Postal Realty Trust (PSTL), mcap=$365m, price $15.65 vs $14.83

$PSTL pitch:
– The largest owner of $USPS postal properties – roll-up with plenty of runways ahead.
– All lease payments are inherently backed by credit from the U.S. government – 100% collection rates and 99% renewal rates.
– Strategic assets of U.S. infrastructure – last mile delivery properties utilized also by the likes of $AMZN, $UPS, and $FDX.
– Owns only 5% of USPS properties, with the rest of the market fragmented among 16k legal entities.
– Can acquire and grow property counts without increasing its G&A base of ~20 employees in corp headquarters.
– Attractive even without further M&A – expected IRR of 9-11% with 6.3% AFFO yield + 3-5% organic growth from rent increases.

$PSTL valuation:

– Trades at 15.8x MC/AFFO or an implied ~6.3% yield.
– Adding 3-5% growth from organic rent increases results in a safe 9-11% IRR without further M&A – properties backed by the U.S. government should command a multiple higher than 10% implied IRR.
– Downside limited, as PSTL at $73/sq ft trades well below the $150/sq ft replacement cost.

Exp. gain: 9-11% IRR + growth from M&A.

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