Good day and welcome to the Postal Realty Trust, Inc. Third Quarter 2019 Earnings Conference Call. All participants will be in a listen only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Blaine Willenborg, Vice President of Business Development and Capital Markets. Please go ahead.

Thank you. Good morning, everyone and welcome to the Postal Realty Trust third quarter earnings conference call. On the call today, we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President; and Matt Brandwein, Chief Accounting Officer. Please note the use of forward-looking statements by the company on this conference call. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The company intends these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements, contained in the Private Securities Litigation Reform Act of 1995, and is making the statements for purpose of complying with those Safe Harbor provisions. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company’s control, including without limitation those contained in the company’s 10-Q for the quarterly period September 30, 2019 and its other Securities and Exchange Commission filings. The company assumes no obligations to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, on this conference call the company may refer to certain non-GAAP financial measures such as funds from operations and adjusted funds from operations. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company’s earnings release and in filings with the Securities and Exchange Commission. Additionally, information maybe found on the investor relations page of the company’s website at www.postalrealtytrust.com. I would now like to turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust.

Good morning and thank you for joining Postal Realty Trust third quarter call. Let me start our call with a brief review of our business. We are an internally managed REIT with a focus on acquiring and owning properties leased to the United States Postal Service. As of today, we own 366 properties in 43 states. Our portfolio is 100% leased and provide stable returns. Over the last 10 years, we’ve achieved the renewal rate of approximately 98% through our owned and managed properties. The overall opportunity for consolidation that exists in a sector is very attractive. There are approximately 23,000 leased postal properties throughout the country. These 23,000 properties generate approximately $1 billion in gross annual rent, which we estimate to be over a $10 billion opportunity. The market is highly fragmented with 16,000 post offices owned by single asset owners. We continue to execute our strategy to acquire and consolidate postal properties that generate strong earnings and ultimately grow shareholder value. With that as the background, I’m pleased to report a successful quarter executing on our plan. We are excited to see our story beginning to resonate with postal owners. We believe our flexibility structuring transactions to meet the needs of sellers, including the use of OP Units will continue to help us secure and complete both small and large transactions moving forward. As we previously communicated, we entered into definitive agreements to acquire a 113 property portfolio for approximately $32 million, $14 million of which were OP Units priced at $17 a share. To date, we’ve closed 22 of these bringing our total acquisitions since IPO to 95 properties for $28.5 million. We anticipate closing the remaining 91 of the 113 properties by the end of the year. We have also entered into definitive agreements on seven additional properties for approximately $4 million. We expect these properties to close in the near-future. To support our growth, we obtained $100 million senior revolving credit facility that maybe expanded to $200 million through an accordion feature. Over all the years of owning, acquiring and operating postal assets, we’d never seen a pipeline and response from the postal community this robust. Our access to capital and ability to source, underwrite and close new properties enabled us to construct a highly accretive portfolio of properties, which will generate value for both postal owners and shareholders alike. I’ll now turn the call over to Jeremy to discuss our third quarter results.

Thank you, Andrew. Let me jump in to discuss our portfolio and financial results in greater detail. During the third quarter, we closed on 18 properties for approximately $11 million totaling 112,000 square-feet with an average rental rate of $9.49 per square-foot. Subsequent to the third quarter, we closed on an additional 77 properties totaling approximately 170,000 square-feet with an average rental rate of $9.57 per square-foot. These properties are purchased at a price of $17.5 million. Combined with the 18 properties and the 17 properties acquired, we have closed 95 properties year-to-date, which would increase our annual rental revenue to $11 million. Moving onto our financial results. FFO for the quarter was $0.10 per share and AFFO for the quarter was $0.145 per share. As we discussed, the company entered into a $100 million senior revolving credit facility with a four-year term through September, 2023. This floating rate facility carries an interest rate of one month LIBOR plus a range of 170 basis points to 240 basis points each dependent on a consolidated leverage ratio. Lastly, on November 5, we declared a third quarter dividend of $0.14 per share, which translates to a 3.3% yield based off of our IPO stock price of $17 per share. Given the high credit quality of our tenant and the stability and recurrent nature of our cash flow, we believe that we have a highly visible and predictable income stream. On behalf of Andrew, myself and the entire team, thank you for joining us today. With that, we will open up the call to questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

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

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

Good morning, guys. In the release, you guys talk about the $5.1 million of revenue on the 56.4 of acquisition. Obviously, these are leases put in place before you got hold of them. How significant are the expenses on here? Because the $5.1 million implies like 9% cap rate on revenue. How much lower is it on NOI? Or are these all triple nets with very little expenses?

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

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

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

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

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

Okay. Thanks guys. Appreciate it.

Pleasure. Thank you.

[Operator Instructions] And the final question today comes from Craig Kucera of B. Riley FBR. Please go ahead.

Hi, good morning guys. I appreciate the color on the acquisition that you closed already this quarter kind of a range. But from a modeling perspective, it appears that what was closed earlier was closer to a 9% cap, kind of how should we think within that range? Is it right down the middle or maybe towards the high end of that range?

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

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

So – yes, exactly. The goal is to be paying out the AFFO figures until we reach the target that we have articulated. The board is – has been taken a conservative approach as we ramp up. As you know, the acquisitions are driving our AFFO distribution opportunity. So I couldn’t speak for the board in terms of what their plan is for the next quarter in terms of a distribution. But again, we’re trending towards our goal for the $1.2 by six – on the run rate for 6/30/2020.

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

No, it’s the combined.

Okay. All right. Thank you very much.

Thank you.

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

I just want to thank everybody that dialed into listen to our earnings call and we appreciate everybody’s support. And if anybody has any questions offline, they will always feel free to call us. Thank you very much for joining us.

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