Post offices have gained a stamp of approval from the investment management firm Osterweis Capital Management, emerging as prime real estate targets for high-net-worth clients.
“One interesting investment we’ve seen more recently is opportunities to invest in post offices,” Chris Zand, vice president and director of private client at Osterweis, told Crain Currency. “Not many people know this, but post offices are by far privately held in the U.S. They have one of the most reliable tenants possible — the U.S. government. Post offices are mandated by the Constitution, so they’re not going to go anywhere.”
The first U.S. post office was established in 1639 in a Boston tavern, and Benjamin Franklin was appointed the first postmaster general by the Continental Congress in 1775. Fast forward to 2022, when President Joe Biden signed the Postal Service Reform Act, aimed at supporting financial and operational changes within the U.S. Postal Service. He called the agency “as essential as it ever was.”
Zand highlighted the appeal of these investments: “A lot of times, the underlying property is also very attractive. It’s like a First-and-Main [street] property in a desirable area. There are built-in escalators with the lease agreements that are in place there.
“For some investors, it's a really appealing, tangible investment that, depending on the investment situation, not only provides current income but long-term capital appreciation with some tax advantages depending on what the exit strategy looks like.”
As a licensed real estate broker, Zand also noted that some building owners are finding creative ways to generate daily revenue from post offices, where stamp sales and other mail fees go toward the USPS. “There’s a group that has identified an opportunity to attach Wi-Fi or internet service provider antennas on the flagpoles of some post offices,” he said.
Osterweis blends public real estate investment trusts and private investment deals as part of its real estate strategy for wealthy individuals and family clients. Postal Realty Trust (NYSE: PSTL) is a leading REIT that buys post office buildings leased to the USPS. Its portfolio spans 1,600 properties across 49 states, totaling $60 million in annualized base rent.
“Primarily, it’s the stability of the tenant that they are getting," Zand said. "Their counterparty is the federal government, so there’s really minimal credit risk with the underlying investment. We’ve also seen that through periods where there’s economic uncertainty or market volatility [that] the steady income real estate investments can provide is particularly attractive to investors.”