Getty Realty Touts Benefits of 77-Store Acquisition
JERICHO, N.Y. — Getty Realty Corp. closed on its acquisition of 77 convenience stores and gas stations in the western portion of the United States, President and CEO David Driscoll announced during the company’s 2015 fiscal second-quarter earnings call late Monday.
Getty Realty acquired the sites from Pacific Convenience and Fuels LLC for $214 million, as CSNews Online reported in June. The stores operate under the 76, Conoco, Circle K, 7-Eleven and My Goods Market brand names. They are located in Northern California, Southern California, Colorado, Washington, Nevada and Oregon.
The real estate investment trust (REIT) is leasing these stores to United Oil Co. United Oil is triple-net leasing the 77 properties for an initial term of 20 years, with three five-year renewal options. Getty Realty expects to receive approximately $16.7 million of annual GAAP revenue from the transaction.
This acquisition “accomplished a number of things for us, including expanding our geographic reach into the fastest-growing regions of the country, adding an additional institutional quality major tenant, while generating significant accretion on a per-share basis,” Driscoll stated during Monday's call.
The executive added that as a direct result of this acquisition, Getty Realty increased its quarterly dividend by 2 cents per share to 24 cents per share.
Due to current economic conditions, Getty Realty may curb its appetite a bit in the short term regarding acquisitions, however.
“The market for convenience and gas stations is not divorced from global capital markets, which are being impacted by increased rate expectations [and] increased volatility illustrated by the Greek and Chinese commodity market meltdowns, in what appears to be an abundance of capital-chasing acquisitions and yield,” Driscoll explained. “We believe this demand is distorting prices by holding cap rates below reasonable levels. As a result, while we continue to review opportunities, we remain highly diligent and even more disciplined with respect to opportunities that we were willing to pursue.”
Instead, Getty Realty will focus on additional repositioning, redeveloping, repurposing and otherwise optimizing the yield on its existing portfolio in the near future.
“We are definitely focused on unlocking the embedded growth from these opportunities and expect them to generate a steady tailwind of growth as we begin to execute on our plans and bring them online in the future,” relayed Driscoll.
In its second quarter, Getty Realty also sold six properties for $1.4 million in the aggregate.
Getty Realty enjoyed a solid earnings increase for its most recent quarter, rising $5 million year over year to $11.6 million for the quarter ended June 30. The REIT collected approximately $7 million in the quarter from Getty Petroleum Marketing Inc.’s liquidating trust.
Total revenues from continuing operations were $26.2 million for Getty’s most recent quarter, an increase of $1.1 million year over year.
Rental property expenses from continuing operations declined by $500,000 to $5.5 million in the most recent quarter.
Jericho-based Getty Realty currently has 875 convenience stores and gas stations in its portfolio.