Joshua Dicker - SVP, General Counsel and Corporate Secretary Christopher Constant - CEO Mark Olear - COO Danion Fielding - CFO.

Gene Nusinzon - JPMorgan Peter Lunenburg - JMP Securities.

Good day and welcome to the Getty Realty Corp. First Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Joshua Dicker, SVP, 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 first quarter conference call. Yesterday afternoon, the Company released its financial results for the quarter ended March 31, 2017. The Form 8-K 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 statement.

Examples of forward-looking statements include our 2017 guidance, and may also include statements made by management in their remarks and in response to questions including regarding 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, 2016 as well as our other filings 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 revised definition of 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 first quarter of 2017. With Josh and me, on the call today are Mark Olear, our Chief Operating Officer, and Danion Fielding, our Chief Financial Officer.

I'll begin today's call by providing an overview of our first quarter 2017 business prospects and then I'll pass the call to Mark to discuss our portfolio in more detail, and then Danion will discuss our financial results.

We produced another steady quarter, which display both modest growth over the prior year’s quarter and continued stability if our portfolio of net convenience store and gas station assets. At the time to mad progress on our strategic goal of growing and enhancing our portfolio through disciplined acquisitions and redevelopment projects.

Turning to our results, we reported increases in net earnings, FFO and AFFO for the quarter. Our reported quarterly AFFO per share was $0.41, which represents an increase of 2.6% over the prior year’s quarter after adjusting for certain non-recurring notable items which Danion will discuss.

Excluding notable items, our normalized AFFO was $0.40 per share for the quarter ended March 2017, up from $0.39 per share for the quarter ended March 2016. Moving to our portfolio. We had a good start to the year in 2017, as Mark will discuss in more detail.

We acquired five high quality, well-located properties for $6.2 million during the quarter and have a pipeline of opportunities, which includes both single-unit and portfolio acquisition opportunity.

The assets acquired and those in our pipeline are located in geographic regions which both overlap with our existing sites where we would like to increase our presence and in the new markets which we find attractive, such as the south east and south western regions of the United States.

We also disposed the six sites during the quarter [indiscernible] business. Moving to our redevelopment program, we executed two leases during the quarter which brings our total number of redevelopment projects to15.

We also took several steps during that quarter to improve the strength and flexibility of our balance sheet, including continuing to selectively utilize our ATM program, turning [ph] out $50 million of floating rate borrowing to long-term fixed rate debt and continuing to reduce our environmental liability [ph] Through years of hard work we have stabilized the earnings potential of our portfolio and as we look ahead we can now focus on growth.

Our balance sheet is in excellent shape and we are we are actively seeking to leverage our net lease platform by growing the portfolio both in terms of adding new assets in the redeveloping existing sites to higher and better usage.

As we move forward, we will look to build upon our stable growth and continue to enhance the quality of our [indiscernible] portfolio. We remain excited about our business prospects and our focus on executing on our stated growth strategy which we believe will drive additional shareholder value as we move to 2017 and beyond.

With that, I'll turn the call over to Mark Olear to discuss our portfolio and investment activities..

Thank you, Chris. I will start by reviewing our investments for the quarter. During the quarter we purchased five properties located in New York, Connecticut, Arizona and Ohio for a total purchase price of approximately $6.2 million.

These acquisitions included the purchase of previously leased properties and subsequent transactions with existing tenant and the purchase of triple net lease properties which meet our underwriting standards for real estate attributes any credit and operational quality.

In total, these acquisitions were purchased for a rent weighted average cash return of 7.7% and had a rent weighted average remaining initial term, lease term of 8.4 four years. While the acquisition market continues to be very competitive in the convenience and gas sector, we remain disciplined in our underwriting criteria.

Our pipeline of actionable opportunities continues to grow and we are in the process of reviewing and pursuing several additional acquisition opportunities. In terms of capital recycling, during the quarter we sold six properties for $1.4 million in the aggregate.

Moving to our redevelopment platform, we ended the quarter with 15 signed leases and letters of intent, which includes seven active projects and 8 properties which are currently included in our net lease portfolio. All of these projects are continuing to advance through the development process.

We expect substantially all of these projects will be complete over the next two years. In total, we have invested approximately $1.8 million in redevelopment projects to date and we expect to have rent commencements at several projects in late 2017 and 2018.

On the capital spending side we estimate that these 15 projects will require investment by Getty of $11.2 million to complete and will generate incremental returns for the company in excess of where we could invest these funds in the acquisition market today.

For more detail information on the redevelopment pipeline, please refer to page 16 of our investor presentation which could be found on our website. We remain committed to transforming certain sites in our portfolio and look forward to updating everyone as we make progress.

Turning to leasing, we either entered into new triple net leases or added sites to existing net leases on five gas-keeping store properties during in the quarter. On an incremental basis these transactions are expected to add 170,000 of annual rent income to our results going forward.

As a result of our activity, we ended the quarter with 806 net leased properties, 10 active redevelopment sites and 10 vacant properties.

Our weighted average lease term is approximately 11 years and our overall occupancy excluding our seven active redevelopments increased by 60 basis points to 98.8% as compared to ninety 98.2% at the end of last year. With that, I turn the call over Danion..

Thank you, Mark. Now turning to our financial results. For the first quarter our total revenues from continuing operations and revenues from rental properties, which excludes tenant’s expense reimbursement and interest income were $27.6 million and $24.3 million respectively. Cash rent received from our tenants increase quarter-over-quarter.

However the reported figures declines largely due to lower interest income and non-cash revenue recognition adjustments. During the first quarter of 2017, our results were positively impacted by reductions in all of our major expense categories, including property costs and G&A expenses which both declined 5.6 million quarter--o quarter.

The decline in property costs for the quarter was driven by decreases in real estate taxes and tenant reimbursement and the decline in G&A was primarily attributable to decreases in legal fees and nonrecurring employee costs.

Our reported FFO for the quarter was $18.2 million of $0.52 cents per share, including a penny net benefit from notable items, which we highlighted as they are not part of our core operations. For more information on notable items, please refer to last night's earnings release.

After removing these notable items, our normalized FFO per share for the quarter increased by 21% to $0 51 per share this quarter from $0.42 per share in the prior year’s quarter.

Our reported AFFO for the quarter was $14.5 million or $0.41 per share, after removing notable items normalized AFFO per share for the quarter increased by 2.6% over the prior year’s quarter.

Turning to the balance sheet and our capital markets activity, we ended the quarter with 300 million of borrowings, which include 75 million under our credit agreement and 225 million of long term fixed rate debt/ Our weighted average borrowing cost is 5% and the weighted average maturity of our debt is 4.8 years with 75% of our debt being fixed rate.

Our debt to total capitalizaiton current stands at approximately 25% and our net debt to EBITDA is 3.4 times. In addition, we use our ATM program during the quarter and issued 4.4 million of equity at an average price of $25.84 per share. Our environmental liability ended the quarter at $68.8 million, down $5.7 million so far this year.

For the quarter, the company's environmental remediation spending was approximate $4 million. Finally, we are reaffirming our 2017 AFFO per share guidance 154 to 160 per share.

Our guidance does not assume any additional acquisition on capital market activity, well thought it does reflect our expectation that we will continue to execute on our redevelopment, leasing and disposition activities. With that, I will turn the call back to Chris..

Thank you. We're happy to take any questions..

Thank you. [Operator Instructions] We’ll take our first question from Gene Nusinzon with JPMorgan. Please go ahead..

Thank you. Thanks, guys. Good morning..

Morning..

Question for Mark Olear on investments.

What is the pipeline of single unit portfolio acquisitions currently look like?.

We continue to see a large amount of opportunity in the single net, triple net, I am sorry, triple net single asset opportunities. You know, we think it's very actual pipeline and you know I think we'll continue at our current pace to pursue those and acquire properties that meet our real estate and credit and operational quality..

Okay.

And can you quantify just how many deals you look at in a given quarter? And how many get bids realized?.

Well, we see pretty much everything that's on the market we feel. So as far as what comes across her desk there could be dozens or hundreds in any given month.

We prequalify those, we screen those and then we go into our full due diligence and underwriting and this month we did two or three – this quarter I should say, we did two or three and think that’s kind of where our pace is..

Okay. And then on guidance.

Are any of the acquisitions that maybe in the pipe later this year, are those baked into the FFO guide you provided?.

No, no additional acquisitions are in our AFFO guidance right now. And to the extent there are meaningful acquisitions completed obviously we would consider that as part of the future update on our guidance, but there is nothing in that right now..

Okay. Final question.

Have you seen some of the retail-backed net lease restock selloff recently? I'm just wondering if you're seeing any similar kind of valuation cracks in the private market for C stores and gas stations?.

I think – well, I'll say that I think the C-store sector is an interesting place in the retail environment. You have a product which is gas that drives the consumer there. People are still continuing to drive and as far as I know they there is no e-commerce solution to gasoline at this point.

I think the trend towards convenience are still holding strong, I think more and more consumers are moving towards convenience models. So I'm not sure we have some of the same issues that other retailers or other retail tenants may have.

But you know certainly tenant credit quality is certainly something that we focus on, it’s part of our asset management group..

Okay.

So no spillover from - just overall deceleration of values of other retail?.

I think it hasn't gotten to that point yet..

But you do anticipate that would actually be the case?.

I'm not sure that we would see the same thing, I think the trend that we see is there are, I think it's about 160,000 stations in the US at this point in time, I think the number of stations is projected to probably decline over time. And its part of our underwriting is to evaluate the real estate and the quality of the operation.

We want to be part of buying sites that are - what I call long-term keepers or where there is a real estate value such that it's not going to be a gas station [indiscernible] repurposed to a higher and better use..

Got it. That’s all my questions. Thanks, guys..

Thanks, Gene..

Our next question will come from Peter Lunenburg with JMP Securities. Please go ahead..

Hey, guys. Thanks. Just to follow up on that.

Are you going to seeing any credit issues specifically to any of your tenants today? And then are you doing anything different with regards to kind of analyzing that tenant health?.

Well, I’ll take the second part of that question first, which is we certainly have the right tune in and get tenant level and site level operating performance as part of our leases, have a process in place to evaluate that and monitor it.

Our real estate group is in frequent contact with our significant tenants, many of whom have leases that have upwards of 50 to 100 properties in them. So there is lots of dialogue relating to the sites. You know, the large MLPs have gone through, in many cases their financial restructurings.

And in certain instances the C store aspect of their business has been what’s carried them through. So the wholesale distribution part of the business would have really struggled, but the C store piece have provided the profitability to bring them through that restructuring process..

Great, thanks. And then just back to acquisitions. Are you guys seeing any change in the buyer composition today? And then what would you say pricing looks like compared to say year ago levels? That it, thanks..

I thinks the same universe of buyers are still there. You have some of the - what I call the large strategics, who have an earned real stage strategy. You have the MLPs that are still somewhat active and other regions that are also active.

In terms of pricing, I think pricing has certainly become slightly less aggressive than maybe it was say 18 to 24 months ago. But it's still very competitive and there are still a number of different types of buyers who are bidding on significant transaction..

Great. Thanks, guys..

[Operator Instructions] And it does appear, there are no further questions. At this, I’d like to turn the conference back over to Mr. Christopher Constant for any additional or closing remarks..

Thank you. Thank you everyone for your interest in Getty. We look forward to speaking to everyone at the end of the second quarter and we appreciate your interest in the company..

This concludes today’s call. Thank you for your participation. You may now disconnect..