Greetings, and welcome to the Postal Realty Trust First Quarter 2026 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jordan Cooperstein, Senior Vice President of Finance and Capital Markets. Welcome, Jordan.

Thank you, and good morning, everyone. Welcome to Postal Realty Trust First Quarter 2026 Earnings Conference Call. On the call today, we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President; Steve Bakke, Chief Financial Officer; and Matt Brandwein, Chief Accounting Officer. Please note the company may use forward-looking statements on this conference call, which are statements that are not historical facts and are considered forward-looking. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, but not limited to, those contained in the company's latest 10-K and its other regulatory filings. The company does not assume and specifically disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, on this conference call, the company may refer to certain non-GAAP financial measures such as funds from operations, adjusted funds from operations, adjusted EBITDA, pro forma adjusted EBITDA, pro forma annualized adjusted EBITDA, same-store cash NOI, same-store cash revenue, net debt, adjusted net debt and pro forma adjusted net debt. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP measures in the company's earnings release and supplemental materials. With that, I will now turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust.

Good morning, and thank you for joining us today. In a couple of weeks, we will be celebrating our seventh anniversary as a public company. Over the past 7 years, we've created a purpose-built platform to unlock the value inherent in U.S. postal real estate. As we have developed and continue to refine this platform, we have delivered on multiple fronts. It starts with the 6.1% average annual AFFO per share growth we are on track to achieve from 2021 to 2026 based on AFFO guidance we increased yesterday. This performance ranks us second among net lease REITs. Our progression continued last year with the introduction of AFFO per share guidance made possible by refining our leasing approach with the Postal Service. Today, we are taking another step by sharing our forward-looking top line revenue outlook for 2027 despite being only 5 months into 2026. It is a testament to the unique leasing approach we have developed with the Postal Service that gives us this much visibility into 2027, and it speaks to the benefit of having primarily a single high credit tenant who consistently pays us 100% of contractual rent across our 99.8% occupied portfolio. We are expecting same-store cash revenue growth of approximately 6.5% in 2027, which is approximately 30 basis points higher than what we're expecting for 2026. Higher expected growth in 2027 reflects the increased presence of annual rent escalators across the portfolio as well as the rental mark-to-market tailwind. On our first quarter 2025 earnings call, I shared that we have the systems and people in place to ramp up acquisitions should our cost of capital and opportunity set align. With a stock price improvement of over 70% since then, this symmetry has materialized, allowing us to accelerate the pace of acquisition activity relative to the last few years. Based on the strength of our pipeline, we are increasing our acquisition guidance by $15 million to $130 million to $140 million for the year, and we will revisit this guidance as the year progresses. In the first quarter, we acquired $35 million at a 7.5% weighted average cap rate. In the second quarter to date, we have acquired and have under definitive contracts $17 million, putting us at $52 million year-to-date with a strong pipeline of anticipated transactions behind it. We are capitalizing on the opportunity in front of us from a position of strength. Our revised acquisition guidance is fully funded with liquidity of approximately $250 million at the end of the quarter, consisting of unused revolver capacity and $48 million of unsettled forward equity proceeds. We are laser-focused on maintaining a strong liquidity profile, supported by our access to equity and our recent BBB investment-grade rating from Kroll, KBRA. In summary, our internal growth, supported by our robust acquisition pipeline and access to capital places us in a strong position to generate continued earnings growth. Earlier this week, we attended the Postal Service's National Postal Forum in Phoenix, a conference that brings together the broader logistics ecosystem surrounding the Postal Service. For us, the conference confirms that as the logistics marketplace continues to evolve, the U.S. Postal Service's facilities will remain a critical tool for accessing the American people. These facilities form the backbone of the Postal Service's delivery infrastructure and are the very assets we invest in. This network enables the Postal Service to provide universal service across 170 million delivery points nationwide and is utilized 6 days a week by logistics providers and online retailers. As we'd like to remind investors, the cost to lease the real estate backbone of this network is only 1.5% of the Postal Service's annual operating expenses. This annual expense equates to $1.4 billion of annual rent, resulting in a $12 billion to $15 billion market for Postal real estate, creating a long runway for future acquisitions. With that, I will turn the call over to Steve.

Thank you, Andrew. I'll make a few comments on the multiyear earnings growth opportunity at Postal Realty before unpacking first quarter results and our updated guidance in more detail. When considering Postal Realty's medium-term earnings growth algorithm, we see 4 primary drivers. First is the mark-to-market opportunity. From 2027 to 2030, approximately 33% of our rental income is expected to reset to market. This represents a meaningful source of embedded growth beyond 2026. Second, annual rent escalators are becoming an increasingly significant driver of organic growth. In 2022, approximately 3% of our rental income experienced an annual escalation. By 2027, that figure will have increased significantly to approximately 53% experiencing an escalation. Moving from a portfolio with predominantly flat leases to one with the majority 3% plus annual escalators signifies a major shift into the visibility of our annual growth for years to come. To that point, our visibility into annual escalations in our mark-to-market allows us to provide a 2027 same-store cash revenue growth outlook of approximately 6.5%. Third is retained cash flow. As we have scaled, we have reduced our payout ratio while continuing to grow the dividend. In 2026, we expect to pay out only 70% of our AFFO, which is one of the lowest payout ratios among net lease REITs. Our Board has balanced retained cash flow with a dividend yield above the REIT median at approximately 4.5%. Moreover, retained cash flow, which we can deploy into acquisitions or to repay debt is a meaningful source of recurring growth for us, increasing our per share growth rate by about 15% in 2026. Fourth is day 1 accretion. Our improved cost of capital in conjunction with our increased access to capital has led us to begin accelerating the velocity of acquisitions relative to the last few years. With our weighted average cost of capital currently standing at approximately 6.1%, day 1 accretion from acquisitions is becoming an even more meaningful source of AFFO per share growth. In summary, we remain focused on utilizing these 4 growth levers to drive attractive AFFO per share growth in the coming years. Turning to first quarter results. Yesterday, we reported AFFO per share of $0.33, which is $0.01 ahead of the first quarter of 2025. Note that last year's quarter benefited from holdover payments and prior year property tax reimbursements totaling $0.02 per share. In comparison, in this year's first quarter, we realized $11,000 of holdover payments from recent acquisitions. We ended the quarter with net debt to pro forma annualized adjusted EBITDA of 5.2x, within the leverage target we updated last quarter of under 6x. Giving effect to approximately $53 million of unsettled forward equity raised year-to-date at an initial forward price of $18.44 per share, our pro forma adjusted net debt to pro forma annualized adjusted EBITDA is 4.5x. A brief note on our leverage metrics. This quarter's supplemental includes metrics based on pro forma annualized adjusted EBITDA. The only difference with the prior metric is that it gives effect to acquisitions and dispositions as if they took place at the start of the quarter, consistent with many peers' reporting methodologies. As it relates to sources and uses, the midpoint of our guidance implies $100 million of acquisitions for the remaining 3 quarters of 2026, which we plan to fund on a leverage-neutral basis using unsettled equity and retained cash flow. In terms of debt funding specifically, we are focused on limiting floating rate exposure and adding duration to our maturity schedule. We anticipate refinancing our floating rate revolver and term loan balances with longer-term fixed rate private placements or term loans in the coming months. Turning to our expectations for the remainder of 2026. With yesterday's earnings release, we raised the AFFO per share guidance range we provided last quarter by $0.01 to $1.40 to $1.42 per share, representing 6.8% growth at the midpoint for the year. The increase is supported by higher acquisition volume. Related to additional guidance items, cash G&A and same-store cash NOI are tracking in line with our forecast. Recurring capital expenditures of approximately $143,000 for the first quarter was within our guidance range, and we are expecting $150,000 to $200,000 in the second quarter. Lastly, guidance includes approximately $0.01 per share of dilutive impact from unsettled forward equity compared to the $0.05 assumption we shared on the fourth quarter call, calculated in accordance with the treasury stock method, largely due to a higher stock price. Our Board of Directors has approved a quarterly dividend of $0.2450 per share, representing a 1% increase from last year. Our dividend payout ratio for the first quarter is approximately 74% and our dividend yield as of yesterday was approximately 4.5%. With that, I will turn the call over to Jeremy.

Thank you, Steve. I will provide an update on our re-leasing efforts, followed by more detail on first quarter acquisition activity. All 2020 rents have been agreed upon and are currently in lease production. In addition, we have substantially agreed on 2027 expirations that do not include renewal options. These leases have also commenced lease production. All 2026 and 2027 leases will have 3% escalators and the vast majority will have 10-year terms. As of quarter end, 53% of leases in our portfolio contain annual rent escalators. The first escalation takes place in year 2. Therefore, 41% of leases will get the benefit of an escalator in 2026. Shifting to 10-year leases, 45% of our portfolio consists of leases with 10-year terms based on executed and agreed-upon leases as of March 31, 2026. The increase in rent subject to 10-year terms compared to last quarter was predominantly a result of successfully amending the majority of our 2022 expirations to 10 years from 5 years. By the end of 2026, we expect the weighted average lease term of our current portfolio will extend to over 6 years compared to the 3 years when we went public. Moving on to acquisitions. In the first quarter, we acquired 61 properties for $34.6 million at a weighted average cap rate of 7.4%, adding 195,000 square feet to our portfolio. First quarter acquisitions consisted of 48,900 square feet from 34 last-mile post offices and 146,200 square feet from 27 Flex properties. As Andrew mentioned, based on acquisition volume closed in the first quarter, plus our robust forward pipeline, we are increasing our acquisition guidance to $130 million to $140 million for the year. This concludes our prepared remarks. Operator, we would like to open the call for questions.

Our first question comes from John Kim with BMO Capital Markets.

I wanted to ask what drove the decision to provide '27 same-store revenue guidance at this time? And how should we think about cash same-store NOI? Will it be a similar improvement of 30 basis points that you're seeing on the revenue side from '27 to '26.

This is Steve. To answer your question, the reason we're providing 2027 same-store cash revenue relates back to Jeremy's point that we have substantially completed all of our 2027 lease expiration negotiations with USPS. So given this high level of visibility we have into 2027, we felt it appropriate to share it with the market. To your second question on how that filters down to same-store NOI, it's early in the year. You can make—early in 2026, I should say, so hard for us to have visibility into 2027, but you can use a range of inflationary or maybe slightly above inflationary expense assumptions to get to a same-store NOI estimate for modeling purposes.

And what are your expenses this year?

Yes. We expect them to be in the 5% range. That's what's underpinning our guidance assumption.

Okay. And then you mentioned roughly 1/3 of your portfolio going to market over the next few years and the mark-to-market opportunity. How much of—what is the mark-to-market, first of all? And second of all, how much of that can you capture given you have one tenant that's essentially a partner?

Yes, it's a great question. We don't provide too much specific quantitative detail on the mark-to-market given the nature of having one primary tenant. But fair to say the mark-to-market has been healthy. And at least as it relates to '26, '27, it's been a pretty consistent mark-to-market opportunity. We have a really efficient leasing approach that we've developed with USPS. It works well for them, and it works well for us. And at least for the next couple of years, it will continue.

Our next question comes from Jon Petersen with Jefferies.

Congrats guys on another strong quarter. Can you—on the same-store revenue guidance for 2027, can you break down the components there? Like how much of that is coming from escalators? How much of that is upside on lease renewals?

Yes, great question. So to answer your question, of the 6.5%, 25% of that growth is due to the escalators. So as Jeremy mentioned in his remarks, a little more than 50% of our portfolio will experience an escalator in 2027. The remainder of the growth is derived from the mark-to-market.

Okay. All right. That's helpful. And then maybe on acquisitions, good to see the acquisition volume rise and your cost of capital improving. For a number of years, the question was when does your cost of capital get to a point when you can be more aggressive on acquisitions. Now we're there. And I guess it raises the question of what's the total addressable market for you guys now? Like at what point do you start to run out of post offices to buy, I guess, is the short way to ask that question. So just talk about the opportunity and how many years of opportunity there is out there for you.

Sure. I appreciate the question. Yes, we're very happy that we have the access to the capital and the cost of capital that we have today, and we're looking forward to continuing to grow the business and acquire postal assets. The runway is very long. You've got—as I stated before, you've got about $1.4 billion in rent paid by the Postal Service. Any cap rate or margin you want to put on that makes it a $12 billion to $15 billion market. We probably want to address probably $6 billion to $8 billion of that. So I believe we have a lot of opportunities sitting in front of us. And I'm happy to say that the conversations we've had and the pipeline is looking very good. We're—these are deals that I've been talking to for decades and some new ones, but we're looking forward to the year ahead.

Okay. Outside of your improved ability to transact, is there any change on the seller side of things, the way that they're positioning, the way that their conversations with you are changing and their willingness to transact?

The reality is that the properties that we're looking at today are similar to the properties that we've always looked at. Sellers' tone is somewhat similar. The only thing that has changed is the buzz around us and our stock price, which has, I guess, created sellers' motivation to facing off with us. We're constantly in front of owners. As everybody knows, I've been in the space my whole life. And so interacting with them is nothing new for being able to transact given our access and cost of capital is really what's going to change.

Our next question comes from Greg McGinniss from Scotiabank.

We understand you don't want to provide too many details on the mark-to-market. But looking at the kind of forward opportunity, could you provide some color on how it tends to compare between assets that you've controlled for years versus those that you're acquiring?

So the opportunity set on the mark-to-market is interesting, and it varies deal by deal, right? So we underwrite each deal individually. Some of the properties that we acquire have a more significant mark-to-market opportunity and some of them don't. And that's just the nature of any real estate transaction and any real estate lease. As we continue to grow and as we continue to acquire, the mark-to-market opportunity in that particular year changes, and it's constantly fluid. What I could tell you is it seems, at least from what we've done to date and what we're seeing in our pipeline and what we're seeing as our leases are rolling is that, that opportunity still exists. And from our perspective, we look for it to continue to exist.

Okay. And I guess from an acquisition standpoint, is the increased guidance a result of stronger cost of capital opening up the funnel a bit more efficiency on the acquisition side? Or are you seeing some broader macro trends supporting the increased acquisitions?

The guidance is really based on what we're seeing us being able to acquire based on the access and cost of capital. The deals that we are looking at, like I just said, are very similar to the deals that we've always looked to buy, primarily properties that are important to the Postal Service's network that have good underlying real estate value. We look to buy deals that are accretive on day 1 and that we can add our internal growth to it as the leases continue to expire. And that's the model for what we're looking to acquire, and that's what we'll continue.

Andrew, on the acquisition cap rate, right, it's been fairly 7.5-ish percent range for few years now. But with the stronger cost of capital that you have, would an increased level of acquisitions necessitate a lower cap rate, meaning should we expect a similar investment spread, although considering how much the WACC has come down, still quite strong to get to a higher acquisition volume that results in ultimately more growth, but just a lower cap rate that we'll see on the face initially?

Yes. I think that we can expect the cap rate to come down a little bit because what we are going to do is acquire some larger properties, some larger portfolios. These are things that we weren't able to acquire in the past few years given our cost of capital. And so as time goes on, we don't—we believe the cap rates will constrain slightly. But again, keeping in mind that it needs to be accretive on day 1, and we need to be able to have some internal growth on the acquisitions that we're buying.

Just to supplement Andrew's answer to your point you made, what we're solving for is higher per share growth in future years. So the total dollar value of accretion is going to be higher by making more acquisitions at potentially somewhat lower cap rate than it would have if we pass up on those opportunities.

Right. Makes sense. And then just a final one for me. With the stock price performance the recent time frame, have you seen an increased preference for OP Unit from sellers?

Yes, we have, and we're constantly in conversations with owners interested in using the Operating Partnership Unit currency. And we're always balancing that between our sources of debt and equity. But we have definitely seen an increased appetite for the Operating Partnership Units given our stock price growth.

Our next question comes from Anthony Paolone with JPMorgan.

I guess my first question just goes back to the Postal Service and the back and forth they had with Amazon earlier in the year. And I was just wondering if you can maybe just summarize kind of how that played out just to someone that's not in the weeds on those machinations and just any implications back to your portfolio?

Yes. This is Jeremy. This was a 5-year contract that was coming due in October of 2026. As we've seen in the past, a lot of these discussions are played out in the public domain. But we were happy to see that they reached a final agreement. They are going to keep the lion's share of their capacity with the Postal Service. As we stated before, this really doesn't have an impact on our business, right? The scale and size of this industry in terms of other users doesn't change how critical these assets are for the American people. And just to give you some context, we were just, as Andrew mentioned, at the Postal Forum with over 4,000 industry professionals who touch the Postal Service. I mean this is a massive industry, $1.9 trillion mailing industry and 7.9 million jobs associated with this industry and the Postal Service plays a much broader role in the U.S. economy than any of us really appreciate. So the Amazon contract was important. It has been renewed, and we're looking forward to seeing other logistics providers take advantage of this critical network.

Okay. Got it. And then on the leases, you've been so successful with the rent increases, the bumps, the duration. What's the impediment to full net lease pass-through of expenses?

It's a somewhat complicated question. I don't know that there's an impediment to it. The Postal Service lease structure has been in place the way it is for a very long time. As a government agency, I think they have some difficulty in general with a full pass-through on the insurance side. But like we've said before, the vast majority of our leases are this modified double net structure where we're predominantly responsible for roof structure and insurance. I think this works well for us and it works well for them. And so I think the current structure of the lease is going to stay in place.

Okay. And then if I could sneak one last one in. You mentioned maybe tapping private placement debt to extend out some duration. Just can you give us any color around maybe cost and what you're being quoted or what that might look like?

Tony, this is Steve. It depends on the duration. I think if we're looking to issue anywhere from 5 to 10 years, the cost could be anywhere from the low 5% range to high 5%, low 6% range, depending on where the markets are. Treasury yields have expanded coming out of late February, early March. We also had a rise in spreads that have since contracted. So I think somewhere, if you estimate 5.5% to 5.7% for a coupon, that's our best guess at the current time.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Andrew Spodek for the closing remarks.

We believe the unique platform we've built to maximize the value of Postal real estate in addition to the inherent stability and growth of the real estate we own offers a unique investment profile in the public REIT space. We look forward to speaking with many of you in the coming months and updating you on our progress next quarter. Thank you again for joining us.

Ladies and gentlemen, the conference of Postal Realty Trust has now concluded. Thank you for your participation. You may now disconnect your lines.