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Getty Realty Corp. Announces First Quarter 2019 Results
JERICHO, N.Y.–(BUSINESS WIRE)–Getty Realty Corp. (NYSE: GTY) (“Getty” or the “Company”) announced
today its financial results for the quarter ended March 31, 2019.
Highlights For The First Quarter
- Net earnings of $0.26 per share
- Funds From Operations (FFO) of $0.43 per share
- Adjusted Funds From Operations (AFFO) of $0.42 per share
- Completed one redevelopment project
- Re-Affirms 2019 Outlook
Christopher J. Constant, Getty’s President & Chief Executive Officer
commented, “In the first quarter, we produced solid revenue growth
reflecting the additional properties we added last year. We remain
focused on growing our national portfolio of convenience stores and
gasoline stations in markets that have high barriers to entry in
established metropolitan areas, along with targeted high growth markets.
We maintain a well occupied portfolio which generates stable growth,
while continuing to analyze our growing acquisition and redevelopment
pipeline of opportunities that would be accretive to earnings. With a
strong balance sheet and stable cashflows, we will continue to work to
deliver additional value to our shareholders.”
Net Earnings
The Company reported net earnings for the quarter ended March 31, 2019,
of $10.9 million, or $0.26 per share, as compared to net earnings of
$10.0 million, or $0.25 per share, for the same period in 2018.
Funds From Operations (FFO) and Adjusted Funds From Operations
(AFFO)
FFO for the quarter ended March 31, 2019, was $17.8 million, or $0.43
per share, as compared to $17.8 million, or $0.44 per share, for the
same period in 2018.
AFFO for the quarter ended March 31, 2019, was $17.5 million, or $0.42
per share, as compared to $16.8 million, or $0.42 per share, for the
same period in 2018.
All per share amounts in this press release are presented on a fully
diluted per common share basis, unless stated otherwise. FFO and AFFO
are defined and reconciled to net earnings in the financial tables at
the end of this release. See “Non-GAAP Financial Measures” below.
Results of Operations
Revenues from rental properties increased 6.1%, or $1.9 million, to
$33.3 million for the quarter ended March 31, 2019, as compared to $31.4
million for the same period in 2018. The growth in revenues from rental
properties for the quarter ended March 31, 2019, was primarily due to
revenue from properties acquired by the Company in 2018, along with
contractual increases. Tenant reimbursements included in revenues from
rental properties, which consist of real estate taxes and other
municipal charges paid by the Company which were reimbursable by the
tenants pursuant to the terms of triple-net lease agreements, were $3.7
million and $3.1 million for the three months ended March 31, 2019 and
2018, respectively.
Property costs were $5.5 million for the quarter ended March 31, 2019,
as compared to $4.9 million for the same period in 2018. The increase
was principally due to higher reimbursable real estate taxes and
professional fees related to property redevelopments.
Environmental expenses were $0.9 million for the quarter ended March 31,
2019, as compared to $1.0 million for the same period in 2018. The
decrease was principally due to lower environmental legal and
professional fees. Environmental expenses vary from period to period
and, accordingly, undue reliance should not be placed on the magnitude
or the direction of change in reported environmental expenses for one
period, as compared to prior periods.
General and administrative expense was $4.0 million for the quarter
ended March 31, 2019, as compared to $3.6 million for the same period in
2018. The increase in general and administrative expense for the quarter
ended March 31, 2019, was principally due to $0.3 million of
non-recurring employee related expenses attributable to retirement costs.
Impairment charges were $0.8 million for the quarter ended March 31,
2019, as compared to $2.8 million for the same period in 2018.
Impairment charges for the quarter ended March 31, 2019 and 2018, were
primarily attributable to the effect of adding asset retirement costs
due to changes in estimates associated with the Company’s environmental
liabilities, reductions in estimated undiscounted cash flows expected to
be received during the assumed holding period for certain of its
properties, and reductions in estimated sales prices from third-party
offers based on signed contracts, letters of intent or indicative bids
for certain of its properties.
Portfolio Activities
There were no property acquisitions or dispositions during the quarter
ended March 31, 2019 and 2018.
Redevelopment Activities
During the quarter ended March 31, 2019, rent commenced on one
redevelopment project and the Company spent $0.2 million (net of
write-offs) of construction-in-progress costs.
As of March 31, 2019, the Company was actively redeveloping seven of its
properties either as a new convenience and gasoline use or for
alternative single-tenant net lease retail uses. In addition, as of
March 31, 2019, the Company had signed leases on five properties, that
are currently part of its net lease portfolio, which will be recaptured
and transferred to redevelopment when the appropriate entitlements,
permits and approvals have been secured.
Balance Sheet
In connection with the adoption of the new lease accounting standard, on
January 1, 2019, the Company recognized operating lease right-of-use
assets of $25.6 million (net of deferred rent expense) and operating
lease liabilities of $26.1 million.
As of March 31, 2019, the Company had $415.0 million of outstanding
indebtedness with a weighted average interest rate of 5.2%. The
Company’s indebtedness consisted of $90.0 million in aggregate
borrowings under its credit agreement and an aggregate principal amount
of $325.0 million of senior unsecured notes. Total cash and cash
equivalents were $19.1 million as of March 31, 2019.
2019 Guidance
The Company reaffirms its 2019 AFFO guidance at a range of $1.71 to
$1.75 per diluted share. The Company’s guidance does not assume any
potential future acquisitions or capital markets activities. The
guidance is based on current plans and assumptions and is subject to
risks and uncertainties more fully described in this press release and
the Company’s periodic reports filed with the Securities and Exchange
Commission.
Conference Call Information
Getty Realty Corp. will host a conference call and webcast on Wednesday,
May 1, 2019, at 8:30 a.m. EDT. To participate in the call, please dial
(800) 289-0438, or (323) 794-2423 for international participants, ten
minutes before the scheduled start. Participants may also access the
call via live webcast by visiting the investors section of the Company’s
website at ir.gettyrealty.com.
A replay will be available on Wednesday, May 1, 2019, beginning at 11:30
a.m. EDT through 11:59 p.m. EDT, Wednesday, May 8, 2019. To access the
replay, please dial (844) 512-2921, or (412) 317-6671 for international
participants, and reference pass code 7172224.
About Getty Realty Corp.
Getty Realty Corp. is the leading publicly-traded real estate investment
trust in the United States specializing in the ownership, leasing and
financing of convenience store and gasoline station properties. As of
March 31, 2019, the Company owned 859 properties and leased 73
properties from third-party landlords in 30 states across the United
States and Washington, D.C.
Non-GAAP Financial Measures
In addition to measurements defined by accounting principles generally
accepted in the United States of America (“GAAP”), the Company also
focuses on Funds From Operations (“FFO”) and Adjusted Funds From
Operations (“AFFO”) to measure its performance. FFO and AFFO are
generally considered by analysts and investors to be appropriate
supplemental non-GAAP measures of the performance of REITs. FFO and AFFO
are not in accordance with, or a substitute for, measures prepared in
accordance with GAAP. In addition, FFO and AFFO are not based on any
comprehensive set of accounting rules or principles. Neither FFO nor
AFFO represent cash generated from operating activities calculated in
accordance with GAAP and therefore these measures should not be
considered an alternative for GAAP net earnings or as a measure of
liquidity. These measures should only be used to evaluate the Company’s
performance in conjunction with corresponding GAAP measures.
FFO is defined by the National Association of Real Estate Investment
Trusts as GAAP net earnings before depreciation and amortization of real
estate assets, gains or losses on dispositions of real estate,
impairment charges and cumulative effect of accounting change. The
Company’s definition of AFFO is defined as FFO less (i) Revenue
Recognition Adjustments (net of allowances), (ii) non-cash changes in
environmental estimates, (iii) non-cash environmental accretion expense,
(iv) environmental litigation accruals, (v) insurance reimbursements,
(vi) legal settlements and judgments, (vii) acquisition costs expensed
and (viii) other unusual items that are not reflective of the Company’s
core operating performance. Other REITs may use definitions of FFO
and/or AFFO that are different than the Company’s and, accordingly, may
not be comparable.
FFO excludes various items such as depreciation and amortization of real
estate assets, gains or losses on dispositions of real estate and
impairment charges. In the Company’s case, however, GAAP net earnings
and FFO typically include the impact of revenue recognition adjustments
comprised of deferred rental revenue (straight-line rental revenue), the
net amortization of above-market and below-market leases, adjustments
recorded for recognition of rental income recognized from direct
financing leases on revenues from rental properties and the amortization
of deferred lease incentives, as offset by the impact of related
collection reserves. Deferred rental revenue results primarily from
fixed rental increases scheduled under certain leases with the Company’s
tenants. In accordance with GAAP, the aggregate minimum rent due over
the current term of these leases is recognized on a straight-line basis
rather than when payment is contractually due. The present value of the
difference between the fair market rent and the contractual rent for
in-place leases at the time properties are acquired is amortized into
revenue from rental properties over the remaining lives of the in-place
leases. Income from direct financing leases is recognized over the lease
terms using the effective interest method, which produces a constant
periodic rate of return on the net investments in the leased properties.
The amortization of deferred lease incentives represents the Company’s
funding commitment in certain leases, which deferred expense is
recognized on a straight-line basis as a reduction of rental revenue.
GAAP net earnings and FFO include non-cash changes in environmental
estimates and environmental accretion expense, which do not impact the
Company’s recurring cash flow. GAAP net earnings and FFO also include
environmental litigation accruals, insurance reimbursements, and legal
settlements and judgments, which items are not indicative of the
Company’s core operating performance. GAAP net earnings and FFO from
time to time may also include acquisition costs expensed and other
unusual items that are not reflective of the Company’s core operating
performance. Acquisition costs are expensed, generally in the period
when properties are acquired and are not reflective of our core
operating performance.
The Company pays particular attention to AFFO, as the Company believes
it best represents its core operating performance. In the Company’s
view, AFFO provides a more accurate depiction than FFO of its core
operating performance. By providing AFFO, the Company believes that it
is presenting useful information that assists analysts and investors to
better assess its core operating performance. Further, the Company
believes that AFFO is useful in comparing the sustainability of its core
operating performance with the sustainability of the core operating
performance of other real estate companies.
Forward-Looking Statements
CERTAIN STATEMENTS CONTAINED HEREIN MAY CONSTITUTE “FORWARD-LOOKING
STATEMENTS” WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. WHEN THE WORDS “BELIEVES,” “EXPECTS,” “PLANS,”
“PROJECTS,” “ESTIMATES,” “ANTICIPATES,” “PREDICTS” AND SIMILAR
EXPRESSIONS ARE USED, THEY IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT’S CURRENT BELIEFS AND
ASSUMPTIONS AND INFORMATION CURRENTLY AVAILABLE TO MANAGEMENT AND
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH
MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.
EXAMPLES OF FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO,
THOSE REGARDING THE COMPANY’S 2019 AFFO PER SHARE GUIDANCE, THOSE MADE
BY MR. CONSTANT, STATEMENTS REGARDING THE RECAPTURE AND TRANSFER OF
CERTAIN NET LEASE RETAIL PROPERTIES, AND STATEMENTS REGARDING THE
ABILITY TO OBTAIN APPROPRIATE PERMITS AND APPROVALS.
INFORMATION CONCERNING FACTORS THAT COULD CAUSE THE COMPANY’S ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS CAN
BE FOUND IN THE COMPANY’S PERIODIC REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
RELEASE REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE
EVENTS OR CIRCUMSTANCES OR REFLECT THE OCCURRENCE OF UNANTICIPATED
EVENTS.
GETTY REALTY CORP. CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands, except per share amounts) |
||||||||
March 31, |
December 31, |
|||||||
ASSETS | ||||||||
Real estate: | ||||||||
Land | $ | 630,653 | $ | 631,185 | ||||
Buildings and improvements | 406,812 | 409,753 | ||||||
Construction in progress | 2,023 | 2,168 | ||||||
1,039,488 | 1,043,106 | |||||||
Less accumulated depreciation and amortization | (154,132 | ) | (150,691 | ) | ||||
Real estate held for use, net | 885,356 | 892,415 | ||||||
Real estate held for sale, net | 630 | — | ||||||
Real estate, net | 885,986 | 892,415 | ||||||
Investment in direct financing leases, net | 85,066 | 85,892 | ||||||
Notes and mortgages receivable | 32,015 | 33,519 | ||||||
Cash and cash equivalents | 19,145 | 46,892 | ||||||
Restricted cash | 1,938 | 1,850 | ||||||
Deferred rent receivable | 38,676 | 37,722 | ||||||
Accounts receivable, net of allowance of $1,950 and $2,094, respectively |
1,522 | 3,008 | ||||||
Right-of-use assets – operating | 24,649 | — | ||||||
Right-of-use assets – finance | 1,156 | — | ||||||
Prepaid expenses and other assets | 57,339 | 57,877 | ||||||
Total assets | $ | 1,147,492 | $ | 1,159,175 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Borrowings under credit agreement, net | $ | 87,433 | $ | 117,227 | ||||
Senior unsecured notes, net | 324,438 | 324,409 | ||||||
Environmental remediation obligations | 59,250 | 59,821 | ||||||
Dividends payable | 14,555 | 14,495 | ||||||
Lease liability – operating | 25,201 | — | ||||||
Lease liability – finance | 4,606 | — | ||||||
Accounts payable and accrued liabilities | 53,774 | 62,059 | ||||||
Total liabilities | 569,257 | 578,011 | ||||||
Commitments and contingencies | — | — | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value; 20,000,000 shares authorized; unissued |
— | — | ||||||
Common stock, $0.01 par value; 100,000,000 shares authorized; |
409 | 409 | ||||||
Additional paid-in capital | 638,877 | 638,178 | ||||||
Dividends paid in excess of earnings | (61,051 | ) | (57,423 | ) | ||||
Total stockholders’ equity | 578,235 | 581,164 | ||||||
Total liabilities and stockholders’ equity | $ | 1,147,492 | $ | 1,159,175 |
GETTY REALTY CORP. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts) |
||||||||
Three Months Ended |
||||||||
2019 | 2018 | |||||||
Revenues: | ||||||||
Revenues from rental properties | $ | 33,287 | $ | 31,352 | ||||
Interest on notes and mortgages receivable | 762 | 764 | ||||||
Total revenues | 34,049 | 32,116 | ||||||
Operating expenses: | ||||||||
Property costs | 5,495 | 4,935 | ||||||
Impairments | 771 | 2,817 | ||||||
Environmental | 903 | 987 | ||||||
General and administrative | 3,977 | 3,587 | ||||||
Allowance for uncollectible accounts | 85 | 126 | ||||||
Depreciation and amortization | 6,099 | 5,594 | ||||||
Total operating expenses | 17,330 | 18,046 | ||||||
Gain (loss) on dispositions of real estate | (51 | ) | 649 | |||||
Operating income | 16,668 | 14,719 | ||||||
Other income (expense), net | 205 | 363 | ||||||
Interest expense | (5,946 | ) | (5,050 | ) | ||||
Net earnings | $ | 10,927 | $ | 10,032 | ||||
Basic earnings per common share: | ||||||||
Net earnings | $ | 0.26 | $ | 0.25 | ||||
Diluted earnings per common share: | ||||||||
Net earnings | $ | 0.26 | $ | 0.25 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 40,873 | 39,710 | ||||||
Diluted | 40,891 | 39,712 |
GETTY REALTY CORP. RECONCILIATION OF NET EARNINGS TO FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS (Unaudited) (in thousands, except per share amounts) |
||||||||
Three Months Ended |
||||||||
2019 | 2018 | |||||||
Net earnings | $ | 10,927 | $ | 10,032 | ||||
Depreciation and amortization of real estate assets | 6,099 | 5,594 | ||||||
(Gain) loss on dispositions of real estate | 51 | (649 | ) | |||||
Impairments | 771 | 2,817 | ||||||
Funds from operations | 17,848 | 17,794 | ||||||
Revenue recognition adjustments | (379 | ) | (782 | ) | ||||
Changes in environmental estimates | (341 | ) | (512 | ) | ||||
Accretion expense | 538 | 691 | ||||||
Environmental litigation accruals | 45 | — | ||||||
Insurance reimbursements | (191 | ) | (215 | ) | ||||
Legal settlements and judgments | — | (147 | ) | |||||
Adjusted funds from operations | $ | 17,520 | $ | 16,829 | ||||
Basic per share amounts: | ||||||||
Earnings per share | $ | 0.26 | $ | 0.25 | ||||
Funds from operations per share | 0.43 | 0.44 | ||||||
Adjusted funds from operations per share | $ | 0.42 | $ | 0.42 | ||||
Diluted per share amounts: | ||||||||
Earnings per share | $ | 0.26 | $ | 0.25 | ||||
Funds from operations per share | 0.43 | 0.44 | ||||||
Adjusted funds from operations per share | $ | 0.42 | $ | 0.42 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 40,873 | 39,710 | ||||||
Diluted | 40,891 | 39,712 |
Contacts
Danion Fielding
Chief Financial Officer
(516) 478-5400
Investor Relations
(516) 478-5418
ir@gettyrealty.com