5% Dividend Yield From Postal Office Real Estate: Postal Realty

Seeking AlphaREITs5% Dividend Yield From Postal Office Real Estate: Postal RealtyOct. 13, 2020 2:22 PM ET|| About: Postal Realty Trust, Inc. (PSTL), Includes: FDX, O, UPSby: Julian LinJulian Lin Best Of BreedHigh conviction investment ideas in the high quality space.SummaryPSTL offers exposure to postal office real estate.
The growth potential is sizable as PSTL’s footprint represents less than 5% of the total addressable market.
PSTL maintains a conservative leverage profile, but is currently relying on its revolving credit facility.
Shares appear undervalued in light of the growth opportunity.
Postal Realty Trust (PSTL) is an internally managed real estate investment trust (‘REIT’) that owns properties leased to the United States Postal Service (‘USPS’). The fragmented state of USPS properties makes PSTL an unlikely growth story with a hefty 5% dividend yield as a starting point. While the tenant concentration is a potential cause for concern, PSTL appears to be a worthy addition to any dividend growth portfolio.
Postal Office Real Estate
For those who are unfamiliar with postal office real estate, the USPS is a government entity whereas the underlying USPS properties are often privately owned. PSTL owns 666 such properties spread across 47 states, with a heavy concentration everywhere except the West coast:

(2020 Investor Presentation)
While it is tempting to put PSTL in the same league as triple net lease (‘NNN’) operators such as Realty Income (O), there are important distinctions to make. Typical NNN REITs like O leave the entirety of taxes, insurances, utilities, and maintenance expenses to the responsibility of its tenants. PSTL, on the other hand, is responsible for insurance and many components of maintenance expenses:

(2020 Investor Presentation)
USPS has proven to be a consistent and sticky tenant - lease retention rates averaged a high 97.9% over the past 10 years:

(2020 Investor... Read more