Earnings call transcript Q3 2022

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Operator

Good morning, and welcome to Getty Realty's Earnings Conference Call for the Third Quarter 2022. This call is being recorded. After the presentation, there will be an opportunity to ask questions.

Prior to the starting of the call Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a Safe Harbor statement and provide information about the non-GAAP financial measures. Please go ahead Mr. Dicker.

Joshua Dicker

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

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

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

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

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

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

Christopher Constant

Thank you the welcome quarter and earnings Joshua. of call to Good our morning, everyone, for third XXXX.

are Chief Chief Financial Officer. Mark Dickman, us the Joining Olear, today Officer; and Brian Operating call our on our

I quarter's financial activities, conditions, and the despite across impacting observations unsettled companies will on some and and lead providing strong commentary company's investment the on and which country. perspectives today's market by off the position call results, are offer consumers

As usual, Mark results you financial our will in our through will more detail. then and portfolio take discuss Brian

pleased of retail are net platform with We the quarter. lease performance in the our third

strategy, and perform to flows trajectory increased and continue continues earnings stable well, with a coverage, rent pipeline. to and portfolio in-place our an investment on Our we cash positive growth generating execute

the grew For quarter, X.X%. our base income rental

to grew high-quality AFFO subsequent company and attractive adjusted growth $XX markets million, end, Charleston Our and and $X.XX. in AFFO Antonio. has funds the including operations wash million as located CNG the third from such San per our quarter invested share car and more to X.X% $XX or than Austin, increased approximately and properties Year-to-date, quarter in

convenience investment stores, or than properties, led dedicated to we of from year the so. to centers new-to-industry development wash and $XXX car over have The our acquisition million to auto next the which pipeline increase team net in committed our more of fund a service and efforts expect

but in rates. of and approximately fund liquidity elaborate identified XX% this select attractive raising Equally or allow activities raised prevailing at transaction funding meaningfully have further transactions. market inside activity capital to us will spreads position in we strong Brian for will important, our costs lock these accretively remarks, already and investment of his

further growth. while so, and maintaining an activity we've capacity provide to undrawn And balance low of this leverage revolver to the done fund and

classes, all an across as disciplined evolving marketplace. to we of continues and our remain asset team navigate approach target we in Our opportunities underwrite our

we across and automotive the partnering in currently diversifying to continue relationships, set undergoing our change. Our and executing owning retail continues With a to significant in portfolio, investment underwriting is further on national while expertise, sectors. where real estate opportunity strategy an operators convenience our our an ability and environment emphasize growing pricing expanding and are asset and high-quality confident strategy remaining with our regional disciplined

Given our expected year ninth the performance increase an This growth, and our growth. in our board dividend year-to-date have approved share. to earnings represents recurring $X.XX grown our the of quarterly dividend alongside future straight X.X% per we

ratio company's believes increase prospects this is for growth a XXXX. and maintains annual payout as the Our appropriate Board it stable reflects

Additionally to capital to $X.XX a our as we guidance per our a AFFO investment year-to-date in of XXXX share. $X.XX result of range activities, are raising

business. despite we macro reiterate, to want the environment challenging for I are open

continue capital to Our to permanent to and accretive long-term underwrite diligently work and finance source raise teams opportunities to growth. that investment

Getty through and the value nature our environment well-positioned tenant to believe including and well-positioned XXXX portfolio through essential create current operating our XXXX. is very We of as given diversification ability balance We assets, in our the and remain earnings ample strength for base confident end liquidity. into shareholder we leverage our sheet of the institutional growth move and low the of

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

Mark Olear

Chris. you, Thank

As third active quarter, properties, of portfolio lease our the end includes four net redevelopment sites the four vacant and of X,XXX properties.

active years XX.X%. our X.X was to term lease average increased overall excluding and redevelopments weighted Our occupancy

of times. to top tenant properties XXX and country XX% plus $XX.X on from million top additional million. which additional $X.X total And Our our properties our base annualized by Washington the in XX-month trailing bringing third an million quarter our after of coming MSAs D.C. year-to-date MSAs, investment coverage XX% the terms rents added invested end in XX two eight are $XX.X our in ratio well states the we spans and from covered the portfolio XX rent X.X investment the of come across activities across and quarter US

the $X.X and stores Fairhaven, Adding, Connecticut new Antonio convenience closing and and Car a of South Austin MSA, quarter's two in San six million, carwash Charleston Austin two investments convenience providing in York the China development acquisition properties another Jacksonville, this $X.X approximately for into Texas total of the three in include properties, located and in Wash industry Newberg Go leaseback one store on New MSA of MSA properties one MSAs. Texas for the the funding million construction of

part investments on upon phase final and As during the accrue these interest and will completion sale-leaseback funding our the construction the of via transactions projects of we acquire properties funding.

acquired cash weighted For third initial XX.X the the the was for aggregate X.X% years. properties quarter, and activity was lease investment of approximately yield the average term our

our X.X% been our directly and tenants. and acquisition XXX% with team Year-to-date tenants existing by is initial activity approximately aggregate the cash term XX.X acquired our repeat investment retail includes yield sourced and mixture has of for convenience years. and activity automotive Year-to-date properties investment on lease weighted average a is new the business of

the to assets funding were from sale new upon that investments XX% a expect renew sale-leaseback derived leaseback which and subject transactions, we of to development are long-term triple-net industry of acquire from were derived XX% completion lease via project. the

Chris of schedules are of and dependent acquisitions timing agreements development ultimately fully to each Looking developments commitments we the business each that and under fund on projects to while referenced ahead executed have investment and complete able the close certain which regarding acquisitions. million counterparties the they and amount is our $XXX for transaction

year-to-date. points XX the XX have or these in transactions closed so where acquisitions average to yields we of the with months access initial next throughout expect fund basis We approximately

during quarter the to convenience and XX% representing investment We underwritten variety other potential underwrite sectors continue convenience automotive volume a the with stores retail opportunities balance. the of and of representing

target economic of in the As our tighter pricing asset changed continued credit discussed asset classes, lease call, net and to retail landscape movement we last across markets. asset market on our all are as the seeing adjusts

of While positioned believe the we invest the end XXXX we cost and are well increase not movement into to accretively speed capital as the market, across to and through XXXX. this has yet up magnitude move caught the we of in

redevelopment our to platform. Moving

projects the in During in We Boston on $XXX,XXX We six our invested a of commenced and the stages project letters in a triple and project on in currently to with one drive-through at the leases commence invested signed in location or next intent, been new at generated various from one capital in recaptured projects, four over subject a property, rent ended The company which we these We Chase lease completed and pipeline. other quarter, vacant Bank yet a project property. return on the rent the X.X%. quarter MSA. of LOI which not are active invested approximately one signed and tenant later where includes net redevelopment a to including have current projects which years XXXX. is $XXX,XXX expects set

dispositions the and of our realizing exited sold gross We'll for continue to quarter. properties. million to leased property. one asset third activities three pursue proceeds in properties Turning $X We management

allow do our sheet and believe either not compelling which compelling no us capital have are longer that part We valuations balance as sources their have in to redevelopment managing competitive of format current may capital. recycle of potential, we have and determined

With to I call turn that the Brian. over

Brian Dickman

Thanks, $X.XX Last we of morning, X.X% versus quarter the year-over-year third XXXX. we quarter, FFO the the reported reported in per per Mark. of increase $X.XX share for Good night everyone. representing of a third share

were quarter, $X.XX to million. for FFO adjustments and tenant X.X% Total GAAP which income, rent $XX up For grew the and revenue the million to and net and per additional quarter excludes any X.X% rental $X.XX share, reimbursements, base respectively. income revenues were $XX

the in increase, our recurring leases the additional with contribution over redevelopment activity from and of were acquisition the projects. Our last escalators drivers XX completed primary months rent

costs. the side, of increased $XXX,XXX, a personnel the for On G&A slight quarter, expense result third increase a of compared XXXX $X as million to costs the quarter of were

to were over Property we by with rent XX development reduction primarily costs leased reductions costs, increased due expenses exited declined past professional in partially associated months. XX the fees lower expense, including potential projects. $X.X $X.X operating million permanent properties to offset million redevelopment These have increases property declined – a and as leasing in

a due to estimates are to of $XXX,XXX number variable primarily XXXX, non-cash reduction versus in a Environmental quarter $XXX,XXX expenses, to to liabilities. for estimates related which declined highly unknown due the adjustments, environmental in and

markets entirely of and of debt a with years. X.X% weighted sheet million of with X.X activities. maturity $XXX and average balance a weighted of unsecured consisting senior total the interest capital the to Turning notes ended quarter rate We average our outstanding,

have facility, other our we unsecured quarter until no revolving We end. have private which was no our placement, floating our at debt with XXXX. undrawn having rate $XXX debt February maturities maturity exposure than credit XXXX notes And million addressed

credit XX, and indebtedness while September of defined in to our EBITDA value was was capitalization to asset total as net XX%. total As total times debt X.X to was XX%, agreement total debt

million. we have quarter, formal been which proceeds entered ATM of will no settled. gross agreements sell at $XX.XX the to generate date, During agreements into our $XX.X sale XXX,XXX through program to common shares shares sale To per forward share, subject

$XXX Returning million to our and pipeline financing. associated committed investment

which of X.XX% XXXX, million of to due million $XXX after $XX notes funding have in of in refinancing We unsecured notes, activity XXXX. of our investment is X.XX% coming available January fund June

$XX of identified $XX over of Combining flow with and and proceeds on required $XX or sheet, debt we've this balance XX net of capital forward million million cash proceeds fund from our our next cash raised to select of property million the pipeline. retained the proceeds, XX% months, over dispositions ATM

Cost undrawn of an and rates, continue provide additional this and current capacity we leverage and capital is to inside and of fund of our the flexibility spot revolver the balance pipeline to meaningfully to remain growth. low

ample expect capital to stated this strong our ranges. including and Pro for forma leverage investment previously with in line, balance our remain we activity, in sheet liquidity

and including pipeline we're manner, transactions an continues proceeds ensure investment-grade our to common accretive evaluate As capital sources while we equity, debt that disposition profile. credit funding investment will all in our incremental evolve, to

to of XXXX. of a liabilities. of reduction million million The which respect at removal million, from of $XX.X end reserve driver liability, unknown of the environmental $XX.X our With ended the improvement the was quarter was primary we the $XX.X

to As legacy expired XXXX. unknown that related defined properties pre-existing, discovered was during responsibility we during reserves where reminder, retained look-back these periods, environmental were contamination a up the have to which clean

the at there had properties, was accrued. liabilities, We having unknown been continued material which accordingly and obligations contractual satisfy remove concluded these no previously reserve to that risk of

$X.XX. to was with of our a investment quarter of respect the a result we Our and to raising range to to $XXX,XXX remediation our per AFFO of net environmental are our our as in $X.XX $X.XX range previous capital markets XXXX $X.XX earnings finally guidance, approximately spending share from activities, in year-to-date

through the As includes a assume does AFFO guidance property acquisitions, transaction to redevelopment costs, factors on include P&L. costs costs or remainder which deal but otherwise not impact run certain reminder, and respect of variability, our for to potential operating with our $XXX,XXX approximately of pursuit to markets which related projects dispositions and any activity to demolition date, capital outlook activities Specific our the year. continue

questions. to the will call With for that open ask the I operator

Operator

Ladies Instructions] first you. question session Thomas conducting a question-and-answer Todd comes we now will be from Markets KeyBanc and [Operator Thank Capital gentlemen of The

Todd Thomas

morning. good thanks, Hi,

expected I basis think as stabilized First year-to-date question, yield anticipating like it terms points pricing you're of you're the asset the on pressure in sounded upward investments rates, pipelines, on but above some yields million yields seeing just on you XX X.X. and on with $XXX the investments initial expectation which about noted the the mentioned cap committed you that

quarters think you more you're rates? pressure of color cap that's is few provide expectation rates for consistent in and with around, cap what last I seeing your How Can are what a over bit quarter. that little next terms trending? the upward

Mark Olear

it's Thanks the for Yes, Mark. question.

certainly activity. the slow, is in expansion of further pipeline. of activity, we're basis It's year-to-date the are in XX restate cap higher I'll the rates looking So at commitments forward kind just the than there points been points some but that that outlook the

there bit upward So that. again, a little slower, and sure some we'll movement, I'm is but capture

Todd Thomas

the to Okay. pipeline? Can for of It $XXX sort the this I the today? increased like quarter characterize, suppose $XX investments I characterize can here? behind What's pipeline maybe $XXX your shadow additional pipeline And million million. million by behind this? I was what's pipeline quarter. adding this guess, guess appetite you last you

Mark Olear

We're underwrite highlighted And verticals. within pipeline. continue momentum asset team on So, hopefully grow classes. deal experience to opportunities to continues good us we focus the opportunities, those we'll for across continue see is What to all the across that diverse all the bring retail forward activity automotive the verticals. we've all staying to that here gaining committed

Brian Dickman

is it's of way But the we're some the really to our that use repetitive. time. fund the balance match drawing first it's this is, at on We the positioned to Todd, the the along we Brian. would little pipeline. whether you feel whether a maybe amount used others if bit look well where ability have and it's on on know again, a I add forward sheet revolver, just for very that capital the effectively go raise forward, in tapping I ATM tool.

little our and we've disposition good a select accelerating that. But tool of business that's a on for used activity the We about a bit some basis. talked

feel to in And activity. that opportunities continue find and for as it's finding business. I think upon So, summed to that is Mark the in we're said, a position. it incumbent Chris the financing team investment to fund us his good And open we up remarks, we're

Todd Thomas

the has move think volume of additional forward relatively move lock you cost well. we we current your that's yes, It about Yes, and discussed sources was of a for committed equity which capital Brian, sort up helpful. you I you've for also, what How held issuance forward, should the to pipeline, your as you runway about as here, capital guess, helpful. the cost potential funding dispositions gives and of into what in XXXX? of

Brian Dickman

Yes.

On best or sold overall investments price third to obviously basis contract the the it, we the of the describe the and the equity, the the business under cognizant into that we but look, I the and for raised fits valuation we're in we that way that forward how think right model. at on works selective have quarter, is

the So low Again, I have we revolver. We undrawn do do say, leverage. have selective. would

lot of flexibility a if have So we as feel we there.

as we And far I in and think talked probably, I about back on certainly July, we April this the dispositions, did. February, maybe as know

on remarks. think bit Mark this a strategically in looking at I to Just more portfolio identify, his the little touched

and equity the but better markets proceeds costs bit pull where achieving today important also little in at some portfolio objectives. the can value of we maybe than Assets it's market greater capture in a

one-off lease unitary looking of whether that's perspective. primary So a properties transact term that shorter leases, or to from something are but that's something that's a a away at income-producing select opportunities disposition those lease our from some otherwise

Todd Thomas

Okay, great. you. That's helpful. Thank

Operator

of Massocca Thalmann. from Ladenburg The comes next John question

John Massocca

Good morning.

Christopher Constant

Good morning.

Brian Dickman

John. morning, Good

John Massocca

expect about on really color call I is this XX-month the the the a at million cadence of just sorry the kind kind that's the of the last I'm of any leak-out kind and But color you in the next mean call, $XXX pipeline. talked it be $XXX of thinking to for was million you wondering, it as this that maybe would Just June helpful. weighted year know closing on this I Just window of for be end we on of towards year? had QX. far the should do kind any of as there

Brian Dickman

this that is under time probably final balance that give sale-leaseback will XX% back-end I'll over Those transactions as more regular and three convert this we time those you XX-plus their front-end will of is waste be half John, composition kind Yes, to range just fund weighted About months. the of That's sure. development percent activity. helpful. that likely pipeline Brian. are six and funding. The make transactions. on draws into tenants of sale-leaseback more is hopefully

So you be right all that that it straight-line is a But the over there's probably look way time to we transactions the to this I a you look horizon fundings from closing may basis. relatively blend continue equal on at when assumption to a perspective, period. think XX-month going to out, weighted from throughout board. across it and But line it that's it deviate the at modeling is months think XX over straight best that throughout

John Massocca

should of existing of leaseback then the tenants some kind And active investment I M&A pretty competitive we activity about the Okay. on think know front. in to transactions been of environment your sale how top portfolio have the the additional in terms do market, in

deals? relatively still tight just now there for pricing are because those opportunities if there's, those operators is of type wondering maybe I'm larger

Brian Dickman

some continue our tenants to to I portfolio. are markets M&A our into bring the still that tenants the in talk whether try think prospective we all they're we tenants, to continue or of active. portfolio with The to

Obviously, that opportunity I not one in getting I say multiples an in sale-leaseback is tenants of But pricing think there's large M&A business small. the for do or right? changing and with both wouldn't our market, existing to

be managing good constantly market, into maybe had maybe tenants fact we're bank our some available out it the today's financing here that more the not a allows as to today. to of think job get heavily the our that into whereas us activity readily previously opportunity I in active heavily doing form or sheet may underwriting market be other balance

John Massocca

And I lease it, call? kind of how back investment people that net more have capital QX at is competing even that competition deals, for cost sale people granular since guess just of environment competition, the the in has kind table of maybe leaseback even volatility? of or terms competitive and Are changed left, the or weren't kind there of of there because

Brian Dickman

say, would ever just as as I it's it's been. competitive

John Massocca

it you Okay. me. for very much. That's Thank

Operator

now Thank you. questions for in Chris gentlemen, [Operator over no hand Instructions] Ladies are further the to queue. will and I Constant, closing remarks. there

Christopher Constant

call. company. fourth forward when on everyone thank we joining to we your operator, quarter you, report Great. February. getting look late And phone Thank you our the interest appreciate and morning this and in for us results back with you We the for in our year-end

Operator

Thank lines. now participation. Thank may And disconnect your your you, sir. conference. This for concludes you today's you

Getty Realty (GTY) 27 Oct 222022 Q3 Earnings call transcript