Joshua Dicker - Vice President, General Counsel and Corporate Secretary Dave Driscoll - Chief Executive Officer Chris Constant - Chief Financial Officer.

Anthony Paolone - JPMorgan.

Good day and welcome to the Getty Realty Corp's Second Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Joshua Dicker, Vice President, General Counsel and Corporate Secretary. Please go ahead, sir..

Thank you. I would like to thank you all for joining us for Getty Realty’s quarterly earnings conference call. Yesterday evening, the company released its financial results for the quarter ended June 30, 2014. The Form 8-K and earnings release are available in the Investor Relations section of our Web site 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 may include those made by Mr.

Driscoll regarding future company operations, future financial performance and the Company’s acquisition or redevelopment opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual results or events could differ materially.

I refer you to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as well as our other progress with the SEC for a more detailed discussion of the risk and 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 views only as of the date hereof. The company undertakes no duty to update any forward-looking statements that will be made in the course of this call. With that, let me turn the call over to Dave Driscoll, our Chief Executive Officer..

Thank you, Josh and thank you everybody for joining on our call this morning. Welcome to the call for the second quarter of 2014. Our second quarter results continue to reflect a steady progress we think we’re making.

The quarter was relatively was quite, we are pleased that we continue to executive in the final pieces of our portfolio repositioning activities. To that end we sold an additional 21 locations during the quarter and leased 14 location into long term triple-net basis.

With huge distractions we’ve produced stable operating results and the improved results themselves illustrate the progress we’re making. We did produce significant year-over-year financial improvement, with AFFO per share increasing by 59%.

After adjusting downward for the effect of onetime receipts generated by the successful legal action against Lukoil, the former parent of GPMI. However, our consistent quarter-to-quarter sequential results of $0.27 per share of AFFO is more reflective of our overall investment objectives and the asset class we operate.

This demonstrates the type of steady results we expect to achieve going forward. While we diligently were to conclude our transitional activity and pursue growth by accretive acquisition and other means, we believe that our results this quarter are pushing a good baseline for the performance of our current portfolio.

For the quarter ended June 30, 2014 our revenues increased by $0.7 million 700,000 to $25 million. The primary drivers to this increase or the impact of our full quarters revenue from the May 2013 CPG acquisition and the impact of the commencement of triple net leases on the 13 properties I mentioned earlier on this call.

On the expense side, we continue to see reductions in rental property expenses and general overheads. We benefitted from the $1 million reduction in our rental property expenses that was driven largely by the repositioning activities over the last year as we continue to see declines in the rent expense and maintenance.

We also purchased 5 properties that we had previously leased in transactions that will results in roughly a 10% cash return after everything is counted. On the administrative overhead side, legal and professional fees declined by 1.1 million for the quarter, while employee related costs and public company expenses were relatively confident.

As we move forward, we will continue to focus on gaining operating expense leverage as we conclude our repositioning and redeployment process. These expenses are in the nature of decline property taxes, maintenance cost, utility charges and professional fees.

We may need to invest capital to successfully reposition a number of locations and we will focus most of that investment on capturing measurable improvements that we also contribute measurably to our cash flow.

While we have made great progress we still have challenges that we are working through, and we expect that in the coming quarters we will become to harvest some of the work in the capital we have put in.

Turning to our environmental and remediation efforts, the overall environmental liabilities declined in the quarter by approximately 700,000 to approximately $41.3 million.

As usual I want to underscore that environmental cost and accruals vary considerably from period to period and are hard to predict and should be evaluated based on long term multiyear trends rather than quarter-to-quarter. As I mentioned earlier, we are working to improve on our steady performance by growing through accretive acquisitions.

We are by nature a long term investor focused on long term returns. This is an unusually low interest rate environment and in that environment competition for income producing assets is quite heated. The results is that values are very high and returns at historical lows.

Our response to this competition is to stay disciplined and focused on executing only on the best opportunities, while being mindful of our cost of capital and return thresholds.

As a result, we cannot control the timing of acquisition but the flow of potential opportunities remains good and we remain confident that by being patient and disciplined in our approach overtime we will be able to grow our portfolio.

Another way we are seeking to generate growth is increasingly by focusing on internal growth opportunities inside our existing portfolios more than 900 locations. During the past few years most of our activity in the portfolio has focused on leasing and dispositions.

Moving forward, we expect to see more opportunities to redevelop and reposition properties for high and better uses to increase our return on these properties. Our low leverage position reflected in our conservative balance sheet positions us exceptionally well to execute on these growth opportunities from a financial perspective.

At quarter end our net debt was approximately 125 million, which remained at its lowest level in more than three years. And our debt-to-EBITDA stood at approximately 3 times. This permits of meaningful capacity and flexibility to support our growth initiatives. We believe Getty is on the move and our progress continues.

We have both internal and external growth opportunities which will drive our financial performance over the long term. Of course, challenges will exist but our team is adept with navigating and overcoming difficulties. We've positioned the company to succeed and improve our performance.

With our low leverage balance sheet, stable cash flow and multiple growth opportunities we are excited by the progress we’ve made and even more easier to create value in the future for our shareholders in coming years. That concludes my prepared remarks. So let me ask the operator to open the call for questions..

(Operator Instructions) And we will go to our first question from Anthony Paolone with JPMorgan..

Thanks. Good morning. On property operating expenses, the $6 million that you have in the quarter, how of that is discretionary I guess or controllable if you will. Because you talk about just doing things to reduce that.

I just want to understand what part of that is really just reimburse up in revenue and wash down more part of it, can you really have some control over?.

I am going to ask Chris Constant our CFO to comment on that report Tony..

Sure. The lion share of that number is up in revenue and it’s reimbursable, the controllable expenses are part of the repositioning, which is really expected reductions in maintenance rent and only reimbursed real estate taxes as we conclude sort of, the leasing activities and disposition activities that Dave had referenced..

So, and I guess another way of trying to look at it is if you just take the $25 million in revenue against $6 million of OpEx in the quarter, you have $19 million of effectively net rents.

I guess, like does that -- should that number be higher if some of these other, these controllable expenses kind of go away or you stop making certain investments? Or is that the run rate? I'm just trying to understand like what you can do versus what just will be the case going forward..

Not sure I followed the question?.

Is the 19 million a good run rate? Are there things and expenses that can still go away?.

I think there are elements to our rental property expenses that we’ll continue to follow off in a lot of quarter. So I think we all believe that the rental property expenses will continue to decline in the coming quarters, I think it’s the best way to put in Tony. But I don’t think that they're going to disappear completely.

That number is not going to go to zero because there's a lot pass through expenses in there..

Right.

So do you know what the amount of non past through expenses are out of the 6 million?.

Yes. Roughly $2.5 million for the quarter..

Okay, got you.

The acquisition pipeline you guys talked about, said there’s a lot of flow, can you put some brackets around just the size of that and I know you did a few million bucks in the quarter and some after the quarter, but is it something where we could see that go to $20 million $30 million a quarter on deals that you do or is this kind of a [indiscernible].

We’re certainly seeing new opportunity Tony at the rate of -- need to put some brackets around the $20 million $30 million a month. That doesn’t mean it's stuff that we want to do. Really more particularly at this point stuff that we want to do with the price that is been offered at. So we're looking at stuff, we’re seeing stuff we want to buy.

We’re making offers on that stuff. But I guess the best way to describe is that the market is not clearing.

I’ll make a further comment is that from what I can see, you don’t have perfect visibility on this, that doesn’t mean the stuff is trading away from us, so much of it is that the sellers are just continuing to say well boy I got 2% bank debt, I'm just going to sit on this for a while and the transaction isn’t going to happen.

So it doesn’t need to mean, I guess the point I'm trying to make is, it doesn’t mean it’s going away. It’s just that there’s not a lot of compulsion to sellers right now.

And either the values that have returned, essentially you can see them as expressing opposite ends of the same spectrum or just not attractive and the market isn’t clearing in a lot of cases..

What kind of yield do you -- are you kind of seeking out? Is it 9s or 7s like where, what’s the sweets spot and what kind of stuff that you'd like to buy?.

We have stuff in the portfolio that we are interested in buying that ranges from modestly below 7 for high quality good location, great credit tenant to our more speculative crossing the high eight, which will have one or two of those aspects but maybe not all of them..

Okay.

And are you looking outside of gas stations or you’re sticking with product that’s similar to which currently on?.

Right now we’re looking inside of gas station. Now, I will say that, one something is in our portfolio and I'm trying to telegraph this in the prepared remarks. We’re spending a great deal more time looking at ways to convert some of our existing own gas stations into other things. And I think starting to get very good traction in that.

So we could see conversions inside the owned portfolio, but right now the acquisition portfolio is sticking to what we know best..

(Operator Instructions) And at this time we have no further questions..

Great. Well, I want to thank everybody for joining the call and we look forward to seeing you again in three months as we continue to move forward and create value for the shareholders. Have a great day everybody..

That conclude today’s conference, we thank you for your participation..