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Getty Realty (GTY)

Participants
Joshua Dicker Executive Vice President-General Counsel and Secretary
Christopher Constant Chief Executive Officer
Mark Olear Chief Operating Officer
Danion Fielding Chief Financial Officer
Laura Dickson KeyBanc Capital Markets
Anthony Paolone JPMorgan
Mitchell Germain JMP Securities
Joshua Dennerlein Bank of America Merrill Lynch
John Massocca Ladenburg Thalmann
Call transcript
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Operator

Good morning, everyone, and welcome to Getty Realty’s Earnings Conference Call for the First Quarter of 2018. This call is being recorded. Prior to starting the call, Joshua Dicker, our Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about our non-GAAP financial measures. Please go ahead, Mr. Dicker.

Joshua Dicker

you. Thank to quarter for conference like Getty us you first Realty’s call. thank would joining all for I Yesterday afternoon, the the quarter company released its March XXXX. financial XX, ended results for Investor release The and at are Relations section available gettyrealty.com. Form of earnings in X-K website our the made this are Certain on in not statements. forward-looking course may and information constitute the based of statements call historical to those uncertainties These subject to are in statements beliefs that cause statement. and could and are from based expectations on differ actual forward-looking the results events described management’s and materially current trends, of XXXX and performance Examples financial management guidance may opportunities. also regarding in forward-looking remarks response including plans future their operations, and by made the and future statements include company questions, to company’s our include acquisition in and redevelopment statements or you judgment statements differ known caution events that currently factors that best could or us results on our to reflect based and materially. actual such We I well factors made materially any refer made the detailed expressed company’s cause December today. for those the a other for the ended XX, discussion results to report actual in our could from XX-K or Form more of as forward-looking risks annual on you implied the SEC to and XXXX, that statement other as year differ with filings

and Christopher Chief earnings. the let measures at the turn definition call that, forward-looking call. of reliance financial our release earnings that should date including course XXXX revised only any refer revised AFFO, Executive as duty use may me which over of hereof. no which non-GAAP the on of of discussion of be those please With in this was our The place You to statements not to reconciliation reflect to undue update for to the of statements made our forward-looking Constant, our Officer. view measures, of Also, company a net our end undertakes our

Christopher Constant

our on quarter and XXXX. you, everyone call With for Josh. first our me and Operating the are Officer; our Financial Mark morning to Olear, call Danion the Officer. of Chief Thank Chief Fielding, Good today Josh welcome and

providing discuss first in of call Danion then our me today’s detail to XXXX portfolio our We a and the we I’ll by and call income from Let initiatives begin reflected core then steady performances began results. XXXX our additional an will and discuss pass more the quarter to growth the net our financial which overview with of portfolio Mark solid XXXX acquisition performance quarter and both activity. lease our generate

million, million $X.X more year’s we over net of of AFFO quarter $XX.X grew first and of the reported which million income by $XX.X the For million, or quarter. prior $XX FFO XX% than

per $X.XX Our quarterly share $X.XX X% year’s per over share, the of increased by prior AFFO or quarter.

we recycling our redevelopment active remained opportunities, portfolio, Moving and capital. in potential to acquisition pursuing selected projects evaluating

States XXXX beyond. of estate to further to the opportunities, quarter, presence non-core leaseback to who we are we gas value we continue portfolio first end, the company’s transaction strengthen continue additional the acquiring This properties continue and During sector, enhanced of we in Investments. properties acquisition be of we the critical focused we United as in sold acquired a would several and further the and believe through remain portfolio. as standards Subsequent invest in tenants redevelopment and projects. diligent $XX driving quality four in GPM such shareholder million high and move our commitment and pursue in these share quarter convenience our Southern diversify we a to underwriting the our attractive real on transaction to XX partnering components We to growth which additional and evolution with

During our to balance sheet. fortify steps important several we the quarter, also completed

refreshed million we’ve $XXX program. our ATM First,

staff pushed pleased out borrowing. hard reflects has particularly by debt the Fitch. debt And of as our second which last up an our we the years, and first to portfolio. balance unsecured management sizably and and the team maturities and accretively maintain rating completed of adequate in and flexible low significantly activity our of interest work to company’s improved proven and Secondly, terms the we support of our over investment in of ability our us grow from quarter by in terms leasing company’s portfolio, our ever our and years distribution repositioning successful I’m rating it credit new near-term facility, finally refinement debt terms by effort leverage finance strong a five received existing approach pricing sheet our the enabled grade

three-pronged that, investment management to net activities we sheet portfolio, convenience, combination able to throughout over of net our selected believe of at to growth remainder flow balance cash lease us be to to ahead, portfolio successfully continue strategic focus conservative continue efforts and sectors asset with by in will from opportunity the we a We look through lower core call activity. our on a acquisitions auto-related that our the and gas core discuss will and consisting stable on the redevelopment growth, of on the the portfolio our expanding Mark Olear, focused execute we’ll to and and our XXXX. projects. I that objectives As growing our lease We supported of platform afford of business remain our portfolio stability capital. remain our our cost turn With confident

Mark Olear

end. will after I activity and first which Chris. by quarter our then reviewing our to you, Thank turn closed we’ll acquisition, start quarter portfolio

four non-core quarter the the we locations proceeds. of million During for $X.X dispose

to we new total our property net operate the capital, company and by million. Getty convenience acquisition one be completed with over of we process, $XXX,XXX This added these of invested two to during the advance with the all to as returns signed in the through expect have through store. lease we industry property a one rent we terms in gas executed projects the LOIs redevelopment excess these total that included several could XX funds incremental tenants market quarter, of in investment projects with three portfolio. years of investment approximately total, use new leases these who the projects as includes moving million expect projects which completion to $X.X we part projects approximately redevelopment XXXX. redevelopment of will XXXX projects and next through brings projects and today. In we of with QX to XX, All The commencement occurring that are six which will automotive substantially additional in these invested projects the generate leases redevelopment projects to currently estimate redevelopment for active these properties will and our and in a continue what In other and $XX

on of XX%. anticipate For Page which greater our redevelopment involving found more X% of Getty’s detailed yields investor can years five refer please between information the with our be XX our portfolio next website. of remain and on redevelopment program presentation continue optimizing committed targeted to redevelopment unlevered opportunities to We over than possibly our projects, to current and portfolio XX%

XX ended As lease with a active properties. we net quarter five result activities, vacant the our redevelopment properties, of sites and portfolio XXX

gas States at at including X of points store operators to quarter average our to XX have both years part closing acres tenant approximately quality in completed and since headquartered size million the average other remained XX in active in sites X privately-held XX and of Investments term square which recognize transaction as XX X.X in properties Arkansas, portfolio diversity in funded of acquired $XX.X to not leaseback lease The the in a Investments average XX.X%, GPM a larger end, and whereby of Mart, operations we full compared XXXX. the expected transaction, feet, weighted and occupancy, year that GPM one includes portfolio. the our acquired overall of X,XXX convenience end approximately operator as the our XX.X% million. basis Subsequent Texas, E-Z of the has tenant Oklahoma and and convenience enhance real acquisition been of friend lot XX our in and of With business our redevelopment property Our Texas. properties of we by we X initial XX in increased rent size portfolios acquired $X.X gas We to estate an and our Louisiana. ours XXXX. in is largest is United of which

strong the While the to actual acquisition. for remain single Danion. gas past, acquisition transactions. market disciplined in call both competitive the are convenience several assets in we I and the will as sector, acquisition and pipeline additional accretive With in continues and That process ensure pursuing in our remains reviewing, we opportunities or have turn the opportunities to said, of over we be our underwriting that, to portfolio making

Danion Fielding

Mark. you, Thank

results. Turning to our financial

For and XX% $XX.X the from which the income the million were increase to XXXX, rental $XX.X million impact excludes from tenant and first year’s our XXXX XX% over interest received of prior quarter expense The reimbursements quarter revenues respectively. grew the and drivers to of revenues total of primary acquisition. our properties, rent

cost quarter general experienced and first flat of recovering expenses. property administrative the relatively and XXXX, During we

afternoon our movement, quarter specific to environmental information of million, credit $X.X be of expenses million first up More addition, compared was XXXX. release. in earning expense refer time as In the can which to yesterday or $X.X variable on please

or $X.XX $X.XX as for quarter. per FFO or quarter million share Our million compared share the per was $XX.X $XX.X for prior year’s the to

the was $X.XX per million or for share compared for to prior million $X.XX Our the quarter per year’s quarter. AFFO $XX.X or as $XX.X share

the weighted facility long debt ended million and under the rate weighted million Chris borrowings, our mentioned, of debt. which to cost which as quarter includes extended of million borrowings we $XXX first quarter, refinance the $XXX our agreement completed of and company’s credit the reduced sheet, We credit Turning maturity. of the balance fixed term average our $XXX average with during

And X.X is the maturity X.X%, of XXXX. Our debt debt have average refinancing, credit facility weighted weighted is we borrowing our do and not years, rate. being average cost any XX% with fixed of our until post maturities our

capitalization XX%. Our currently debt to total at stands

value total net to EBITDA XX%, debt and times. to asset debt our is X.X Our is

quarter, issue under ATM any program. our the During did we shares not

year. $XX.X so far Our environmental liability down ended the $X.X quarter at million, this million

remediation the the quarter, environmental million. was approximately spending net company’s For $X.X

includes impact are XXXX announced we our to per AFFO Finally, of recently which $X.XX acquisition. share, now share $X.XX our of per guidance reaffirming

redevelopment, guidance year year properties impact average year increase or expectation, acquisition. in I activity. call our expectation in borrowings raising reminder, execute back will XXXX this our rent from we on but three, our company’s of include: redevelopment, a continue impact activities. the in the weighted acquisitions does turn that Two, to guidance it the expectation full our Specific does that, full earnings will capital will one, to assume disposition associated we of our any which four, although, not Chris. markets As activities, our XXXX; impact and forego With and capital reflects factors leasing our of for we XXXX when dilution the recapture the with cost will future

Christopher Constant

the remarks, open you. Our [Operator Thank line concludes the ask from That call Please Craig me question ahead. to prepared KeyBanc for so comes Markets. the questions. our Capital of Mailman operator let of go first Instructions]

Laura Dickson

here Hi, Craig. with everyone. This is Laura Dickson

on even since confirm to it parts there? the though, other are wanted what impact Just the includes reaffirming, of your moving acquisition, guidance

Christopher Constant

Well, I think relatively year. early the still we’re in

what appropriate to of think as evaluate the want well, progresses expect kind the the year performance business, rest of think continue the so is. continue to we we’ll we range of our to guidance I I think – the

Laura Dickson

Okay.

So no offsets.

being conservative in just year? the So really

Christopher Constant

That’s correct.

Laura Dickson

it Okay. low And X% cap and came like, discuss, can sounds GPM that correct? deal, the rate. at marketed in how Is you like deals for all Chris, then sounds that

Christopher Constant

$XX.X recognized on to million fund the expect invested we million So $X.X capital. of

on XXX initial of that’s is XX.XX% So in deal it’s kind basis range How which about the cash priced years. been we year talked range came over us. long the for of point that XX to ours The was for to our XX.XX%. time, of rent of GPM, deal. deal the sort tenant

operations were quite bought other and in them acquired we the we the XX of two countries, And XXX deal. have with we of of other as part certainly properties so think the that deal, locations over part we in we know existing looked, well. portfolios I each of total side We GPM areas

like, with a happy successful a So had time. do we long existing with to who tenant, relationship an for deal we

Laura Dickson

Okay, great.

acquisition. So stand your list? that the top on I would forma of they pro tenant guess Where

Christopher Constant

be Yes. five. in They would our top

Laura Dickson

would comfortable deals them how Of with five. that And doing more exposure? you be given

Christopher Constant

and one we’ve as been of as is high right. our of teen Well, We that our XX%. Yes. talked goals have obviously, that revenue, about the that in diversifying ever intent

is deal keep at sub to partners would We looking, and sort diversify long XX%. them we that. or XX% certainly continue we with what to do extent, revenue continue sub of So are and term the deals look

Laura Dickson

Okay. Thank you.

Operator

go from We question Paolone will ahead. our take next Please JPMorgan. Anthony of

Anthony Paolone

good Thanks, Okay. morning.

guidance. on confirm the to Just last point on

So effectively already. change the for but the $XX you number million in didn’t guidance that year, that your done actually you’ve the million, $XX is

Christopher Constant

Correct.

Anthony Paolone

And that the bonds then can you you on got contractual deal? comment $XX the million on

Christopher Constant

X.X% Yes, the at year. annual contractual bonds a

Anthony Paolone

versus store stores properties of – Can last about out period. that a Okay. the portfolio have like – couple the and you of your And is had now. of gives C-stores not Can as legacy many you’ve are really some done the changing with to a gas think bond it few trades really characteristics? you you years, been how much the just compression portfolio talk guys

Mark Olear

detail on Slide we for first the have that time. we this deck laid Well, XX, Sure. published actually investment new out our morning

Dunkin combo. about that hot private just the excluding GPM either are of label of And excuse of not also you’re have a – QX, And the that that a nationally as branded deal what’s XX% store excluding say or the the but C-store about of that QSR is, have some such today So QSR XX% as to end a we combo, sort food about convenience out me tenants store. QSR themselves. inside or prepared only on our XX%, of Subway our slide actually properties a preparing when of talking deal, as talk –

Anthony Paolone

it. Got Okay.

I didn’t deck the yet. sorry, see And

way. now what receiving are a – have sense straight statements you of of one What covered. EBITDA portion this or answer are portfolio maybe the So financial

of credit Just kind financial stuff?

Christopher Constant

Yes. increasing on as site something tenant Today, level about the time. we more obviously, transactions been We over we I’ve level, received financials XX% at of were do that portfolio. –

recent on or our debt deals, level financials those. of level site do All we tenant

today probably addition of public the XX% the a another where to In get we XX% of portfolio company. we guarantee is corporate that get

site the we have see idea, an performing. necessarily don’t is is the we So how to level but company

Anthony Paolone

of you’re around Got the coverage stores gaining brackets Any it. the or EBITDA rough financial on. that

Christopher Constant

our Well, [Audio well. get deck This discovered financial site it’s where in Dip]. level as we

Anthony Paolone

I auto-related compass? the your sectors Okay. in pipeline, mentioned comments, was And then last question, you deal what in think adding

Christopher Constant

as extension Yes. that underwriting. chains, and of That’s publicly whether of parts a sort our some traded lub, oil view of service, the auto national the tire battery, We kind that stores.

Anthony Paolone

Okay, great. Thank you.

Operator

question go JMP our Please ahead. take We next of will from Mitchell Germain Securities.

Mitchell Germain

have certain tenant ask Tony’s question customer good different it of some in the Hi, deals of Whether you. I or is credit a that right. concerning? that morning. your now Obviously, of be would store to the way, If there of improved you concern base right anything done, profile performance a recently that’s that’s

Christopher Constant

working with a vacancies portfolio through. active with plus pretty through of portfolio dialogue a still working in XXX amidst this them or at properties we’re of all our have our a there’s of point time, always We five major that of that tenants, all we’re handful

have management time of a any will concerns there’s asset to kind of definitely work is a on. point. that lot we So this at of nothing team But watchlist mark. There working us our significance that

Mitchell Germain

that capital the plan Great. out How the of looking deal What’s post guys got there? deal? sheet now do you envision the kind balance we’ve

Christopher Constant

Yes.

I reducing to this point. percentage continue think will on flowing that our of be focus big to for the rate at us work

Mitchell Germain

is about. Ratings where that the Fitch Got And facilitated through you. new we think

Christopher Constant

look that’s to certainly raise helpful that going We to as yes. say, be we capital,

Mitchell Germain

can of just targets me leverage. you if And longer-term on remind

Christopher Constant

a debt levels. to we be running X% that the to EBITDA comfortable Well, numerous we’ve said will in times X.X%

up end obviously where were of I acquisition at probably X.X%, a this quarter we’re at we we’re time. with to bit in point low still the little think post the but comfortable for tick quarter that’s going the

Mitchell Germain

of one been we’ve of targeting. change development that the Last me. kind economics it hearing of that Obviously is Great. a labor thing. short cost been for little you’ve always horizon your returns the all, or of some at type still same redeployment Is

Christopher Constant

to I changed still three at really targeting has as there, still market targeting XX% the of Yes. basis stay points yield entire the is but And our over the average, we’re been XX% program. incremental think levels look Nothing for internal. if completed projects at acquisition to premium same date, completed XXX what’s for kind you we’re and us

Mitchell Germain

on you – said XX%. said, those You

Christopher Constant

incremental we targeting is – we’re are wide program projects There average north the three have XX%. completed target yield XX%, of

Mitchell Germain

Great. That’s really you. Thank good.

Christopher Constant

Thank you.

Operator

We’ll then now Dennerlein take go Merrill Bank Lynch. ahead. our next of question from of Joshua America Please

Joshua Dennerlein

Good morning, guys.

Christopher Constant

Good morning.

Joshua Dennerlein

or… be the might at large portfolio there Is market in any looking out historical you that

Christopher Constant

definitely activity say of but a and small portfolios there’s at Kroger host reviewing. don’t time out there one-off sized there’s and host as that was of transaction traded earlier in anything year – that portfolios Well, this of think the I process a in that’s were the the medium certainly there’s large,

Joshua Dennerlein

since have Okay. where And start kind any year, know you of gone. you move the cap rate have of in seen rates the interest

Christopher Constant

Yes. be My cap in for which lot there – deals sector, money the certainly to is are them continue a rate smaller they the keeping of compressed. view there is chasing There’s pretty especially of certainly that sticky. sort them

is view take rate the in the to year. cap end of XX the little sort for time through to market rise a to the of in that – towards for year of that rates Our acquisitions going to cap filter it’s bit the

Joshua Dennerlein

do Okay. you your how guys about And then cost think capital. of

Christopher Constant

for cost on-time think What we we cost this, our appropriate debt. equity business. And if long issue at look view us rate term and of as our the our you fixed with

I think I think acquisition the since still relatively can and accretively both proud it’s in for consistent And us redevelopment of we invest market the We’re metrics market. of leverage year. our and start the the

Joshua Dennerlein

Okay. Thanks.

Operator

Please question Ladenburg next our from go take Thalmann. Massocca Thank ahead. John you. We’ll now of

is line open. Your

John Massocca

everyone. morning Good

a its sense or given pursue more looked X-Eleven, something larger closed – would of transaction competitors you with you or and this pricing make transaction what maybe pursue versus is to this IGXX at I X-Eleven. less of little transactions brand given does make name is it think name, does kind a with brand type your pricing sizable there

Christopher Constant

their a investment stores like I’d portfolio. our would underwrite we And maybe and transactions tenancy performance believe for can we to estate do that the or in us itself. to of to sector a in credit with the not sense them make underwrite say like financial also we and But Well, extend of our certainly X-Eleven do real certainly we is broadly as ours, tenants, in and credit that. ability tenant speaking just grade rated and the their the

types certainly we both look at So of transaction.

John Massocca

those And things you X-Eleven are X-Eleven purchase the purchases those either or X-Eleven X-Eleven. your as in became portfolio Sunoco those via purchased things this of that other kind or by maybe

Christopher Constant

short the Both, answer both. is

has certainly that the benefited acquired. X-Eleven we’ve very X-Eleven acquired and then been we’ve so acquisitive, we’ve But that. operators So from

John Massocca

And the Operator kind is potential speaking, do of up for from then continued is within externally maybe but credit portfolio roughly think how quite you operator internal… upgrades there much M&A? M&A

Christopher Constant

that That’s consolidate in down. industry see question. going the layers XX a you’re great to year I continue the participants the several or down really think next to top

would consolidation time. acquirers expect given continue our within the some to see to this I in point So bigger tenant who mix at are just

think I credit those of get portfolio in some transactions. that the a upgrade for would we

John Massocca

much. Thank That’s it right. All very for you me.

Operator

Markets. We’ve got KeyBanc another Capital Craig Please from go ahead. question from Mailman

Laura Dickson

it’s year. again, issuance about quick the everyone, in debt sort Hey follow-up Laura the potentially of question

in like you’re could terms just $XXX line. and at. outstanding I’m think in terming it on size you out about what modeling wondering issue rate like do the got of terms You’ve what potentially you million

Christopher Constant

where floating to portion is. comment we on the certainly don’t we our significant want term helps I the what think borrowings with But balance I we’re rating I to – what think can think our our looking of Well, a out. of for Fitch rate year. issue think out think we cost specifically what we – recent the

Laura Dickson

any have sense you timing? Do Okay. of

Christopher Constant

No, want on I to don’t comment this call.

Laura Dickson

Thank Okay. you.

Operator

for we remarks. closure like Mr. have Thank questions. or further any I’d turn to this back you. time At to Constant further no

Christopher Constant

second and joining quarter. the when you report for company forward in our Thank interest look we your all we everyone to speaking We Great. us. appreciate to in July

Operator

participation ladies disconnect. know will and That gentlemen, call. Thank may you. conference conclude today’s you for Thank you your