Getty Realty (US:GTY)2022-10-27 21:01Financial Data and Key Metrics Changes - Base rental income grew by 7.7% for the quarter [12] - Adjusted funds from operations (AFFO) increased by 6.7%, with AFFO per share rising to $0.54 [12][35] - Total revenues increased by 4.7% to $42 million for the quarter [35] - Year-to-date investment exceeded $80 million, with approximately $21 million invested in Q3 [12][23] - The company raised its 2022 AFFO guidance to a range of $2.12 to $2.13 per share [18][47] Business Line Data and Key Metrics Changes - The portfolio includes 1,013 net lease properties, with an overall occupancy rate of 99.6% [22] - The weighted average lease term was 8.6 years [22] - The initial cash yield for investment activity in Q3 was approximately 6.7% [25] - 84% of investments were from new sale-leaseback transactions, while 16% were from development funding [27] Market Data and Key Metrics Changes - 65% of annualized base rents come from the top 50 metropolitan statistical areas (MSAs) in the US [22] - The trailing 12-month tenant rent coverage ratio was 2.7 times [22] - The company is seeing upward pressure on cap rates, indicating a changing market environment [50][51] Company Strategy and Development Direction - The strategy emphasizes owning high-quality real estate and partnering with growing regional and national operators in convenience and automotive retail sectors [16] - The company aims to diversify its portfolio while remaining disciplined in an evolving marketplace [16] - The investment pipeline has increased to over $150 million, focusing on convenience stores, auto service centers, and car wash properties [13][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position despite challenging macroeconomic conditions [20] - The company is open for business and actively sourcing investment opportunities [19] - The board approved a 4.9% increase in the quarterly dividend, reflecting growth prospects for 2023 [17] Other Important Information - The company ended the quarter with $625 million in total debt, with no floating rate debt exposure [39] - Environmental liabilities decreased significantly to $29.2 million, primarily due to the removal of unknown reserve liabilities [45] - The company continues to pursue dispositions of non-competitive properties to recycle capital [32] Q&A Session Summary Question: Trends in asset pricing and expected yields - Management noted upward pressure on cap rates, with forward commitments expected to be 20 basis points higher than year-to-date activity [50][51] Question: Characterization of the $150 million pipeline - The company continues to see good activity across all verticals, with a focus on maintaining diversity within retail automotive sectors [52] Question: Cadence of closing for the $150 million pipeline - About 55% of the pipeline is development funding, likely backend weighted, while 45% is regular sale-leaseback activity expected to close sooner [64] Question: Competitive environment for transactions - The competitive environment remains strong, with opportunities still available despite changing pricing dynamics [66][69]