Postal Realty Trust (PSTL) risk factors, FY2024 10-K

Risks Related to the USPS

1. 01Our business is substantially dependent on the demand for leased postal properties
2. 02The USPS’ inability to meet its financial obligations may render it insolvent or increase the likelihood of Congressional or regulatory reform of the USPS, which may have a material adverse effect on our business and operations
3. 03The USPS has a substantial amount of indebtedness and is subject to rising expenses
4. 04The USPS is subject to congressional oversight and regulation by the PRC and other government agencies
5. 05The business and results of operations of the USPS are significantly affected by competition from both competitors in the delivery marketplace as well as substitute products and digital communication
6. 06The USPS’ potential insolvency, inability to pay rent or bankruptcy would have a material adverse effect on our financial condition, results of operations, cash flow, cash available for distribution and our ability to service our debt obligations and could result in our inability to continue as a going concern
7. 07Implementation of the Ten-Year Plan proposed by the USPS could have a material adverse effect on our operations, financial position and results of operations
8. 08Because the USPS is an independent agency of the U.S. federal government, our properties may have a higher risk of terrorist attacks than similar properties leased to non-governmental tenants
9. 09Litigation and catastrophic events involving the USPS may disrupt our business

Risks Related to Our Business and Operations

1. 10We may be unable to acquire and/or manage additional USPS-leased properties at competitive prices or at all
2. 11Our acquisitions may not achieve the returns we expect
3. 12We currently have a concentration of postal properties in certain regions and are exposed to changes in regional or local conditions in these states
4. 13We may be unable to renew leases or sell vacated properties on favorable terms, or at all, as leases expire, which could materially adversely affect us
5. 14We may incur significant maintenance, repair and capital expenses under our leases
6. 15Property vacancies could result in significant capital expenditures and illiquidity
7. 16As of February 26, 2025, the leases at seven of our properties were expired and the USPS is occupying such properties as a holdover tenant. If we are not successful in renewing these expired leases, we will likely experience reduced occupancy, rental income and net operating income and potential impairment loss
8. 17Our use of OP Units as consideration to acquire properties could result in stockholder dilution and/or limit our ability to sell such properties
9. 18Illiquidity of commercial real estate could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition
10. 19An increase in the amount of USPS or U.S. government-owned real estate may adversely affect us
11. 20Our real estate taxes for properties where we are not reimbursed could increase due to property tax rate changes or reassessment
12. 21We may be exposed to risks associated with property development and redevelopment
13. 22Increases in interest rates or unavailability of debt financing may make it difficult for us to finance or refinance our debt
14. 23Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt
15. 24Covenants in our debt instruments could adversely affect our financial condition
16. 25Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of operations, cash flow, cash available for distribution and our ability to service our debt obligations
17. 26Our success depends on key personnel whose continued service is not guaranteed, and the loss of one or more of our key personnel could adversely affect our ability to manage our business and to implement our growth strategies, or could create a negative perception of our company in the capital markets
18. 27Insurance on our properties may not adequately cover all losses and uninsured losses if we experience a substantial or comprehensive loss of such properties
19. 28Potential future joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers
20. 29Competition for skilled personnel could increase our labor costs
21. 30We could incur significant costs and liabilities related to environmental matters
22. 31Our properties may contain or develop harmful mold or suffer from other air quality issues, which could lead to liability for adverse health effects and costs of remediation
23. 32We are subject to risks from natural disasters and the risks associated with climate change
24. 33We also are exposed to risks associated with inclement winter weather, particularly in the Northeast, Mid-Atlantic and Mid-West, including increased costs for the removal of snow and ice. Inclement weather also could increase the need for maintenance and repair of our properties
25. 34Our properties may be subject to impairment charges and we are subject to risks related to commercial real estate ownership that could reduce the value of our properties
26. 35Our title insurance policies may not cover all title defects
27. 36We may incur significant costs complying with various federal, state and local laws, regulations and covenants that are applicable to our properties
28. 37addition, we do not know whether existing requirements will change or whether future requirements will require us to make significant unanticipated expenditures that will adversely impact our financial condition, results of operations and cash flow
29. 38We have acquired and may continue to acquire properties that are (i) leased to both the USPS and non-postal tenants, (ii) leased solely to non-postal tenants or (iii) in markets that are new to us, and we may not be able to adapt to these new business models
30. 39The increased use of artificial intelligence (“AI”) and automation activities by our USPS and non-postal tenants may change the uses, space configurations, and tenant requirements for our owned properties in currently unforeseen ways
31. 40We have acquired and may continue to acquire properties that are subject to purchase options in favor of the USPS
32. 41We may incur goodwill and other intangible asset impairment charges, which could adversely affect our earnings and financial condition
33. 42We may have difficulty implementing changes to our information technology systems and incorporating AI into our business
34. 43We may not be as successful as our competitors incorporating AI into our business or adapting to a rapidly changing marketplace
35. 44Use of social media may adversely impact our reputation and business
36. 45We cannot assure shareholders of our ability to pay dividends in the future

Risks Related to Our Organizational Structure

1. 46Mr. Spodek and his affiliates own, directly or indirectly, a substantial beneficial interest in our company on a fully diluted basis and have the ability to exercise significant influence on our company and our Operating Partnership, including the approval of significant corporate transactions
2. 47Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of units in our Operating Partnership, which may impede business decisions that could benefit our stockholders
3. 48Our charter contains certain provisions restricting the ownership and transfer of our stock that may delay, defer or prevent a change of control transaction that might involve a premium price for our Class A common stock or that our stockholders otherwise believe to be in their best interests
4. 49We could increase the number of authorized shares of stock, classify and reclassify unissued stock and issue stock without stockholder approval
5. 50rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares
6. 51Certain provisions in the partnership agreement of our Operating Partnership may delay or prevent unsolicited acquisitions of us
7. 52Tax protection agreements may limit our ability to sell or otherwise dispose of certain properties and may require our Operating Partnership to maintain certain debt levels that otherwise would not be required to operate our business
8. 53Although we are no longer an “emerging growth company,” we are still a “smaller reporting company,” with reduced disclosure requirements
9. 54Our Board of Directors may change our strategies, policies and procedures without stockholder approval, and we may become more highly leveraged, which may increase our risk of default under our debt obligations
10. 55Our rights and the rights of our stockholders to take action against our directors and officers are limited
11. 56We are a holding company with no direct operations and, as such, we rely on funds received from our Operating Partnership to pay liabilities, and the interests of our stockholders are structurally subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries

Risks Related to Our Status as a REIT

1. 57Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders
2. 58Failure to make required distributions would subject us to federal corporate income tax
3. 59Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments
4. 60The prohibited transactions tax may limit our ability to dispose of our properties
5. 61We could be affected by tax liabilities or earnings and profits of our predecessor
6. 62There are uncertainties relating to the estimate of the accumulated earnings and profits attributable to UPH
7. 63A sale of assets acquired as part of the merger between us and UPH within five years after the merger would result in corporate income tax, which would reduce the cash available for distribution to our stockholders
8. 64The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders
9. 65Our transactions with our TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms
10. 66The restrictions on ownership and transfer in our charter may inhibit market activity in our capital stock and restrict our business combination opportunities
11. 67Dividends payable by REITs generally do not qualify for the reduced tax rates on dividend income from regular corporations
12. 68If our Operating Partnership failed to qualify as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences
13. 69Covenants in our agreements for our Credit Facilities or other borrowings may restrict our ability to pay distributions which could cause us to fail to qualify as a REIT
14. 70New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could adversely affect us or our stockholders
15. 71An increase in market interest rates may have an adverse effect on the market price of our securities
16. 72Inflation may adversely affect our financial condition and results of operations
17. 73Changes in accounting pronouncements could adversely impact our reported financial performance
18. 74We could be adversely impacted if there are deficiencies in our disclosure controls and procedures or internal control over financial reporting
19. 75Future offerings of equity securities, which would dilute our existing stockholders and may be senior to our Class A common stock for the purposes of dividend distributions, may adversely affect the market price of our Class A common stock
20. 76The market price of our Class A common stock has been, and may continue to be, volatile and has declined, and may continue to decline, which may result in a substantial or complete loss of your investment in our Class A common stock
21. 77We face cybersecurity risks and risks associated with security breaches
22. 78Third-party expectations relating to environmental, social and governance factors may impose additional costs and expose us to new risks