Postal Realty Trust (NYSE:PSTL) raised its 2026 acquisition and adjusted funds from operations, or AFFO, guidance after reporting increased transaction activity, continued leasing progress and lower borrowing costs during the second quarter.
Chief Executive Officer Andrew Spodek said the company closed $45 million of acquisitions during the quarter at a 7.3% weighted-average cash capitalization rate, representing its highest quarterly acquisition volume since June 2022. Through July, the company had acquired $88 million of properties at a 7.4% weighted-average cash cap rate.
Acquisition Activity Expands
Spodek said improved access to capital has broadened the company’s potential acquisition universe to include larger assets and portfolios with postal-related characteristics and growth potential. He highlighted a $9.6 million acquisition in San Diego, describing it as a facility west of Interstate 805 with a below-market lease and potential for future growth in coastal California.
During the second quarter, Postal Realty Trust acquired 37 properties for $45 million and added 237,000 square feet to its portfolio. The acquired space included 20 last-mile post offices totaling 29,600 square feet, 16 flex properties totaling 141,500 square feet, and one industrial property totaling 62,000 square feet.
In response to analyst questions, Spodek said industrial assets are not the company’s “bread and butter,” but it will pursue them when they are accretive from the outset and offer internal growth potential over the lease term. He said the company evaluates properties based on purchase basis, their importance to the Postal Service, day-one accretion and long-term growth prospects.
Chief Financial Officer Steve Bakke said the company’s weighted-average cost of capital was approximately 6.0%, compared with acquisition cap rates of 7.3% during the quarter. He contrasted that with a roughly 7.3% weighted-average cost of capital and a 7.7% acquisition cap rate when he was joining the company last September.
AFFO Guidance Raised and Internal Growth Outlook
Postal Realty Trust reported second-quarter AFFO per share of $0.36, up $0.03 from both the first quarter and the year-ago period. Bakke noted that the prior-year quarter included approximately half a cent of earnings from one-time lump-sum catch-up payments, while such payments were de minimis in the latest quarter.
The company raised its 2026 AFFO per share guidance by $0.01 to a range of $1.41 to $1.43. At the midpoint, the outlook implies 7.6% growth for the year, according to management. Bakke said the increase was supported by higher acquisition volume, reduced borrowing costs and general and administrative efficiencies.
Management identified lease mark-to-market opportunities, annual rent escalators, retained cash flow and acquisition accretion as the primary drivers of AFFO per-share growth. Bakke said 28% of rental income is scheduled to expire between 2027 and 2030 without remaining renewal options.
He also said approximately 52% of rent will experience an escalation in 2027, compared with 37% in 2026 and 5% in 2023. Postal Realty Trust expects AFFO available after dividend payments to reach $16 million in 2026, compared with $3 million three years earlier.
Spodek said the company has generated average same-store cash net operating income growth of 5.5% over the last five years, including the current year, which is tracking toward a 6% to 7% range. The company also expects approximately 6.5% same-store cash revenue growth in 2027.
Leasing Progress and Balance Sheet Changes
President Jeremy Garber said the company had executed 90% of its 2026 new leases by rent and expects to complete the remaining 10% during the second half of the year. Substantially all rents for 2027 leases have been agreed upon, he said, with the company beginning the execution process.
All new leases for 2026 and 2027 are expected to include 3% annual rent escalators, while the vast majority are expected to have 10-year terms, excluding leases subject to renewal options. Following the leasing activity, 59% of the portfolio’s leases contain annual escalators and 54% have 10-year terms. The weighted-average lease term was 6.4 years at quarter-end, including executed and agreed-upon leases through 2027.
The company reported occupancy and retention above 99%, according to Spodek. Garber said the properties serve as last-mile logistics infrastructure for the U.S. Postal Service and that the cost of leasing the real estate network represents 1.5% of the Postal Service’s annual operating expenses.
Postal Realty Trust ended the quarter with net debt to pro forma annualized adjusted EBITDA of 4.6 times, down from 5.2 times in the prior quarter. Including unsettled forward equity and post-quarter-end equity sales, pro forma adjusted net debt to pro forma annualized adjusted EBITDA was 4.0 times, Bakke said.
In July, the company expanded its credit facility by $60 million, extended its weighted-average debt maturity from 2.8 years to 3.5 years and reduced its interest-rate margin by 30 basis points. Management said the new term loan borrowings and maturity extensions were fully hedged at fixed rates, leaving floating-rate exposure below 10% of total debt.
Bakke said management intends to keep leverage no higher than 5.5 times net debt to pro forma annualized adjusted EBITDA. The board also approved a quarterly dividend of 24.5, representing a 1% increase from the prior year, with a second-quarter dividend payout ratio of approximately 68% and a dividend yield of 4.3% as of the day before the call.
About Postal Realty Trust (NYSE:PSTL)
Postal Realty Trust is a real estate investment trust that acquires, owns and manages single-tenant commercial properties net-leased primarily to the United States Postal Service and other government agencies. The trust focuses on facilities that support mail processing, distribution and retail operations, targeting assets that offer long-term, inflation-protected lease structures.
The company’s portfolio includes post offices, distribution centers and mail processing facilities located throughout the contiguous United States.
