Getty Realty (GTY)

Josh Dicker SVP, General Counsel and Corporate Secretary
Christopher Constant CEO
Mark Olear COO
Danion Fielding CFO
Anthony Paolone JPMorgan
Mitch Germain JMP Securities
John Massocca Ladenburg Thalmann.
Call transcript
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Good morning, everyone and welcome to Getty Realty's Earnings Conference Call for the Second Quarter of 2019. This call is being recorded. Prior to the start of the call. Josh, Joshua Dicker, 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.

Josh Dicker

financial would Getty thank call. The Realty's the of released at I joining all Yesterday website Form operator. quarter our the company for the investor earnings us second its available X-K you, and like XX, release you to for afternoon ended our Thank June for are XXXX. on results gettyrealty.com. quarter section conference relations

may are on constitute the in of call historical course results are information those materially based on uncertainties and and trends to statements. Certain current statements made from actual and described based forward-looking are this could statements subject These expectations not the cause in events statements. differ that management's beliefs to and forward-looking

looking also include redevelopment and questions in statements statements materially. by and management caution including guidance, XXXX events or future include to and We operations, remarks us, company made financial forward results and plans that opportunities. response best may their acquisition factors known our on differ performance, regarding Examples could our in company's based to statements or reflect of the currently and such actual that you future judgment

to the and year other you filed factors that as risks, company's materially on refer any cause for SEC those report differ for results forward-looking the from implied the made with in to today. I as our XX-K discussion statements detailed ended the of Form XXXX, XX expressed reports December annual well periodic a or actual more could

statements may this company update of course the place only statements, be the hereof. should made undertakes which call. The that undue forward-looking in not reflect as forward-looking to on duty any no view You date reliance of our

those our definition adjusted of discussion to release and refer to our from non-GAAP of our of net financial please our funds operations reconciliation of measures, measures AFFO earnings. including a or use for Also earnings

Constant, to me Officer. Chief the our call Executive let turn over that, Christopher With

Christopher Constant

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

today's an providing second investment the remainder detail. I Danion activities strategic me overview and objectives Let year. of call quarter by the for our results. will financial our XXXX sheet more balance And to finally, of portfolio begin our our the and pass in to Mark then will discuss And performance, discuss call

steady, and Our our results in expectations. once line were for the with quarter again

we our redevelopment our properties And quarter, sites to the non-core lease that long the demonstrated in pipeline. properties consistently displayed of stability in triple net our During net term from dispose our strength portfolio, selectively have portfolio invest leases. to and add ongoing and continue we

for income income, contractual to and rent by million our of to recognition tenant from of Rental adjustments grew $XX.X several reimbursements, quarter, GAAP properties due increases X.X% the last redevelopment acquired received primarily which and excludes projects. revenue the year, our completion

we million the $XX.X of the prior $XX.X of reported net grew FFO million, quarter. X% of quarter, income second and $XX.X year's million, For which over AFFO

to maintain the attributed $X.XX was our income well share, efforts growth operating our as be was an per both can AFFO our which basis AFFO to year's On in structure. growth The comparable share per cost to quarter. rental a efficient as prior

both our to in platforms. we growth announce strategy of terms on active redevelopment our acquisition quarter and pleased I'm as an executed

approximately convenience properties and nine million. acquired for $XX gas we quarter, the During

a net the other leases. additional In a is carwash we addition collision two site newly after $X.X and year acquired quarter for both One are XX center [ph] subject triple and million. to constructed end was facilities properties

asset investment of enhance supports an include Getty's as well our properties are in a types. expanding stated opportunities there our acquiring important the quality, various related our these located of all number goals segments attractive sector. automotive more the We in evolution, As well as CNG as sector, acquisition to believe activity what Mark call further acquisitions closely criteria of discuss believe detail mark we we other year-to-date our to in high milestone portfolio with of will

our second we to of redevelopment to lease to bringing our one added Turning signed program, pipeline the during projects redevelopments. pipeline our quarter, XX

raised growth quarter funded the our our partially aftermarket equity via During we proceeds with by program. --

long and term Looking plan well laddered maintain balance structure. will ahead capital and sheet capital. for our We and company's the favorable fund market conditions we to to our with having committed company flexible capital conservative remain look a permanent are to growth

activity continue and of transactions underwrite volume other opportunities sectors. While timing types real competition REIT these acquisition of the assets volume for institutional quarter-to-quarter, we both investors. and our gas the and automotive-related continue convenience and the available Overall, in of peers can vary strong we remain see from to of to source estate other

are and value. well-located quality have acquiring high a drive additional dense established demonstrated we high areas will will believe As either disciplined term properties in estate markets focused when metropolitan or be in long continuously of real portfolio growth reviewing and we on opportunities as we shareholder

a are addition, projects does properties not disposing community redevelopment and gas where we potential. additional selectively of that the property nowhere made we redevelopment is In competitive have location the determination have pursuing as and

acquisitions from one, focused our from of to the remain benefit As platform through cash of growth XXXX We leased of consisting second balance core beyond, growth on by conservative supported we flow our three and our quarter sheet. pronged portfolio we our stable gas move will be objectives continue asset stability throughout projects. redevelopment the and in activities our selectively sectors. successfully on execute confident auto-related strategic portfolio. of our net remainder Two, three, And remain that management XXXX. in we convenience, We portfolio able lease to to continue core the and our expanding the through

the our over discuss activities. to investment call With that will Olear Mark I turn portfolio to

Mark Olear

start on I'll general. Chris. our activities investment and redevelopment additional portfolio you, our our provide and reviewing in Thank projects by detail

part leaseback market. transaction properties and in of a nine car New Circle acquired lease. $XX.X stores a an acquired million. net franchisee, K and triple we year experience of the owner Southern for $XX.X are million convenience the XX sale unitary we to the All properties MSA quarter, these the properties California Los in who subject is a During are with Angeles Six of were located operator and for washes

We a recognize our The volume in design expect and to competitive land of initial this and are and and positioned transaction. rent properties profitability of the size full million that $X.X marketplace are underwriting sales from the have history year criteria. well meet and building approximately

three in million for In transactions properties, individual addition, the we the during $X in acquired quarter, aggregate.

are to located excess and North leased properties at acres lot Carolina. are than Alabama, these in of All in X.X of and sizes these square and feet. K properties Georgia each The are for three X,XXX stores more Circle the site average

is quarter acquired Additionally, site we million for Wash One lease $X XX on Car which in triple million. newly [ph]. the after a Wash the closed acquisition year ended, $X.X to District facility Kentucky was with two constructed for of properties a net additional subject

a The the which was acquired lease for million Minneapolis to Collision. site, with center constructed Caliber MSA other $X.X subject in Paul newly year is St. XX a collision

expect when have gas tenant with quarter, In removed to been seven which which six and Turning we be appropriate commence XX our subject new it properties leases, redevelopment plans will on is the various currently and required into site leases, signed where commence state-of-the-art, recapture we existing work once active and subject the which to to convenience facility. received. and to signed program, a ended a to we transform The are approvals approvals a new triple-net we lease, to includes new-to-industry total, construction. and our update an the during property projects quarter projects currently receive lease,

and stores, parts wide as and and specialty retail enhanced range uses and fast gas Our casual includes service convenience automotive such retail pipeline a restaurants. quick-serve such of as

of redevelopment advance our continuing the projects to through All are process.

next all years, these projects to three over be to XXXX. moving completed in substantially We will the projects additional several rent commencement with expect one

by of company completed total will for To-date, redevelopment quarter invested completion approximately acquisition investment progress the XX million have expect we $X.X approximately occurring currently the with through and estimate we XXXX, the $XX.X that for if in projects in these in-progress investment we returns redevelopment projects in excess could both incremental in the The and market today. will anticipated we the during be funds invested $X.X second of projects Getty what these in million. generate million

For presentation, investor information refer projects, on please which can redevelopment our website. our more on detailed XX Getty's to of found be page

the with targeting We to redevelopment next unlevered five current XX%. our portfolio and remain greater than anticipate XX% portfolio, redevelopment X% involving over of program years, possibly and yields between optimizing committed to our continue

landlords. we million exited we of six Finally, locations disposed leased proceeds, from previously third-party during which quarter, in properties we and two for the $X.X noncore

sites activity, seven of properties. redevelopment result ended lease XXX net a As our quarter and eight portfolio the we properties, vacant with active

occupancy, our seven lease Our weighted term overall increased to not And average XX including is our active approximately XX.X%. redevelopments, years.

With turn Danion. over call that, I'll the to

Danion Fielding

Thank you, Mark.

our to results. Turning financial

were quarter, revenues million. which For and to the our second X.X% tenant on notes $XX.X receivables, and million, mortgages income, interest excludes and total reimbursements $XX.X rental grew

rental redevelopment driven by continues plus income escalators in projects. rent incremental growth Our to acquisitions in be completed and from growth our leases,

benefited quarter, During both from general administrative property and environmental company costs and second also decreases the the in and expenses.

specific to release. please information earnings more refer on For afternoon's yesterday expense movements,

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

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

$XXX capital $XXX balance debt. $XXX and the which includes million markets credit activities, quarter million of of long-term and the ended our under our fixed borrowings, to rate with agreement Turning million sheet we

Our cost our debt years, is of our fixed average X.X our remains and debt XX% XXXX. is earliest rate, maturity being weighted debt weighted X.X%. of average maturity approximately with borrowing The

debt-to-total at XX%. Our stands currently capitalization

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

million used ATM per quarter $XX.XX price an we at of addition, of the during issued share. capital $X.X In our and average program

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

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

a share we AFFO range per Finally, at $X.XX $X.XX our per share. of to reaffirmed XXXX guidance

does on assume will guidance rent expectation we activities. not one, expectation we redevelopment, our that factors or impact leasing redevelopment. Specific to although that market reflect we recapture forego Our and which year activities, when our acquisition does for our execute guidance any include continue properties disposition this will capital our it

full could the cost remain And activities. associated in additional not four, Three, redevelopments, with in which expectation is year our acquisitions borrowings the increase XXXX we impact expenses active that deal and completed. expectation our XXXX. capital-raising that in ultimately company's dilution Two, our pursuing result the of will will of if

the turn call will back to I Chris. that, With

Christopher Constant

you. Thank our That remarks. concludes prepared

me to call let the questions. the open So operator for ask

first will We Instructions] [Operator ahead. go Please Anthony question you. JPMorgan. take our from from Thank Paolone

Anthony Paolone

of rest My Good question the morning. of you have is, the up you just all can thanks. order what year, sale hi, for about Yeah, first magnitude? talk teed over

Christopher Constant


I sold for properties $X.X million X in think proceeds. the quarter we

I as is that company think properties for our year of rate that don't potential. for a of long-term that again, are But number using don't redevelopment a the are use. run good probably the all sort again think really at to have point this holds and we dispositions the rest of

So expect proceeds significant generate I to do net really not post-sale.

Anthony Paolone

Okay. like, $X And sounds couple where portfolios? it two, million-ish are this a that Got likely you're auto-related Or you're of with to did, space deals couple to a regards a of is like it. at like front mostly the then see post on the one-off that XQ, looking transactions? deals look you

Mark Olear


So Mark. it's

that sourcing see indicative But they're one-off a say deals both. think mix efforts. deals. our I and our we both I first were wouldn't that we'll in underwriting all consider the of two

So deals acquisitions. we're individual the hopeful to -- to continue and some portfolio I evaluate we're likely think to find

Anthony Paolone

as a as broadly talk others competitors. well just Can up can against as about half? the about you just into mentioned good And REITs for pipeline, you're second talk we more and also the picture you other have You what but that these pipeline you like? that look looks bumping as growth

Mark Olear

sure. Yes,

billion much couple the of line year, pipeline opportunities last first of year with is the in the the for of convenience that We're pretty first around what opportunities somewhere with annualized. through we've in half our excess pace half evaluated years. So of sector of in of pretty year $X.X much we saw probably on which the is the gas last

date our in other growing not It's the at of opportunities are that in have automotive. quite pace volume and the fuel to the convenience. We of we pipeline

of sourcing develop make also and much seeing and With that, a better direct and to volume more better inroads, continue to -- opportunities. we're us pace we presented relationships, a opportunities again

we're So to some both going get in categories. momentum

Anthony Paolone

seems leaseback provided; seemed K sale like about was or yield. a it you And like just Okay. a the X.X the -- good math It numbers provided the Circle you yield.

deals $X.X first Like connected like, just in aggressive? -- like for the terms other a pipeline that Or more the was curious, billion were of you? well just make Just point, having price in half, just it of capital? to it to bid make of just lot deals that and accretive cost able seems a like hit should you at and the be clear your

Christopher Constant

that think activity I right? A, we Obviously, a mean I lot a there's there's of Yes. host referenced certainly sector. in the of competitions. factors,

one and fit underwriting through the either criteria, issue that's opportunity put there's things or maybe that our also have credit We estate don't in. come our on certain real screen a tenant side. We've

to this that portfolio of transaction and and to we out opportunities lot of we But that move us. certainly year add cost the going the is capital that for there for on of So are beyond. course be not every over there can think and a forward work our

Anthony Paolone

thank Okay, great, you.


from one And JMP go ahead. is moment please. Please from question next Mitch next from our our -- Germain is Securities. And question

Mitch Germain

portfolio Thank much you. as of auto? is today your How other characterized currently

Christopher Constant

percentage, Very, -- X%, less plus or very small minus. Mitch,

Mitch Germain

the then there. of into Maybe just And perspective due you some competition and traditional kind is of shift your acquisition more can -- that of assets? kind kind to criteria, provide stretching

Christopher Constant

yes, I Thanks. -- word Yes. wouldn't I the use sure. word the use -- wouldn't

Mitch Germain

I'm struggling right word. at the

Christopher Constant


got we feel still there. think which we gas. can It's portfolio. XX% core grow the and the about think remains deep find I and we've very portfolio We've the comfortable that of demonstrated I and opportunities relationships, business, convenience

bit similarities. specifically automotive As things piece of has with to is -- universe, right, which we other as of such the lot at carwashes, overlap, always lease a a broader is a There portfolio. look been net obviously, a has our

as So we think I view additive. it

we size, and building in think size I view real of the terms similar sides, location lot and very both the as size. estate the

and add, moving anything. shift set. on but we to our or away gas no this to thought as an convenience not again, not view So opportunity just a adding side, our There's from

Mitch Germain

trend you are a and sector? seeing gas consolidation still convenience significant And in the

Christopher Constant

That to It sector opportunities are M&A-driven, coming is consolidate. certain continues So right? in. there

transaction over been, several at history years, the M&A If largely you our therefore, been has by variable. has last look driven and it

to months. continue come will we portfolio that to more will think market yes, significant XX the be So there over that next

Mitch Germain

Great. I'm it. I And on Danion, ATM it the Was missed quarter? $X one. then last million sorry, just the in

Danion Fielding


Mitch Germain

Thank you.


Please is question go Massocca John Ladenburg from And from your ahead. Thalmann. next

open. line is Your

John Massocca

Good morning.

Christopher Constant

are Hey, you? John. How

John Massocca

Not bad.

industry the the was it modeling, Is Division So there, from some correct? what that it just seems for help with reports the Street out were quarter. was deal timing the of on like pretty in late that

Christopher Constant


John Massocca

is quarter it Okay. two days like in or I left mean of like kind the mid-June? like

Christopher Constant

right, call mid-June. it, All

John Massocca

Okay. transaction your And transaction, is there operator? for more And Division up on was that following of then potentially first with deals opportunity Street? kind with this Mid-June. the an

Mark Olear

market. in opportunities. He been listen distributor was he future? If our He's first lends from relationship, for this But operator. just a it's LA now, for if Yes, -- from us This was business operator who certainly transaction grow the But Mark. operator while. California. properties an acquired. to Southern it He's with experienced and it these larger good in bought there And business, the he's out in a we these knows more him. the that it's won't a we his we right can

John Massocca

lease that maybe you There's because the when investments lot of pure their Okay. the of players Just the a net in estates. larger And look thinking, of of investors potential other been lease two real a fairly in invested space, popular in carwash it's been especially you REITs to the have how then kind investment, sector? differentiate PE-backed space. regards at with kind specifically some from do in of kind the yourself net

Or specific is it just underlying looking So for that just fundamentals? it's of sector? in kind there something you're -- based that the is attractive on

Christopher Constant

they're larger I and to terms invest understanding want who operators in think where do looking direct what we to our to are there other have goal with owning as -- of where the is to grow to estate. real an specifically with operators form relationships the or seeking also we

we first We and with that within high-quality both to well is our an continue there estate for locations, certainly the which have that's parties deal think fits find specifically to -- our portfolio. with work did opportunity, that quarter real

John Massocca

And list? is kind assumptions coming of kind into you how redevelop side it? Or in development it guidance, kind maybe kind then that works specifically you of stuff of all worked much the six terms rent order side? way of regards of when isn't that is -- the on making pipeline development to with from how the off-line your its of you to project within guidance, in that are assuming of property Are contemplate yet much being actual

Christopher Constant

specifically call net it that those properties, relates pipeline, leases. we they as So to which in six currently are those

those We for properties, today. rent into the downtime. We and right, when is There upon take will factored downtime, try back, that are we collecting work completion. back into guidance. to will currently be properties the properties That those service come our then obviously, minimize on

average, on XX be would X think downtime the for properties, particular I of to somewhere it on between construction months process. those

John Massocca

rent specifically assumption you for I September. is what that budgeted But making general is to on as see? a some just those don't net you in -- assume in, have conservatism, all XXX that based the -- from that of Or part let's what know, we're can XXX, stop of guys paying lease

Christopher Constant

about And Each time has its specifically then one and roll off So roll time guidance, different John, a on. actually, numbers, they own back each has right? our line, on. we think project, when XXXX and line

it's Again, individual it's do to in model your -- nature. as to comment from how that. hard you So standpoint

John Massocca

it for very Okay, thank much. me. you That's


questions. back closure Mr. for to return time, no to further remarks. we like I this Constant have any At further would

Christopher Constant

all, this in look for interest Well, phone our thank continued October and you you. your when of Getty, getting quarter. third back Thank first year we on the report of forward to all Excellent. in we


our call. This concludes conference now

now all disconnect. may You