Getty Realty Corp (GTY) 2010 Q1 法說會逐字稿

Good morning, everyone, and welcome to Getty Realty's conference call for the first quarter ended March 31, 2010. Today's conference is being recorded.

At this time, for opening remarks and introductions, I would like to turn the call over to Joshua Dicker, Vice President, General Counsel and Secretary of the Company. Please go ahead, Mr. Dicker.

Thank you very much. I would like to thank you all for joining us for Getty Realty's quarterly conference call. 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. Examples of such forward-looking statements would include management's estimation as to the accretive effect of a particular transaction or statements about expected financial results or business prospects of the Company.

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, 2009, 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 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.

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. David Driscoll, the Company's President; Mr. Thomas Stirnweis, 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. For those listeners who have not received a press release, which went out after the close of business yesterday, May the 6th, we reported the results of our first quarter ended March 31, 2010. 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 increased by $2 million to $11.9 million for the quarter ended March 31, 2010, as compared to $9.9 million for the quarter ended March 31, 2009. Earnings from continued operations increased by $2 million to $11.6 million for the quarter ended March 31, as compared to $9.6 million for the quarter ended March 31, 2009.

The $2 million increase in net earnings for the quarter ended March 31, 2010, as compared to the respective prior-year period, was principally due to increased rental income and the net reduction in operating expenses, partially offset by higher interest expense.

Adjusted funds from operation, AFFO, for the quarter ended March 31, 2010, increased by $1.3 million to $13.6 million as compared to $12.3 million for the quarter ended March 31, 2009.

Revenues from rental properties included in continued operations increased by $1.9 million to $22.5 million for the quarter which ended March 31, 2010, as compared to $20.6 million for the quarter ended March 31, 2009.

Rent received increased by $1.5 million to $22.1 million for the quarter ended March 31, 2010, as compared to $20.6 million for the prior-year period. The increases of rent received were principally due to rental income from the 36 Exxon properties acquired from White Oak Petroleum on September 2009, and to a lesser extent due to rent escalations, primarily offset by the effect of dispositions of real estate and lease expirations.

Environmental expense, net of estimated recoveries from tank funds, included in continuing operations for the quarter ended March 31, 2010, decreased by $900,000 to $1.6 million, as compared to $2.5 million for the quarter ended March 31, 2009. The decrease in net environmental expense for the quarter ended March 31, 2010, was principally due to lower litigation loss reserves and legal fees, which decreased by an aggregate of $0.6 million and a lower provision for estimated environmental remediation costs, which decreased by $400,000 as compared to the amounts recorded in the quarter ended March 31, 2009.

As you all know, environmental expense vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of a particular change.

Regarding our major tenant, Getty Petroleum Marketing, we remain open to negotiating with Marketing for removal of properties from the unitary master lease because we believe the take-back of properties on mutually acceptable terms could be beneficial for both of us. For example, it is possible that reducing the number of properties held by Marketing may benefit its financial position and, at the same time, allow us to relet, redevelop or sell certain properties and reinvest the proceeds in new properties.

On another subject, as announced on February 25, 2010, as part of our management succession process, I will relinquish my position as Chief Executive Officer of the Company at the 2010 annual stockholder meeting, which is scheduled for May 20, 2010. Mr. David Driscoll, who has been serving as the Company's Lead Independent Director, has been appointed to the position of President, effective April 1, 2010, and will be appointed as Chief Executive Officer, effective on the date of the Company's annual stockholders' meeting. I will continue to serve as the Chairman on the Company's Board of Directors and will retain an active role in the Company.

With that said, David Driscoll, Tom Stirnweis, Kevin Shea, Josh Dicker and I are ready to answer any of your questions.

Thank you. (Operator instructions.)

Our first question comes from Brett Rice from Janney Montgomery Scott.

Good morning, gentlemen. My questions are on the resolved staff comment with the SEC. Did that come about because the SEC finally accepted your position, or were you able to get from Getty Marketing information that the SEC was requesting, which they finally cooperated and gave to you?

Well, Brett, it's Josh Dicker speaking.

The financial data that's provided to us by Marketing is subject to confidentiality covenants in the master lease, which cannot be disclosed in our public filings as a result of that covenant. However, through some active discussions and work with the SEC, we were able to resolve that comment by the provision of certain other financial data, as well as certain narrative disclosures, to the satisfaction of the SEC.

So there was nothing, though, additional that Getty Marketing was more liberal in giving to you to help you resolve the staff comment with the SEC?

GPMI was not involved with our discussions with the SEC in resolving the comment and would not be in connection with that kind of an interaction with the SEC.

Okay.

And because it's resolved now, in the future, I -- you filed a shelf registration. You have the green light to be more aggressive on the acquisition front if opportunities present themselves?

Well, we filed the shelf. Yes.

Right.

And our options are open.

Okay. I'm going to drop back in the queue. Thank you.

Moving on, our next question is from David Fick from Stifel Nicolaus.

Good morning.

Good morning, David.

First, why don't we walk through the mundane regular environmental cycle analysis, if you could just give us your -- the good news on your closures this quarter -- I'm sure there were some -- and where we stand in terms of the rest of them.

Good morning, David. It's Kevin Shea.

Yes, we got five no-further-action letters so far for the year. We're down to 250 open incidents. The breakdown of life cycle is as follows - -pre-delineation, two; assessment, 12; remediation action plan implementation, 10; operation and maintenance, 58; and closure activities, 168.

Okay.

A couple of questions, one sort of structural, so I guess I'll start with that. Now that you've resolved sort of a five-year open issue with the SEC and, at least in theory, have access to all forms of capital at this stage, where do you -- you've had one of the most conservative balance sheets in the entire equity REIT universe, and you trade at a cap rate that is substantially below where you're able to buy assets. And so you've got sort of the best of all worlds in terms of the value of your capital. Where do you -- as you look forward and consider acquisitions, where do you target leverage? That's the first question.

And the second question relates to the Exxon transaction that you completed last year and, as you look forward, what you see in terms of those kinds of opportunities for pseudo-sale lease-backs, if you will, or actual sale lease-backs.

I'll answer that, David. Leo Liebowitz here.

First, with regard to what we see in the marketplace, Exxon has publicly announced that they want to get out of the retail real estate business and has offered a number of packages available, some of which we're looking at. But we'll see what happens with that. If we can get topnotch properties at what we consider to be fair market prices, we would be very interested in becoming a bidder and will be a bidder.

With regard to leverage, our board, I and I believe our shareholders have been very conservative and been happy with our conservative position so that we do not intend to have leverage up. We do not intend to -- we may have more debt than we currently have, but we certainly don't intend to be highly leveraged by any stretch of the imagination.

Would you be looking to do acquisitions on a line and then raise equity? Or do you think you might raise some equity so that you can show the market that you have the ability to close? Would you start using some mortgages?

We may do all of the above, David. We certainly have the ability to raise equity now and we may do that. We certainly have the ability to raise debt, despite the fact that the debt markets have been so tight. We have a number of lenders who've been very receptive to speak to us with regard to the future.

Great. Well, congratulations on the expansion of your executive team, and we look forward to some real external growth now.

Thank you, David.

At this time, we have no further questions. I'd like to return back to Mr. Liebowitz for any closure or further remarks.

Well, I just want to thank everyone for participating, for being here, and we look forward to speaking to you again soon.

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