming weeks and months to discuss Postal Realty further. Moving to this quarter's results. We delivered AFFO of $0.33 per diluted share, representing $0.03 growth from the third quarter of last year. We increased the 2025 AFFO guidance range to $1.30 to $1.32 per share, which represents growth of $0.14 at the low end and $0.16 at the high end versus 2024. We continue to outperform our expectations, driven by a few factors. First, operating expenses have trended lower than expected this year, driven by the timing and scope of R&M projects. Second, revenue has outperformed due partly to even faster lease executions with the USPS as well as re-leasing outcomes, fees and other income exceeding our initial expectations. In regard to fourth quarter AFFO per share, there are a couple of items to call out when thinking about our sequential cadence. First, in the third quarter, we received a lump sum catch-up payment for an asset we acquired in holdover last December, which resulted in a onetime AFFO benefit of $0.01 per share, which we mentioned on our second quarter call. Additionally, for the fourth quarter, embedded within guidance, there is an additional $0.02 per share of R&M expense compared to the quarterly pace. It's important to note, we don't expect the fourth quarter's higher R&M expenses to carry forward into 2026. Shifting to the balance sheet. As Andrew stated, a strong balance sheet is core to our strategy. At the end of the third quarter, net debt to annualized adjusted EBITDA was 5.2x. Fixed rate debt comprised 93% of our borrowings and our weighted average debt maturity was 3.5 years. Through our recently completed recast, we successfully increased credit facility commitments by $40 million to $440 million. On our additional borrowings, we achieved a weighted average all-in fixed rate borrowing cost of 4.73% through the January 2030 maturity. In addition, we hold ample liquidity to pursue investment opportunities with $125 million of undrawn revolver capacity before giving effect to $250 million of accordion capacity as of quarter end. Similarly, we extended the maturity dates of both our revolver and our $115 million term loan by approximately 3 years each, enhancing our financial flexibility. Shifting to acquisition funding, we utilized multiple sources of capital in the third quarter, including credit facility borrowing, equity raised via ATM and OP unit issuance totaling $26.7 million at an average gross price of $15.50 per share or unit. And lastly, approximately $3 million of retained AFFO after dividend payments for the quarter. Retained AFFO has been a growing contributor to acquisition funding as AFFO has outpaced dividend growth since 2023. Recurring capital expenditure in the third quarter was $288,000, within our guidance range of $175,000 to $325,000. Looking forward to the fourth quarter, we anticipate the figure to be between $100,000 and $250,000. We continue to expect total cash G&A expense to be between $10.5 million and $11.5 million for the full year 2025 as we prioritize platform efficiency and declining cash G&A as a percentage of revenue. Our Board of Directors has approved a quarterly dividend of $0.2425 per share, representing a 1% increase from the third quarter 2024 dividend. Our dividend payout ratio for the third quarter is approximately 73%, and our dividend yield as of yesterday was in the 6.5% range. I would now like to turn the call over to Jeremy.

Thank you, Steve. I'll provide an update on our leasing efforts, followed by more detail on our third quarter acquisition activity. Starting with leasing, rents for all leases set to expire in 2025 and 2026 have been agreed with the Postal Service, and we are continuing our discussions of the 2027 expirations, which will include 3% annual rent escalations and a mix of 10-year leases. As of October 17, 53% of our portfolio rent was subject to annual rent escalations and 38% of our portfolio rent consisted of leases in place with 10-year term based on leases executed and agreed upon through 2026. As we shared on our second quarter earnings call, due to the execution of new leases during the third quarter, the company received a total lump sum catch-up payment of $329,000. Looking forward to 2026, aside from prospective acquisitions that are acquired in holdover status, lump sum catch-up payments should continue to diminish in frequency and value as we sign leases ahead of their expiration dates. Shifting to acquisitions. As Andrew mentioned, in the third quarter of 2025, we acquired 47 properties for approximately $42.3 million at a 7.7% weighted average cash cap rate, which added approximately 160,000 net leasable interior square feet to our portfolio, a 2.3% expansion of our physical footprint, inclusive of 41,000 square feet from 28 last mile post offices and 119,000 square feet from 19 flex properties. Looking at our Q4 acquisition activity through October 17, we have acquired an additional 19 properties for approximately $7.2 million and placed another 9 properties totaling $5 million under definitive contracts. Postal Realty continues to strengthen its position as the market leader in the postal real estate space, executing its business plan of acquiring new assets and improving the cash flow. This concludes our prepared remarks. Operator, we would like to open the call for questions.

[Operator Instructions] Our first question comes from Jon Petersen with Jefferies.

Congratulations on the good quarter. I was hoping to maybe get a little more details on the Newtonville, Massachusetts acquisition. It looks pretty interesting. I'm curious how often you see these type of infill post office opportunities come up. And then on something like that with just the volume of it, do you end up bidding against more institutional type investors rather than just the typical cast of buyers of USPS properties?

Thanks, Jon. I appreciate the question. So the Newtonville transaction was unique. It's a unique property that is very well utilized by the Postal Service, very needed for them to serve that area. As some of you may know, it's really an infill location, as you recognize, but it's also a very affluent area right outside of Boston. We see these often. We don't actively and aggressively go after bidding on them or trying to acquire them because typically, they're not accretive out of the gate. And this was a unique opportunity that was off market that we were able to acquire that was accretive out of the gate given our cost of capital at the time that we thought was something that really was a good asset to add to our portfolio.

Okay. All right. That's helpful. And then I was just curious if in your conversations with potential sellers, how often OP units are part of the conversations these days?

So the operating partnership unit currency has been valuable in general. There are sellers that are interested in them. Sometimes we just use them to start the conversation because on smaller deals or deals that have multiple partners that are not on the larger side, they tend to be a little more complicated for some sellers. But in general, it is a currency that is interesting to postal owners in general.

Our next question comes from Nahom Tesfazghi with JPMorgan.

I guess sticking with acquisitions, if we look at the $106 million you guys have completed inclusive of what's under contract to date, guidance implies that there's only about $4 million left to go, which seems low for the rest of the year. Maybe could you guys talk about what you're expecting for the remainder of the year? Maybe what's driving that slowdown and what you guys see in the pipeline?

Thanks. I appreciate the question. So acquisitions in general are all about timing. So our third quarter was heavier than as usual. Some deals we were able to close quicker like the Newtonville transaction. We closed approximately $94 million in the first 3 quarters of the year. We closed $7 million early on in Q4 and have another $5 million in definitive. So the $110 million is really just guidance. It's meet or exceed that number. I don't view it as a slowdown. I really view this as an annual story, not a quarterly story. So things just end up leveling out at some point.

Got it. Okay. That makes sense. And the second one for me, it seems like seemingly you guys are able to hit the trifecta on these new leases with the post office getting a mark-to-market annual escalator and then extending the duration of the lease terms as well. But is there any way you guys could quantify or give some guidepost or bounds as to where those marks have been? Maybe if you can't say where they've been currently, you speak to where they've been in the past.

As you know, and we've shared on prior calls with a single tenant, we've steered away from sharing mark-to-markets. We have started providing same-store numbers quarterly. And that's the metric that we've been sharing in order to give you a better understanding on how leases are trending and rolls are trending.

And I want to just to add to that, if you look at our same-store NOI the last 3 years on average, including 2025, we're at 6%. Now it fluctuated around that mean depending on the timing of expenses and expense margins, but I think that should give you some indicator to Jeremy's point of the internal growth potential of the business.

Our next question comes from Eric Borden with BMO Capital Markets.

I was just hoping to get your updated views on the trajectory of cap rates as we look to 2026. There's been some downward trend in the 10-year. I was just curious if you had any indication of if cap rates would trend downward in lockstep with the 10-year or if you still expect to have cap rates trend in the [ 77, 78 ] range.

Thanks, Eric. I appreciate the question. It's a difficult one to answer. It doesn't really trade in lockstep with the 10-year. We're typically lagging to it. Sellers have an expectation of where they want to be with the move in interest rates that we've seen over the past couple of years, the problem is that sellers haven't fully adjusted their expectations with that move. I think they're probably happy that it's come down and think that their pricing should come down as well. So I don't know what this year is going to bring us. I'm still, from my perspective, looking to do 7.5% or better. But as the year progresses, we may -- we hopefully will be able to adjust that guidance, but that's still where I'm seeing things today.

And Eric, this is Steve. Just to point out, our business, unlike many of our net lease peers is not dependent on external acquisitions to grow. Given the lease expiration schedule that we have over the next few years, 34% of our leases expiring, we have significant growth we can drive as we unlock value there.

And then just on the lease terms, you've extended the WALT to 10 years, up from your previous 4 to 5 years. Is that the goal going forward is to have 10-year leases with rent escalators? Or will you continue to have a mix of 5-year WALT with escalators as well?

So I think we'll continue to see a mix. The 10-year term, once we -- we're in agreement with the Postal Service with the annual escalators, the 10-year term just seemed like the natural next step. It gives investors a security in terms of our lease renewal and our WALT, but there will continue to be a mix of 5- and 10-year leases.

Our next question comes from Steve Dumanski with Janney Montgomery Scott.

Just one real quick one from me. Do you see, I guess, in terms of the space, any of your competitors potentially moving in or I guess, more acquiring properties leased to the USPS. Just wanted to see what the landscape looks out there.

I appreciate the question, Steve. Yes. So there's always been competitors in the space of different sizes and shapes. It really depends on the type of assets that are trading. We are, by far and away, the largest owner in the space. Currently, I think we own about 8% of the market. And yes.

As there are no further questions, I would now like to hand the conference over to Andrew Spodek for closing comments.

In closing, I'd just like to state that we remain confident in the value of our properties to the Postal Services mission, the security and visibility of our cash flows and our ability to generate strong internal growth while continuing to consolidate this highly fragmented industry. On behalf of the entire team, thank you for your interest in Postal Realty Trust.