Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to Getty Realty's Earnings Conference Call for the Second Quarter 2023. 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 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 Second released available Form you, X-K like June 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 include best our on may and operations, that results could include known company's future differ opportunities. and guidance such events to statements or our us judgment that financial you the statements forward-looking performance investment also future materially. XXXX reflect We based Examples or plan currently actual regarding of factors and caution

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

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

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

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

Christopher Constant

quarter XXXX. Good Josh. And for everyone. call of you, the earnings to morning, welcome our second Thank

activities will Brian Officer. our us Joining Chief Chief Operating company's today and our I the are our lead on call financial commentary provide by accomplishments. our Olear, providing off and Officer perspective Dickman, on call and investment on year-to-date today's Financial Mark results

usual, As will and then financial further you portfolio our to results Mark Brian and discuss will guidance. our take

year-to-date under than than second particularly by our thoughtful the million aforementioned contract $XXX driven first was over development environment of months. car which thus uncertain share capital $XXX second all or growth of and past for to investment the including our of economic XXXX our the first X.X% results QSRs, with we've fund also the invested given been centers growth combined AFFO investment healthy performance growth next XX million we per acquisition able quarter In third to to half and the Year-to-date, convenience of pipeline which express We over tunnel and committed half over net first in $XX.X million washes we expect and X.X% of a produce XXXX. of This the quarter, which to service in are markets operating. stores, earnings nine the the activity auto and pleased robust of $XX quarter, quarter. were year, more in which execution our in far increase with we more we've million, strong activity

stores. disciplines increasing country, source of non-keeping new acquire our in year over particularly to target given added and plans many to identify increased transaction investments these market. types our and MSAs underwriting XXXX high respect newer With their asset which continues team addition percentage investments in diversifying than thus diversification, directed of top quality around classes opportunities And businesses. In transactions we've to and portfolio year-to-date earnings to standards. portfolio. this success all our as new on continued our our the driving rigorous also more grow of ABR to our our tenants XX% to true eight finding are to reflect in to the given additional scaling also proud asset our of have choppy We've seek emphasis operators year, the investment these this am new XXXX the far investments from growth, to with our relationships I beyond. opportunities strong tenants with our that through will established been The

interests and bring portfolio. of When our diversity we like have incremental pipeline, strong look our tenants to the a that at we with they alignment our

continues conservative with $XXX On leverage quarter the million capital. revolver accretive that investments. additional permitted a unsettled profile undrawn and us equity attractively and We side, capital has capital provided ended forward provides activity to that of access our support priced flexibility markets the approximately to year-to-date capital and with

With the industry for of more health the survey every salesforce. service. convenience in transaction industry of particular topping last inside both continues for gasoline across state counts fuel with billion year for the of of recently increase stores data time. annual regard sales, was industry, year a for sales and store XXXX. highlights in gross convenience to Convenience region to profits Association be on United Based Foodservice of than another store for $XXX the merchandise X well driver and first X% an record growth transactions, key the their in published wide sales survey growing National as C-store Stores States, for the and goods The as inside NEXT report

substantially. immune both expense direct side, not store card to expenses in with were the operating significant On store increases costs, operators fees related credit employer convenience rising and

from the headwinds, in drive help who to branding, these the takeaways invested these challenges, overcome and in have sales the continue who technology report profits. and C-store operators of sector, resilience operations store increased Despite are the key

strategy we investment and we our in of the benefit growing our advantages in earnings the market diversifying As with this We have direct focused space. portfolio. competitive move from our believe expertise relationships from balance operators on sector nature scaling environment, our through XXXX, team and while the resulting targeted and remains that the we of our

Our and to high national development regional major partnering in opportunities. emphasizes continues with yield quality owning and growing approach, disciplined attractive real funding acquisition operators metro which and estate areas,

We opportunities operations carefully will tenant to and underwrite site credit. each characteristics, level real continue estate

our to conservatively activity sheet support this balance Importantly, access value capital demonstrated to create investment our leveraged continue additional and and for shareholders.

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

Mark Olear

Chris. Thank you,

the Lease and XX.X%, lease occupancy of X,XXX As leased term the and redevelopment sites, years. properties was was our our active included weighted of end active X.X portfolio the quarter, four excluding redevelopment net average

and top plus of XXX Our XX% coming DC, portfolio Washington coming XX base the annualized top XX% from with MSAs our XX rent MSAs. states from spans the

are X.Xx. covered rent Our well coverage XX-month a rents tenant trailing with ratio of

properties across million another California number our across properties types for construction of MSAs. to we service $XX.X Turning property activities, Highlight of acquisition quarter’s this US markets had for $X.X Louisiana different of $XX million, and million investment the one quarter, Getty in three restaurant carwash invest in attractive to diverse investment include Thru which a in activities under the Drive three point, quick Southern million. carwash located for $X.X strong

complete additional will this construction As funding to period we the acquisition, projects. these during provide part of

for in the amount and accrued centers. the of including We also $XX.X funding auto stores advanced interest convenience industry construction service carwashes, development of new million,

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

US. million initial $XX.X acquired the invested quarter, And the cash we second across of average is X.X%. of an lease Subsequent investment for targeted four end, and markets term of spread acquisition cumulative on is our the gross development of The quarter for activity carwash cash yield was $XX.X convenience additional XX.X our an XX in across yield industries. investment or stores approximately our of million The the years. at aggregate weighted activity various properties to result investments X.X% properties year-to-date the initial

commitments consistent activities. of approximately we Looking and asset average basis Chris yields rates a the investment across profile. XX ahead initially our over developments these variability evaluate variety to target depending class tenant next with year-to-date and to XX with acquisitions points to Continue the XX and and potential that underwrite asset our Cap expect have of months, months regarding classes. expanded referenced, on opportunities to average in fund $XXX transactions fund X million last

to As of leverage opportunities new are business majority to the reputation the economic with of we and broad credit, several to and as of vast change are well our believe adjust accretively quality access we market we our tighter invest the which proven tenants, are XXXX. high to the move to pleased through remainder perform and positioned includes landscape sourcing relationships. continues network that to we repeat ability We through create

pipeline. in land a for to four $X our with Trip. invested We one million active store a expect Austin, projects the properties of of Moving million the and years. on which convenience quarter under of included rent in the in to lease in project, are quarter of net generated we over our and return which which stages to our continuously We Kwik during on platform, planning portfolio the various project total projects commenced redevelopment invested from XX.X%. stages complete leased and $X.X feasibility various ended acquisition capital few redevelopment a is in MSA, the invested in approximately redevelopment completed the We new where potential adjacent next other recapture

were second management property we quarter, one asset no property the Turning there dispositions. to our exited activities and for leased

that, turn over Brian I’ll to With the to discuss results. our call financial

Brian Dickman

recorded net we Good $X.XX per share the of we for X.X% and XXXX, share increase respectively. $X.XXfor income in per $X.XX Mark. the reported share, QX Last Thanks, everyone. XXXX. quarter $X.XX QX AFFO over were morning, a and AFFO night, per representing

excludes quarter, recurring redevelopment rental GAAP activity driven increase million leases, to escalators tenant projects. and by revenues our total rent completed our grew for year. growth with for $XX.X income to additional which be X.X% X.X% acquisition were adjustments commencements $XX.X and second continues over million. an the in This contribution prior and representing reimbursements revenue the Base rent Our

and due costs $X.X the quarter $X.X On in quarter $X.X compared of to rent quarter XXXX. the and slightly The million million million costs, compared real Leasing the Total to costs expenses $XXX,XXX due the declined costs in taxes. for compensation. in projects. to estate was increase due expense also as in by personnel non-cash property were reductions declined to operating stock-based for as expenses side, the quarter to second million XXXX. demolition primarily of reductions second in redevelopment for G&A $X.X including reimbursable redevelopment G&A change second expense, were Property

are which variable of XXXX. a to second the estimates expenses, to a compared of Environmental quarter credit for highly were as adjustments million quarter number of noncash $XX.X in the $XXX,XXX due and

XXXX at for unknown reserves credit accrued of a in liabilities due As the was environmental previously properties. the removal reminder, to certain

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

XX, was June was capitalization EBITDA net debt total of total X.Xx and to As to XX%. debt

While total debt net account to asset would as indebtedness to pursuant of equity agreement total our to was million, credit Xx. unsettled XX%. approximately forward Taking $XXX into EBITDA be calculated value

$XXX was end, at revolving in undrawn maturity step completely Our is credit our quarter million XXXX. facility and near

X Moving approximately shares sale for settled million. to proceeds of ATM the to agreements forward subject common program, net during of stock quarter, $XX.X we the million

anticipated which entered proceeds total of agreements, million. common stock, will XXX,XXX of anticipated agreements for upon raise of shares million. also settlement new a We into X.X gross We have $XXX currently generate million approximately shares sale for are gross forward approximately proceeds $X.X subject sale to of which

Pro million to these balance to as these expected mentioned, debt transactions forward sheet investments for Chris agreements, the Forma expect committed X.Xx we to our funding to standard to our out to our as we investment pipeline, capacity EBITDA Leverage in remain our growth. equity support line target continued we revolving through well facility. range anticipate $XXX expect in well and revolver. credit to remain maintain of ample as positioned X.Xx from capital proceeds with is activity, our under undrawn net Returning

an reduction that we're our to we was all investment ended ensure profile. transactions evaluate in sources the pipeline the at accretive quarter investment liability, With continue we $XXX,XXX our funding which XXXX. grade evolves, manner capital environmental while maintaining end to As since of will our of $XX.X to respect million,

million. second approximately Our net was $X.X the in spending remediation environmental quarter

$X.XX XXXX are $X.XX. our of range we our Lastly, of AFFO share per previous $X.XX from a range to guidance to to $X.XX narrowing

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

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

Operator

Instructions] [Operator

comes from Dennerlein America. question from First Joshua the of line Bank of

Unidentified Analyst

of Hi, the year. QX, specifically on I'm Granite Farrell already pacing you've comment is of make the what you about for Josh this is Dennerlein. question for Considering announced, behalf your closing maybe if pipeline. curious My rest about can for the investment a

Christopher Constant

little to Farrell, it’s you. a bit hard hear

asking about you're we deploy of think the balance I pipeline, expect the the year? what to

Unidentified Analyst

Yes, considering announced been already QX. pace the especially that has for

Mark Olear

permits into and the XX the to expect transactions. say. over out months, program, look of some four we I basis, funding on close of the forward dependent pipeline close that's three pacing forward particular or quarters, So X But we development to those go next timing a of stayed next those actual would transactions the is that completion, upon in construction over

Brian Dickman

we and Those the Farrell, out a to Mark’s And period. usually that put that will a that evenly throughout are is funding timing acquisitions out Yes, from think be that modeling come straight for later. be guide But to perspective, the going estimate we time will of best when I that we is which typically line some bit points assume relatively deployment. little little pipeline kind bit generally sooner. happen deployment, will development

Operator

from Next KeyBanc Todd the Capital question of comes Markets. from Thomas line

Todd Thomas

morning. Good thanks. Hi,

question. First

then, pipeline were as upside or forward anticipated quarter a volume new forward like about You seeing. yields yield Can and levels, I talk you're those committed what's commented there. the X.X% just that on it deals? that pricing investment the of you moving and the additional underwrite Or on locked in what's pipeline remain bit. any at do to up you little at moving picking levels investment expect guess that's price Do investment activity stable appears in in acquisitions see these the you deals sounds you is

Christopher Constant

I to would year. say over the yield, modest the there with expansion Yes, of respect be might balance a

the movement that last within will That classes push think moderated over continue XX said slightly. months referenced to different I XX is to we the asset pricing. we've seen

are your pipeline. than percent assets stickier good I different to that But to yields the forward So the others. X-ish about specific question probably are a of way think think

Todd Thomas

under but you think additional that Okay, the is bit committed be right – expansion, about contract, a the to could there X.X so cap rate little for deals yield moving pipeline, new might put

Christopher Constant

in Yes. months it's at but than XX expansion There could pace modest more the be the some there's, modest XX to I same there, much have back and I wouldn't be put points, look it we think. going

in I of stabilized. categories those asset somewhat our classes, think have many

Todd Thomas

in stabilized yields a preference that development you about then at on those like? talk is achieve can between and us capital buckets? two there terms pricing properties that the how acquisitions? What Okay, how the or And developments, on you yield looks of you funding and allocate you'll remind acquire spread to those the how completion, compared

Christopher Constant

of guess. questions, I a couple Yes,

return that us two go deals With funding out some to includes, our timing There collars a range partners, roughly both products protect XX deals, the over pretty across our blended capital basis the the see to market on leaseback new within preference to it's and committed tenant investments. regard of we'll the forward point we funding, of great roughly a deal commitment, the for premium, funds. for specific and obviously, types than we good a of from developing structures, that development as to of their further some a deals look, say referenced instruction. are the year anywhere development evenly industry against partners are sale point our those both that, And they're deployment and those for So, would quarter to basis traditional offer for the between balanced it, of to close I products, forward of source and because premium all that value fluctuations.

Todd Thomas

less was I straight across second you a then that. in down the decreased and wondering additional XX limited what or But of occupancy, about you expect tick And know I could have loss just quarter. it's three And points, anything role it's the any or if years, seeing basis very you ABR in but it Okay, two talk you're than occupancy ‘XX. out nature. or another and just whether small next curious the that was through X% any move portfolio of occupancy

Christopher Constant

into I talking, literally too quarter. Chris, read I a think, that. wouldn't much about We're property is one this for Todd,

months. roll XX portfolio little As is to very leased, XX our you the said, next over largely

to term. number near So, again, don't expect that materially the move we in

Operator

Next Mitchell Securities. JMP with Germain line question of comes from the

Mitchell Germain

morning, front. assets, activity C- there rather of or mentioned investments C-store is than is in XX% stores, a the I there? pricing Good anything the function competition kind think that deal Is of you Is of read to of lack other or inventory?

Christopher Constant

asset we're the percentage wants our certainly Mentioned new in diversify of too existing across read classes and partner able acquiring be wouldn't of that. the asset of much the you, the eight year. across said, a focus in size is our increase over so We our for classes. partners we're that that years tenants It's to I would C-store investments or to C-stores tenants value of and as we're bring to that [inaudible] and one here. our before certainly make able diversity on of couple capital all we Again, last underwriting to the and focused been work, into new and ABR we we're balance pleased various

Mitchell Germain

asset different classes that you then like that at there targeted you a Chris, Got you. And is point, own? the look to when mix?

Christopher Constant

four, the the service sector, drive still Yes, I sector. scale, in or thru would auto I especially scaling the we're phase say this up think even

to if next we'd for here like more ramp the in as verticals car balanced. several we look and more we other be we think internally balanced are washes again, majority out certainly underwriting out, two I has look been us, years. the But of up those our year-to-date. plans I'd as much say our to over be C-stores So

Mitchell Germain

Great. Last recent some the you're of one for the you're term investments, escalators terms bit it lease structure, development. obviously, like of a of me, seems lease in on kind similar little Is of the more a longer getting? getting

Christopher Constant

XX Yes. It's either really average XX that some terms was base years. or

just close it And specific. the deal it’s really, you're depends what on So quarter-to-quarter.

Operator

Next question Akhil JP Tampali comes the line from with Morgan. of

Unidentified Analyst

I question, can Morgan. current Hi, Akhil you JP the anything My am on watch on the elaborate and time? from at first good overall credit morning. this list

Christopher Constant

Yes, about in this we've past. talked the

us, as the sites to level given at get, For reporting site tend our we look of we watch list. specific property really

So point. talking list the or it's have for our always But this tenants several Whether there's candidate watch we to or is redevelopment picture big any do portfolio, at that not re-leasing a properties or tenants on we're not about. for a inside But referenced perform moved tenants very this potentially are the tenants properties disposition. continue to well. continuing carwash well quarter-to-quarter. industry number environment, state Again, to hasn't current do at looking the data, that really in we're our substantially of NEXT, I of

outcome fortunate properties with talking a these our to we're at said, about So best for handful in tenants and of but we're And always we that own properties that those sites. the sectors. looking

Unidentified Analyst

for question. assets long does And rent one how and stabilize towards you. coverage? tenants, take lease With the to last these the deals in the the a for pipeline being it number of used Thank targeted

Christopher Constant

We've assume then model, anywhere the on and to ramp grand our a in pro initial on look underwriting But Yes, two sales, where from we'll had to successes some and anywhere asset they've years. quarterly so three class, a three track from the two typical at up that. the those depending stabilized opening we than a recent it forma on industry basis. two stabilize following we years earlier from then sales, we line basis, to initial growth top year underwriting typically for

Operator

with of from Next Baird. Saigon the question comes line Alex

Unidentified Analyst

question. you thank taking my for guys, Hi,

there, investment have is the in out and of properties kind on what's XX between acquisitions pipeline, mix of first The the the you development?

Christopher Constant

funding. kind the of pipeline of I probably half-ish as it today, But the of snapshot time, earlier blending a and you about closed half, is roughly sale out equally in said It's as down look and flow as leaseback as at acquisition a the the traditional development ebb between again, pipeline. program transactions

Unidentified Analyst

guys Okay, And out what for know don't But question. site tenants; of how it of like thank you don't level those X% you have they? reporting. to the properties go that back you that. to And track are the track do watchlist I you kind properties? report,

Brian Dickman

Yes, any not clarify, this just tenants. don't our just don't our list. watch tenants it's track on We And is that Brian. have to we

do are make right? reporting our we less level So indicator check thing an can that other monitor on you're we do businesses. we where have have to So and the activities, sure between best X% of general those to now Probably between right, their well points that of coming are that's the tenants of paying in We timely, just the business. most over And the Look, as well across. with guys obviously part tenants XX% them rent. rent obviously in public periodically capturing, their managing out important it. visibility just everyday then asset how they're reaching we management site

Operator

from Reiss Scott. the Next line with Brett Janney Montgomery comes question of

Brett Reiss

opportunity station to for automotive to is the story our about of by the a question. a the charging Journal with ask not may companies venture impact And I'm carmakers? service Street build a may Wall respect In the that how billion stations. the on component out joint lead or Thanks your Good there's forming on $X morning. to what's invest view to a the portfolio curious, be today, investment

Christopher Constant

really what's forward this the we the industry are point, at think I industry the right. that in about report state driving still themes talked

focused they're follow growing Certainly stopping whether in at trends follow the those whether need industry their growing customer relates of folks visit categories. at But visits, from the And regardless we tenants they or been of from tenants Again, store. products are very for driving C-stores, far the fueling to gas profits are visits EVs whether successful driving or tenants need there the aware market. folks as expand thus it offer industry the they C-stores, vehicle. the driving on the expanded all Our not. seeing the charge have or additional and share additional to are of profits

expect out we I next that over to several look trend as we the years. continue think that -- and

Thank you. There comments. time. back no to at are further questions like floor to the over Constant closing this turn I Christopher for would

Christopher Constant

Great. Thank October, and our this in for operator. And updating you, everyone everybody to on look report our forward that thank We on call morning. listening activity quarter you in at getting back we point. our on third

Operator

you. teleconference. Thank today's This concludes

disconnect lines may Thank your You time. for at participation. this you your

Getty Realty (GTY) 27 Jul 232023 Q2 Earnings call transcript