Stifel Answers 'What Is Postal Realty Trust?' And 'Why Is It A Buy?'

Postal Realty Trust Inc PSTL is a real estate investment trust that manages and owns properties leased to the U.S. Postal Service.

The Analyst

Stifel's Stephen Manaker initiated coverage of Postal Realty Trust with a Buy rating and $18 price target.

The Thesis

Postal Realty's portfolio consists of 217 owned assets across 40 spaces with an average lease length of 3.5 years, Manaker wrote in the initiation note. The portfolio today boasts a 100-percent occupancy rate, and the company's revenue is typically double-net (i.e., responsible for insurance and structural repairs).

The company should be considered as a growth REIT as it should expand through acquisitions, the analyst wrote. The postal ownership space is attractive for knowledgeable acquirers with few competitors in the market. Also, the core mission of the U.S. post office is set in law and it must continue offering service to nearly 160 million delivery points, according to U.S. law.

Postal Realty holds a key advantage over other REIT segments as the U.S. post office has an "extremely high" renewal rate north of 98 percent. This is due to difficulties associated with moving and closing conditions, and postal building codes are much more stringent than ordinary local building codes.