Getty Realty (GTY) - 2019 Q4 - Annual Report

Part I Business Getty Realty Corp. is a leading REIT specializing in convenience store and gasoline station properties, with a portfolio of 945 properties and significant revenue concentration among three major tenants - Getty Realty Corp. is a leading REIT in the U.S. specializing in convenience store and gasoline station properties, with a portfolio of 945 properties in 33 states and Washington, D.C. as of the end of 2019[12] Property Portfolio Overview (as of Dec 31, 2019) | Category | Number of Properties | | :--- | :--- | | Owned | 877 | | Leased from third-parties | 68 | | Total Properties | 945 | | Leased to tenants (Triple-Net) | 931 | | Under Redevelopment | 5 | | Vacant | 9 | Acquisition Activity (2018-2019) | Year | Properties Acquired | Aggregate Purchase Price (in millions) | | :--- | :--- | :--- | | 2019 | 27 | $87.2 | | 2018 | 41 | $78.0 | - The company's revenue is concentrated among three major tenants: Global Partners LP (18%), United Oil (13%), and Chestnut Petroleum (11%) for the year ended December 31, 2019[30][31] - The company's redevelopment program, initiated in 2015, has completed 13 projects In 2019, rent commenced on four completed projects, following six in 2018[26] Risk Factors The company faces significant risks from environmental liabilities, industry and tenant concentration, and reliance on external capital markets - Significant operating costs and liabilities arise from environmental laws, particularly related to underground storage tanks (USTs) As of December 31, 2019, the company had accrued $50.7 million for prospective environmental remediation obligations[45][52] - Revenues are substantially dependent on the economic success of the petroleum marketing industry, which is highly competitive and volatile[57] - The company has significant tenant concentration risk, with Global Partners (18%), United Oil (13%), and Chestnut (11%) representing total revenues for 2019 The failure of a major tenant could materially impact financial results[70][71] - As a REIT required to distribute at least 90% of taxable income, the company is dependent on external sources of capital for funding acquisitions and other capital needs, which may not always be available on favorable terms[62] - A significant portion of properties (45.9%) are concentrated in New York, Massachusetts, and Connecticut, exposing the company to adverse economic conditions specific to the Northeast and Mid-Atlantic regions[86] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[108] Properties Getty Realty's portfolio comprises 945 properties, heavily concentrated in the Northeast, with detailed lease expiration schedules indicating significant long-term rent Geographic Distribution of Properties (Top 5 States as of Dec 31, 2019) | State | Owned Properties | Leased Properties | Total Properties | Percent of Total | | :--- | :--- | :--- | :--- | :--- | | New York | 205 | 42 | 247 | 26.2% | | Massachusetts | 100 | 9 | 109 | 11.5% | | Connecticut | 69 | 8 | 77 | 8.2% | | New Jersey | 46 | 5 | 51 | 5.4% | | Texas | 49 | 0 | 49 | 5.2% | | Total (All Locations) | 877 | 68 | 945 | 100% | Rental Property Lease Expirations (by Annualized Rent) | Calendar Year | Annualized Contractual Rent (in thousands) | Percentage of Total | | :--- | :--- | :--- | | 2020 | $2,300 | 1.9% | | 2021 | $2,503 | 2.0% | | 2022 | $3,149 | 2.5% | | 2023 | $3,549 | 2.9% | | 2024 | $3,642 | 2.9% | | Thereafter | $98,075 | 77.8% | Legal Proceedings The company is involved in material legal proceedings, primarily environmental contamination cases, with an accrued liability of $17.8 million as of year-end 2019 - As of December 31, 2019, the company had accrued $17.8 million for legal proceedings, up from $12.2 million at the end of 2018[117] - The company is a defendant in multi-district litigation (MDL) proceedings brought by the states of New Jersey, Pennsylvania, and Maryland concerning alleged groundwater contamination from the fuel additive MTBE[119][120][123] - Getty is involved in a complex matter related to its former terminal in Newark, NJ, and the Lower Passaic River The EPA has named the company as one of over 100 Potentially Responsible Parties (PRPs) for the Diamond Alkali Superfund Site, which includes a 17-mile stretch of the river[125][128] - The company is defending a lawsuit from the State of New York seeking reimbursement for investigation and remediation costs related to contamination allegedly from a formerly owned gasoline station in Uniondale, New York[135] Mine Safety Disclosures This item is not applicable to the company's business - None[137] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Getty Realty Corp.'s common stock trades on the NYSE, significantly outperforming the S&P 500 and its peer group in five-year cumulative total return - The company's common stock is traded on the New York Stock Exchange under the symbol GTY[139] Five-Year Cumulative Total Return Comparison (2014-2019) | Index | 12/31/2014 | 12/31/2019 | Cumulative Return | | :--- | :--- | :--- | :--- | | Getty Realty Corp. | $100.00 | $231.65 | 131.65% | | Standard & Poor's 500 | $100.00 | $173.86 | 73.86% | | Peer Group | $100.00 | $191.97 | 91.97% | Selected Financial Data This section presents a five-year summary of key financial metrics, including 2019 total revenues of $140.7 million and net earnings of $49.7 million Selected Financial Data (2018 vs. 2019) | Metric (in thousands, except per share data) | 2019 | 2018 | | :--- | :--- | :--- | | Total revenues | $140,655 | $136,106 | | Net earnings | $49,723 | $47,706 | | Diluted earnings per share | $1.19 | $1.17 | | Funds from operations (FFO) | $77,833 | $73,564 | | Adjusted funds from operations (AFFO) | $71,816 | $69,669 | | Total assets | $1,211,777 | $1,161,948 | | Total debt | $469,065 | $444,409 | | Total properties | 945 | 933 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, liquidity, and critical accounting policies, highlighting revenue growth, environmental liabilities, and capital management Results of Operations Revenues from rental properties increased to $137.7 million in 2019, driving net earnings growth and increases in FFO and AFFO Year-over-Year Financial Performance (2019 vs. 2018) | Metric | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Revenues from rental properties | $137.7M | $133.0M | +$4.7M | | Net Earnings | $49.7M | $47.7M | +$2.0M | | FFO | $77.8M | $73.6M | +$4.2M | | AFFO | $71.8M | $69.7M | +$2.1M | | Diluted AFFO per share | $1.72 | $1.71 | +$0.01 | - The increase in revenues was primarily driven by $4.7 million of revenue from properties acquired in 2019 and the second half of 2018[177] - Environmental expenses increased to $5.4 million in 2019 from $4.2 million in 2018, mainly due to a $5.8 million increase in environmental litigation accruals, partially offset by a decrease in remediation costs[181] Liquidity and Capital Resources The company's liquidity is supported by cash from operations, a $300 million revolving credit facility, and its ATM program, funding $87.2 million in acquisitions Cash Flow Summary (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash from Operating Activities | $76,774 | $66,361 | | Net cash used in Investing Activities | ($82,553) | ($78,946) | | Net cash (used in) provided by Financing Activities | ($19,299) | $40,514 | - In September 2019, the company increased its revolving credit facility capacity from $250 million to $300 million and prepaid its $50 million Term Loan[199][346] - The company issued $125 million of new senior unsecured notes in September 2019 with a fixed rate of 3.52% and a 2029 maturity[200][202][203] - Under its at-the-market (ATM) equity program, the company raised net proceeds of $14.2 million in 2019 and $30.1 million in 2018[208] Environmental Matters The company manages significant environmental obligations, with an accrued liability of $50.7 million at year-end 2019, covered partly by a $50 million insurance policy Environmental Remediation Obligations (in millions) | Date | Accrued Liability | | :--- | :--- | | December 31, 2019 | $50.7 | | December 31, 2018 | $59.8 | - The 2019 accrual consists of $12.4 million for reasonably estimable remediation and $38.3 million for future liabilities related to pre-existing unknown contamination[241] - The company holds a 10-year pollution legal liability insurance policy with a $50 million aggregate limit to cover pre-existing unknown environmental liabilities and new events[247] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate debt, with a 1.0% increase impacting 2020 net income by $0.2 million - The primary market risk is interest rate risk associated with the $300 million variable-rate revolving credit facility[251] - As of December 31, 2019, $20.0 million was outstanding under the facility A hypothetical 1.0% increase in interest rates would reduce 2020 net income by approximately $0.2 million[251][252] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2019, including balance sheet, statement of operations, cash flows, and notes Consolidated Balance Sheet Highlights (as of Dec 31, in thousands) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Total Real estate, net | $947,759 | $892,415 | | Total assets | $1,211,777 | $1,161,948 | | Total debt, net | $467,051 | $441,636 | | Total liabilities | $622,338 | $580,784 | | Total stockholders' equity | $589,439 | $581,164 | Consolidated Statement of Operations Highlights (Year ended Dec 31, in thousands) | Account | 2019 | 2018 | | :--- | :--- | :--- | | Total revenues | $140,655 | $136,106 | | Total operating expenses | $74,956 | $72,733 | | Operating income | $66,762 | $67,321 | | Net earnings | $49,723 | $47,706 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[431] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[433] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[434] Other Information The company reports no other information - None[436] Part III Directors, Executive Officers and Corporate Governance This section identifies the company's executive officers, including Christopher J. Constant as President and CEO, and is largely incorporated by reference - Information regarding directors, corporate governance, and Section 16(a) compliance is incorporated by reference from the company's Proxy Statement[439] Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | Christopher J. Constant | 41 | President, Chief Executive Officer and Director | | Joshua Dicker | 59 | Executive Vice President, General Counsel and Secretary | | Danion Fielding | 48 | Vice President, Chief Financial Officer and Treasurer | | Mark J. Olear | 55 | Executive Vice President and Chief Operating Officer | Executive Compensation Information regarding executive compensation is incorporated by reference from the company's Proxy Statement - Information is incorporated by reference to the "Executive Compensation" section of the Proxy Statement[445] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and equity compensation plans is incorporated by reference from the company's Proxy Statement - Information is incorporated by reference to the "Beneficial Ownership of Capital Stock" and "Equity Compensation Plan Information" sections of the Proxy Statement[446] Certain Relationships and Related Transactions, and Director Independence The company reported no related party transactions for 2019, with director independence information incorporated by reference - There were no relationships or transactions to report for the year ended December 31, 2019[447] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement - Information is incorporated by reference to the "Ratification of Appointment of Independent Registered Public Accounting Firm" section of the Proxy Statement[448] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This section includes the Financial Statements, Financial Statement Schedules, and the Exhibit Index[449][450] Form 10-K Summary The company did not provide a Form 10-K summary - None[451]