Getty Realty (US:GTY)2024-07-25 15:05Financial Data and Key Metrics Changes - The company reported a 15% year-over-year increase in annualized base rent (ABR), reaching $185 million compared to $160 million in the previous year [12][34] - Adjusted funds from operations (AFFO) per share increased by 3.6% year-over-year to $0.58 for Q2 2024, with a six-month period AFFO per share of $1.15, up 2.7% compared to the prior year [12][39] - The company raised its full-year 2024 AFFO guidance to a range of $2.30 to $2.32 per share, implying growth at the midpoint of 2.7% over 2023 [39] Business Line Data and Key Metrics Changes - The company completed nearly $62 million of investments in Q2 2024 across 23 properties, focusing on convenience stores, express tunnel car washes, auto service centers, and drive-thru quick service restaurants [13][24] - The investment activity for the year-to-date totaled $103.8 million at an initial cash yield of 7.9%, with an aggregate initial yield on Q2 investments at 8.1% [25][39] Market Data and Key Metrics Changes - The convenience store industry saw total inside store sales grow more than 8% to a record $328 billion, with foodservice sales gross profit averaging over 10% [16] - The car wash sector demonstrated resilience, with coverage ratios increasing for nearly all tenants operating for at least one year, driven by unlimited wash memberships [18] Company Strategy and Development Direction - The company aims to create value for shareholders through a targeted investment strategy, leveraging industry relationships and strict underwriting criteria [15] - The investment pipeline includes over $53 million of assets under contract at a blended cap rate approaching the mid-8% area, with ongoing efforts to source new investment opportunities [14][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate challenges in the transaction and capital markets, citing a strong balance sheet and reliable rental income [19][21] - There is considerable uncertainty regarding interest rates and geopolitical factors, but the company remains well-positioned to execute its growth strategy [20][21] Other Important Information - The company's lease portfolio included 119 net lease properties with an occupancy rate of 99.7% and a weighted average lease term of 9.2 years [23] - The trailing 12-month tenant rent coverage ratio was 2.6 times, indicating strong tenant performance despite macroeconomic volatility [23] Q&A Session Summary Question: What is the pricing landscape across investment segments? - The pipeline is well distributed across all asset classes, with quick service restaurants at the lower end of the pricing range [50] Question: Is there increased competition in the investment space? - The competitive landscape has remained stable, with challenges in sourcing opportunities aligning with the company's value perspective [51] Question: How do current deal spreads compare to historical norms? - Closed deals are around a 100 basis point spread, with assets under contract wider than that, reflecting recent market dynamics [55] Question: What is the company's approach to funding mix? - The company maintains a 65-35 equity-to-debt capital funding model and does not anticipate significant changes [60] Question: Are there any tenant credit concerns? - There are no notable credit concerns within the portfolio, with a consistent tenant rent coverage ratio [91][92]