Getty Realty Corp (GTY) 2009 Q3 法說會逐字稿

Good morning everyone and welcome to Getty Realty's conference call for the third quarter and nine months ended September 30, 2009. Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Joshua Dicker, Vice President, Secretary and General Counsel for Getty Realty Corp. Please go ahead Mr. Dicker.

Thank you very much. Thank you all for joining us for Getty Realty's conference call. Before we begin I would like to 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 or management's forecast as to anticipated developments arising from a particular business arrangement.

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, 2008, our quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 2009 and June 30, 2009 and 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 date 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.

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

I will now turn the call over to Mr. Liebowitz.

Good morning everyone. Thanks for joining us. To those listeners who have not received the press release which went out after the close of business yesterday, November 3, we reported the results of our third quarter and nine months ended September 30, 2009.

With regard to the press release I will mention some of the highlights and afterwards we will be happy to answer your questions.

Our financial results for the three and nine months period ended September 30, 2009 were minimally affected by the $49 million acquisition of 36 gas stations and convenient store properties located primarily in Prince George County, Maryland, on September 25, 2009.

The properties were acquired in a simultaneous transaction amongst Exxon Mobile, White Oak Petroleum LLC and Getty, whereby White Oak will acquire the properties from Exxon Mobile and simultaneous completed a sale leaseback of all 36 properties with us.

We paid cash for the properties with $24.5 million under our existing credit agreement and $24.5 million provided by a new three-year term loan agreement entered into on that date with TD Bank. The properties were leased to us -- by us to White Oak under a unitary triple net lease, which has the unit -- an initial term of 20 years plus renewal options. White Oak is responsible for all existing and future environmental conditions at the properties.

As we've said, we believe these newly acquired properties are high quality sites and we are pleased to have White Oak amongst our roster of tenants. In addition, we expect this transaction to be immediately accretive to our [earnings].

Earnings from continued operations were $10.7 million for the quarter ended September 30, 2009, as compared to $9.9 million for the quarter ended September 30, 2008, an increase of $800,000.

Earnings from continued operations for the nine months ended September 30, 2009 were $30.8 million as compared to $30 million for the nine months ended September 30, 2009, also an increase of $800,000.

Net earnings from continued operations exclude the operating results and gains from the disposition of properties sold in 2009 and 2008, which we classified and are included in earnings from discontinued operations.

Earnings from discontinued operations, which consists primarily of gains and disposition of real estate, increased by $900,000 to $1.5 million for the quarter, and increased by $2.5 million to $5 million for the nine months ended September 30, 2009, as compared with the respective prior year periods.

Our adjusted funds from operations, AFFO, for the quarter ended September 30, 2009 increased by $700,000 to $12.9 million, and an increase by $2.1 million to $39 million for the nine months ended September 30, 2009.

Net environmental expenses decreased by $300,000 for the quarter and increased by $700,000 for the nine months ended September 30, 2009 as compared to the respective two 2008 periods. We remain close to our annual target for our environmental program despite expected quarter to quarter expenses fluctuations.

Interest expense decreased by $500,000 for the quarter and by $1.7 million for the nine months ended September 30, 2009 as compared to the respective prior year periods. Interest decreased primarily due to a reduction in interest rates and our floating rate borrowings.

With regard to our major tenant, Getty Petroleum Marketing, which as you know is a wholly owned subsidiary of Luke Oil, the large Russian integrated oil company. Although we remain open to negotiations with Marketing on the possible modification of our master lease with them, there have not been any material developments in regard to such negotiations during this quarter.

We do however continue to remove individual locations on the master lease on a one-off basis as opportunities arise and we have recently entered into an agreement with Marketing which allows us to list with brokers and to show the prospective purchasers or lessees 75 of the properties subject to the master lease.

In conclusion, we continue working hard to increase our shareholder value even during these volatile financial times.

With that said, Thomas Stirnweis, Kevin Shea, Josh Dicker and I are ready to answer any of your questions. Please state your name and company before we ask the questions -- your question.

(OPERATOR INSTRUCTIONS) And our first question will come from the line of David Fick with Stifel Nicolaus. Please go ahead.

Good morning gentlemen.

Good morning, David. How are you?

Excellent. Congratulations on your acquisition. My first question relates to that. Given that your north of an $11 million cap and presuming that you can access capital going forward, do you see -- this looked like it was fairly high quality stuff, certainly compared to the average in your current portfolio. Do you see more of these kinds of transactions out there, number one? And number two, how competitive was the acquisition?

A - we agree that these are truly top notch properties in a very good area, an area where there are unusual profit margins for the district (inaudible).

As to other acquisition opportunities, as you know the majors at (inaudible) announced that they intend to divest themselves of much of their retail operations or distributor operations and we are approached continuously and do have opportunities to make additional acquisitions.

And was it a competitive situation? Were there other significant bidders that you were aware of on this?

They are always competitive David. There is no such thing in this business world of doing deals without competition. I wish there was.

Okay. You commented that you hadn't made a whole of progress other than one-off transactions in your conversations with Luke Oil but then you also indicated you had an arrangement on 75 assets to show them to other potential users or buyers. So obviously you've had some conversations with them. Can you characterize where you think things stand in terms of their position and their willingness to subsidize the operations while you're working through this?

Well, as you can surmise, it's not easy. The fact that they have now agreed to allow us to aggressively try to find other tenants or owners for those, for some of the properties, is important and we hope that that will help us. Other than that there's nothing more that we can say.

Okay. On those 75 assets, are they operating properties still? There's a reference to removing the underground storage tanks. Has that already occurred?

They either have occurred or they will occur. They've been identified by Getty Marketing as properties where they will attempt to remove the tanks or the tanks are already removed.

And would they retain environmental liability in that circumstance?

Absolutely.

Okay, so there's an implication that some of these locations that they're talking to you about are already non-operational, non-earning for them?

I agree, yes.

Do you have a sense overall of the assets that they initially requested that you take back how many of them are closed at this point?

We really don't know anything more than what I've disclosed.

Okay. And then lastly, my normal question, can you walk us through the environmental cycle? It looked fairly stable this quarter.

Kevin is standing by and ready.

Good morning, David. We have 250 sites with open incidents. We got one No Further Action letter in Q3. For life cycle phases, we have one in pre- delineation. We have 13 in assessment. For remediation action plan implementation we have 10. We have 66 in operation and maintenance and we have 167 in the closure activities phase.

Okay, great. Thank you.

Certainly.

Thank you very much, David.

(OPERATOR INSTRUCTIONS) And at this time we have no further questions. I'd like to return back to Mr. Liebowitz for any closure or further remarks.

Well, this is a record and we thank all of you for participating and we'll now adjourn the meeting. Thank you.

This now concludes our conference. You may disconnect at this time.