Getty Realty Corp. Provides 2023 Business Update
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Insights
The announcement by Getty Realty Corp. of record annual investment activity and the provision of 2024 earnings guidance is a significant disclosure with potential implications for the company's stock valuation and investor sentiment. The deployment of $326 million in convenience and automotive retail assets signals aggressive growth and a strategic focus on these sectors. The capital raised through equity and debt, including the forward equity and unsecured term loan, suggests a robust capital structure that can support further expansion.
The committed investment pipeline is a forward-looking indicator that provides insights into the company's growth trajectory. However, investors should be wary of the associated risks, such as the dependency on counterparties to complete transactions on schedule. The 2024 AFFO guidance range of $2.29 to $2.31 per diluted share offers a projection of operational performance, but it is essential to note that it excludes potential future acquisitions, dispositions, or capital market activities, which could materially affect the actual results.
The strategic moves by Getty Realty Corp. to diversify and scale their portfolio through various sale leaseback and development funding transactions aligns with broader trends in the real estate market, where such strategies are often employed to unlock capital and foster stable earnings. The focus on convenience stores, express tunnel car washes and auto service centers reflects a targeted approach to investment in sectors that may offer resilience against economic fluctuations due to their essential nature.
The company's ability to commence rent on redeveloped properties, such as the Brooklyn property leased to AutoZone, demonstrates effective asset management and the potential for revenue growth. However, the disposition of nine properties raises questions about the strategic fit or performance of these assets within the portfolio. Observing the balance between acquisitions, development funding and dispositions will be crucial in assessing the company's portfolio optimization strategy.
Getty Realty Corp.'s activities in 2023, particularly the acquisition of 66 properties, indicate a bullish stance on the real estate segments they operate in. The triple net lease structure of the AutoZone property in Brooklyn, NY is notable, as it typically benefits the landlord by passing on most expenses to the tenant, potentially enhancing the stability and predictability of cash flows. The delayed draw term loan provides flexibility in capital management, allowing the company to respond to market conditions and investment opportunities as they arise.
The 6.1% effective interest rate on the term loan, while reflective of the current interest rate environment, will impact the cost of capital and should be monitored, especially given the potential for rate fluctuations. The AFFO (Adjusted Funds From Operations), a key REIT metric indicating the company's cash flow from operations, is crucial for evaluating the company's ability to sustain and grow dividends, an essential aspect for REIT investors.
- Reports Record Annual Investment Activity -
- Introduces 2024 Annual Earnings Guidance -
2023 Highlights
-
Invested approximately
$326 million $61 million -
Committed investment pipeline of approximately
$75 million -
Raised
$295 million $25 million $150 million -
Committed capital totaling more than
$107 million $32.5 million $75 million
“We had very productive year in 2023, achieving record investment volumes and successfully accessing the capital markets to accretively fund our investments,” stated Christopher J. Constant, Getty’s President and Chief Executive Officer. “We continued to scale and diversify our portfolio through a variety of sale leaseback and development funding transactions, which also provide the foundation for steady earnings and dividend growth. As we move into 2024, we will remain thoughtful and disciplined as we execute on our investment strategy and navigate the evolving transaction and capital markets.”
Portfolio Activities
Acquisitions
In 2023, the Company acquired fee simple interests in 66 convenience and automotive retail properties for approximately
Acquisitions included 38 express tunnel car washes, 13 auto service centers, 12 convenience stores, and 3 drive-thru quick service restaurants.
Development Funding
In 2023, the Company advanced total funding of approximately
Investment Pipeline
As of December 31, 2023, the Company had a committed investment pipeline of approximately
Redevelopments
In 2023, rent commenced on three redevelopment properties, including one property in the fourth quarter which is located in
As of December 31, 2023, the Company had three properties under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio.
Dispositions
In 2023, the Company sold nine properties for gross proceeds of approximately
Capital Markets Activities
Common Equity
In 2023, the Company raised approximately
As of December 31, 2023, the Company had a total of 1,063,348 shares subject to outstanding forward equity agreements under its ATM equity program, which upon settlement are anticipated to raise gross proceeds of
Delayed Draw Term Loan
As previously announced, in October 2023, the Company entered into a new senior unsecured term loan with a group of existing lenders for an aggregate principal amount of
The Term Loan matures October 17, 2025, with one twelve-month extension at the Company's option, and the effective interest rate on the Term Loan was
2024 Guidance
The Company has established its 2024 AFFO guidance at a range of
The guidance is based on current assumptions and is subject to risks and uncertainties more fully described in this press release and the Company’s periodic reports filed with the Securities and Exchange Commission.
About Getty Realty Corp.
Getty Realty Corp. is a publicly traded, net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate. As of December 31, 2023, the Company’s portfolio included 1,093 freestanding properties located in 40 states across
Non-GAAP Financial Measures
In addition to measurements defined by accounting principles generally accepted in
FFO and AFFO are generally considered by analysts and investors to be appropriate supplemental non-GAAP measures of the performance of REITs. FFO and AFFO are not in accordance with, or a substitute for, measures prepared in accordance with GAAP. In addition, FFO and AFFO are not based on any comprehensive set of accounting rules or principles. Neither FFO nor AFFO represent cash generated from operating activities calculated in accordance with GAAP and therefore these measures should not be considered an alternative for GAAP net earnings or as a measure of liquidity. These measures should only be used to evaluate the Company’s performance in conjunction with corresponding GAAP measures.
FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net earnings before (i) depreciation and amortization of real estate assets, (ii) gains or losses on dispositions of real estate assets, (iii) impairment charges, and (iv) the cumulative effect of accounting changes.
The Company defines AFFO as FFO excluding (i) certain revenue recognition adjustments (defined below), (ii) certain environmental adjustments (defined below), (iii) stock-based compensation, (iv) amortization of debt issuance costs and (v) other non-cash and/or unusual items that are not reflective of the Company’s core operating performance.
Other REITs may use definitions of FFO and/or AFFO that are different than the Company’s and, accordingly, may not be comparable.
The Company believes that FFO and AFFO are helpful to analysts and investors in measuring the Company’s performance because both FFO and AFFO exclude various items included in GAAP net earnings that do not relate to, or are not indicative of, the core operating performance of the Company’s portfolio. Specifically, FFO excludes items such as depreciation and amortization of real estate assets, gains or losses on dispositions of real estate assets, and impairment charges. With respect to AFFO, the Company further excludes the impact of (i) deferred rental revenue (straight-line rent), the net amortization of above-market and below-market leases, adjustments recorded for the recognition of rental income from direct financing leases, and the amortization of deferred lease incentives (collectively, “Revenue Recognition Adjustments”), (ii) environmental accretion expenses, environmental litigation accruals, insurance reimbursements, legal settlements and judgments, and changes in environmental remediation estimates (collectively, “Environmental Adjustments”), (iii) stock-based compensation expense, (iv) amortization of debt issuance costs and (v) other items, which may include allowances for credit losses on notes and mortgages receivable and direct financing leases, losses on extinguishment of debt, retirement and severance costs, and other items that do not impact the Company’s recurring cash flow and which are not indicative of its core operating performance.
The Company pays particular attention to AFFO which it believes provides the most useful depiction of the core operating performance of its portfolio. By providing AFFO, the Company believes it is presenting information that assists analysts and investors in their assessment of the Company’s core operating performance, as well as the sustainability of its core operating performance with the sustainability of the core operating performance of other real estate companies.
Forward-Looking Statements
Certain statements contained herein may constitute “forward-looking statements” within the meaning of the private securities litigation reform act of 1995. When the words “believes,” “expects,” “plans,” “projects,” “estimates,” “anticipates,” “predicts,” “outlook” and similar expressions are used, they identify forward-looking statements. These forward-looking statements are based on management’s current beliefs and assumptions and information currently available to management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Examples of forward-looking statements include, but are not limited to, those regarding the company’s 2024 AFFO per share guidance, those made by Mr. Constant, statements regarding the recapture and transfer of certain net lease retail properties, statements regarding the ability to obtain appropriate permits and approvals, and statements regarding AFFO as a measure best representing core operating performance and its utility in comparing the sustainability of the company’s core operating performance with the sustainability of the core operating performance of other REITs.
Information concerning factors that could cause the company’s actual results to differ materially from these forward-looking statements can be found elsewhere from this press release, including, without limitation, those statements in the company’s periodic reports filed with the securities and exchange commission. The company undertakes no obligation to publicly release revisions to these forward-looking statements to reflect future events or circumstances or reflect the occurrence of unanticipated events.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240110601173/en/
Brian Dickman
Chief Financial Officer
(646) 349-6000
Investor Relations
(646) 349-0598
ir@gettyrealty.com
Source: Getty Realty Corp.
FAQ
How much did Getty Realty Corp. invest in convenience and automotive retail assets in 2023?
What was the amount of new equity and debt capital raised by Getty Realty Corp. in 2023?
What is Getty Realty Corp.'s 2024 annual earnings guidance?
