Postal Realty Trust, Inc. (NYSE:PSTL) Q4 2023 Earnings Call Transcript
Postal Realty Trust, Inc. (NYSE:PSTL) Q4 2023 Earnings Call Transcript February 27, 2024
Postal Realty Trust, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to Postal Realty Trust's Fourth Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the prepared remarks. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Mr. Jordan Cooper, Senior Vice President of FP&A Capital. Welcome, Jordan.
Jordan Cooperstein: Thank you and good morning, everyone. Welcome to Postal Realty Trust fourth quarter 2023 earnings conference call. On the call with me today we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President; Robert Klein, 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 Securities and Exchange Commission filings.
The company does not assume and specifically disclaims any obligations 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.
Andrew Spodek: Good morning and thanks for joining us today. The fourth quarter marked another period of strong results and concluded a productive year for Postal Realty. We acquired 223 properties for $78 million and came in well above the midpoint of our target weighted average cap rate range at 7.7% for both the fourth quarter and the full year 2023. The weighted average cap rate for 2023 reflects an almost 100 basis point increase from 2022's cap rate. As a result of the flow-through benefit of acquisitions and lease renewals in prior years as well as efficient operations, AFFO per share increased 6% year-over-year. This was due to the hard work of our dedicated team and is a testament to our ability to be flexible and patient while navigating a challenging interest rate environment.
Turning the focus to our capital markets activity during the past year, we were successful in accessing equity through our ATM program and by completing transactions with operating partnership units while also accessing debt through our strong banking relationships. We have significant availability on our revolving credit facility and have maintained conservative leverage with the net debt to annualized adjusted EBITDA at 5.6 times at the end of 2023. Looking at 2024, we have a long runway and are still seeing significant opportunities. Absent changes to the current macroeconomic environment and the capital markets, we anticipate a similar year to 2023 with acquisition volume in the neighborhood of $80 million. We will continue to target a going-in weighted average cap rate at or above 7.5%, and we'll provide further updates as the year progresses.
With no near-term debt maturities, a solid balance sheet, and high collections and retention rates, we are confident in the fundamentals of our business. I'll now turn the call over to Jeremy.
Jeremy Garber: Thank you, Andrew. In the fourth quarter of 2023, we acquired 75 properties, which added approximately 153,000 net leasable interior square feet to our portfolio, inclusive of 71,000 square feet from 55 last mile post offices and 82,000 square feet from 20 flex properties The fourth quarter brought our 2023 acquisition total to 223 properties. Subsequent to quarter end and through February 23, the company acquired 8 properties for $4.5 million and placed an additional 20 properties totaling $13.9 million under definitive contracts. We have maintained a 99% historical weighted average lease retention rate over the past 10 plus years, reflecting the strategic importance of these properties to both the Postal Service and the communities they serve.
As we have previously shared, our lease negotiations with the Postal Service are progressing, and we are hoping to receive 2022 leases over the coming months. I'll now turn the call over to Rob to discuss our fourth quarter financial results.
Robert Klein: Thank you, Jeremy, and thank you, everyone, for joining us on today's call. We are pleased to discuss our fourth quarter financial results. Funds from operations or FFO was $0.24 per diluted share and adjusted funds from operation or AFFO was $0.26 per diluted share. We've continued to manage our balance sheet prudently by maintaining low leverage and minimizing our exposure to variable rate debt. At the end of the fourth quarter, our debt outstanding at a weighted average interest rate of 4.14%, a weighted average maturity of four years and no significant debt maturities until 2027. As of February 23, 2024, our $150 million senior unsecured revolving credit facility had $142 million undrawn and 97% of all borrowings were sent to fixed rates.
Net debt to annualized adjusted EBITDA ratio was 5.6 times at the end of the year, well within our target of remaining below 7 times. Recurring CapEx for the fourth quarter was $211,000 as we completed additional projects prior to yearend. Looking forward to Q1 2024, we anticipate the figure to be between $125,000 and $175,000 depending on timing of projects. Cash G&A expense came in at the bottom of our stated range for the fourth quarter and the full year 2023 due to cost savings and efficiencies achieved throughout the year. As a percentage of revenue, it declined on an annual basis for the full year 2023, and we anticipate this continuing in 2024. As for Q1 2024, we expect cash G&A to be between $2.1 million and $2.3 million. Our Board of Directors approved a quarterly dividend of $0.24 per share, representing a 1.1% increase from the Q4 2022 dividend.
Our business provides investors with stable cash flows each quarter. We continue to execute on our strategy, exhibiting patience with acquisitions and prudence in the capital markets, which should reassure investors that our business will continue to thrive across all economic cycles. This concludes our prepared remarks. Operator, we'd like to open the call for questions.
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