JERICHO, N.Y. — Getty Realty Corp. had a “slow year” in 2014 in terms of acquisitions, but the real estate investment trust (REIT) is expecting to have a more active year in 2015, CEO David B. Driscoll noted during Thursday’s 2014 fiscal fourth-quarter earnings call.
Prices for potential acquisitions were too high last year due to several factors, he said, including the ability for tax-advantaged master limited partnerships to pay higher multiples for available convenience store and gas station assets.
Specifically, Getty Realty is seeking acquisitions ranging from $2-$3 million up to $7 million or more, said Driscoll. He did not discuss any specific acquisition targets.
“We remain energetic about growth and acquisitions,” he said. “... We are well capitalized for [these transactions]."
Getty Realty did acquire three properties for $10.8 million in its fourth quarter ended Dec. 31, and purchased a total of 10 properties for $17.6 million for all of 2014.
At the same time, the REIT disposed of 22 properties for $5.8 million in its fourth quarter, and a total of 93 properties for $31.2 million for all of 2014. The company deemed these properties should not be part of its core portfolio.
As of Dec. 31, Jericho-based Getty Realty owned and/or leased approximately 860 locations nationwide.
As for the properties currently leased, Driscoll stressed that the retailers occupying these sites are performing well, in large part due to lower gas prices.
As prices fall, margins rise, he explained. One lesser-known factor causing margins to rise are lower credit card fees. When gas sells for $4 per gallon at the pump, credit card processors could take 16 cents per gallon in fees. However, in this same scenario, when prices reach $3 per gallon at the pump, credit card fees drop to 12 cents per gallon. “That 4-cent difference is huge for retail profits,” Driscoll remarked.
Getty Realty has commenced a process to take control and reposition the properties that had been subject to a master lease it formerly had with now-bankrupt Getty Petroleum Marketing Inc. A substantial portion of these properties had underground storage tanks (USTs) that were either at or near the end of their useful lives.
For properties the company sold, it elected to remove certain USTs and for properties that Getty Realty re-let, its tenants are replacing many USTs. Under several of these new leases, Getty Realty is reimbursing tenants for the costs of UST removals and replacements, Driscoll announced Thursday.
The REIT expects to incur additional environmental remediation costs associated with the removal and replacement of USTs in the future.
Q4 EARNINGS FALL
Getty Realty reported a net loss of $3.1 million for its 2014 fourth quarter, compared to a gain of $5 million in the same time period in 2013. The loss was attributed to the recording of $15 million of non-cash impairment charges.
Total revenues from continuing operations also declined by $1.1 million year over year to $25.4 million. Meanwhile, rental property expenses from continuing operations dropped $1.4 million year over year to $6.2 million.