Getty Realty Corp (GTY) 2010 Q2 法說會逐字稿

Good morning, everyone, and welcome to the Getty Realty's Conference Call for the quarter Ended June 30, 2010. This call is being recorded. Prior to starting the call, Joshua Dicker, Vice President, General Counsel, and Secretary of the Company will read a Safe Harbor statement. Please go ahead, Mr. Dicker.

Thank you. 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 and 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 acquisitions prospects.

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 10K for the fiscal year ending 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 publically release revisions to these forward-looking statements to reflect future events or circumstances or reflect the occurrence of unanticipated events.

David Driscoll, our Chief Executive Officer will not comment on our press release issued after the close of business yesterday.

Thank you, Josh. Prior to starting my formal statement I want to introduce the other officers of the Company who are here in the room with me in addition to Josh Dicker. Mr. Leo Liebowitz, our Cofounder and Chairman who is directly involved in all of our acquisition activities, our Chief Financial Officer, Tom Stirnweis, and Kevin Shea, our Executive VP for real estate.

Last night's press release reported results for our second quarter ending June 30, 2010. It's available on our website, the SEC's EDGAR website and many other news and financial websites. The highlights include that our earnings increased by $400,000 to $14 million for the quarter ended June 30 as compared to the quarter--or June 30, 2010 as it compares to the prior year quarter, June 30, 2009, and increased by $2.4 million to $25.9 million for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009.

Earnings from continuing operations increased by $2.1 million to $12.6 million for the quarter ended June 30, 2010 versus the prior year quarter in 2009 and increased by $4.1 million to $24.2 million for the six months ended June 30, 2010 versus $20.1 million for the six months ended June 30, 2009.

The increases in our earnings from continuing operations for the quarter and the six months ended June 30, 2010 as compared to the respective prior year period was principally due to increased rental income and net reductions in operating expenses, partially offset by higher interest expense. Interest expense increased for the three month period June 30, 2010 due to higher weighted average interest rate margins partially offset by lower average borrowings resulting from the repayment of our credit line or the pay down of our credit line using the proceeds of our common stock offering.

Adjusted funds from operations--AAFO--for the quarter ended June 30 increased by $1 million to $14.8 million versus the prior year quarter of $13.8 million, June 30, 2009. Adjusted funds from operations for the six months increased by $2.3 million to $28.4 million versus the six months ended June 30, 2009.

Revenues from rental properties included in continuing operations increased by $1.2 million to $21.7 million for the quarter as compared to $20.5 million for the quarter ended June 30, 2009. Rents received increased by $1.5 million to $21.5 million for the quarter ended June 30, 2010 as opposed to $20 million for the prior year period. All of the increases in rent received were primarily due to rental income received from the 36 Exxon properties, Exxon [flags] properties that we acquired from White Oak Petroleum in September 2009.

With regards to environmental expenses, as you know environmental expenses vary from quarter to quarter; accordingly we would ask you not to place undue reliance on the magnitude or the direction of any quarterly changes but to look at much longer-terms for changes in those expenses. With respect to our largest tenant, Getty Petroleum Marketing Corporation, we continue to remain open to negotiating with Marketing for removal of properties or modifications of the master lease; however, progress such as it is remains very slow.

In the aggregate, our operating results are frankly in line with our expectations. The major event of the quarter was our share offering of a little over $5 million shares which raised net proceeds of approximately $1.8 million. The offer benefited from fortuitous timing in what has been a very volatile equity market. We were gratified by the interest and support shown by many investors new to our story. The offering enabled us to reduce outstanding debt to less than $70 million and our leverage ratio to less than 10% of capitalization.

More importantly, this increased our deployable capital to well in excess of the $108 million that was raised. This immediate access to significant magnitudes of deployable capital has already and continues to make a positive impact in our discussions for additional acquisitions.

The US financial markets broadly appear to be continuing a remarkable healing process that commences just a few short months ago. Capital, even aggressively priced capital is emerging in many sectors including ours. Against this background, our perspective acquisition pipeline remains attractive, wide ranging, and robust. We are working hard and in a disciplined fashion in our efforts to put our capital to work and we remain comfortable that we will be able to do so at attractive returns.

I've only been with the Company for a short time but in that time I've grown ever more respectful of the professionalism and the dedication of our officers and employees. We are all excited about our prospects for the future and we spend each day moving forward into it.

With that, all of us are happy to entertain any questions you might have. Operator, perhaps you could explain the procedure on how they can ask questions?

(Operator Instructions) And we'll take our first question from Anthony Paolone with JPMorgan.

Thanks and good morning. I was wondering, can you tell us what was sold in the quarter?

We sold two properties during the quarter ended--the proceeds from those sales were $2.1 million.

Were they occupied or is there anything to read through in terms of just getting a sense of cap rates or anything?

No. Each of the properties we sell are unique. One of the properties, for example, was vacant land that was a former gasoline station attached to it. Another retail box that was previously used as a drug store. Again, it's hard to find the trend, particularly in a specific quarter slice of what those dispositions are. There's are a thousand--there are a million stories in the naked city and you've got to understand each one of them.

Got it. Then just turning to the acquisition side, can you put some parameters around the types of deals that you're looking at? Either one-off, if there are portfolios maybe the size of those and cap rates?

We're still looking at portfolios. For the most part we're not looking at one-offs. The portfolio sizes range from $20 million to frankly a little over $100 million in some cases. On average you can think generally $1 million a copy if you want to know how many properties are in one of those portfolios. That doesn't mean they're all going to hit that number but plus or minus.

Cap rates clearly have compressed certainly since September of 2009. I think that probably right now the things that we're looking at--I don't want to disclose to the other side, Tony, but there are circumstances under which we could see ourselves breaking ten. Let me put it that way. Good quality credit, high quality properties. We could conceivably go below ten.

Okay. And then just last question on the environmental stuff. Any visibility in the next couple quarters for modeling purposes?

This is Kevin Shea. No. We don't anticipate any extraordinary swings one way or the other really on the horizon.

Okay. Thank you.

You're welcome.

(Operator Instructions) It appears at this time we have no further questions. I'd like to return the call back to Mr. Driscoll for any closing or further remarks.

My only closing remarks are thank you for continuing to stay with us. We're going to be actively out talking to everyone and we're going to go back to work working on that acquisition portfolio and managing the Company. Thank you.

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