Getty Realty Corp (GTY) 2007 Q4 法說會逐字稿

Good morning everyone and welcome to Getty Realty's Conference Call for the Fourth Quarter and Year Ended December 31, 2007. Today's conference call is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Leo Liebowitz, Chairman and CEO of the Company. Please go ahead, Mr. Liebowitz.

Thank you and good morning. I would like to thank you all for joining us for Getty Realty's Conference Call. I want to take this opportunity to introduce everyone to Joshua Dicker who just recently joined our Company as General Counsel and Corporate Secretary. I assume you've all seen the press release.

Thank you, Mr. Liebowitz. As a preliminary matter, let me say that I'm delighted to have joined Getty. Now, as we formally begin the conference call, I will read into the record the Safe Harbor Statement.

The statements made during the course of this conference call may include our hopes, intentions, beliefs, expectations, or projections of the future that, along with other statements that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. An example of such forward-looking statements would be management's estimation as to the accretive effect of a particular acquisition transaction.

It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Information concerning factors that could cause actual results to differ materially from those forward-looking statements can be found in our annual report on Form 10-K for the fiscal year ended December 31, 2006 as well as in our other filings with the SEC.

You should not place undue reliance on forward-looking statements, which reflect our view only as of the days hereof. We undertake no obligation to publicly release revisions to these forward-looking statements to reflect future events or circumstances or reflect the occurrence of unanticipated events.

Mr. Leo Liebowitz, Chairman and CEO, will comment on our press release that was issued yesterday after the close of business. Now I would like to introduce the other officers of the Company who are present during this call and are prepared to answer your questions. Mr. Thomas Stirnweis, the Company's Vice President, Treasurer, and Chief Financial Officer, and Mr. Kevin Shea, Executive Vice President with principle responsibility for real estate acquisitions, asset Management, and environmental matters. I will now turn the call back over to Mr. Liebowitz.

Thank you, Josh. And good morning, again. For those listeners who have not received a press release which went after the close of business yesterday, February 5, we reported the results of our fourth quarter and year ended December 31, 2007. With regard to the press release, I will mention some of the highlights and afterwards we will be happy to answer your questions.

Net earnings for the quarter ended December 31, 2007 were $11.1 million as compared to $9.8 million reported for the prior year period. For the 12 months ended December 31, 2007, net earnings were $44.4 million as compared to $42.7 million reported for the comparable prior year period. Net earnings for the year ended December 31, 2007 reflected an increase of $1.7 million over the year ended December 31, 2006 and rent revenues increased by $6.6 million to $78.5 million for the year. The increase in rent is income primarily resulting from the acquisitions the Company completed and the regular escalations in rent that are paid. Discontinued operations of compromised of $1.2 million of earnings from operating activities and gains on the disposition of real estate of $4.6 million for 11 non-core properties that were sold during 2007. Our adjusted funds from operation, AFFO for the quarter and the year ended December 31, 2007 increased by $0.8 million and $1.5 million respectively as compared with the year ended December 31, 2006.

Although environmental expenses have increased by $2.8 million for the year ended 2007 as compared to the comparable 2006 period, the increase occurred primarily as a result of a change in project scope mandated by environmental authorities at certain properties and a legal settlement with the state of New York in our second and third quarters. As we previously reported, ,we continue to expect quarter to quarter fluctuations in accrued estimated remediation expenses; however, cash flow provided by our business remains in line with our expectations.

In conclusion, we remain optimistic that our Company will continue to increase shareholder value. With that said, Tom Stirnweis, Kevin Shea, and I are ready to answer any of your questions. Please state your name and company before you ask a question. We'll take questions now.

Very good, sir. (OPERATOR INSTRUCTIONS) We'll go first to George Auerbach from Merrill Lynch. Your line is open, sir.

Great. Good morning, guys.

Good morning, George.

Tom, straight-line rent and FAS 141 increased this quarter this quarter to about $1.3 million. Why was there such a large sequential increase and is this a good run rate going forward?

Part of the increase in straight-line rent may have to do with the lease determined income we record when a property is terminated from the lease early. That income is recognized between the time an agreement is reached and when the property is disposed of. In addition during the year we had an increase in straight line rent due to the acquisition from the trust REIT property. As far as a run rate, our straight-line rent is generally going to be going down as opposed to up. It's probably going to be slower than the current quarter's results.

Okay. And switching gears, when you underwrite acquisitions, what kind of unlevered IRRs do you target?

Preferred cap rate between eight -- George, this is Kevin Shea speaking.

Thank you.

We will end up north of eight. We've been successful in doing that, getting those kind of returns.

And generally you underwrite CPI rent increases?

Generally our rent increases, they're tied to CPI with floors and ceilings and they typically occur every three or five years, whatever we can negotiate.

Okay. And finally, Kevin, could you please give us an update on the environmental life cycle.

Sure. Pre-delineation, we have two sites, estimate 17, remedial action. We have eight O&M, operation and maintenance, 82, closure activities. We have 173 and that should add up to 182 open.

Okay. That's great. Thanks, everyone.

Thanks, George.

Thank you.

(OPERATOR INSTRUCTIONS) We'll go next to the site of Brett Rice from Janney Montgomery. Your line is open.

Good morning, gentlemen. And welcome, Mr. Dicker.

Thank you.

When you look at the presidential election, no matter who gets in there it looks like the environment is going to be more on the radar screen. Are you concerned that in that kind of climate that may embolden some of the state legislatures where we have service stations to be a little bit too aggressive or more aggressive than in what they want you to do and not do with the remediation that's an ongoing expense for the Company?

Sure, Brett. This is Kevin Shea. We're already seeing the regulatory climate becoming much tougher than it had been over the last few years. In the majority of the states where we have open releases there's less of a rational approach to environmental remediation on the part of the regulators. We've factored into our estimated costs for remediation all the changes that we can possibly anticipate coming down the pike but of course there's facts and factors that will occur that we really can't anticipate before they happen but I can tell you that it has the regulatory environment has been a lot tougher than it had been as recently as four years ago.

On the other hand, Brett, I'm sure you know that we have pretty good relationships with most of the regulators. Unfortunately they're driven by political purposes rather than purely environmental.

Right. Different question. You're very disciplined buyers which I like. With the turmoil in the credit markets and what's going on, are the prices of the things that you would contemplate buying, are you seeing more opportunities coming your way or is it just kind of the same? Can you give us some color on that?

It's been pretty much the same as it has been over the last few years. Unlike residential, we haven't seen big drops in commercial prices or prices of service stations, convenience stores recently. You're right. We are disciplined buyers. We're not going to change course there. And we'll continue to look for acquisitions that can immediately be accretive but we're patient and that's not going to change.

And so far as our tenants, operators, despite the run up, the astronomical run up in gasoline prices, we don't have any -- we don't see any problems, economic problems for those people. They're all doing quite well.

Right. Alright. Thank you for taking my questions.

Certainly.

You're welcome.

(OPERATOR INSTRUCTIONS) At this time we have no further questions. I'll turn the call back to Mr. Liebowitz for any closure or further remarks.

We look forward to these quarterly meetings. And thank you all very much for joining us. We're looking forward to the next one in three months. Have a good day, everyone.

This now concludes our conference call. You may disconnect at any time.