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): December 2, 2020
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) (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)) |
| 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 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§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. ☐
Explanatory Note.
On January 10, 2020, Postal Realty Trust, Inc. (the “Company”), through a subsidiary of its operating partnership, Postal Realty, LP, completed the acquisition of a 21 property portfolio (the “21 Property Portfolio”), from unaffiliated third parties, for an aggregate purchase price of approximately $13.6 million, including closing costs. Filed herewith as Exhibit 99.1 to this Current Report on Form 8-K are the Independent Auditors’ Report and Combined Statement of Revenues and Certain Expenses for the year ended December 31, 2019 for the properties known as the 21 Property Portfolio, together with the related notes thereto (collectively, the “21 Property Portfolio Financials”). The 21 Property Portfolio Financials were previously included in the Company’s Registration Statement on Form S-11 (File No. 333-239829).
In November 2020, the Company signed a purchase and sale agreement for an industrial building in Warrendale, Pennsylvania (such property referred to herein as the “Industrial Property”) for $47.0 million and expects to complete the transaction in the fourth quarter of 2020. Filed herewith as Exhibit 99.2 to this Current Report on Form 8-K are the Independent Auditors’ Report and Statements of Revenues and Certain Expenses for the nine months ended September 30, 2020 (unaudited) and for the year ended December 31, 2019 (audited) for the property known as the Industrial Property, together with the related notes thereto.
Filed herewith as Exhibit 99.3 to this Current Report on Form 8-K is an Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2020 and the Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2020 and the Unaudited Pro Forma Combined Consolidated Statement of Operations for the year ended December 31, 2019 for the Company.
Item 9.01 Financial Statements and Exhibits.
| (a) | Financial Statements of Business Acquired. |
The Independent Auditors’ Report and Combined Statement of Revenues and Certain Expenses for the year ended December 31, 2019 for the properties known as the 21 Property Portfolio, together with the related notes thereto, is filed as Exhibit 99.1 hereto.
The Independent Auditors’ Report and Statements of Revenues and Certain Expenses for the nine months ended September 30, 2020 (unaudited) and for the year ended December 31, 2019 (audited) for the property known as the Industrial Property, together with the related notes thereto, is filed as Exhibit 99.2 hereto.
| (b) | Pro Forma Financial Information. |
The Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2020 and the Unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2020 and the Unaudited Pro Forma Combined Consolidated Statement of Operations for the year ended December 31, 2019 for Postal Realty Trust, Inc., together with the related notes thereto, is filed as Exhibit 99.3 hereto.
| (d) | Exhibits. |
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.
| POSTAL REALTY TRUST, INC. | ||
| Date: December 2, 2020 | By: | /s/ Jeremy Garber |
| Name: | Jeremy Garber | |
| Title: | President, Treasurer and Secretary | |
2
EXHIBIT 99.1
Independent Auditors’ Report
To
the Board of Directors and Stockholders
Postal Realty Trust, Inc.
Report on the Financial Statement
We have audited the accompanying combined statement of revenues and certain expenses of the properties known as the 21 Property Portfolio (“Properties”) for the year ended December 31, 2019, and the related notes to the combined statement of revenues and certain expenses.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined revenues and certain expenses, described in Note 2, of the Properties for the year ended December 31, 2019, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to Note 2 to the financial statement, which describes that the accompanying combined financial statement was prepared for the purpose of complying with rules and regulations of the U.S. Securities and Exchange Commission and it is not intended to be a complete presentation of the Properties’ combined revenues and expenses. Our opinion is not modified with respect to that matter.
/s/ Marcum LLP
New
York, NY
April 27, 2020
1
21
Property Portfolio
Combined Statement of Revenues and Certain Expenses
For the Year Ended December 31, 2019
| Revenues | ||||||||
| Rental revenue | $ | 1,287,514 | ||||||
| Tenant reimbursements | 250,717 | |||||||
| Total Revenues | $ | 1,538,231 | ||||||
| Certain Expenses | ||||||||
| Real estate taxes | 251,914 | |||||||
| Repairs and maintenance | 7,797 | |||||||
| Ground rent | 31,358 | |||||||
| Insurance | 32,478 | |||||||
| Total Certain Expenses | 323,547 | |||||||
| Revenues in Excess of Certain Expenses | $ | 1,214,684 | ||||||
The accompanying notes are an integral part of the combined statement of revenues and certain expenses.
2
21
Property Portfolio
Notes to Combined Statement of Revenues and Certain Expenses
For the Year Ended December 31, 2019
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
The accompanying combined statement of revenues and certain expenses include the operations of the 21 separate post office properties known as the 21 Property Portfolio (the “Properties”), which consist of approximately 83,000 (unaudited) interior square feet of rentable space, located in Colorado (65.4% of square footage), Texas (10.0% of square footage), South Dakota (5.5% of square footage), Utah (5.4% of square footage), Kansas (4.8% of square footage), Missouri (4.7% of square footage) and Montana (4.2% of square footage).
On October 23, 2019, Postal Realty, LP (the “Buyer” or “Company”) entered into a purchase and sale agreement with Sanddollar Investments, LLC, 3025 Wood Gate Road, Inc., Sand Pebble, LLC and Sandstone Development, LLC to acquire the 21 properties. Common control exists across all properties in the portfolio. The sale closed on January 10, 2020 for a total purchase price of $13.8 million.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined statement of revenues and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statement is not representative of the actual results of operations for the period presented as revenues and certain expenses, which may not be directly attributable to the revenues and expenses to be incurred in the future operations of the Properties, have been excluded. Such excluded items include interest income, interest expense, related party fees, management fees, nonrecurring professional fees, depreciation, and amortization.
USE OF ESTIMATES
The preparation of a financial statement in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that in certain circumstances may affect the reporting and disclosure of revenues and certain expenses. Actual results could materially differ from these estimates.
REVENUE RECOGNITION
The Properties recognize rental revenue from tenants on a straight-line basis over the non-cancellable term of the leases which includes the effects of rent steps and rent abatements, if any. The Properties commence rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use.
Tenant reimbursements represent the reimbursement of real estate taxes. The reimbursements are recognized and presented on a gross basis as certain Properties are the primary obligor of the real estate taxes.
GROUND LEASE
The Properties records ground lease expense on a straight-line basis over the term of the lease.
3
21
Property Portfolio
Notes to Combined Statement of Revenues and Certain Expenses
For the Year Ended December 31, 2019
NOTE 3 — OPERATING LEASE AGREEMENT
The Properties lease post office properties in different locations to a single tenant, the United States Postal Service. As of December 31, 2019, future minimum rental income to be received under the non-cancellable operating leases are as follows:
| 2020 | $ | 1,211,093 | ||
| 2021 | 1,126,490 | |||
| 2022 | 1,046,314 | |||
| 2023 | 797,864 | |||
| 2024 | 340,061 | |||
| Thereafter | 165,000 | |||
| Total | $ | 4,686,822 |
NOTE 4 — GROUND LEASE AGREEMENT
One of the Properties assumed a lease agreement to lease land from a third party. Pursuant to the original lease, the tenant is required to pay $1 annually for the first 20 years through September 30, 2019. The tenant has eight 5-year renewal options to renew the lease commencing October 1, 2019. During 2018, the lease was renewed and now requires the tenant to pay annual rent of $22,400 through the expiration date of September 30, 2024.
As of December 31, 2019, future minimum rental expense to be paid under the non-cancellable lease is as follows:
| 2020 | $ | 22,400 | ||
| 2021 | 22,400 | |||
| 2022 | 22,400 | |||
| 2023 | 22,400 | |||
| 2024 | 22,960 | |||
| Thereafter | 1,159,690 | |||
| Total | $ | 1,272,250 |
NOTE 5 — CONCENTRATION OF CREDIT RISK
For the year ended December 31, 2019, one tenant contributed to 100% of the rental revenue for the Properties.
NOTE 6 — SUBSEQUENT EVENTS
The Company evaluated all events and transactions that occurred after December 31, 2019 up through April 27, 2020, the date this combined financial statement was available to be issued. During this period, the Company did not have any material subsequent events, other than discussed below.
On March 11, 2020, the World Health Organization declared the outbreak of a coronavirus (COVID-19) a pandemic. 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 tenant and operating results.
4
EXHIBIT 99.2
INDUSTRIAL PROPERTY
STATEMENTS OF REVENUES
AND CERTAIN EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019 AND
NINE MONTHS ENDED SEPTEMBER 30, 2020 (UNAUDITED)
INDUSTRIAL PROPERTY
CONTENTS
| Independent Auditors’ Report | 1-2 |
| Statements of Revenues and Certain Expenses | 3 |
| Notes to Statements of Revenues and Certain Expenses | 4-5 |
To the Board of Directors and Stockholders
Postal Realty Trust, Inc.
Report on the Financial Statement
We have audited the accompanying statement of revenues and certain expenses of the properties known as the Industrial Property (“the Property”) for the year ended December 31, 2019, and the related notes to the statement of revenues and certain expenses.
Management's Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.
1
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses, described in Note 2, of the Property for the year ended December 31, 2019, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement was prepared for the purpose of complying with rules and regulations of the U.S. Securities and Exchange Commission and it is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to that matter.
/s/ Marcum LLP
New York, NY
December 1, 2020
2
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
For the Nine Months Ended September 30, 2020 (Unaudited) and
Year Ended December 31, 2019
| Nine Months Ended September 30, 2020 (Unaudited) | Year Ended December 31, 2019 | |||||||
| Revenues | ||||||||
| Rental revenue | $ | 2,162,049 | $ | 2,830,633 | ||||
| Tenant reimbursements | 658,056 | 1,020,138 | ||||||
| Total Revenues | 2,820,105 | 3,850,771 | ||||||
| Certain Expenses | ||||||||
| Real estate taxes | 414,258 | 543,861 | ||||||
| Repairs and maintenance | 173,586 | 389,821 | ||||||
| Management fees | 27,000 | 36,000 | ||||||
| Utilities | 14,277 | 12,017 | ||||||
| Insurance | 25,110 | 33,480 | ||||||
| Total Certain Expenses | 654,231 | 1,015,179 | ||||||
| Revenues in Excess of Certain Expenses | $ | 2,165,874 | $ | 2,835,592 | ||||
The accompanying notes are an integral part of the statements of revenues and certain expenses.
3
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
For the Nine Months Ended September 30, 2020 (Unaudited) and
Year Ended December 31, 2019
Note 1 – Organization and Description of Business
The accompanying statements of revenues and certain expenses include the operations of the post office property known as the Industrial Property (the “Property”), which consist of approximately 431,000 (unaudited) interior square feet of rentable space, located in Warrendale, Pennsylvania.
In November 2020, Postal Realty, LP (the “Buyer” or “Company”) entered into a purchase and sale agreement with The Northwestern Mutual Life Insurance Company (the “Seller”) to acquire the property. The sale is expected to close in December 2020 for a total purchase price of $47.0 million.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying statements of revenues and certain expenses have been prepared for the purpose of complying with Rule 3-14 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the statements are not representative of the actual results of operations for the periods presented as revenues and certain expenses, which may not be directly attributable to the revenues and expenses to be incurred in the future operations of the Property, have been excluded. Such excluded items include interest income, interest expense, related party fees, non- recurring professional fees, depreciation, and amortization.
Interim Unaudited Information
The accompanying unaudited interim statement of revenues and certain expenses for the nine months ended September 30, 2020 has been prepared on the same basis as the statement of revenues and certain expenses for the year ended December 31, 2019. In the opinion of the management of the property all adjustments consisting only of normal recurring adjustments necessary for fair presentation of the information for this interim period have been made. The revenues in excess of certain expenses for such interim period is not necessarily indicative of the excess of revenues over certain expenses for the full year.
Use of Estimates
The preparation of a financial statement in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that in certain circumstances may affect the reporting and disclosure of revenues and certain expenses. Actual results could materially differ from these estimates.
4
INDUSTRIAL PROPERTY
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
For the Nine Months Ended September 30, 2020 (Unaudited) and
Year Ended December 31, 2019
Revenue Recognition
The Property recognizes rental revenue from tenants on a straight-line basis over the non- cancellable term of the leases which includes the effects of rent steps and rent abatements, if any. The Property commences rental revenue recognition when the tenant takes possession of the leased space and the leased space is substantially ready for its intended use.
Tenant reimbursements represent the reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expense. The reimbursements are recognized and presented on a gross basis as the Property is the primary obligor of these expenses.
Note 3 – Rental Income
The Property is leased to tenants under operating leases with expiration dates ranging from 2023 to 2026. One tenant accounted for 67% of rental income as of December 31, 2019. The minimum rental amounts due under the leases are subject to scheduled fixed increases. Future minimum rents to be received over each of the next five years and thereafter under the non-cancelable operating leases in effect as of September 30, 2020 are as follows:
| 2020 (three months ending December 31, 2020) | $ | 767,014 | ||
| 2021 | 3,003,682 | |||
| 2022 | 2,963,608 | |||
| 2023 | 2,900,955 | |||
| 2024 | 2,902,085 | |||
| Thereafter | 2,829,069 | |||
| Total | $ | 15,366,413 |
Note 4 – Subsequent Events
The Property has evaluated events and transactions for potential recognition or disclosure through December 1, 2020, the date the financial statement was available to be issued.
5
EXHIBIT 99.3
Postal Realty Trust, Inc.
Introduction to Unaudited Pro Forma Financial Statements
The unaudited pro forma financial statements of Postal Realty Trust, Inc. (the “Company”) are based on the historical consolidated and combined consolidated financial statements of the Company and prepared on a pro forma basis to reflect completed acquisitions of properties during 2019 and 2020 and probable acquisitions of properties as of the date of this prospectus, in each case 100% leased to the United States Postal Service (the “USPS”) with the exception of the multi tenanted Industrial Property, as defined below.
The Company has adopted in its entirety the amendments to the financial disclosure requirements in Regulation S-X relating to the acquisition and dispositions of businesses which were initially proposed by the SEC in May 2019 (the “Amendments”).
The unaudited Pro Forma Consolidated Balance Sheet of the Company as of September 30, 2020 is presented on a pro forma basis to reflect the following as if they occurred on September 30, 2020:
| ● | the purchase of 21 postal properties that we have acquired since September 30, 2020 (“2020 Recent Acquisitions”); |
| ● | the acquisition of the Warrendale, Pennsylvania industrial facility that we expect to acquire in the fourth quarter of 2020, subject to customary closing conditions (“Industrial Property”); and |
| ● | the purchase of 17 postal properties, the majority of which that we expect to acquire in the fourth quarter of 2020, subject to customary closing conditions (“2020 Probable Acquisitions”); |
The unaudited Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2020 and the Pro Forma Combined Consolidated Statement of Operations for the year ended December 31, 2019 are presented on a pro forma basis to reflect the following as if they occurred on January 1, 2019:
| ● | the purchase of 21 postal properties that we acquired as a portfolio acquisition on January 10, 2020 (the “First January Portfolio” or “21 Property Portfolio”); |
| ● | the purchase of 245 additional postal properties that we have acquired since December 31, 2019 (including 21 postal properties that we have acquired since September 30, 2020) as well as one postal property which is accounted for as a direct financing lease (“2020 Completed Acquisitions”); |
| ● | the completion of the purchase of the Industrial Property; |
| ● | the completion of the 2020 Probable Acquisitions; |
| ● | the secured borrowing of $9.2 million in June 2020 related to certain unencumbered properties (“New Borrowing”); |
| ● | the secured borrowing of $4.5 million in April 2020 related to certain unencumbered properties; |
| ● | the Company’s acquisition of a 113-building portfolio for cash and OP Units (“November 2019 Portfolio Acquisition”); |
| ● | the contribution of Nationwide Postal and Affiliates Predecessor (the “Predecessor”), the predecessor of the Company, including 190 properties owned by the Predecessor, in exchange for Class A Common Stock, Voting Equivalency Stock, limited partnership units of Postal Realty LP, a subsidiary of the Company (the “Operating Partnership” or “OP”), and cash; |
| ● | the Operating Partnership’s acquisition for cash of 81 additional properties (the “Acquisition Properties”) by the Company or its subsidiaries effective May 17, 2019 upon completion of our initial public offering and related formation transactions; |
| ● | the Company’s acquisition for cash of 82 postal properties that we acquired in 2019 following completion of our initial public offering and related formation transactions, in addition to the November 2019 Portfolio Acquisition and one property purchased by the Predecessor in 2019 (the “2019 Other Completed Acquisitions); and |
| ● | the July 2020 offering of 4,021,840 shares in our follow-on offering (“Follow-On Offering”). |
These transactions are more fully described in the notes to the unaudited pro forma financial statements.
The Company’s unaudited pro forma transaction adjustments are based on available information and assumptions that the Company considers reasonable. The Company’s unaudited pro forma financial statements are not necessarily indicative of what the Company’s actual financial position or results of operations would have been as of the date and for the periods indicated, nor do they purport to represent the Company’s future financial position or results of operations.
The purchase price allocations are preliminary for the 2020 Recent Acquisitions, the Industrial Property and 2020 Probable Acquisitions and the final allocations will likely differ from the amounts reflected in the unaudited pro forma financial statements. Such differences will likely result in operating results and financial condition different than that reflected in the unaudited pro forma financial statements and such differences may be material. The final accounting for these transactions will be reflected in the consolidated financial statements for the quarterly period during which the acquisition is completed.
Postal Realty Trust, Inc.
Pro Forma Consolidated Balance Sheet
As of September 30, 2020 (Unaudited)
Transaction Adjustments | ||||||||||||||||||||
| Postal Realty Trust, Inc. (a) | 2020 Recent Acquisitions (b) | Industrial Property (c) | 2020 Probable Acquisitions (d) | Total Pro Forma | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Investments: Real estate properties, at cost: | ||||||||||||||||||||
| Land | $ | 38,603,504 | $ | 2,229,240 | $ | 1,780,948 | $ | 3,879,518 | $ | 46,493,210 | ||||||||||
| Buildings and improvements | 144,763,204 | 6,538,832 | 41,912,294 | 15,017,586 | 208,231,916 | |||||||||||||||
| Tenant improvements | 3,227,454 | 668,431 | 470,250 | 192,712 | 4,558,847 | |||||||||||||||
| Total real estate properties, at cost: | 186,594,162 | 9,436,503 | 44,163,492 | 19,089,816 | 259,283,973 | |||||||||||||||
| Less: Accumulated depreciation | (11,875,852 | ) | - | - | - | (11,875,852 | ) | |||||||||||||
| Total real estate properties, net | 174,718,310 | 9,436,503 | 44,163,492 | 19,089,816 | 247,408,121 | |||||||||||||||
| Investment in financing lease, net | 516,164 | - | - | - | 516,164 | |||||||||||||||
| Total investments | 175,234,474 | 9,436,503 | 44,163,492 | 19,089,816 | 247,924,285 | |||||||||||||||
| Cash | 7,786,677 | (6,084,016 | ) | - | (17,524 | ) | 1,685,137 | |||||||||||||
| Rent and other receivables | 2,728,818 | - | - | - | 2,728,818 | |||||||||||||||
| Prepaid expenses and other assets, net | 3,669,503 | - | - | - | 3,669,503 | |||||||||||||||
| Escrows and reserves | 694,910 | - | - | - | 694,910 | |||||||||||||||
| Deferred rent receivable | 145,690 | - | - | - | 145,690 | |||||||||||||||
| In-place lease intangibles, net | 9,349,264 | 1,339,939 | 2,836,508 | 1,579,892 | 15,105,603 | |||||||||||||||
| Above market leases, net | 54,667 | - | - | - | 54,667 | |||||||||||||||
| Total Assets | $ | 199,664,003 | $ | 4,692,426 | $ | 47,000,000 | $ | 20,652,184 | $ | 272,008,613 | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Secured borrowings, net | $ | 16,599,366 | $ | - | $ | - | $ | - | $ | 16,599,366 | ||||||||||
| Revolving credit facility | 49,000,000 | 4,450,000 | 47,000,000 | 19,925,000 | 120,375,000 | |||||||||||||||
| Accounts payable, accrued expenses and other | 4,537,644 | - | - | - | 4,537,644 | |||||||||||||||
| Below market leases, net | 8,379,874 | 242,426 | - | 727,184 | 9,349,484 | |||||||||||||||
| Total Liabilities | $ | 78,516,884 | $ | 4,692,426 | $ | 47,000,000 | $ | 20,652,184 | $ | 150,861,494 | ||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Equity: | ||||||||||||||||||||
| Common stock, Class A common shares $0.01 par value; 500,000,000 shares authorized: 9,449,352 shares issued and outstanding as of September 30, 2020 | 94,494 | - | - | - | 94,494 | |||||||||||||||
| Class B common shares $0.01 par value; 27,206 shares authorized: 27,206 shares issued and outstanding as of September 30, 2020 | 272 | - | - | - | 272 | |||||||||||||||
| Additional paid-in capital | 101,303,229 | - | - | - | 101,303,229 | |||||||||||||||
| Accumulated deficit | (8,246,422 | ) | - | - | (8,246,422 | ) | ||||||||||||||
| Total Stockholders’ Equity | 93,151,573 | - | - | - | 93,151,573 | |||||||||||||||
| Operating Partnership unitholders’ noncontrolling interests | 27,995,546 | - | - | 27,995,546 | ||||||||||||||||
| Total Equity | 121,147,119 | - | - | - | 121,147,119 | |||||||||||||||
| Total Liabilities and Equity | $ | 199,664,003 | $ | 4,692,426 | $ | 47,000,000 | $ | 20,652,184 | $ | 272,008,613 | ||||||||||
1
Postal Realty Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2020 (Unaudited)
Transaction Adjustments | ||||||||||||||||||||||||||||
| Postal Realty Trust, Inc. (a) | First January Portfolio (b) | 2020 Completed Acquisitions (f) | Industrial Property (A) | 2020 Probable Acquisitions (g) | Other Transaction Accounting Adjustments | Total Pro Forma | ||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||
| Rental income | $ | 14,211,317 | $ | 2,078 | $ | 3,090,857 | $ | 2,245,211 | $ | 1,463,773 | $ | - | $ | 21,013,236 | ||||||||||||||
| Tenant reimbursements | 1,997,716 | 6,066 | 322,959 | 658,056 | 105,690 | - | 3,090,487 | |||||||||||||||||||||
| Fee and other income | 890,008 | - | 30,333 | - | - | - | 920,341 | |||||||||||||||||||||
| Total revenues | 17,099,041 | 8,144 | 3,444,149 | 2,903,267 | 1,569,463 | - | 25,024,064 | |||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||
| Real estate taxes | 2,136,805 | 6,095 | 413,418 | 414,258 | 223,002 | - | 3,193,578 | |||||||||||||||||||||
| Property operating expenses | 1,261,515 | 1,582 | 327,264 | 239,973 | 129,842 | - | 1,960,176 | |||||||||||||||||||||
| General and administrative | 6,245,732 | - | - | - | - | - | 6,245,732 | |||||||||||||||||||||
| Depreciation and amortization | 6,590,982 | 22,256 | 1,330,770 | 1,325,304 | 675,993 | - | 9,945,305 | |||||||||||||||||||||
| Total operating expenses | 16,235,034 | 29,933 | 2,071,452 | 1,979,535 | 1,028,837 | - | 21,344,791 | |||||||||||||||||||||
| Income (loss) from operations | $ | 864,007 | $ | (21,789 | ) | $ | 1,372,697 | $ | 923,732 | $ | 540,626 | $ | - | $ | 3,679,273 | |||||||||||||
| Interest expense, net: | ||||||||||||||||||||||||||||
| Contractual interest expense | (1,757,413 | ) | - | - | - | - | (930,143 | )(j) | (2,687,556 | ) | ||||||||||||||||||
| Write-off and amortization of deferred financing fees | (343,511 | ) | - | - | - | - | (6,824 | )(j) | (350,335 | ) | ||||||||||||||||||
| Interest income | 2,155 | - | - | - | - | - | 2,155 | |||||||||||||||||||||
| Total interest expense, net | (2,098,769 | ) | - | - | - | - | (936,967 | ) | (3,035,736 | ) | ||||||||||||||||||
| (Loss) income before income tax (expense) benefit | (1,234,762 | ) | (21,789 | ) | 1,372,697 | 923,732 | 540,626 | (936,967 | ) | 643,537 | ||||||||||||||||||
| Income tax (expense) benefit | (44,876 | ) | - | - | - | - | - | (44,876 | ) | |||||||||||||||||||
| Net (loss) income | (1,279,638 | ) | (21,789 | ) | 1,372,697 | 923,732 | 540,626 | (936,967 | ) | 598,661 | ||||||||||||||||||
| Net loss attributable to Operating Partnership unitholders’ non-controlling interests | 436,149 | - | - | - | - | (574,440 | )(n) | (138,291 | ) | |||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | (843,489 | ) | $ | (21,789 | ) | $ | 1,372,697 | $ | 923,732 | $ | 540,626 | $ | (1,511,407 | ) | $ | 460,370 | |||||||||||
| Net (loss) income per share (basic and diluted) | $ | (0.18 | ) | $ | 0.03 | (o) | ||||||||||||||||||||||
| Weighted average common shares outstanding | 6,276,145 | 9,226,473 | (o) | |||||||||||||||||||||||||
2
Postal Realty Trust, Inc.
Pro Forma Combined Consolidated Statement of Operations
For the Year Ended December 31, 2019 (Unaudited)
Transaction Adjustments | ||||||||||||||||||||||||||||||||||||||||
| Postal
Realty Trust, Inc. (a) | Acquisition
Properties (h) | November
2019 Portfolio Acquisition (i) | 2019
Other Completed Acquisitions (j) | First
January Portfolio (B) | 2020
Completed Acquisitions (f) | Industrial
Property (A) | 2020
Probable Acquisitions (g) | Other
Transaction Accounting Adjustments | Total
Pro Forma | |||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||
| Rental income | $ | 8,865,868 | $ | 1,065,795 | $ | 2,241,919 | $ | 2,155,445 | $ | 1,323,303 | $ | 6,803,538 | $ | 3,008,330 | $ | 2,098,797 | $ | - | $ | 27,562,995 | ||||||||||||||||||||
| Tenant reimbursements | 1,311,121 | 148,509 | 239,495 | 215,154 | 250,717 | 885,965 | 1,020,138 | 123,432 | - | 4,194,531 | ||||||||||||||||||||||||||||||
| Fee and other income | 1,112,367 | - | - | - | - | 39,383 | - | - | - | 1,151,750 | ||||||||||||||||||||||||||||||
| Total revenues | 11,289,356 | 1,214,304 | 2,481,414 | 2,370,599 | 1,574,020 | 7,728,886 | 4,028,468 | 2,222,229 | - | 32,909,276 | ||||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
| Real estate taxes | 1,366,892 | 152,742 | 272,916 | 319,569 | 251,914 | 1,033,871 | 543,861 | 261,191 | - | 4,202,956 | ||||||||||||||||||||||||||||||
| Property operating expenses | 1,207,486 | 76,470 | 117,423 | 156,605 | 71,633 | 688,248 | 471,318 | 180,615 | - | 2,969,798 | ||||||||||||||||||||||||||||||
| General and administrative | 4,846,392 | - | - | - | - | - | - | - | 852,476 | (k) | 5,698,868 | |||||||||||||||||||||||||||||
| Depreciation and amortization | 3,800,059 | 488,925 | 1,503,964 | 1,230,746 | 661,124 | 3,764,283 | 1,767,072 | 1,008,799 | - | 14,224,972 | ||||||||||||||||||||||||||||||
| Total operating expenses | 11,220,829 | 718,137 | 1,894,303 | 1,706,920 | 984,671 | 5,486,402 | 2,782,251 | 1,450,605 | 852,476 | 27,096,594 | ||||||||||||||||||||||||||||||
| Income (loss) from operations | 68,527 | 496,167 | 587,111 | 663,679 | 589,349 | 2,242,484 | 1,246,217 | 771,624 | (852,476 | ) | 5,812,682 | |||||||||||||||||||||||||||||
| Interest expense, net: | ||||||||||||||||||||||||||||||||||||||||
| Contractual interest expense | (1,098,788 | ) | - | - | - | - | - | - | - | (2,277,492 | )(l) | (3,376,280 | ) | |||||||||||||||||||||||||||
| Write-off and amortization of deferred financing fees | (242,763 | ) | - | - | - | - | - | - | - | (354,146 | )(l) | (596,909 | ) | |||||||||||||||||||||||||||
| Loss on early extinguishment of Predecessor debt | (185,586 | ) | - | - | - | - | - | - | - | 185,586 | (l) | - | ||||||||||||||||||||||||||||
| Interest income | 5,928 | - | - | - | - | - | - | - | - | 5,928 | ||||||||||||||||||||||||||||||
| Total interest expense, net | (1,521,209 | ) | - | - | - | - | - | - | - | (2,446,052 | ) | (3,967,261 | ) | |||||||||||||||||||||||||||
| (Loss) income before income tax (expense) benefit | (1,452,682 | ) | 496,167 | 587,111 | 663,679 | 589,349 | 2,242,484 | 1,246,217 | 771,624 | (3,298,528 | ) | 1,845,421 | ||||||||||||||||||||||||||||
| Income tax (expense) benefit | (39,749 | ) | - | - | - | - | - | - | - | 39,749 | (m) | - | ||||||||||||||||||||||||||||
| Net (loss) income | (1,492,431 | ) | 496,167 | 587,111 | 663,679 | 589,349 | 2,242,484 | 1,246,217 | 771,624 | (3,258,779 | ) | 1,845,421 | ||||||||||||||||||||||||||||
| Net income attributable to non-controlling interest in properties | (4,336 | ) | - | - | - | - | - | - | - | 4,336 | (n) | - | ||||||||||||||||||||||||||||
| Net income attributable to Predecessor | (463,414 | ) | - | - | - | - | - | - | - | - | (463,414 | ) | ||||||||||||||||||||||||||||
| Net loss (income) attributable to Operating Partnership unitholders’ non-controlling interests | 462,968 | - | - | - | - | - | - | - | (782,212 | )(n) | (319,244 | ) | ||||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | (1,497,213 | ) | $ | 496,167 | $ | 587,111 | $ | 663,679 | $ | 589,349 | $ | 2,242,484 | $ | 1,246,217 | $ | 771,624 | $ | (4,036,655 | ) | $ | 1,062,763 | ||||||||||||||||||
| Net (loss) income per share (basic and diluted) | $ | (0.30 | ) | (o) | $ | 0.11 | ||||||||||||||||||||||||||||||||||
| Weighted average common shares outstanding | 5,164,264 | (o) | 9,186,104 | |||||||||||||||||||||||||||||||||||||
3
Postal Realty Trust, Inc.
Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 30, 2020 (Unaudited) — (Continued)
| Historical (d) | Other Transaction Accounting Adjustments (e) | Total (A) | ||||||||||
| Revenues | ||||||||||||
| Rental income | $ | 2,162,049 | $ | 83,162 | $ | 2,245,211 | ||||||
| Tenant reimbursements | 658,056 | - | 658,056 | |||||||||
| 2,820,105 | 83,162 | 2,903,267 | ||||||||||
| Operating Expenses | ||||||||||||
| Real estate taxes | 414,258 | - | 414,258 | |||||||||
| Property operating expenses | 239,973 | - | 239,973 | |||||||||
| Depreciation and amortization | - | 1,325,304 | 1,325,304 | |||||||||
| Total operating expenses | 654,231 | 1,325,304 | 1,979,535 | |||||||||
| Income (loss) from operations | 2,165,874 | (1,242,142 | ) | 923,732 | ||||||||
| Interest expense, net | - | - | - | |||||||||
| Income (loss) before income tax benefit (expense) | 2,165,874 | (1,242,142 | ) | 923,732 | ||||||||
| Income tax benefit (expense) | - | - | - | |||||||||
| Net income (loss) | 2,165,874 | (1,242,142 | ) | 923,732 | ||||||||
| Less: Net income attributable to non-controlling interest | - | - | - | |||||||||
| Net income (loss) attributable to Postal Realty Trust, Inc. | $ | 2,165,874 | $ | (1,242,142 | ) | $ | 923,732 | |||||
Postal Realty Trust, Inc.
Pro Forma Combined Consolidated Statement of Operations
For the Year Ended December 31, 2019 (Unaudited) — (Continued)
| Historical (d) | Other Transaction Accounting Adjustments (e) | Total (A) | ||||||||||
| Revenues | ||||||||||||
| Rental income | $ | 2,830,633 | $ | 177,697 | $ | 3,008,330 | ||||||
| Tenant reimbursements | 1,020,138 | - | 1,020,138 | |||||||||
| 3,850,771 | 177,697 | 4,028,468 | ||||||||||
| Operating Expenses | ||||||||||||
| Real estate taxes | 543,861 | - | 543,861 | |||||||||
| Property operating expenses | 471,318 | - | 471,318 | |||||||||
| Depreciation and amortization | - | 1,767,072 | 1,767,072 | |||||||||
| Total operating expenses | 1,015,179 | 1,767,072 | 2,782,251 | |||||||||
| Income (loss) from operations | 2,835,592 | (1,589,375 | ) | 1,246,217 | ||||||||
| Interest expense, net | - | - | - | |||||||||
| Income (loss) before income tax benefit (expense) | 2,835,592 | (1,589,375 | ) | 1,246,217 | ||||||||
| Income tax benefit (expense) | - | - | - | |||||||||
| Net income (loss) | 2,835,592 | (1,589,375 | ) | 1,246,217 | ||||||||
| Less: Net income attributable to non-controlling interest | - | - | - | |||||||||
| Net income (loss) attributable to Postal Realty Trust, Inc. | $ | 2,835,592 | $ | (1,589,375 | ) | $ | 1,246,217 | |||||
4
Postal Realty Trust, Inc.
Pro Forma Combined Consolidated Statement of Operations
For the Year Ended December 31, 2019 (Unaudited) — (Continued)
| Historical (b) | Other Transaction Accounting Adjustments (c) | Total (B) | ||||||||||
| Revenues: | ||||||||||||
| Rental income | $ | 1,287,514 | $ | 35,789 | $ | 1,323,303 | ||||||
| Tenant reimbursements | 250,717 | - | 250,717 | |||||||||
| Total revenues | 1,538,231 | 35,789 | 1,574,020 | |||||||||
| Operating expenses: | ||||||||||||
| Real estate taxes | 251,914 | - | 251,914 | |||||||||
| Property operating expenses | 71,633 | - | 71,633 | |||||||||
| Depreciation and amortization | - | 661,124 | 661,124 | |||||||||
| Total operating expenses | 323,547 | 661,124 | 984,671 | |||||||||
| Income (loss) from operations | 1,214,684 | (625,335 | ) | 589,349 | ||||||||
| Interest expense, net | - | - | - | |||||||||
| Income (loss) before income tax benefit (expense) | 1,214,684 | (625,335 | ) | 589,349 | ||||||||
| Income tax benefit (expense) | - | - | - | |||||||||
| Net income (loss) | 1,214,684 | (625,335 | ) | 589,349 | ||||||||
| Less: Net income attributable to non-controlling interests | - | - | - | |||||||||
| Net income (loss) attributable to common stockholders | $ | 1,214,684 | $ | (625,335 | ) | $ | 589,349 | |||||
5
Postal Realty Trust, Inc.
Notes and Management’s Assumptions to Unaudited
Pro Forma Combined Consolidated Financial Statements
| 1. | Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2020 |
| (a) | Reflects the Unaudited Consolidated Balance Sheet of Postal Realty Trust, Inc. as of September 30, 2020 as included in the company’s Form 10-Q. |
| (b) | The 2020 Recent Acquisitions reflect preliminary estimates of the relative fair value of the tangible and intangible assets acquired and liabilities assumed in connection with the acquisitions and are therefore subject to change. The combined contractual purchase price for the 2020 Recent Acquisitions was $10.5 million excluding closing costs. The Company funded the purchase with a borrowing of $4.4 million under the Company’s revolving credit facility and $6.1 million from cash on hand. Interest on the borrowing includes various components which are included as an adjustment to the Unaudited Pro Forma Combined Consolidated Statements of Operations as discussed in Note 2. |
| (c) | The Industrial Property reflects preliminary estimates of the relative fair value of the tangible and intangible assets acquired and liabilities assumed in connection with the probable acquisition and is therefore subject to change. The contractual purchase price for the Industrial Property is $47.0 million excluding closing costs. The Company expects to fund the acquisition with a borrowing of $47.0 million under the revolving credit facility. Interest under the revolving credit facility includes various components which are included as an adjustment to the Unaudited Pro Forma Combined Consolidated Statements of Operations as discussed in Note 2. |
The Industrial Property is subject to a definitive agreement. Formal due diligence has been completed and the transaction is expected to close in the fourth quarter of 2020, subject to the satisfaction of customary closing conditions.
| (d) | The 2020 Probable Acquisitions reflect preliminary estimates of the relative fair value of the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition and is therefore subject to change. The combined contractual purchase price for the 2020 Probable Acquisitions is $19.9 million excluding closing costs. The Company funded the purchase with a borrowing of $19.9 million under the Company’s revolving credit facility and $0.02 million from cash on hand. Interest on the borrowing includes various components which are included as an adjustment to the Unaudited Pro Forma Combined Consolidated Statements of Operations as discussed in Note 2. |
The 2020 Probable Acquisitions are subject to definitive agreements. Formal due diligence has been completed and the majority of the transactions are expected to close in the fourth quarter of 2020, subject to the satisfaction of customary closing conditions.
6
Postal Realty Trust, Inc.
Notes and Management’s Assumptions to Unaudited
Pro Forma Combined Consolidated Financial Statements
| 2. | Notes to the Unaudited Pro Forma Combined Consolidated Statements of Operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 |
| (a) | Reflects the unaudited Consolidated Statements of Operations for the nine months ended September 30, 2020 as included in the company’s Form 10-Q and the audited Consolidated Statements of Operations for the year ended December 31, 2019 for the Company and its Predecessor as included in the company’s Form 10-K. |
| (b) | Represents the unaudited statement of revenues and certain expenses for the 21 Property Portfolio for the period prior to the acquisition in 2020 and the audited combined statement of revenues and certain expenses for the 21 Property Portfolio for the year ended December 31, 2019. |
| (c) | Represents the transaction accounting adjustments for depreciation and amortization expense based on the purchase price allocation for the First January Portfolio. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for buildings and improvements and 1-8 years for tenant improvements and lease intangibles based on the term of the related leases. |
| (d) | Represents the unaudited statement of revenues and certain expenses for the Industrial Property for the nine months ended September 30, 2020 and the audited statement of revenues and certain expenses for the Industrial Property for the year ended December 31, 2019. |
| (e) | Represents the transaction accounting adjustments for depreciation and amortization expense based on the preliminary purchase price allocation for the Industrial Property. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for buildings and improvements and 2-5 years for tenant improvements and lease intangibles based on the term of the related leases. |
| (f) | Represents the pro forma revenues and expenses for the 2020 Completed Acquisitions (inclusive of the 15 properties included in the 2020 Recent Acquisitions) for the period prior to the acquisitions in 2020. Also represents transaction accounting adjustments for depreciation and amortization expense based on the purchase price allocation for the 224 properties included in the 2020 Completed Acquisitions. Depreciation and amortization for the 2020 Recent Acquisitions is based on a preliminary purchase price allocation. The purchase price allocation for the 2020 Recent Acquisitions is based on a preliminary estimate. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for building and improvements and 1-12 years for tenant improvements and lease intangibles based on the term of the related leases. With respect to a portfolio of 42 of these properties, operating expense amounts are based on management’s estimates based on its experience owning postal properties. |
| (g) | Represents the pro forma revenues and expenses for the 2020 Probable Acquisitions. Also represents transaction accounting adjustments for depreciation and amortization expense based on a preliminary purchase price allocation for the 2020 Probable Acquisitions. Depreciation and amortization for the purchase price allocation is based on a preliminary estimate. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for building and improvements and 1-8 years for tenant improvements and lease intangibles based on the term of the related leases. |
| (h) | Reflects the pro forma revenues and expenses for the Acquisition Properties for the period prior to the date of acquisition on May 17, 2019. Also represents transaction accounting adjustments for depreciation and amortization expense for the period prior to the acquisition of the Acquisition Properties on May 17, 2019 based on the purchase price allocation for the Acquisition Properties. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for building and improvements and 1-9 years for tenant improvements and lease intangibles based on the term of the related leases. |
| (i) | Represents the pro forma revenues and expenses for the November Property Portfolio for the period prior to the date of acquisition on November 22, 2019. Also represents transaction accounting adjustments for depreciation and amortization expense based on the purchase price allocation for the November Property Portfolio. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for building and improvements and 1-10 years for tenant improvements and lease intangibles based on the term of the related leases. |
7
Postal Realty Trust, Inc.
Notes and Management’s Assumptions to Unaudited
Pro Forma Combined Consolidated Financial Statements
| (j) | Represents the pro forma revenues and expenses for the 2019 Other Completed Acquisitions for the period prior to their respective dates of acquisition in 2019. Also represents transaction accounting adjustments depreciation and amortization expense based on the purchase price allocation for the 2019 Other Completed Acquisitions which were purchased at various dates throughout 2019. Depreciation and amortization are recognized on a straight-line basis over a range of 15-40 years for building and improvements and 1-9 years for tenant improvements and lease intangibles based on the term of the related leases. |
| (k) | General and administrative expenses for the year ended December 31, 2019 were adjusted to reflect compensation for the period prior to the Company’s initial public offering based upon agreements in effect at the date of the initial public offering less historical compensation for the Predecessor recognized in the historical financial statements through May 17, 2019. Also, reflects an adjustment for director and officer insurance pursuant to insurance agreements executed concurrent with the completion of the initial public offering on May 17, 2019 for the period prior to that date. Also, includes equity based compensation expense for the period prior to the initial public offering including the (i) issuance of 73,529 long term incentive units of our Operating Partnership (“LTIPs”) to the Company’s chief executive officer upon completion of the initial public offering which vest over three years, (ii) issuance of 119,118 restricted shares of Class A common stock to the Company’s President, directors and employees upon completion of the initial public offering which vest over three years, (iii) issuance of 41,177 LTIPs to the Company’s chief executive officer in lieu of cash compensation upon completion of the initial public offering that vest over eight years and (iv) issuance of 29,412 restricted shares of Class A common stock to the Company’s directors upon completion of the initial public offering for their annual equity compensation, less historical compensation expense recognized by the Company from May 17, 2019 through December 31, 2019. |
| (l) | Represents the elimination of contractual interest expense related to certain mortgage indebtedness repaid with proceeds from the initial public offering for the year ended December 31, 2019. There were no prepayment penalties. Also represents the reversal of certain amortization of deferred financing costs and loss on extinguishment of debt related to certain mortgage indebtedness repaid with proceeds from the initial public offering for the year ended December 31, 2019. After the repayments, $2.9 million of Predecessor indebtedness remained outstanding following completion of the initial public offering. In addition, for purposes of preparing the pro forma interest expense adjustment, the Company has applied the current interest rate using the stated terms of the revolving credit facility to the amounts borrowed under its $150.0 million senior revolving credit facility for the nine months ended September 30, 2020 and year ended December 31, 2019. On January 30, 2020, the Company exercised a portion of the accordion feature on its facility. The facility matures in September 2023. On July 24, 2020, the Company paid down approximately $42.0 million under the revolving credit facility with a portion of the proceeds received from the Follow-on Offering. The Company is required to pay an unused facility fee on the revolving commitments under the Facility of 0.75% per annum for the first $100.0 million through March 31, 2020 and 0.25% per annum for the period thereafter, and 0.25% per annum for the portion of revolving commitments exceeding $100.0 million. The effective interest rate includes the following components: |
| ● | $1.5 million of deferred financing costs incurred in connection with the borrowing which are being amortized over the term of the revolving credit facility; |
| ● | Interest on $120.4 million of outstanding borrowings at a rate of 0.15% based on current LIBOR plus 190 basis points that is due and payable on a monthly basis for the acquisition of the November 2019 Portfolio Acquisition, 2019 Other Completed Acquisitions, 2020 Completed Acquisitions, the Industrial Property and 2020 Probable Acquisitions; |
| ● | Unused fee of 0.75% per annum for the first $100.0 million of the revolving credit facility for the period from January 1, 2019 to July 5, 2019 and 0.25% per annum from July 6, 2019 to September 30, 2020; and |
8
Postal Realty Trust, Inc.
Notes and Management’s Assumptions to Unaudited
Pro Forma Combined Consolidated Financial Statements
| ● | Unused fee of 0.25% per annum for the additional $50.0 million in connection with the exercise of the accordion feature of the revolving credit facility for the period from January 1, 2019 to September 30, 2020. |
If market rates of interest on the variable debt changed by a 1/8 of 1% variance, then the increase or decrease on the variable debt interest expense would be approximately $152,590 and $152,590 respectively for the year ended December 31, 2019.
If market rates of interest on the variable debt changed by a 1/8 of 1% variance, then the increase or decrease on the variable debt interest expense would be approximately $114,547 and $114,547, respectively for the nine months ended September 30, 2020.
In addition, includes interest on a mortgage financing of $4.5 million for the acquisition of certain properties included in the 2020 Completed Acquisitions at a fixed rate of 4.25% with interest only for the first 18 months and the amortization of debt issuance costs related to such borrowing. The financing matures in December 2038. Also includes interest on a mortgage financing of $9.2 million for certain postal properties at a fixed interest rate of 4.25% with interest only for the first 18 months and the amortization of debt issuances costs related to such borrowing
| (m) | Represents an adjustment to remove income tax benefit for UPOI related to the period prior to the offering since the Company has elected to be taxed as a REIT. |
| (n) | Represents an adjustment to the pro forma combined consolidated statement of operations for the allocation for net income (loss) attributable to non-controlling interests. The OP and LTIP Unit holders’ interest in the OP is 23.1%. The 23.1% used for both periods is based off of 9,449,352 shares of Class A common stock, 27,206 shares of Class B common stock, 2,640,795 OP Units, 214,307 LTIP Units and 23,424 RSUs issued and outstanding on November 30, 2020. Also represents the reversal of a de minimis net income attributable to non-controlling interest in the Predecessor as the previous non-controlling interest was redeemed in connection with the formation transactions. |
| (o) | Pro forma net income (loss) per share for the year ended December 31, 2019 and nine months ended September 30, 2020 includes the issuance of shares in our Follow-On Offering. It is presented in accordance with the two-class method of computing earnings per share. OP units, LTIP units and restricted shares of Class A common stock, would not be dilutive and were not included in the computation of diluted earnings per share for the period presented. |
9