Getty Realty Is Getting Risky - The Good And The Bad

Core Viewpoint - GTY Realty Corp. (GTY) is a triple-net lease REIT focusing on retail/service-oriented properties, particularly in the convenience-gas and automotive sectors, with a strong occupancy rate and solid weighted average lease term (WALT) but faces challenges due to high tenant concentration and upcoming debt maturities [4][16]. Group 1: Business Metrics - GTY has a weighted average annual rent escalation of 1.7%, which is on the higher end compared to peers like NNN at approximately 1.5% [2]. - The company's WALT is 9.2 years, with recent investments yielding a WALT of over 15 years for new acquisitions [7]. - GTY boasts a high occupancy rate of 99.7%, outperforming the median occupancy rate of 94.8% for S&P 500 REITs [7]. Group 2: Financial Health - GTY has a BBB- rated balance sheet with a coverage ratio of 3.9x and a weighted average debt maturity of 5.8 years [8]. - The company faces significant debt maturities in 2025, totaling $175 million, which constitutes nearly 22% of its total debt outstanding [8]. - GTY's AFFO per share growth from 2019 to 2023 was 5.6%, but its 2024 guidance suggests a modest growth of 2.2% [10]. Group 3: Tenant Concentration - Approximately 68.6% of GTY's annual base rent (ABR) comes from its top 10 tenants, indicating a high tenant concentration risk [9]. - This level of tenant concentration is significantly higher than peers like EPRT (19.1%), ADC (37%), and NTST (52.3%) [21]. Group 4: Dividend and Yield - GTY offers an attractive dividend yield of approximately 6.6%, with a dividend per share compound annual growth rate (CAGR) of 5.8% from 2019 to 2023 [11]. - However, upcoming debt maturities may negatively impact the company's financial situation and its ability to sustain dividend growth [11]. Group 5: Valuation - The forward-looking price-to-FFO multiple for GTY stands at 12.6x, which is lower than peers like NTST (14.2x), EPRT (14.7x), and ADC (15.1x) [23]. - Given the high AFFO payout ratio of 78.3%, GTY is considered riskier compared to its peers, which may limit its potential for multiple appreciation [23].