*From either re-negotiated “base” USPS leases, or …

 *From leases to non-Postal Service tenants 

Many potential investors in USPS postal facilities often ask us whether they should consider buying facilities that are near the end of their “base leases”, or already in an “option period”.  For a couple of good reasons, the answer can be YES! 

The Postal Service often will re-negotiate a new “base lease” after the initial one is about to expire, giving that building new life, and a basis for financing the property.  This is one way of providing RESIDUAL VALUE to the property.  Residual value has been a big question regarding older post offices, especially when it comes to financing them.  Most lenders will not finance a post office that has no “base lease” left. 

Another way to establish residual value (and attract financing!) is to determine the success many landlords have had in leasing their old postal facilities to NEW tenants when the building is no longer required by USPS.  Some interesting facts, (from a recent research project by James Thomas Coe, CRE), about the USPS, and this alternate method of establishing residual value, are below: 

¨       USPS is a part of our Executive Branch, and uses over 35,000 real estate properties; 77% of those are PRIVATELY OWNED

¨       USPS long – term leases (usually 20 years) are signed with owners when building is new; options (exercised 92% of time) make the average 24 years. 

¨       Most PO’s are “build – to – suit”, have service life of 40 years. 

¨       Lenders generally offer amortization schedules that match lease length; this has been based on assumption that PO had no residual value after base lease. 

¨       HOWEVER, good news, there is residual value, lots of it; research from published reports, USPS personnel & USPS electronic records indicates that … 

*Significant re-use potential exists after Postal Service lease expires.

*Landlords turned to leasing their old Post Offices to state and local municipalities as a principal source (city hall, library, law enforcement), followed closely by NATIONAL tenants (services, finance, insurance, real estate).

*53.7% of USPS – vacated properties in the above research project rented for MORE than under the previous USPS contract (at a 180.9% higher rate).