Getty Realty Corporation

Good morning, everyone, and welcome to Getty Realty's earnings conference call for the second quarter of 2020. This call is being recorded. 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 our non-GAAP financial measures. Please go ahead, Mr. Dicker.

Thank you, Operator. I would like to thank you all for joining us for Getty Realty's second quarter earnings conference call. This morning, the company released its financial results for the quarter ended June 30, 2020. The Form 8K and earnings release are available in the investor relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2020 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company's response to the COVID-19 pandemic, future company operations, future financial performance, and the company's acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's annual report on Form 10-K for the year ended December 31, 2019, Our subsequent quarterly reports filed on Form 10-Q and our other filings made with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements which reflect our view only as of the date hereof. The company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of adjusted funds from operations, or ASFO, and our reconciliation of those measures to net earnings. With that, it is my pleasure to turn the call over to Christopher Constance, our Chief Executive Officer.

Thank you, Josh. Good morning, everyone, and welcome to our call for the second quarter ended 2020. With Josh and me on the call today are Mark O'Lear, our Chief Operating Officer, and Daniel Fielding, our Chief Financial Officer. Similar to last quarter, we will provide an update on our business in the context of the ongoing COVID-19 pandemic and also provide our customary quarterly review of our portfolio and financial statements. Regarding COVID-19, I can report that to date, even though the pandemic has had a profound impact on the U.S. economy in general, It has not had a meaningful negative impact on Getty's financial results. Our strategic focus on an essential segment of the retail economy, the strength of our portfolio, and the efforts of the entire Getty team have resulted in strong quarterly performance for our company. I continue to be proud of the resolve and hard work that our employees have shown during this stressful period. We are executing on all our initiatives within the company and are maintaining Getty's high-quality standards under challenging circumstances. The net results of our efforts combined with the resilience of our convenience and gas and other automotive portfolio of net leased assets was another quarter of earnings growth where our quarterly AFFO increased by 3% and on a per share basis grew to 44 cents as compared to 43 cents in the prior year's quarter. Turning to our strategic objectives, year to date, Getty acquired 15 high-quality properties for approximately $69 million, including the acquisition of three properties during the quarter. While the transaction market had taken a pause for most of the second quarter and continues to be restricted in certain ways by the COVID-19 situation, we are beginning to again see opportunities emerge. In addition, we completed two more redevelopment projects in the second quarter, bringing our total number of completed projects to 17 since the inception of our redevelopment effort. Let me now share some additional detail on Getty's performance during the pandemic. For the quarter, the performance of the commuting gas and other automotive asset classes in general and our portfolio more specifically was strong. We collected more than 96% of rent and mortgage payments and agreed to 2.3% of short-term deferrals for rent and mortgage payments. These deferrals were granted to select tenants and mortgagers who made specific requests and were able to demonstrate a material negative impact to their businesses. In most of these cases, the base rent or mortgage payment deferrals will be paid back over the course of the following six to 12 months, depending on the particular arrangement. Looking ahead to the third quarter, as of today, our collections rate increased to 98% for the month of July, And we also agreed to additional short-term deferrals of 0.6% of rent and mortgage payments for the month. In addition, we collected substantially all the COVID-related rent and mortgage deferrals that were due to be repaid in July. I will now provide some additional perspective to better understand the basis of our strong rent collection. Last quarter, we discussed the impact of the public health crisis, associated travel restrictions, and stay-at-home orders. As a reminder, the vast majority of our convenience stores and gasoline stations and other automotive-related properties, including our car wash assets, were deemed essential under state guidelines, meaning that almost all of our properties have remained operational. Again, I want to reiterate, it remains a challenging environment for our tenants, with reduced customer traffic and sales, and many tenants continue to face multiple operational and health and safety challenges. But our properties and tenants have fared much better than other retail asset losses. Nationally, fuel volumes are rebounding from their lowest levels during the pandemic of being down almost 50% and are now down approximately 20%. Much of this recovery can be attributed to the fact that it is the summer season, which is typically strong for fuel volumes, combined with the fact that people are avoiding air travel for summer vacations and that certain office markets are reopening. Although the recent historically high fuel margins have stabilized, they continue to be slightly elevated on a national average, meaning that our tenants are making more money on a cent-per-gallon basis. That said, the overall net impact to fuel gross profit remains a highly regional issue, with certain of our tenants experiencing year-over-year declines and others reporting increases in annual fuel gross profit. In contrast, the convenience store side of the business has generally performed well across the board, with many of our tenants reporting that results are slightly ahead of prior years' performance. While our industry has continued to exhibit stability, and there are a number of positives for Getty in particular, I would like to emphasize that the greater the duration and severity of the COVID-19 pandemic in the United States, the greater the risk that there will be additional economic impacts on consumer and retail activity generally, and therefore to Getty's financial results. To touch on our balance sheet and liquidity position, we ended the quarter with $25 million of cash on hand and $225 million of availability on our revolving credit facility. Additionally, we were active with our ATM program in the quarter and officially raised permanent capital. We placed a premium on low leverage and remain committed to maintaining a well-laddered and flexible capital structure. We believe we have sufficient access to capital as we sit here today through cash on hand, funds available under our revolver, and our ATM program. Looking ahead, while the situation remains fluid, we are continuing to effectively navigate this uncertain environment. We believe that our execution of our strategic objectives over the last several years, the essential nature of our tenants' businesses, the net lease structure of our leases, and our stable balance sheet all position us well. Furthermore, we believe there will continue to be opportunities for Getty to continue to grow its business. We are confident that our targeted investment strategy, which focuses on the largely Internet-resistant, service-oriented convenience and gas and other automotive sectors, in metropolitan markets across the country will continue to create value for our shareholders over the long term. We remain committed to an active approach in managing our portfolio of net lease assets, expanding our portfolio through acquisitions in the convenience, gas, and auto-related sectors, and selective redevelopment projects. We are confident in our ability to continue to successfully execute on our strategic objectives over the long term. This approach and focus on these critical components should result in driving additional shareholder value as we move through 2020 and beyond. With that, I'll turn the call over to Mark O'Lear to discuss our portfolio and investment activities.