Getty Realty Corporation

Good morning and welcome to Getty Realty first quarter 2024 earnings call. This call is being recorded. After the presentation, there will be an opportunity to ask questions. Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel, and Secretary for the company will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker.

Thank you. I would like to thank you all for joining us for Getty Realty's first quarter earnings conference call. Yesterday afternoon, the company released its financial and operating results for the quarter ended March 31, 2024. 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 2024 guidance and may also include statements made by management, including those regarding the company's future company operations, future financial performance, or investment 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, 2023 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. They hear up. 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-GAF 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 earnings call for the first quarter of 2024. Joining us on the call today are Mark O'Lear, our Chief Operating Officer, and Brian Dickman, our Chief Financial Officer. I will lead off today's call by summarizing our financial results and investment activities, and will provide commentary on how we continue to execute on our overall strategy in a thoughtful and disciplined manner, despite the headwinds impacting all net lease companies. Mark will then take you through our portfolio, and Brian will further discuss our financial results and guidance. We had a productive start to 2024, building on our momentum from last year. The combination of the investments made in 2023 and our year-to-date activity, plus the successful capital markets activity that pre-funded these investments, positions us to deliver continued earnings growth in 2024, even as we remain patient in a still uncertain interest rate environment. In the first quarter, we invested approximately $41 million across 35 properties. We also continue to diversify our business by investing across our four primary convenience and automotive retail asset classes, including convenience stores, express tunnel car washes, auto service centers, and drive-through quick-serve restaurants. In addition, the team at Getty continue to actively manage our in-place portfolio by extending two material unitary leases with near-term maturities, which resulted in an uptick in our weighted average lease term at quarter end. The net result of our excellent performance from the last year and our strong start to this year was a quarterly base rental income increase of 13.1% and a 1.8% growth in our quarterly ASFO per share. Looking ahead, Getty continues to be well positioned to create value for shareholders in the current environment, both through the strength of our in-place portfolio and our ability to source and close investment opportunities, which will further advance our growth and portfolio diversification efforts. To that end, we currently have a committed investment pipeline of more than $44 million under contract at a blended cap rate in the high 7% area, which is fully funded from our prior capital markets transactions. In addition, thanks to the efforts of our investments team, we are evaluating a steady flow of potential acquisition and redevelopment opportunities. Our target retail sectors and institutional tenant base continue to perform well and maintain healthy profit margins and rent coverage ratios. Specific to the C-Store sector, the National Association of Convenience Stores recently published a summary of their annual State of the Industry report showing that 2023 was another record year of sales for the industry. We also continue to benefit from our focused strategy and direct relationships. Despite many operators in our target sectors prioritizing operations and or being more selective when it comes to growth, we've been steadily sourcing new opportunities to underwrite. Pricing these transactions remains a challenge as bid-ask spreads persist, but we're pleased with the deal flow and trust that we'll be able to execute as the transaction market continues to adjust. Overall, we expect 2024 to be a challenging year for acquisitions of net lease properties in our sectors. However, we believe we have a clear path to generate earnings growth from the rent escalators in our in-place portfolio, additional income from investments made in 2023, and those already completed in the first quarter, as well as closings from our committed pipeline, which are expected to occur throughout 2024.