A Membership Association

How Owning A Post Office Property Works

For those of you who might be confused about how you can profit from owning a leased U.S. Post Office property, let us try to give you a simple view of how it works.

As with investing in any piece of real estate there are advantages not found in other types of investments, namely:

  • Owning something tangible, a building and land, not some paper that can become worthless, something that will always have some sort of value and be of use for someone;
  • The tax advantage of being able to keep your profits (and not pay capital gains taxes on them) from the sale of real estate provided you re-invest that money into other 'like-kind' real estate within a certain period of time;
  • Most likely a solid real estate investment will appreciate over time;
  • The ability to collect rental income from a tenant that should cover your mortgage costs, insurance and maintenance upkeep (essentially someone else is paying off your investment).

Owning a US Postal Service property has several other advantages not seen in most commercial real estate investments. Many people who have invested in real estate for years never knew that most US Postal Service occupied buildings were not owned by the government but leased to them by owners/investors. Most, but not all, post offices have been designed for use by the postal service.

When the US Postal Service decides they need a post office building but there is no suitable existing space they send a site person to the area and that person then takes an option to buy the land. Then through a bidding process a contractor, who has been approved by the postal service, makes a bid by filling in a blank USPS lease form with their proposed rental rates, terms and conditions. The USPS then chooses one of the builders to build the facility to the USPS specifications. The successful contractor/bidder then has to buy the land under the terms of the USPS option to purchase the site. The base, or initial, term of the lease is generally 10, 15 or 20 years with a series of 5 year options. The lease can have various riders and amendments and these affect the value of the investment.

The main advantage of buying a post office is that you are buying the property 'fee simple', meaning that you own the land and the building but you are also buying the rights as the landlord to take over the lease with the US Postal Service being the tenant. The USPS has what are called leasehold rights and as they are the ones that have drawn up the leases they tend to favor the postal service in as many ways as they can figure out to give them the advantage. However, having them as a tenant means the rent is US Government backed and guaranteed as the USPS budgets, even if in the negative, as supplemented by the Federal Government.

Just so you understand exactly how the US Postal Service has come to be what it is today I have decided, after so many conversations with people who do not understand the USPS make-up, to give everyone a little history.

The USPS is the successor to what used to be a full-fledged government department—namely, the Post Office Department, founded in 1792. So much a part of government was it that its rationale is mentioned in the Constitution, and the Postmaster General was in the line of succession to the Presidency—last in line, yes, but in line all the same. So things remained until President Richard M. Nixon’s Administration reorganized the Post Office Department in 1970 in response to a debilitating strike by postal workers, establishing the newly branded USPS as a “corporation-like” independent agency. What did, and does, this mean?

For one thing, it means that, as of July 1971,when the reorganization took effect, Postmaster General was no longer a cabinet-level position appointed by the President. Instead, a Board of Governors was created consisting of nine members appointed by the President. These nine, in turn, chose the Postmaster General. These ten, in turn, then chose a Deputy Postmaster General to serve as chief operating officer, making for a nice round number of eleven. In addition, the new arrangement called for a Postal Rate Commission consisting of five President-appointed members, the idea being that there needed to be some check on those who control the USPS’s financial operations. (As of December 2006, the Postal Rate Commission became the Postal Regulatory Commission, with somewhat expanded powers.)

The result of all this was a platypus-like creation that is neither exactly a Federal agency nor exactly a private corporation. Nor is it a hybrid government-owned corporation, like Amtrak, for example. The USPS isn’t really a corporation at all. Since the Board of Governors does not have the same sort of fiduciary responsibilities and liabilities as real corporate directors do, it amounts to window dressing. In fact, the USPS’s only real shareholder remains the U.S. government, and it has no actual board of directors other than Congress—more specifically the Subcommittee on the Federal Workforce and the Postal System of the House Government Operations Committee. But Congress, as we know, only deals with emergencies. It does not engage in long-range strategic planning or market research. It does not evince responsible financial behavior or exemplify corporate best practices of any kind—especially when it comes to oddball appendages like the USPS. And from this circumstance all else follows.

 

For more information about the investment opportunities vailable in this area please feel free to contact us.

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Hot Post Office Properties

Property News tip

House panel votes relief for Postal Service
The House Oversight and Government Reform Committee voted Friday to approve HR 22, which would save the U.S. Postal Service $2.3 billion this year in health care costs. The bill allows the Postal Service to pay health care premiums for its current retirees using a trust fund designated for future retirees.
Without the bill, the Postal Service would have to make a $2.3 billion payment in September for its current retirees; postal officials say they cannot pay that bill.
“The Postal Service is facing a financial emergency,” said Rep. Edolphus Towns, D-N.Y., the committee chairman. “HR 22 would allow the Postal Service to live to fight another day.”
HR 22 was introduced in January and then spent almost six months before the committee. The bill now heads to the full House for a vote. Passage is almost guaranteed: The bill has 337 co-sponsors.

In Rhinebeck, NY home of APO, the post office is USPS owned. Though it serves well over 10,000 people and has several routes, and is very busy most of the time, they are cutting the hours back. Instead of being open until 7 pm now it will be closing at 5 pm. Instead of opening at 8:30 am it will now open at 9 am. Saturday hours are also being greatly reduced. Many people when considering a purchase often rely on the hours of operation. This is not longer a true indication of how busy the post office is. Think about this.
Do not allow other associations to put a scare into you so that you will be afraid to keep you post office or invest in other new purchases. I say once again, the closings and consolidations have to do with BRANCH offices in large cities or large Processing & distribution Centers.
KEEP THIS IN MIND THE NEXT TIME YOU FEEL CONCERNED ABOUT THE USPS CLOSING SMALL RURAL POST OFFICES.
Under a federal law aimed at ensuring service for rural and remote areas, economizing cannot be the sole factor in closing a post office.
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THE USPS IS CREATING LANGUAGE IN LEASES THAT LOOKS SIMILAR TO FORMER FORM LEASES SO THAT OWNERS WILL NOT PICK UP ON THE SHADY ATTEMPTS TO RUIN THE MARKET VALUE OF YOUR POST OFFICE INVESTMENT.
THERE ARE 2 AREAS YOU NEED TO BE ESPECIALLY AWARE OF AND ONE IS THE PURCHASE OPTION RIDER. SIMPLY, NEVER GIVE THEM THE RIGHT UNDER ANY CIRCUMSTANCE OR CONDITION TO PURCHASE YOUR FACILITY. THEN YOU WILL NOT HAVE TO WORRY ABOUT THEM STEALING THE BUILDING AT WAY BELOW THE ACTUAL MARKET VALUE.
THE SECOND THING TO WATCH OUT FOR IS THE “OTHER PROVISIONS” CLAUSE IN YOUR LEASE NORMALLY ON PAGE 2. THE LANGUAGE OF THE SERVICES & EQUIPMENT RIDER REGARDING ELECTRICITY AND THE SEWER PROVISION IS ESPECIALLY TROUBLESOME. IT APPEARS THAT WE CAN NO LONGER TRUST THE USPS TO NEGOTIATE IN AN OPEN AND FAIR MANNER.
WATCH OUT AND SEND US A COPY OF EACH LEASE THEY SEND YOU SO WE CAN POINT OUT THE FAULTS.


"APO"
A Membership Association
PO Box 840
Rhinebeck, New York 12572-0840
Call Toll Free (800) 393-APO-1 [2761]
International Calls: 1 (845) 516-4008
Email: AmericanPostalOwners@gmail.com
Anyone with a Common Business Interest is Eligible to Join with Full Membership Privileges.