GTY - Earnings call transcript Q2 2021

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Operator

Good morning, and welcome to Getty Realty’s Earnings Conference Call for the Second Quarter of 2021. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker.

Joshua Dicker

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

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

Christopher Constant

our quarter Good today and Olear, are the $XX.X earning to begin quarter Officer; pace X.X% will Financial of our growth million an execution and in and the in to quarter of and XX% detail we'll $XX to Mark was increase $X.X And retail quarter, the portfolio and automotive the our convenience initiatives. end quarter to-date second our call more of AFFO increase for year funds overview strategies almost of from Josh. share. bringing per XXXX. for highlighted our XX.X% Dickman, I on steady and activity our assets. Josh our aggregate. by results continue million in financial just another growing you, me by and call XXXX, welcome investment in of providing today’s Mark our for Brian our then, million highlight increase the and total Chief Operating of Officer. portfolio in pass execution to a The everyone, second discuss investment the morning, With of our company The Thank performance result after of activity and call continued in invested the total call The Chief net adjusted and revenues, stable-in-place operations investment a was Brian

to investment properties traditional include multiple new-to-industry strategies, successfully which of net loans creative leasebacks, acquisitions construction execute on and continue We assets. our leased for sale

normalized the had rental the full agreed published Once to realized also both and another were well further of the by during data More our year roster. XXXX in again pandemic. the asset sector, due industry this broadly, our Getty Mavis of The month we in record which stable XXXX, of the despite convenience we classes profits National our store and income the the added further to new times. collections as the quarter. during tires strong our coverage quarter, as as Association We tenants which the by Stores both Michigan broadened company geographies of continues quarter target benefit demonstrates portfolio also we Convenience of overall Valvoline as to health as recurring adding by COVID-related new X.X COVID State deferments of evidenced of rent this from performance added

the of year, company the activity we pleased the quarter are enter positioned that second to our raise end. we has As investment AFFO guidance half our year-to-date at

Looking maintaining through committed ahead, our are we healthy active to management. portfolio asset

new growing automotive redevelopments. diligently washes unlocking in embedded the by retail to convenience our including pipelines. and underwrite invest by continues through target remain team related opportunities source We our classes, and in to properties, our addition, investment encouraged work opportunities to asset value car stores, In and selected

as through which shareholder are and approach, beyond. we We drive prioritizes targeted We'll across and estate investment metropolitan with acquiring real strong markets confident XXXX additional country. the move to our value continue

Directors. our will to come. like bring with working over the I and will she has that, portfolio and for investment years to activities. record companies real her discuss value about Board call advising Evelyn to I Infurna long to to to forward With I'm to track and of estate look turn of Evelyn excited company. Mark our investing and our in welcome formally a REITs would I the Finally,

Mark Olear

portfolio end six our properties, quarter, the vacant you, includes the properties. Thank lease net redevelopment XXX At active and five sites Chris. of

excluding Our XX.X%. X.X was redevelopments term overall constant weighted our active remain occupancy and average at lease approximately years

portfolio Our D.C. XX XX% be our top Washington XX base of by XX-month in our rent the continue coverage and over well which remains covered rents tenant the annualized of to times. trailing states MSAs come U.S., plus from X.X ratio spread

additional our quarter of another terms to busy the subsequent investment investment we we $XX.X in $X.X property year-to-date across and $XX invested properties. had acquired we activity of In activities, million XX XX million million to which bringing properties in our and one quarter

second which Valvoline Grand are XX net for acquired Inc with The leases guaranteed triple of Our million. completed included Valvoline were change centers purchase by during quarter the acquisitions branded $XX and Rapids, oil years multiple and The XX.X MSAs of located the properties metropolitan options. remaining have Toledo base the area throughout Michigan Ohio. in primarily Lansing, renewal in term are Detroit,

to Chicago, $X.X Tire on also multiple acquisitions additional quarter of our properties our rate historical car new-to-industry construction the targeted renewal million. Getty bringing million closed These expect for during $XX.X XXX three were an Getty store amount range on all in United These acquisition of base by with years properties yields wash unitary approximately operated the term quoted MSA Mavis additional end, In million with for refuel, the Ohio. $XX.X we've acquired remaining are cash completed for options. XX a of generate line of aggregate, and Cincinnati, existing the car acquisition funded classes. added properties total loans asset WhiteWater funded that for States quarter. our Southeast company Illinois our with located with Texas, have Express located a than across stores in to year-to-date. cap Subsequent we wash the convenience the $X.X four the more Center the in Additionally, lease to c locations to and are million

of to the and quarter As highly convenience construction the with investment transaction, construction accrue will and expect the the part investment period. transaction of the leaseback of a strong continuing portfolio automotive properties this grow at pipeline, our interest ended during retail to on real to with our estate. project sale committed the acquire via we We end we remain phase

lease We expect to will sale of new-to-industry pursue we and construction. that net properties acquisitions leaseback for continue direct funding

platform. Moving redevelopment to our

pipeline. approximately commenced during that have approximately which expects on projects are project, tenants and in that the leased signed the on six of a of of or expect generate the company invested leases, a quarter to to intent, of During which funds $X.X total letters and number intent current excess rent our project investment. return redevelopment require we we but million. acquisition have to investment redevelopment At by In on Maryland can which additional XXXX. today. $XXX,XXX of not in subject quarter market invested will been invest end, million properties these in to incremental Getty XX% a XX from leases and recaptured We the these includes returns pipeline will We these of At redevelopment one commence had projects XX in second the we total, net redevelopments nearly sites leases letter generate a project we sites the our in end, half $XXX,XXX quarter in MSA. approximately rent vacant Baltimore estimate where in at in $X.X Company are currently X-Eleven which signed active to invested property. triple yet signed four projects, on

our for not the minimis exit management had activities did properties de sell financial our a asset quarter, results. to which four properties, company Turning on leased any did but the impact

longer their have to current that, of a our potential. look to we continue properties ahead, selectively With As we I no do results. over in determined Brian financial expose turn call to format competitive that compelling we redevelopment and discuss are will will not

Brian Dickman

second a Good a core Mark. AFFO, AFFO for per the believe performance reflects we XX.X%. Thanks company's $.XX was quarter. increase operating Start also per everyone. share representing morning for of share quarter, which the the of $X.XX with best year-over-year earnings, was recap

interest were $XX.X our X% revenues for the and Rental reimbursement acquisition million, [Indiscernible] grew months increase, over receivable million. income, of last total notes than of additional a tenant projects. excludes X.X%. more drivers year-over-year on were the [Indiscernible] mortgages Strong rent activity $XX.X the leases XX and contribution Our representing which primary to increase

Property costs largely as in that decreased costs certain costs fees. decline employee-related in attributable compensation reduction property to activities in to by taxes quarter including the related fees increase the expenses professional estate and fees and as lower expense side, certain mostly through related driven flow quarter, decreases professional redevelopment primarily due AFFO. to expenses in the G&A costs, in and expenses and On environmental and was expenses both the non-recurring was environmental real to the professional retirement well stock-based

environmental each and note subject be variable. to number are a adjustments to we and expenses estimates continue non-cash quarter As will highly of

ended we million and activities, quarter markets capital revolving with credit long-term our unsecured $XXX million sheet, fixed-rate the balance against the outstanding, our debt total drawn million facility. $XXX $XXX.X including to Turning of million notes $XX.X

cost our Our was the borrowing X.X% was X.X weighted and years. debt maturity average of weighted average

In total addition, net GAAP. XX%, asset debt-to-EBITDA was our to according debt value calculated with terms our metrics Each was market capitalization XX% total and to leverage five are accordance our these times. total to was of debt total the

$XX.X debt structure. quarter we program. to capital, strong facility decrease no well-laddered March leverage a ended credit revolving meaningful our price future of quarter until liability, the XXXX. an credit of election. our Year-to-date, We a and from at option program of have to the maturities ATM We $XX.X June of XXXX but which under in which million, $XX.XX raised we a we're our during end with the selective of and profile, as per we've $X.X our environmental and a about to at than liquidity were committed of total With through share. equity one-year average has issuance million maintaining extension general, including XXXX, to matures needs, million our is raising ATM $XXX,XXX low capital a capital moderate access the at respect flexible In think other

spending environmental was net [Indiscernible]. the For remediation approximately quarter,

a of And a for our property acquisitions XXXX and share of to result to ultimately respect for increase guidance the from respect active properties $X.XX, transaction redevelopments, half activities expenses transaction guidance activity market And include investment with $X.XX the call with This costs expenses. are our Specific remainder back It including guidance potential year, markets Chris. capital XXXX. additional of redevelopment, results expectation rent. Variability the to in we're completed. costs per prior in environmental a operating not with which as to or $X.XX of not range and which which pursuing the including certain does otherwise factors AFFO our completed recapturing guidance. I'll that, impact includes assume variability result we raising costs foregoing of could to our in activities will deals that and the in year-to-date. Finally, certain may acquisitions capital that remain for demolition turn first

Christopher Constant

we Thanks, Brian. will questions. take Operator,

Operator

with Thank you. Todd Our Thomas [Operator proceed KeyBanc. Instructions] question. comes Please from with first your question

Todd Thomas

morning. Good Thanks. Hi.

First you I question last no a But year? is investment compared going looks I slowed pipeline in increased can the two little on activity, further bit to guidance. one first move realized But if forward and second incremental comment as investment quarter of the pace we half in have to the the generally quarter. of since last into the the there's up have in on just activity just curious investments the which the like closings months update. the

Mark Olear

Mark. is this So,

include strategy current comfortable of of our inbound We're pace we've both pretty comfortable other addition business CNG generating through We're we broaden investment opportunities. our recently we asset automotive the our of with announced development. in and pipeline, been classes. As opportunities to all that that opportunities pretty the state

comfortable And of a each of pipeline deal pretty the merely think deal. But I individual factor the in just the right pace so that in closings are think of is the I some now. timing we're where

Todd Thomas

cap think trends look the yields -- like rates cap of the And Okay. rate talk quarter? cap I in or here? about acquisitions does And rates the terms the What in can for were the you with initial line that in market. you today? future indicated completed you What that are

Mark Olear

Sure.

So, to I said, mid X% the as in our high been acquisitions, its range.

referenced we've that of of that deliver targets our market mature more automotive broadening to over comfortable few we to the and kind due just our and verticals creative competitive. investment done be of able as Some feel tightening of being is through compression continue the overall as different kind as years. and well those some of to But more I last we'll acquisitions

Todd Thomas

And construction then, just opportunity there. loans, about that can on that Okay. have the just you you talk

originate you're to the to on construction pricing? of also, us spread sale kind more just what pricing achieving And desire Your relative through remind loans. market can you premium leasebacks

Christopher Constant

Yes.

target continue organic loan really and new broadly the of with for it's have obviously. program, partner consolidating certain we the as high as pipelines. the relationships, the or on our chosen construction operators a And think to path I focus our expect. we been existing to relationships on have you'd Multiples speaking, And industries find Getty that business their growth grow way of are ownership really to their a for end to at period. the operators

think I us to grow quite for continue will the opportunity comfortable. So

and from redevelopment team. the extension is have natural capabilities that a We in-house this

So we're pretty comfortable there. operating

to opportunity. but grow the call class all that yield, certainly focused And premium the little acquisition there's of applicable we're like I significant. its vary We think does it asset certainly it a continue terms over would by premium a bit sector, In to the and on. to think market. going we I target

Todd Thomas

that though you do meaningfully? that or ramp opportunity to you an more an you up And -- that opportunity have feel program that is

Christopher Constant

to I don't think time. to number feel it's target I Todd, it accretively. a like continue over capital going behind, avenue I it's deploy put or an grow to to a but on range want certainly

Brian Dickman

add. The I would one Brian. It's thing

our grow build its to a that reiterated large said, It's simple business to last and And feed se. with their into. us think And the are to someone value our component work own. key that's spoke looking I continue want Chris per as type not platforms the to partners That pieces about add ownership ways to that's can to we the explicitly we portfolio obviously to them assets of helps those path two Chris to gives grow tenant that well. to another of as it. it probably said, what get not objective we the loan partners, key us which help really -- we're

Todd Thomas

Okay. Thank All you. right.

Operator

Instructions] Thalmann. with questions. [Operator with Massocca Our Ladenburg John comes Please proceed your you. question from Thank next

John Massocca

morning. Good

Christopher Constant

Good morning, John.

John Massocca

Or pull on trying those So at the assets you're looking balance construction maybe mean primarily opportunity transactions little sheet. just I kind kind a said onto type of ultimately where coming maybe c-store is redevelopment kind to that a and you concept and redevelopment of more existing Greenfield you're funding of developers loan those de and of are novo revamping that? of of an kind like in construction? of out-of-date kind your they're

Mark Olear

want both, Yes. greenfield bring them heavily tenants a is it's net improvements as material both novo with in-place industry existing de a truly It's operation partners with you tenant standards. it's up capital them the would where We've new little put Mark. into more where the art. We'll for bit where lease they of tilted to the our state of towards to got properties. to partner our say, buildings I said our it

all So, in and leading a our new-to-industry operators consumer with latest and of discussed, just on delivering to that the were partnership greatest it's to edge all the the I be addition kind financial want reinforcement meeting that of metrics demands. in the

are of key new art state repeat facilities, that -- look on program is these great. with where of have a only present we've for repeatable the well, obviously partners the rinse it's program. dependable useful a but their tremendously process. And to And and not relationship them ease partner life, So these long kind in become it's

John Massocca

be muted -- a picture, right out seem construction in now? some space guess I big the going much novo maybe the And set more of to like I mean activities near there how term? c-store it of is little de Is maybe I does the of essentially opportunity big how guess is M&A the it terms kind -- in bit in there

Christopher Constant

growth tenants grow significant opportunity with a an is tell has going sort inside would opportunity So a state-of-the-art mom-and-pop there's royalty c-store to to to it, I the c-store M&A in the that or Mark chain their look of operator of partner, that's to talking which what questions. around chunk that's John. or side of c-store brand away, wash I you But car for car don't a right? put across for whether store that call you wash c-stores a it. looking we the create their particular, operators, similar the the has be of country. what is, amount across with car washes square go was the sort The a want space becomes recognition of consumer the sector, that sector there right tunnel may traditional a if in whether absence car the also box brand right, Todd whether as foot is or X,XXX X,XXX, it, for a there facility, specific region of wash QSR it the store about Express is destination certainly prototype with

So, not or repeatable, think again, certainly is. put the opportunity I'll but amount going up but I a I think its to frame dollar high behind,

John Massocca

then forward? range expect a kind gross Okay. But forward? dollar in light a kind a I net seem balance range the we target? target of still to a portfolio on bit of going things, side That's think I quarter good should I can think issued like kind quarter you to $X X% a of today. be EBITDA invested terms about to maybe on be of basis going this mean, know quarter. be heard maybe of ATM variable should amount, versus million debt that good little in-place to Xx But we of issuance kind would which during And on the how correctly, sheet if I

Christopher Constant

What asset was Leveraged stock to, XXXX, capital it focused what terms maintain year times leverage. ensuring on the legal go rest. obviously price remarks to revolver ended to completely was John a to result the of investment just as off in the number we where think settlements different the sales January the as year at pipeline we five sheet, on of a function in and we ATM balance access -- you end that strong low prepared and at we're that of factors. my I some cash if keep I on metrics balance issuance all alluded the liquidity under of time, leverage. And was there's undrawn as we Yes. and really a liquidity is a said think the balance. is lot moderate I you sheet. in paid back of just on of end And itself The

you first lends pattern the to active itself if back of ATM So to again back that year. the half think I less see a end the kind you'll little us the in and being year, back of of that that go this bit on

a of you what we It’s low think and as think six I that's as I points at business. middle down number we're typically tool at ATM. that continue peers the And as but is different great utilize said, our X.X the middle do X.X, so we'll times, stated on have of a ATM. And go to really maybe execute for to forward, Leverage our five looking we we time in end to we the in range. we're to the right

Operator

Thank you.

comes from America. Joshua with question proceed your next questions. with Bank Please Dennerlein of Our

Joshua Dennerlein

on Could to of I the you just remind has your a everyone. us morning guess portfolio. sticks. curious escalators inflation impact was on maybe linked your or portfolios Good what CPI on percent like Hey. for I maybe

get what see of Just result a of inflation? an can as trying sense we more to a there acceleration

Brian Dickman

One them. upwards Josh. leases with some start of Brian, fact I'll It's have XX% XX%, do Yes. of in is our escalator

they're something in the thirds And typical leases or least leases. every minimus. a On date. does that bulk your That's basis the might annual is CPI roughly portfolio the at have escalators. or then your it's one of annual to be five escalators. is our XX% not about. There a two structure So years the typical, balance two Of

with Obviously, a our it's be blend earnings, off our level based for growth the I redevelopment in value So think annual. into all creation I'll add. I it that in thing to and helpful. is will other of is nice that as And start space. think year. our But way year each about And going escalator is the that then most of and acquisition X.X

opportunity. the And buy at types that my and the originating you're really said, existing But least we environment changing have Mark conversation of and it continue activity some sales and from where leases. as own our about your markets prospective opinion different frequency of is been where have will at and humble it gives -- Given the when with leases majority us activity tenants leases. and leaseback Chris to least and getting either it's to tenants least is that the different in or levels escalators or at

bit acquiring our destiny leases. only we so a that to speak So more were if little control existing over

Joshua Dennerlein

Yes, interesting. like last a in what those want Or conversations is would year the changed lot you like in two? or lease? a maybe Have

Christopher Constant

in not term, if you're something as certainly that increase We best it's in if of material not get specifically dynamic those to think an near annuals. strive about would talking our Do I more but change escalators Brian the mentioned. for conversations. just a

Joshua Dennerlein

Okay, leave awesome. We'll guys. there. it Thanks

Operator

the you. closing and we the reached Mr. question remarks. Christopher I and turn will the of session. have over Ladies Constant for Thank answer end gentlemen, call to now

Christopher Constant

in everyone our look you, forward appreciate to operator. morning. this in forward look your And call on. earnings QX participating Getty. in back Thank for we We interest you Great. We Thank our October. getting

Operator

you your and a for Thank concludes may wonderful participation this conference. This your have time. today's And disconnect at day. lines you

Getty Realty (GTY) 29 Jul 212021 Q2 Earnings call transcript