Postal Realty Trust, Inc. (PSTL)
First Day Turnover23.72%
We are an internally managed real estate corporation that owns and manages properties leased to the United States Postal Service, or the USPS. Upon completion of this offering and the related formation transactions, we will own and manage an initial portfolio of 271 postal properties located in 40 states comprising 871,843 net leasable interior square feet, all of which are leased to the USPS, and through our taxable REIT subsidiary, or TRS, we will provide fee-based third party property management services for an additional 401 postal properties leased to the USPS and owned by members of Mr. Spodek’s family and their partners. We believe that we will be one of the largest owners and the largest manager (measured by net leasable square footage) of properties that are leased to the USPS. We will have a right of first offer to purchase 255 of our 401 managed properties. Our chief executive officer, Andrew Spodek, currently owns interests in 199 of the 271 initial properties we will own which he will contribute to us as part of our formation transactions. Mr. Spodek controls our 190 Predecessor Properties and has a non-controlling ownership interest in nine of our Acquisition Properties. Mr. Spodek has been actively engaged in the ownership and management of postal properties for over 20 years.
The USPS is an independent agency of the executive branch of the U.S. federal government that generated $70.6 billion of revenue for its fiscal year ended September 30, 2018. Article I, Section 8, Clause 7 of the United States Constitution empowers Congress “[t]o establish Post Offices and post Roads,” making the USPS one of the few federal agencies explicitly authorized by the United States Constitution.
The USPS is federally required to provide universal service to all residents of the United States and its territories, including rural and isolated areas, and has a monopoly on mail delivery and delivery to residential and business mailboxes, with delivery to most homes and businesses six days per week. The USPS’s ability to make deliveries to an estimated 159 million delivery points as of September 30, 2018 is driven by a sophisticated logistics infrastructure of post offices, processing and distribution centers and annexes. As of September 30, 2018, the USPS managed a network of over 31,000 properties of which over 23,000 were owned by private owners and leased to the USPS. We believe that this network of properties is a critical element of the nation’s logistics infrastructure that facilitates cost effective and efficient “last mile” delivery solutions for the nation’s largest e-commerce providers including Amazon, FedEx and UPS.
In December 2018, a presidential task force issued a report, which we refer to as the Task Force Report, evaluating the operations and finances of the USPS. The Task Force Report stated that the USPS’s comprehensive delivery network that covers every address in the country is a critical part of the nation’s infrastructure and that maintaining this critical infrastructure as a national resource should be considered the primary business objective of the USPS. The Task Force Report further concluded that the USPS should make accommodating changes to its pricing, cost, and customer and revenue strategies.
In its Annual Report to Congress for the fiscal year ended September 30, 2018, the USPS reported that it owns nearly 8,400 and leases over 23,000 postal facilities. Approximately 11.2% of the leased properties are owned by the top ten private post office owners according to REAC, with the substantial majority of owners holding a single property. The USPS typically enters into five-year leases with postal lessors, including us, that are modified double-net leases pursuant to which the USPS, as tenant, is responsible for utilities and routine maintenance and reimburses the landlord for property taxes, while the landlord is responsible for insurance, roof and structure.
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