Getty Realty (US:GTY)2025-10-23 13:32Financial Data and Key Metrics Changes - Getty Realty reported over 10% year-over-year growth in annualized base rent and a 5.1% increase in quarterly AFFO per share for Q3 2025 [5][6] - AFFO per share for Q3 2025 was $0.62, a 5.1% increase compared to Q3 2024, and for the nine months ended September 30, AFFO per share was $1.80, up 3.5% year-over-year [18][19] - The company increased its full-year 2025 AFFO per share guidance to a range of $2.42-$2.43 from the previous guidance of $2.40-$2.41 [22] Business Line Data and Key Metrics Changes - The company invested over $235 million year-to-date, exceeding its full-year activity in 2024, with a focus on drive-through QSR segment, acquiring more than 25 properties [7][8] - The leased portfolio included 1,156 net-leased properties with an occupancy rate of 99.8% and a weighted average lease term of 9.9 years [14] - The trailing 12-month tenant rent coverage ratio was consistent at 2.6x, reflecting steady performance from the convenience store portfolio [7][14] Market Data and Key Metrics Changes - 61% of annualized base rent comes from the top 50 MSAs, and 77% from the top 100 MSAs, indicating a strong market presence [14] - The company has diversified its tenant base by transacting with 10 new tenants in 2025 [8] Company Strategy and Development Direction - Getty Realty is focused on acquiring well-located convenience and automotive retail properties leased to growing regional and national operators [11] - The company aims to leverage its underwriting expertise and real estate selection to support investment decisions and mitigate credit risks [11] - The board approved a 3.2% increase in the recurring quarterly dividend to $0.485 per share, marking the 12th consecutive year of dividend growth [12] Management's Comments on Operating Environment and Future Outlook - Management expressed excitement about the platform built over the years, highlighting the ability to deliver strong financial results amid market disruptions [11] - The company remains focused on scaling its operations and retaining capital for growth while balancing shareholder returns through dividends [22] Other Important Information - The company has a committed investment pipeline of over $75 million under contract, which can be funded without raising additional capital [8][21] - The weighted average cost of debt was 4.5%, with no debt maturities until 2028, indicating a strong balance sheet [19][20] Q&A Session Summary Question: Thoughts on the health of the middle to lower-end consumer regarding drive-through QSRs - Management noted gaining momentum in the quick service restaurant sector, which aligns with macroeconomic pressures and consumer preferences [25] Question: Details on environmental expense adjustments - Management clarified that adjustments were due to alleviated risks at legacy sites, resulting in the removal of certain reserves [26] Question: Timeline for engagement with Now & Forever acquisition - The acquisition process took less than six months, with varying timelines for different transactions based on relationship building [28][29] Question: Funding plan for upcoming transactions - Management discussed typical funding sources, including forward equity and revolver availability, to manage leverage [30][31] Question: Sources of debt and pricing - Management indicated that the private placement market would likely be the best source for new debt, with current pricing in the high fives [35] Question: Dividend increase rationale - The board's decision to retain more cash internally was to support growth and scale the business while still aligning dividend growth with earnings [36] Question: Sourcing future travel center transactions - Management emphasized relationship building and market presence as key to sourcing future acquisitions in the travel center sector [40][41] Question: Update on bad debt - Management reported no significant rent collection issues this year, maintaining a typical bad debt level [43] Question: Tenant health and lease substitutions - Management noted it is too early to assess requests for asset substitutions in master leases, expecting most properties to remain long-term [48] Question: Underwriting differences for travel centers - Management highlighted that travel centers have a different risk profile, with a focus on total value and broader service offerings [52] Question: Impact of cap rate discussions - Management indicated no significant movement in cap rates recently, suggesting a longer-term shift may be needed to see impacts [58] Question: Car wash industry performance - Management reported positive trends in car wash rent coverage, with new builds stabilizing ahead of schedule [61][62]