Getty Realty Corp (GTY) 2010 Q4 法說會逐字稿

Good morning everyone. Welcome to the Getty Realty's conference call for the quarter and year-ended December 31, 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 and year-end conference call. Now as we formally begin the conference call, I will read into 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. Forward-looking statements are usually identified by words such as will, should, could, expect and believe and other words with forward-looking connotations. Examples of such forward-looking statements would include management statements about the nature of the Company's acquisition pipeline or acquisition prospects or statements about expected financial results.

It is important to note that the Company's actual results could differ materially from those anticipated 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, 2010, as well as in our quarterly and 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. David Driscoll, our Chief Executive Officer will now comment on our press release issued after the close of business yesterday.

Thank you, Josh. Prior to starting my formal remarks, I want to introduce the other Officers of the Company who are on the call with us today. Mr. Leo Liebowitz, our Co-Founder and Chairman. Our Chief Financial Officer, Tom Stirnweis; and Kevin Shea, our Executive Vice President. Last night's press release reported our results for the fourth quarter and the year-ended December 31, 2010. It is available on our website, the SECs EDGAR website and I think widely disseminated through the network.

The highlights include revenues from rental properties increasing by approximately $4 million to $88 million this year as compared to $84 million during 2009. The increase was primarily due to rental income from the 36 Exxon properties acquired from White Oak Petroleum in September 2009. Our 2010 net earnings increased by $4.7 million to approximately $51.7 million versus $47 million for 2009. Earnings for the fourth quarter 2010 increased by $1.2 million to $12.5 million. Earnings from continuing operations for the quarter increased by $1.6 million to $12.4 million as compared to Q4 2009 and by approximately $8.5 million to $50.1 million during 2010 versus $41.7 million for the year-ended December 31, 2009.

The increases in earnings from continuing operations for the quarter as compared to the respective prior quarter were principally due to net reductions in operating expenses and an increase for the year-end 2010 was also affected by additional rental income realized from the properties acquired in September 2009. Adjusted funds from operations per share for the quarter was $0.48, a decrease of $0.03 a share as compared to $0.51 for the fourth quarter of 2009 mainly deriving from an increase in share count resulting from our common equity offering last May. For the year, the decrease was $0.01 from 2009 -- $2.09 in 2009 and $2.08 in 2010.

Environmental expenses declined in the quarter and for the year. However as you know, environmental expenses continue to vary from quarter to quarter and undue reliance should not be placed on the magnitude and direction of short-term changes even though it's now been four quarters, we're still not comfortable to declare that this is a trend. We also continue to remain open to negotiating with Getty Petroleum Marketing for the removal of properties in the unitary master lease or other measures. However, progress again this quarter remains very slow.

As you saw in early January 2011, we announced an investment with the subsidiary of New Paltz, New York based Chestnut Petroleum Distributors totaling approximately $111 million and including the acquisition of 59 Mobil branded gas stations in New York. We also completed an offering of 3.45 million shares raising approximately $92 million of net proceeds including the exercise of the over allotment option. We anticipate that the CPD transaction will be immediately accretive even taking into account the additional shares issued in this most recent offering. The acquisition environment in our sector remains competitive. I'm pleased with the progress we've been making to step up our origination efforts to meet that competition.

Our acquisition pipeline remains strong. We are actively engaged in a number of perspective transactions at various stages in the acquisition process and all of these transactions should be accretive to us in the first year that they close if they close. Nevertheless as a caution while I am optimistic we will be able to close additional investments during 2011; the timing, size, and returns from any prospective transaction are just that. They are prospective. We cannot accurately predict when or even if they will happen.

All in all, I'm pleased with our results for the quarter and the year-ended December 31, 2010 and the progress we made during the year. In 2010 we commenced a process of enhancing our human resources and improving our business processes while pursuing our objective of making accretive acquisitions. We plan to continue all these activities and more in 2011. I remain optimistic about our future. With that, all of us are happy to entertain any questions you might have. So operator I'm going to turn it back over to you to explain procedures.

(Operator Instructions)We'll go first to Tony Paolone of JPMorgan.

Thanks. Good morning, guys.

Good morning.

Dave, could you give us an update and put some parameters around your deal pipeline in terms of things like size, general cap rate vicinity, and also just the nature of the deals you're seeing whether it's kind of the oil majors shedding assets or whether these are coming from other places? What's driving the deal flow?

Sure. The first in terms of number of transactions Tony, it's multiple. It's more than two, less than 10, I think are active consideration. Size ranges from I think at the low end in the mid-20s to at the high end a little over 100. I guess it remains 65% to 70% oil majors shedding properties in various different fashions, but there continues to be non-major transactions. Certainly on the just-over-the-horizon basis, there continue to be, frankly, quite a frenzy of activity around some of the major transactions that the oil majors have announced and are commencing the process of. Those are, I think farther down the road for us in terms of closing. Might make it to 2011 but could also be in 2012 range. That's not the near term pipeline.

In terms of cap rate, I'm going to say that it is a -- it ranges. I read your note about a week and a half ago. I think you're probably a little high in your model as to what we can bring in. I'd probably call it an 8.5% -- say 8% to 9% kind of market maybe with 9% being on the top end of that. But I think that the cap rate compression that we saw -- the acceleration of the cap rate compression that we saw over the last, I want to say 7% or 8% quarters has probably slowed somewhat and getting stuck now in the 8% to 9% range. Does that help?

Yes. That's helpful. A couple other items. Did you guys sell anything in the quarter?

I think we sold one property. Tom, what did we sell?

I'm not sure if we sold one. I think we sold one property. Yes, we had a gain on the sale of a property this quarter.

It wasn't material.

Yes, not material. Not memorable.

Okay, then can you give us an update on just where the NFAs stand? I think last quarter you mentioned you had about 21, I think, submitted or pending and you were hoping for a bunch by the end of the year -- give us an update.

Kevin, do you want to make a comment on that? I think we've moved to a little bit farther along here.

Sure, good morning Tony. This is Kevin Shea speaking. In the fourth quarter, we received 4 NFAs for a total of 14 for the year. I'm happy to report that in Q1 2011 to date we have received nine No Further Action letters. So we're off to a very good start this year.

Okay. How many are pending or do you think you'll submit over the course of this year?

We have, I believe 31 NFAs pending now. We anticipate another two dozen or so to be submitted this year. We have a total of 241 open incidents as of 12-31-2010. I can give you the lifecycle breakdown if you're interested.

Sure.

Pre-delineation is two, site assessment is 12, remediation action plan implementation is eight, operation and maintenance is 48 and closure activities is 171.

Okay. Great. Then just last question item is, Dave, in building out the organization, where do you think you're at, at this point? And any sense for G&A in 2011 for modeling purposes?

Well, I think you can expect to see increases. We're going to bolster our systems and I think we'll bolster our people as well. We haven't finalized yet exactly what those numbers look like, Tony. I think one way to look at it is the increase that we saw from 2009 to 2010 probably is the right order of magnitude from 2010 to 2011.

Okay, we'll use that.Thank you.

(Operator Instructions) We'll go next to Craig Schmidt of Bank of America Merrill Lynch.

Good morning. I guess keeping on the G&A focus. You had mentioned you're enhancing Getty's human resources. I assume that's primarily in the area of acquisitions, but could you talk about other areas that might be getting enhanced?

I think asset management, underwriting capability and origination capability.

Okay. And you're almost coming up on a year of heading the Company. I was wondering what outlook has maybe changed since when you started that and where you are now?

Craig, it's funny. It's yin and yang. The compression of cap rates makes our business harder, but by the same token, I won't say the lack of competition in the field, but the availability of origination opportunities is steady. And that's quite gratifying.

Okay. Thank you

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

I just want to thank everybody for listening to the call and invite anyone that would like to call us individually. We'd be happy to talk and tell you about our business. We're otherwise, looking forward to talking to you again in three months and telling you about the first quarter of 2011.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.