GETTY REALTY CORP /MD/ Q3 FY2024 earnings call

• The company grew and diversified its portfolio through accretive acquisitions, with more than 90% of 2024 investments direct with tenants. - Advanced redevelopment projects, including a new Chipotle restaurant and three new automotive service lease signings. - Extended two material unitary leases representing 11% of ABR, with year-to-date extensions of four unitary leases representing over 13% of ABR, increasing weighted average lease term to over 10 years. - Raised more than $245 million of common equity and unsecured debt, including $121 million via an overnight offering in July and $125 million of new senior unsecured notes in a private placement. - ABR increased 13.1% year-over-year to $190 million as of September 30, 2024.

The company's portfolio includes convenience and automotive retail assets. In the third quarter, Getty invested $30.2 million across 16 properties at an initial cash yield of 8%. It has more than $70 million of assets under contract at a blended cap rate approaching the mid-8% area. The in-place portfolio remains strong with excellent occupancy, rent collections, and rent coverage. Redevelopment activities included the first rent commencement of the year with a new Chipotle restaurant in Providence, Rhode Island MSA, and three new signed leases with a large take five oil franchisee for automotive service redevelopment opportunities.

• Raised 2024 AFFO guidance to a range of $2.32 to $2.33 per share from a previous range of $2.30 to $2.32 per share. - Guidance includes transaction and capital markets activity to date and does not assume further acquisitions, dispositions, or capital markets activities for the remainder of 2024. - Primary factors impacting outlook include variability in operating expenses, deal pursuit costs, and timing of redevelopment demolition costs.

• Lingering economic uncertainty and upcoming election. - Material bid-ask spreads for net lease properties in target sectors. - Uncertainty with respect to the rate environment and cap rates not expanding to capture full increase in capital costs borne by institutional investors.

Q: How would you characterize the current transaction market?

A: Christopher Constant noted a disconnect between buyers and sellers, with sellers expecting cap rates to decline but Getty's view is cap rates should align with longer-term rates. Pipeline is in the mid-8% area.

Q: Can you provide more color on the sale of properties to Global?

A: Christopher Constant and Mark Olear explained it involved negotiation around term, rents, and which properties to keep in the portfolio, with Global wanting to refine their portfolio and it being a good outcome for both parties.

Q: Has the bid-ask spread improved and do you expect cap rates to move down in 4Q?

A: Mark Olear said bid-ask spread is still there but Getty is confident in sourcing deals. He expects cap rates may increase on closings of current pipeline transactions but may come down in 2025.

Q: Do you prefer existing tenants or new relationships if Arco exits C-stores?

A: Christopher Constant said it would depend on the counterparty and their view of Getty's properties and strength as a counterparty