8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 11, 2019

Postal Realty Trust, Inc.

(Exact Name of Registrant as Specified in Charter) 

Maryland	001-38903	83-2586114
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

75 Columbia Avenue

Cedarhurst, NY 11516

(Address of Principal Executive Offices, and Zip Code)

(516) 295-7820

Registrant’s Telephone Number, Including Area Code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report) 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	PSTL	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter).

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. ☐

Item 2.02. Results of Operations and Financial Condition.

Postal Realty Trust, Inc. (the “Company”) issued a press release on November 11, 2019 announcing its financial results for the quarter ended September 30, 2019. A copy of the press release is furnished herewith and attached hereto as Exhibit 99.1.

The information in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act except as set forth by specific reference in such filing.

Item 7.01. Results of Operations and Financial Condition.

On November 11, 2019, the Company held a conference call to discuss its financial results for the quarter ended September 30, 2019. A copy of the conference call transcript is furnished herewith and attached hereto as Exhibit 99.2.

The information in this Item 7.01 and the related information in Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section and shall not be deemed incorporated by reference in any filing made by the Company under the Securities Act or the Exchange Act except as set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press Release of Postal Realty Trust, Inc., dated November 11, 2019
99.2	Postal Realty Trust, Inc. Conference Call Transcript dated November 11, 2019

1

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  November 12, 2019	POSTAL REALTY TRUST, INC.
	By:	/s/ Jeremy Garber
	Name:	Jeremy Garber
	Title:	President, Treasurer and Secretary

2

EX-99.1

Exhibit 99.1

Postal Realty Trust, Inc. Reports Third Quarter 2019 Results

- Rental Revenue Grew 68.4% -

- Closed on $28.4 Million of Acquisitions Since IPO -

- Raised Quarterly Dividend -

CEDARHURST, NEW YORK, November 11, 2019 (BUSINESSWIRE) — Postal Realty Trust, Inc. (NYSE:PSTL) (the “Company”), an internally managed real estate investment trust that owns properties leased to the United States Postal Service (“USPS”), today announced its results for the quarter ended September 30, 2019.

“We made significant progress this quarter in sourcing and securing acquisitions,” stated Andrew Spodek, Postal Realty Trust, Inc.’s Chief Executive Officer. “Our thesis for consolidation of these stable, cash flowing properties continues to prove out. We have closed on 95 properties for $28.4 million since our IPO with an additional 98 properties for approximately $28 million under definitive agreements. We expect that all of these acquisitions will collectively contribute $5.1 million in annual rental revenue. Our acquisition activity is well-supported by our new $100 million credit facility and our ability to selectively issue operating partnership units. We continue to scale our platform and deliver growing cash flow for our shareholders.”

Highlights for Quarter Ended September 30, 2019

● Entered into a $100 million credit facility with a $100 million accordion feature.

● The Company completed acquisitions of 18 USPS properties for $11.1 million.

● Rental revenue increased 68.4% quarter-over-quarter to $2.4 million primarily as a result of the Company’s formation transactions and completed acquisitions since its initial public offering on May 17, 2019.

● GAAP net loss to common stockholders was $307,969, or $0.06 per diluted share.

● Funds from Operations for the quarter was $674,021, or $0.10 per diluted share.

● Adjusted Funds from Operations for the quarter was $982,733, or $0.15 per diluted share.

Highlights Subsequent to Quarter End**

● To date in the fourth quarter, we closed on the acquisition of 77 properties for $17.3 million. The properties comprise approximately 172,000 net leasable interior square feet with a weighted average rental rate of $9.58 per square foot. The expected weighted average cap rate is between 7% and 9%.

● The Company entered into definitive agreements to acquire 98 properties for $27.6 million, which includes $14.0 million of OP Units valued at $17.00 per unit. The properties comprise approximately 270,000 net leasable interior square feet with a weighted average rental rate of $8.93 per square foot. The transactions are expected to close in the fourth quarter, subject to the satisfaction of customary closing conditions.

● Declared an increased cash dividend of $0.14 per share and common unitholders.

* The Company believes results for subsequent quarters will provide more meaningful insight into the financial and operational activities of the Company.

Property Portfolio

As of September 30, 2019, the Company owns 289 postal properties in 43 states comprising approximately 984,000 net leasable interior square feet, is 100.0% occupied and has a weighted average rental rate of $9.59 per square foot. As of November 11, 2019, the Company owns 366 properties in 43 states comprising approximately 1,200,000 net leasable interior square feet, is 100.0% occupied and has a weighted average rental rate of $9.60 per square foot.

Capital Markets Activity

On September 27, 2019, the Company entered into a $100 million senior revolving credit facility with a 4-year term through September 2023. The floating rate facility carries an interest rate of either a base rate plus a range of 70 to 140 basis points or LIBOR plus a range of 170 to 240 basis points, each depending on a consolidated leverage ratio. The Credit Agreement also provides an accordion feature permitting expansion to $200 million subject to certain conditions.

Dividend

On November 5, 2019, the Company’s board of directors approved a cash dividend of $0.14 per share of Class A common stock for the quarter-ended September 30, 2019, an increase of the previously announced dividend on the quarter ended June 30, 2019. The dividend will be paid on December 2, 2019 to stockholders of record as of November 15, 2019.

Non-GAAP Supplemental Financial Information

An explanation of certain non-GAAP financial measures used in this press release, including, FFO and AFFO, as well as reconciliations of those non-GAAP financial measures, to the most directly comparable GAAP financial measure, is included below.

The Company calculates FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as follows: net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than we do and therefore our computation of FFO may not be comparable to such other REITs.

The Company calculates AFFO by starting with FFO and adjusting for recurring capital expenditures (defined as all capital expenditures that are recurring in nature, excluding capital improvements that are incurred in connection with the acquisition of a property or obtaining a lease or lease renewal) and acquisition expenses that are not capitalized and then adding back non-cash items including: non-real estate depreciation, loss on extinguishment of debt, straight-lined rents and fair value lease adjustments and non-cash components of compensation expense. AFFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that AFFO is widely-used by other REITs and is helpful to investors as a meaningful additional measure of our ability to make capital investments. Other REITs may not define AFFO in the same manner as we do and therefore our calculation of AFFO may not be comparable to such other REITs.

2

These metrics are non-GAAP financial measures and should not be viewed as an alternative measurement of our operating performance to net income. Management believes that accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the additive use of FFO and AFFO, together with the required GAAP presentation, is widely-used by our competitors and other REITs and provides a more complete understanding of our performance and a more informed and appropriate basis on which to make investment decisions.

Webcast and Conference Call Details

Postal Realty Trust will host a webcast and conference call to discuss the third quarter 2019 financial results on November 11, 2019 at 8:30 A.M. Eastern Time. A live audio webcast of the conference call will be available on the Company’s investor website at https://investor.postalrealtytrust.com/QuarterlyResults. To participate in the conference call, callers from the United States and Canada should dial-in ten minutes prior to the scheduled call time at 1-877-300-8521. International callers should dial 1-412-317-6026.

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from 11:30 a.m. Eastern Time on Monday, November 11, 2019, through 11:59 p.m. eastern time on Monday, November 25, 2019, by dialing 1-844-512-2921 in the United States and Canada or 1-412-317-6617 internationally and entering passcode 10136570.

About Postal Realty Trust, Inc.

Postal Realty Trust, Inc. is an internally managed real estate investment trust that owns properties leased to the USPS. The Company believes it is one of the largest owners and managers measured by net leasable square footage of properties that are leased to the USPS.

Forward-Looking and Cautionary Statements

This press release contains “forward-looking statements.” Forward-looking statements include statements regarding the proposed public offering and other statements identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections. Forward-looking statements, including, among others, statements regarding the Company’s ability to obtain financing, the Company’s expected capitalization rates and the Company’s ability to close on pending transactions on the terms or timing it expects, if at all, are based on the Company’s current expectations and assumptions regarding capital market conditions, the Company’s business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the USPS’s terminations or non-renewals of leases, changes in demand for postal services delivered by the USPS, the solvency and financial health of the USPS, competitive, financial market and regulatory conditions, general real estate market conditions, the Company’s competitive environment and other factors set forth under “Risk Factors” in the Company’s filings with the Securities and Exchange Commission. Any forward-looking statement made in this press release speaks only as of the date on which it is made. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Contact:

Investor Relations and Media Relations

Email: Investorrelations@postalrealtytrust.com

Phone: 516-232-8900

3

Postal Realty Trust, Inc. and Predecessor
Consolidated and Combined Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

	Predecessor						Predecessor
	Three Months ended September 30, 2019			Three Months ended September 30, 2018			Nine Months ended September 30, 2019			Nine Months ended September 30, 2018
Revenues
Rent income	$	2,387,082		$	1,417,534		$	5,735,896		$	4,199,767
Tenant reimbursements		342,419			220,676			852,504			668,502
Fee and other income		278,846			255,971			842,097			862,317
Total revenues		3,008,347			1,894,181			7,430,497			5,730,586
Operating expenses
Real estate taxes		353,663			227,373			880,117			688,953
Property operating expenses		332,892			203,994			821,839			639,289
General and administrative		1,207,197			282,361			2,385,228			1,086,384
Equity-based compensation		394,530			-			584,873			-
Depreciation and amortization		1,066,338			457,907			2,314,553			1,363,575
Total operating expenses		3,354,620			1,171,635			6,986,610			3,778,201
Income (loss) from operations		(346,273	)		722,546			443,887			1,952,385
Interest expense, net:
Contractual interest expense		(48,916	)		(361,743	)		(635,423	)		(1,112,353	)
Amortization of deferred financing costs		(4,523	)		(3,126	)		(9,558	)		(9,375	)
Loss on extinguishment of debt		-			-			(185,586	)		-
Interest income		1,136			1,158			3,394			3,370
Total interest expense, net		(52,303	)		(363,711	)		(827,173	)		(1,118,358	)
Income (loss) before income tax (expense) benefit		(398,576	)		358,835			(383,286	)		834,027
Income tax (expense) benefit		6,259			143,382			(39,749	)		83,742
Net income (loss)		(392,317	)		502,217			(423,035	)		917,769
Less: Net income attributable to noncontrolling interest in properties		-			(2,829	)		(4,336	)		(9,462	)
Net income attributable to predecessor and Affiliates Predecessor		-			499,388			(463,414	)		908,307
Net loss attributable to Operating Partnership unitholders’ noncontrolling interests		84,348						191,020
Net income (loss) attributable to common stockholders	$	(307,969	)				$	(699,765	)
Net income (loss) per share (basic and diluted)	$	(0.06	)				$	(0.14	)
Weighted average common shares outstanding (basic and diluted)		5,164,264						5,164,264

4

Postal Realty Trust, Inc. and Predecessor
Consolidated and Combined Consolidated Balance Sheets

				Predecessor,
	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Real Estate Properties
Land	$	16,827,724		$	7,239,213
Buildings and improvements		57,177,951			29,550,076
Tenant improvements		2,114,364			1,646,215
Total real estate properties		76,120,039			38,435,504
Less: accumulated depreciation		(8,180,839	)		(7,121,532	)
Total real estate, net		67,939,200			31,313,972
Cash		10,969,557			262,926
Rent and other receivables		1,138,621			601,670
Prepaid expenses and other assets		2,853,298			146,014
Escrows and reserves		610,200			598,949
Deferred rent receivable		31,687			14,060
In-place lease intangibles (net of accumulated amortization of $5,628,459 and $4,388,699, respectively)		4,776,515			2,735,927
Above market leases (net of accumulated amortization of $16,539 and $8,688, respectively)		9,401			10,914
Total assets	$	88,328,479		$	35,684,432
LIABILITIES AND EQUITY (DEFICIT)
Liabilities
Secured borrowings, net	$	3,237,327		$	34,792,419
Revolving credit facility		17,000,000			-
Accounts payable, accrued expenses and other		4,224,599			1,869,084
Below market leases (net of accumulated amortization of $1,860,167 and $1,525,540, respectively)		5,365,118			3,842,495
Deferred tax liability, net		-			793,847
Due to affiliates		512,530			-
Total liabilities	$	30,339,574		$	41,297,845
Commitments and contingencies
Equity (deficit)
Common stock,
PSTL - $.01 par value per share
Class A, 500,000,000 shares authorized: 5,285,904 shares issued and outstanding		52,859			-
Class B, 27,206 shares authorized, 27,206 shares issued and outstanding		272			-
UPH - no par, 1,000 shares authorized, 1,000 shares issued and outstanding		-			4,000,000
NPM - no par, 200 shares authorized, issued and outstanding					200
Additional paid-in capital		46,502,630			3,441,493
Accumulated deficit		(1,034,471	)		(11,003,876	)
Member’s deficit		-			(2,095,823	)
Total Stockholders’ and Predecessor Equity		45,521,290			(5,658,006	)
Operating Partnership unitholders’ noncontrolling interests		12,467,615			-
Noncontrolling interest in properties		-			44,593
Total equity (deficit)		57,988,905			(5,613,413	)
Total liabilities and equity (deficit)		88,328,479			35,684,432

5

Postal Realty Trust, Inc.
Reconciliation of Net Income (Loss) to FFO and AFFO
For the Three Months Ended September 30, 2019 (Unaudited)

	Three Months Ended September 30, 2019
Net Income (loss)	$	(392,317	)
Depreciation and amortization of real estate assets		1,066,338
FFO	$	674,021
Recurring capital expenditures		(31,417	)
Acquisition related expenses		82,065
Amortization of debt issuance costs		4,523
Straight-line rent adjustments		(5,041	)
Amortization of above and below market leases		(135,948	)
Non-cash stock compensation expense		394,530
AFFO	$	982,733
FFO per common share and common unit outstanding	$	0.10
AFFO per common share and common unit outstanding	$	0.15
Common shares and common units outstanding		6,766,227

6

EX-99.2

Exhibit 99.2

C O R P O R A T E P A R T I C I P A N T S

Blaine Willenborg, Vice President of Business Development and Capital Markets

Andrew Spodek, Chief Executive Officer and Director

Jeremy Garber, President, Treasurer, and Secretary

Matt Brandwein, Chief Accounting Officer

C O N F E R E N C E C A L L P A R T I C I P A N T S

Rob Stevenson, Janney Montgomery Scott, LLC

Craig Kucera, B. Riley FBR

P R E S E N T A T I O N

Operator:

Good day, and welcome to the Postal Realty Trust, Inc. Third Quarter 2019 Earnings Conference Call.

All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Blaine Willenborg, Vice President of Business Development and Capital Markets. Please go ahead.

Blaine Willenborg:

Thank you. Good morning, everyone, and welcome to the Postal Realty Trust third quarter earnings conference call.

On the call today, we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President, and Matt Brandwein, Chief Accounting Officer.

Please note the use of forward-looking statements by the Company on this conference call. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The Company intends these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is making this statement for purpose of complying with those Safe Harbor provisions.

Furthermore, 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, without limitation, those contained in the Company’s 10-Q for the quarterly period September 30, 2019 and its other Securities and Exchange Commission filings. The Company assumes no obligation to update publicly 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 and adjusted funds from operations. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the Company's earnings release and in filings with Securities and Exchange Commission. Additionally, information may be found on the Investor Relations page of the Company's website at www.postalrealtytrust.com.

I would now like to turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust.

Andrew Spodek:

Good Morning and thank you for joining Postal Realty Trust’s third quarter call. Let me start our call with a brief review of our business.

We are an internally managed REIT with a focus on acquiring and owning properties leased to the United States Postal Service. As of today, we own 366 properties in 43 states. Our portfolio is 100% leased and provides stable returns. Over the last ten years, we have achieved a renewal rate of approximately 98% through our owned and managed properties.

The overall opportunity for consolidation that exists in the sector is very attractive. There are approximately 23,000 leased postal properties throughout the country. These 23,000 properties generate approximately $1 billion in gross annual rent, which we estimate to be over a $10 billion opportunity. The market is highly fragmented with 16,000 post offices owned by single asset owners.

We continue to execute our strategy to acquire and consolidate postal properties that generate strong earnings and ultimately grow shareholder value.

With that as the background, I’m pleased to report a successful quarter executing on our plan. We are excited to see our story beginning to resonate with postal owners. We believe our flexibility structuring transactions to meet the needs of sellers, including the use of OP units, will continue to help us secure and complete both small and large transactions moving forward.

As we previously communicated, we entered into definitive agreements to acquire a 113-property portfolio for approximately $32 million, $14 million of which were OP Units priced at $17 a share. To date we’ve closed 22 of these, bringing our total acquisitions since IPO to 95 properties for $28.5 million. We anticipate closing the remaining 91 of the 113 properties by the end of the year.

We have also entered into definitive agreements on seven additional properties for approximately $4 million. We expect these properties to close in the near future.

To support our growth, we obtained a $100 million senior revolving credit facility that may be expanded to $200 million through an accordion feature.

Over all the years of owning, acquiring, and operating postal assets, we have never seen a pipeline and response from the postal community this robust. Our access to capital, and ability to source, underwrite, and close new properties, enabled us to construct a highly accretive portfolio of properties, which will generate value for both postal owners and shareholders alike.

I’ll now turn the call over to Jeremy to discuss our third quarter results.

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352 www.viavid.com

1

Jeremy Garber:

Thank you Andrew. Let me jump in to discuss our portfolio and financial results in greater detail.

During the third quarter, we closed on 18 properties for approximately $11 million, totaling 112,000 square feet with an average rental rate of $9.49 per square foot. Subsequent to the third quarter, we closed on an additional 77 properties, totaling approximately 170,000 square feet with an average rental rate of $9.57 per square foot. These properties were purchased at a price of $17.5 million.

Combined with the 18 properties and the 17 properties acquired, we have closed 95 properties year-to-date which has increased our annual rental revenue to $11.1 million.

Moving on to our financial results, FFO for the quarter was $0.10 per share and AFFO for the quarter was $0.145 per share.

As we discussed, the Company entered into a $100 million senior revolving credit facility with a four-year term through September 2023. This floating rate facility carries an interest rate of one-month LIBOR plus a range of 170 to 240 basis points, each dependent on a consolidated leverage ratio.

Lastly, on November 5, we declared a third quarter dividend of $0.14 per share which translates to a 3.3% yield based off of our IPO stock price of $17.00 per share. Given the high credit quality of our tenant and the stability and recurring nature of our cash flow, we believe that we have a highly visible and predictable income stream.

On behalf of Andrew and myself and the entire team, thank you for joining us today. With that, we will open up the call to questions.

Operator:

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you’re using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.

Jeremy Garber:

Operator, before we take the first question, I just want to correct a number that may have been misspoken in my prepared remarks. I meant to say that we acquired 77 properties subsequent to the quarter, not 17, for a total of 95 properties year-to-date.

With that, we will take our first question.

Operator:

The first question today comes from Rob Stevenson of Janney Montgomery Scott. Please go ahead.

Rob Stevenson:

Good morning, guys. In the release, you guys talk about the $5.1 million of revenue on the $56.4 million of acquisitions. Obviously this release was put in place before you got a hold of them. How significant are the expenses on here, because the $5.1 million implies like a 9% cap rate on revenue; how much more is it on NOI or are these all triple nets with very little expenses?

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352 www.viavid.com

2

Jeremy Garber:

Yes, Rob, thank you for joining us this morning. Again, the type of leases that we’ve historically engaged in are the typical USPS lease. We don’t see any significant change in the expense ratio on acquired properties than properties we’ve historically owned, so I wouldn’t model in any change in terms of the expense ratios that we’ve articulated historically.

Rob Stevenson:

Okay. Then you guys had $17 million drawn on the line of credit at September 30. How much is drawn down today; is it just that $17 million plus the incremental $17 million that you guys closed in the fourth quarter? Were there some stock or units in those acquisitions that makes the line of credit balance less at this point?

Jeremy Garber:

We did draw down an additional $20 million in this quarter, and that will fund the borrower transaction that we had disclosed and additional transactions in the pipeline that we anticipate closing in the fourth quarter.

Rob Stevenson:

Okay. Then last one for me, you’re doing OP units on this big transaction. How high is the interest level right now in taking units from prospective sellers; and sort of what is your sort of threshold? I assume that you guys aren’t going to be going through the headaches of issuing units for a $500,000 acquisition, but, can you talk about sort of where you guys sort of set the bar in terms of threshold and then what the interest level is on prospective sellers to you guys?

Andrew Spodek:

Sure, Rob. This is Andrew. We have interest from a number of sellers as it relates to the possibility of taking back units. We’ve set the bar at a few million dollars currently, but it really more depends on the seller in the portfolio than the dollar amount. You’re correct; on the smaller purchases and the one-off buildings it’s not something that we are offering.

Rob Stevenson:

Okay. Thanks, guys. Appreciate it.

Andrew Spodek:

Pleasure. Thank you.

Operator:

Again, if you have a question please, press star then one.

The final question today comes from Craig Kucera of B. Riley FBR. Please go ahead.

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352 www.viavid.com

3

Craig Kucera:

Hey, good morning, guys. Appreciate the color on the acquisitions that you closed already this quarter kind of a range, but from a modeling perspective it appears that what was closed earlier was closer to a 9% cap. How should we think within that range; is it right down the middle or maybe towards the high-end of that range?

Blaine Willenborg:

The properties that we acquired was closer to the higher end of the range. That being said, on a go-forward basis, modeling around the middle of the range from a 7% to a 9% cap would be appropriate.

Craig Kucera:

Got it. The dividend this quarter clearly raised to $0.14, about 96% AFFO payout. I know the goal here is that you acquire properties, to push that dividend up to $0.255 or so on a quarterly basis, but should we expect sort of an elevated payout ratio until you get to that point or is there any thought on how the Board is looking at the dividend as you kind of ramp up the portfolio to eventually pay that $0.255?

Jeremy Garber:

So, yes, exactly; the goal is to be paying out the AFFO figures until we reach the target that we had articulated. The Board is and has been taking a conservative approach. As we ramp up, as you know, the acquisitions are driving our AFFO distribution opportunity. I couldn’t speak for the Board in terms of what their plan is for the next quarter in terms of a distribution, but, again, we’re trending towards our goal for the $1.02 on a run rate for 6/30/20.

Craig Kucera:

Got it. One more for me, I think in your prepared comments you noted that you had moved towards another $4 million or so of properties. Is that a component of the definitive agreements to acquire the 98 properties that you have in your press release or is that incremental to that?

Jeremy Garber:

No. It’s the combined.

Craig Kucera:

Okay. All right. Thank you very much.

Andrew Spodek:

Thank you.

Operator:

This does conclude our question-and-answer session. I would like to turn the conference back over to Andrew Spodek for any closing remarks.

Andrew Spodek:

I just want to thank everybody that dialed in to listen to our earnings call. We appreciate everybody’s support. If anybody has any questions offline, always feel free to call us. Thank you very much for joining us.

Operator:

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-0262 1-604-929-1352 www.viavid.com

4