Getty Realty: Profitable, Solvent, And Undervalued

Core Viewpoint - Getty Realty Corp. (NYSE:GTY) is a net-lease REIT with a diversified portfolio and strong operational focus, presenting potential investment opportunities due to undervaluation and high dividend yield [1][12]. Portfolio Overview - The REIT's portfolio includes 1,124 properties across 42 states, with the largest concentration in New York at approximately 16% [2]. - The tenant base is well-diversified, with a significant reduction in reliance on convenience stores and gas/repair stations, which now account for 63% and 9% of annual base rent (ABR) respectively [4]. Financial Performance - In 2023, Getty Realty achieved $172.8 million in annualized base rent, reflecting a 12.1% year-over-year increase, with occupancy rates at 99.8% [6]. - The net operating income (NOI) increased by 21.55%, and adjusted funds from operations (AFFO) per share rose to $2.25, a 5.14% increase year-over-year [6]. - The company anticipates a slower growth rate in 2024, with a projected AFFO of $2.31 per share, indicating a 2.67% year-over-year growth [6]. Leverage and Liquidity - Getty Realty maintains a BBB- rating from Fitch Ratings, with 44.37% of its assets funded by long-term debt, all of which is unsecured [7]. - The weighted average interest rate on its debt is 4.35%, with a Debt/EBITDA ratio of 5.32x and interest coverage at 4.08x, indicating strong liquidity [7]. Dividend and Valuation - The current quarterly dividend is $0.45 per share, yielding 5.68%, with a payout ratio of 77.92% based on forward AFFO [8]. - The implied cap rate of 7.15% is higher than the forecasted average cap rate for retail asset transactions in 2024, suggesting potential undervaluation [9].