Greetings, and welcome to Postal Realty Trust Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jordan Cooperstein, Vice President of FP&A Capital Markets. Welcome, Jordan.

Thank you, and good morning, everyone. Welcome to Postal Realty Trust's Second Quarter 2025 Earnings Conference Call. On the call today, we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President and Interim Chief Financial Officer; Robert Klein; 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 and 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. The second quarter was one of our strongest quarters in large part due to the more efficient programmatic re-leasing effort with the Postal Service, which has now been in place for over a year. This refined approach provides enhanced visibility across our business and has enabled us to issue annual AFFO per share guidance for the first time, which we are updating today. I think it's important for our shareholders to take stock of all that we have achieved since the start of 2024 in re-leasing, maintaining a strong balance sheet and enhancing investor visibility. We started executing 10-year leases in 2024 and inclusive of executed leases and those agreed to through 2026, 31% of leases in the portfolio are subject to 10-year terms and 55% have annual rent escalations. As stated in our last call, 2025 expirations have all been agreed upon and are being executed prior to lease expiration. We have agreed to rent with the Postal Service on the new leases for the 2026 expirations, and we are in discussions on the 2027 expirations as well. We have continued to grow while always being mindful of our balance sheet. We have displayed we can prudently and opportunistically source equity, having issued over $50 million through our ATM and operating partnership units since the beginning of 2024. Additionally, we sold two assets in 2024 at a sub-5% cap rate for over $6 million in order to redeploy the proceeds into higher-yielding assets. All of these efforts have allowed us to provide further clarity to the investor community about our earnings power through AFFO and same-store NOI guidance. We have certainly accomplished quite a lot over the last 1.5 years and continue to make improvements to the business and provide…

Thank you, Andrew. As we shared in prior calls, rents for all leases set to expire in 2025 and 2026 have been agreed upon, and our re- leasing tempo from last quarter has not slowed down as we are executing 2025 leases prior to expiration. We are actively negotiating 2027 rents with the Postal Service and have agreed to similar terms for expirations from 2023 through 2026 with the inclusion of 3% annual rent escalations and a mix of 10-year leases. For illustration, if the 2027 leases were all executed today, we project that north of 60% of the portfolio would contain annual rent escalations. As of last week, we are caught up on all of our leases in the portfolio and have no leases in holdover. Due to the execution of new leases during the second quarter, the company received a total lump sum catch-up payment of $192,000. We are expecting to receive a total lump sum catch-up payment for around $300,000 in the third quarter. This anticipated payment was factored into our AFFO per share guidance. Aside from prospective acquisitions that are acquired in holdover status, lump sum catch-up payments should continue to diminish in frequency and value as we sign leases ahead of their expiration dates. As Andrew mentioned, in the second quarter of 2025, we acquired 68 properties for approximately $36 million at a 7.8% weighted average cap rate, which added approximately 240,000 net leasable interior square feet to our portfolio, inclusive of 43,000 square feet from 32 last-mile post offices and 197,000 square feet from 36 flex properties. Subsequent to quarter end and through July 18, we acquired 23 properties for approximately $8 million and placed an additional 24 properties totaling $7 million under definitive contracts. I'll now turn the call over to Rob to discuss our second quarter financial results.

Thank you, Jeremy, and thank you, everyone, for joining us for today's call. During the second quarter, we delivered funds from operations, or FFO, of $0.35 and adjusted funds from operations or AFFO of $0.33 per diluted share. Thanks to our re-leasing successes over the past years, the bottom line impact from contractual rent escalations is projected to result in $0.02 of AFFO per share in 2025. As Andrew stated, we are updating our 2025 AFFO guidance range to $1.24 to $1.26 per share due to outperforming our initial expectations for the first half of the year. The increased guidance range is due to lower-than-anticipated operating expenses in the first half of 2025 due to quarterly variability related to the scope and timing of projects and lower recurring CapEx from completing jobs more cost effectively. We have maintained low leverage and minimized our exposure to variable rate debt. At the end of the second quarter, our debt outstanding had a weighted average interest rate of 4.5%. The company's $150 million senior unsecured revolving credit facility had $46 million outstanding and fixed rate debt comprised 86% of all borrowings. Net debt to annualized adjusted EBITDA decreased quarter-over-quarter to 5.1x, well within our target of below 7x. During the second quarter and subsequent to quarter end, we raised nearly $18 million of equity, issuing over 867,000 shares of common stock through our ATM offering program at an average price of $14.79 per share and approximately 392,000 common units in our operating partnership as part of consideration for property acquisitions. Recurring CapEx in Q2 was $127,000, slightly lower than our guidance range for the quarter due to the timing of projects. Looking forward to Q3, we anticipate some projects that carried over from Q2 to complete and the figure to be between $175,000 and $325,000. Based on onetime costs associated with the CFO transition, we now expect total cash G&A expense to be between $10.5 million and $11.5 million for the full year 2025. We continue to prioritize decreasing cash G&A as a percent of revenue on an annual basis. Our Board of Directors has approved a quarterly dividend of $0.2425 per share, representing a 1% increase from Q2 2024's dividend and remains well covered by AFFO. Postal Realty continues to strengthen its position as the market leader in the postal real estate space, executing its business plan of acquiring new assets and improving the cash flow. On a personal note, I'm grateful for the past 4.5 years at Postal Realty. We have achieved tremendous growth, built an amazingly capable team and continuously enhanced our transparency to the market. It has been a pleasure working with the folks at Postal Realty, the research analysts, investors and everyone else who supports us as well. I look forward to staying in touch. Thank you. This concludes our prepared remarks. Operator, we'd like to open the call for questions.

[Operator Instructions] The first question comes from Kyle Bonci from Truist.

Can you just walk us through the pickup in the same-store NOI guidance and what's ahead of pace relative to prior expectations?

Yes. So same-store NOI has a few components to it. There's the revenue component, which we've talked about pretty extensively, which has been some of our re-leasing efforts and our successes along those lines. And then the other component, obviously, is the expense, right, the two together combining to create NOI. As we showed in our earnings and we talked about a bit, expenses were down in the first couple of quarters of the year versus our projections, and that's led to an increase in same-store NOI in addition to some revenue exceeding expectations. So I think it's really the combination of the two, and that's why we've revised the guidance to give you a better flavor of how the remainder of the year may look.

Got you. And in terms of the guidance, it seems like there's a fairly steep step down from the $0.33 in the second quarter. And it looks like there's going to be some higher CapEx and also offset by some catch-up payments in the third quarter. So just curious what's driving the step down in the run rate?

Sure. As we shared on the call, our OpEx is going to be variable depending on the scope and timing of projects. We're vigilant in managing these properties as cost effective and efficiently as possible. We have a network of national vendors and manufacturers that we've been engaged with over the past 20-plus years. I think it's important to note that this is not a quarterly business. So our annual budgeting and forecasting is informed by historical expenses and historical NOI margins, which have trended in the 77% to 82% range. And we expect our NOI margins to remain within that range for the remainder of the year.

The next question comes from Nahom Tesfazghi from JPMorgan.

I just have just one question for me today. I guess on the acquisition front, you guys mentioned you've been capturing yields in the high 7s, but it sounds like from Andrew's comments that the sort of stabilized yield, I guess, once you guys get in the property is a little higher than that. Could you guys talk about, I guess, the efficiencies you guys are putting into these properties and I guess, where that sort of stable yield is?

Sure. I appreciate the question. So yes, as we've stated, we've been actively acquiring at or below -- at or above a 7.5% cap rate, which we've shown, and we will continue to do that. And while these properties are accretive out of the gate, we're gaining a lot of efficiencies just in our management platform. And then as we bring it into our platform through the economies of scale that we're getting through the management of 2,000 buildings. Then we have the opportunity when the leases roll to mark them to market and put them through our programmatic leasing process, which we've shown has yielded great success, both from an efficiency standpoint as well as from a same store. That's why we've adjusted our guidance, and we're now in the 7% to 9% for the same-store cash NOI.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back to Andrew Spodek for closing remarks.

On behalf of the entire team, we thank you all for your continued support and for taking the time to join us today. Have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.