GTY - Earnings call transcript Q1 2019

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Operator

Good day, and welcome to the Getty Realty Corp.

First Quarter 2019 Earnings Call. Today's call is being recorded. At this time I would like to turn the conference over to Josh Dicker, SVP, General Counsel and Corporate Secretary. Please go ahead.

Josh Dicker

you. Thank to quarter for earnings like Getty us you first Realty's conference thank would joining all for I call. XXXX. Yesterday financial afternoon, XX, results its for the the quarter ended company released March available Form in our The at gettyrealty.com. earnings and release website the Relations section X-K Investor of are information made historical may statements based course in this statements. the call Certain constitute not forward-looking are of on and to those uncertainties These subject to are in and beliefs that cause statements. statements could and are from based on management's differ actual forward-looking the results events described current and materially expectations trends, of XXXX and performance Examples financial management guidance may opportunities. also regarding in forward-looking marks 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 a from the statements refer the cause company's or December for today. the that materially factors results ended XX, the in any Report implied detailed expressed made XX-K Form could actual more to Annual on you and other to differ XXXX, those discussion for year forward-looking risks of

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

Christopher Constant

Chief and objectives the discuss providing remainder Financial pass to Olear, our more our Officer; XXXX the welcome results. the of Chief our you, today's begin to discuss and call and on will Operating financial quarter quarter Officer. year, me strategic the With call by and for for Danion Good everyone, our morning, our will Danion today first on call an are of Thank XXXX. our Fielding, of then Josh Josh. I'll overview I to our first portfolio in the call and detail Mark performance, Mark touch then

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

During continued to quarter display strength lease the triple our consistently have from leases. net net portfolio that stability and demonstrated the our we long-term

properties the by redevelopment the primarily Our from completion X% last year total received several revenue in and of of quarter, grew acquired to our income due projects.

In associated retirement costs by addition, our from prior the our or partially as projects with and non-recurring grew impact basis, per costs. On AFFO our certain of operations, share results year's our strong $X.XX, was funds quarter. top adjusted of were line was the redevelopment AFFO, offset to by which X% one-time comparable

During redevelopments. focus and our in leases, the embedded including growth acquisitions quarter, strategies, we to attractive pursuing realizing organic long-term completing on growth our selective continue

a sectors process and potential source in at stages to gas underwriting are opportunities the continue underwrite auto related We convenience, number and various the for numerous of and transactions. of

that dense during Although, XXXX. completing properties for seeing and that timing are the numerous to it value. in long-term difficult add we focused remain portfolio we will our or shareholder portfolio attractive rate of metropolitan can are on and highly-quality in high-growth to areas believe said, be additional acquiring transactions, we remain predict either well-located confident drive opportunities established as will and With a we markets, we real selectively estate properties disciplined and

strategy. to with respect progress We also made redevelopment ongoing our

lease which which was in convenience Mark will our gas and we of quarter, completed discuss detail. tenth location, a the project, a more During ground new-to-industry

our of creating on focused on each remain we ahead, look initiatives. we value executing stated As growth shareholder by

and also will to portfolio committed that, Mark to our structure we conservatively being a flexible call over We a leveraged well-laddered on balance turn investment sheet. capital the our to plan to having Olear With and our discuss and activities. premium are I company. stable We flexible maintain and place as grow

Mark Olear

Thank you, Chris.

terms In activities, a first relatively investment our of quarter. we quiet had

During $X.X we in redevelopment approximately sites invested projects progress. which our both million the and quarter, in completed are

half on quarter, annual redevelopment to million. convenience $X.X mentioned, gas which United and a invested In this million States. project, Chris in leading we of our Sheetz, $X.X a in was in As generated net rent the increase ground operator rent completed project, lease commenced of eastern and the XXth a

terms Of redevelopment seven five are currently sign quarter and net included portfolio are lease in on in not properties projects, are ended which lease we our the In with leases. XX included properties, net projects, portfolio. our of these redevelopment in

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

million all projects one invested We to-date expect in and we redevelopment next XX the years. over rent at during to total expect commencement be completed to substantially XXXX. $X.X several we have of these these have will In sites projects approximately three

total incremental require On company of the to capital investment projects returns these that spending side $X.X the we market acquisition today. in of funds excess million the invest Getty a we by and XX could in where estimate will these will generate

remain make in our to be selective the committed we of detailed refer found We information more as transforming pipeline, on updating For on forward progress. our to our page website. presentation, and redevelopment everyone investor sites to can XX a portfolio which please look

and acquisition of automotive convenience sites other we Turning opportunities to for the volume program, underwriting remained strong. our are used gas and overall

of underwrite a During the pipeline quarter potential XXXX, of first source we to continue transactions. and steady

any close close not move look everyone we will in opportunities did forward to updating discussed, year. we the we as on that Chris confident XXXX acquisitions we as remain and quarter throughout first during the While

did a had We properties the from which exit did leased Turning to we dispositions. landlord. one not any property, in we quarter, previously third-party but sell

to sold million. vacant subsequent three addition end of In quarter proceeds net generating $X.X the we properties

and activity, properties. the we ended active properties, our quarter of XX with redevelopment vacant leased all net of result a XXX As sites, seven

term over our leased redevelopments XX turn XX.X%. years and excluding active average was Danion. weighted the remained With to occupancy approximately I that, overall Our call

Danion Fielding

Mark. you, Thank

income, quarter, receivable revenues first to which tenant X% and on respectively. rental and interest total the and $XX.X reimbursement X.X% grew and our million, For million to mortgages $XX notes excludes

Our a net in to FFO plus resulted escalated in growth our from of be rent and immaterial by the top-line AFFO. and driven completed leases growth continues This At impact adopted acquisitions standard. incremental beginning the projects. accounting year, on redevelopment earnings, we change new an lease XXXX

not addition, certain directly from rental included prior period revenues properties. we note are In line and reimbursements now that tenant are not have comparable. adjusted result in Also items

accounting to the leasing and release yet be standard in Form has changes on to yesterday's please new to our refer information due more For which earnings XX-Q, filed.

costs associated our During experienced nonrecurring the of redevelopment in increase in an quarter, which certain first nature. with are property initiatives, we

-- In one-time addition, expenses due our retirement G&A increased employer employee $X.X million cost. primarily of to

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

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

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

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

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

Our to capitalization $X.XX. total at debt currently stands

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

the program. for equities issue under Lastly, not market – quarter did equity we any our equity

down $X.X $XX.X liability million, ended at the million quarter in environmental Our year-to-date.

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

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

the any active our on Chris. with that activities; we when disposition acquisitions will our capital one, to activities expectation expectation activities. With redevelopment, in leasing which to factors XXXX increase impact of expectation will that associated is include: in impact the result ultimately back deal turn redevelopments execute pursuing our the that properties dilution guidance markets the redevelopment; that, continue four Our it not borrowings this guidance does does I we and not we expenses cost full recapture the will of XXXX; our two, will our rent if forego assume three, reflect that remain for Specific which will additional we our company's call year acquisitional capital-raising and year our could expectation although in and completed.

Christopher Constant

concludes That remarks. our prepared

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

Operator

We'll our you. first [Operator take JMP question Thank with Instructions] Mitch Securities. Germain from

Mitch Germain

the of you year? fourth this terms we Was trend, quarter causing Chris, obviously we activity about maybe just it first have considering quarter. in the volatility a more the acquisition should been thinking with little the maybe a no – the be Was anything have fourth for in disciplined? the how to Did the sort pricing any do guys quarter quarter pipeline? where have rates morning. competition? Good when lower full the Any about should acquisitions from dynamic of in think it so markets

Christopher Constant

think any I would No, there's to Mitch. trend that one don't I point

is market there would I as But opportunities the the and be competitive. seeing confident large what is acquisitions predict. dynamics that's have remain difficult or that, I some is our on. traditionally The timing point thing that's just continued lumpy, think industry think of now due one to that, transaction are within to be been out of opportunity. will to of continues to seeing what I we we're that We that the M&A able other close timing we're some

Mitch Germain

Or unit Does that this retirement space? private sort owners that much? haven't offer Or currency? currency considered some of is really some planning something in the you guys the op of

Christopher Constant

structure. an op We have don't

So we don't playbook. in our accompany that

Mitch Germain

So any me. Last of one you. you that. for don't have Got

understand, think Is to earnings that benefit? decline way was that the retirement we it? just trying in should Just the the about sequential

Christopher Constant

had retire in and non-recurring. obviously quarter truly that Well, incurred the we time highlighted that's which the we cost we a are long that employee

AFFO been those our back would costs you $X.XX. out If have

expense. So the uptick see you would I without that think

Mitch Germain

when Got – – that guidance was was you. was that that incremental? considered you that in issued guys it? of Or kind And

Christopher Constant

No.

Mitch Germain

wasn't. It

Okay.

Christopher Constant

It was not.

Mitch Germain

Thank you.

Operator

of question next take Merrill with We'll Dennerlein America from Joshua our Lynch. Bank

Joshua Dennerlein

guys. morning, good Hey,

Christopher Constant

Good morning.

Joshua Dennerlein

past. like should of in getting jumped redevelopment think quarter. – there jumped yields up up kind the you've Is to we On – the yield page how should yield been A about with of the project XX XX% – projects? your presentation last the looks XX% yield investor future last average we from higher the just any

Christopher Constant

Sure.

total I general XXX in what yield. about think said over the several we acquisition the market, we've XX% basis points in program premium that think is I expect plus so

completed relates the that was in the it investment increase modest significant part on rent. as was a Specifically, and first to quarter, there project in relatively our a

So, jump to the that's why XX%. from XX% saw you

Joshua Dennerlein

maybe in any Okay, the or deals that the have curious you past are or you there. may of were market like few passed up on? out okay. something you Or there And months Kind that weren't large the -- the wanted? portfolios anything didn't pricing like

Christopher Constant

I think -- sure.

thing. answer part that to So, would in on market been second nothing comes really say considering overall mind the the mean of there's to specifically that the first, I first top The quarter. that the passed we've I perhaps timing I to the the and trend think that's and down, And this think consolidation to a of purely we just grow at consolidate expect large timing I it's but slow just point. continue industry

Joshua Dennerlein

Appreciate Thank Okay, you. it. all right.

Operator

We'll our question Please Anthony ahead. Instructions] JPMorgan. from go [Operator take Paolone next with

Anthony Paolone

Yes, thanks.

sense or total Just terms what you up get are How questions. all in you of pipeline first a to the to look quarter? volume? much the at Just how following in much -- of seeing did on as

Christopher Constant

the pipeline first How added quarter? much new in is the to

Anthony Paolone

underwrite? tens you or I dollars like like order did Yes, the-- how what's it mean was and millions of much -- or of of Just hundreds magnitude

Mark Olear

It's Olear. Mark

underwriting we've in actionable remain but we confident so on criteria the something think or consistent out a basis, far far broke I as we've of we'll pace we that coming of but far steady find that been don't the And I as it seen as -- that opportunities meets stated, on year down what think to-date year. been we're quarterly disciplined through it's our So, as a applied criteria, would opportunities steady last I say year. that last our presented it's we seeing to. we're

Anthony Paolone

Okay. the consider versus huge stuff stations, split point? that traditional you'll between the much some -- what does gas sort of is look And how you currently of like that automotive this at other the storage own concepts

Mark Olear

of towards I it's and or heavily certainly convenience deals. profile would one-off -- portfolios and the -- in say weighted more are gas our

definitely outside of reviews. expand the you in uses. search -- We continue automotive-related it's looking our that gas if to convenience But are towards until to weighed our

Anthony Paolone

set and that that's Or think just the guess deal is potential around yourselves how still trying deal hit opportunity other you you the is looking do these -- set volume toward just like what up buy how the Does lead areas. some getting convenience? to just and of in because And and opening of more box largely rate and gas to that an I'm that higher at of your by you for industry are just understand big kind future? it's brackets I

Mark Olear

convenience think gas new convenience the I relationships both historical relationships existing the continue the towards to is the based tenants on way gas Yes, relationships in and in investment with community. mostly grow that and our our brokerage sector

making are opportunity We other the both to in industries efforts tenant side brokerage set auto-related grow the the in side. and

convenience pipeline will we transition, now to our expand we make of of continue So, in towards as heavily as we hope criteria. that because the that But relationships grow the overall historical weighted sector. it's gas universe that right

Anthony Paolone

question. last just then And

the sold properties vacant few a mentioned after You quarter.

like what this sort sell magnitude or probably at look you'd total, of the time over you its at what portfolio to in As point?

Mark Olear

there's of at point. properties portfolio this disposition -- for not material a not It's

Operator

John We'll next take question Ladenburg Massocca from our Thalmann. with

John Massocca

morning. Good

Christopher Constant

Hey John.

John Massocca

regards broader here of early in on versus active sentiment With been that of you've Just shift with a a as maybe haven't other operators there amongst that shift sentiment couple of types seen? Has has kind financing? been there sale-leaseback M&A to the any with operator but been that traditionally in front. fund sale-leaseback there's though transactions M&A to in using XQ been guessing regards acquirers

Christopher Constant

mean which to. what Not large a probably broader is there referring certain I shift. are you're acquirers

equity. a We have used to or have market traditionally They credit sale-leaseback not financing. access broader

midsized amongst markets. Our not capital and consolidation are some to do in access companies that larger maybe that of well public to not very the fits have capital

to don't happening is really the I that's of and so year-to-date I choose do way sheet. in the What the have been And balance own see largest change. or any their participants see some they first the buyers industry the quarter finance in

John Massocca

locations. been for perspective your from consider lease remarks transact guys c-store anything credit comfortable widening more or more in Okay. be will to that something of kind you rural your get And of terms would property? that mentioned in maybe then Is focused I a as might say prepared acquiring infill and you on you have might you little acquisition parameters -- fairly assets there

Christopher Constant

Yes it's a good question.

stores, acquiring east in the the always We've strategy urban the -- suburban certainly coast. footprint. more and been U.S. southern of has on the in Our history of the company particularly been the markets more area larger larger

rural bit. So tweak sort maintains that But continue U.S. we way think industry. I -- I of the think and the big splash our the a about it MSAs does be XXX the think to or strategy very expect about XX, go It's can little a the model to will a in us you don't around there. real estate to top area be into make think way top we

John Massocca

associated color was being quarter detailed onetime over the pipeline? little development costs with the question. the something of maybe X-timish properties there more are When then you last in on that a say those development And in course one of kind Or Could just uptick this specifically? operating costs? provide there you is

Christopher Constant

reasons a for not Yes, statement. were costs to the then we those projects there pursue and few expensed that elected through were income various

John Massocca

projects. of you When there into not from the active just into knocked to were maybe -- the the it that stuff active pursue is was And be pipeline as pipeline stuff the the that say something I projects moving going figured put well? kind was out

Christopher Constant

below forward various in to the that or know. projects don't means just that presentation These our reasons where weren't counterparty the on various -- be Yes. they whether stages you that were that we not probably side, on elected for side in move investor it'd were step

John Massocca

plans are properties. And kind long-term the for of those what

it You is just operate as or?

Christopher Constant

will let be of lease certain of and will our the we them some them term. sheet again continue redevelopments don't portfolio the of drawing you balance accounting believe continue in Well to stations just will and them But But good the net long keep board. to on back to the the costs gas be -- some go over right? operating then rules

John Massocca

you much. Thank That’s it very sense. for Makes me.

Operator

back to like remarks. we'd time any the additional turn closing to this presenters our At or call over for

Christopher Constant

very Excellent. we the on And as today the the June finish for for much being in look on our goes we Thank progress on second company. will call you forward to the you interest and updating your year quarter of ended then XX.

Operator

concludes This call. you participation. Thank for today's your

You may disconnect. now

Getty Realty (GTY) 1 May 192019 Q1 Earnings call transcript