Getty Realty Corporation

Good morning, everyone, and welcome to Getty Realty's earnings conference call for the third 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 third quarter earnings conference call. Yesterday afternoon, the company released its financial results for the quarter ended September 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-K and our other filings may be 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 that are 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 AFFO and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer.

Thank you, Josh. Good morning, everyone, and welcome to our call for the third quarter end of 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 prior quarters in 2020, we will provide an update on our business in the context of the ongoing COVID-19 pandemic and also provide our quarterly review of our portfolio and financial statements. Regarding COVID-19, I am pleased to report that our third quarter results are further evidence of the stability of our triple net lease rents and growth platform. Our portfolio of convenience stores, gas stations, and other automotive assets produced another strong quarter of rent collections, operating performance, and growth at Getty. I am especially proud of our company as we achieved our results during a difficult time for the overall U.S. economy and related challenges to many aspects of the retail real estate sector. The entire Getty team is working hard to continue what has been a very strong year for our company. We are proud of our accomplishments year to date and expect to continue executing on all of our initiatives for the remainder of 2020. Turning to our results, we've benefited from the stability of our triple net lease rents and our active and accretive acquisition program. As a result, our third quarter revenues for rental properties increased by more than 4% to $37.2 million in and our ASFO per share by more than 9% to 47 cents per share. The success of our acquisition strategy year-to-date has been a key contributor to our earnings growth, including transactions that closed just after the third quarter ended. Getty has acquired 32 properties for approximately $140 million so far this year. These high-quality assets are located in numerous markets across the country and include portfolios of both convenience and gas assets as well as car washes. While the COVID-19 pandemic caused disruptions in transaction activity across the commercial real estate sector, Getty has been able to maintain momentum and close on several opportunities which we had underwritten earlier in the year. In addition, as Mark will mention, we completed our redevelopment project with 7-Eleven and the Dallas-Fort Worth MSA for a remodeled convenience and gas location, bringing our total number of completed projects to 18 since the inception of our redevelopment. Let me now share some additional details on Getty's performance during the pandemic. For the third quarter, the performance of the convenience and gas and other automotive asset classes in general and our portfolio more specifically was strong. Our collections have continued to improve, and in the quarter, we collected 98% of our rent and mortgage payments and agreed to a small number of short-term deferrals for rent and mortgage payments. Perhaps more importantly, we received substantially all of the deferred rent and mortgage payments which were due to be repaid during the third quarter. Looking ahead to the fourth quarter, as of today, our collections rate currently remains at 98% for the month of October, and we are continuing to collect substantially all of the COVID-related rent and mortgage deferrals that were due to be repaid this month. Although uncertainty remains regarding the forward impact of COVID-19 to the broader economy, we are encouraged by the strength exhibited by our tenants and assets since the beginning of the pandemic. We will continue to be vigilant in monitoring the health of our tenants as we believe the severity of the COVID-19 pandemic on the U.S. economy will continue to impact consumer and retail activity generally and therefore could negatively affect Getty's rent collections and financial results. The operating environment for our tenants remains stressed as many tenants continue to adjust their operations to reflect ongoing health and safety challenges. Despite these challenges, most of our properties and tenants have performed well during this difficult time. Nationally, fuel volumes continue to recover and are now down 17% year-over-year compared to the 50% decline we saw at the height of the pandemic's impact during the second quarter. In addition, fuel margins remained elevated on a national basis from comparable periods in 2019, meaning that on an average, operators are making more money on a cents per gallon basis. The net impact to fuel gross profit remains highly regional, with certain of our tenants experiencing year-over-year declines and others reporting increases in annual fuel gross profit. The convenience store side of the business has generally performed well across the board during the pandemic, with a majority of our tenants reporting that results are slightly ahead of the prior year's performance. To touch on our balance sheet and liquidity position, we ended the quarter with $58 million of cash on hand and $190 million of availability on our revolving credit facility, with some of the cash on hand being used to fund acquisitions we have already closed during the fourth quarter. We believe we have sufficient access to capital at this point in time to execute on our business plan. Turning to our dividend, given our performance, I am pleased to report that our board approved an increase of 5.4% to $0.39 per share in our quarterly dividend. This represents the seventh straight year with a dividend increase. Our board believes this annual increase is appropriate as it maintains a stable payout ratio and is tied to the company's growth over the past year. 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 tenant 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 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, across metropolitan markets in this 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 leased assets, expanding our portfolio through acquisitions 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 the remainder of 2020 and beyond. Before turning the call to Mark, let me just address our recently announced executive transition. Daniel Fielding, our CFO, is going to be leaving the Getty team for personal reasons. I'd like to thank Daniel for his dedication to Getty over the last four plus years. Daniel led his team and the company's finances and was a key part of Getty's success. We expect that Daniel will leave Getty before year-end, and we wish his family and him well in his future endeavors. The search is underway, and we anticipate a smooth transition of the CFO role. With that, I will turn the call over to Mark O'Leary to discuss our portfolio and investment activities.