GPMI Bankruptcy Continues to Affect Getty Realty
JERICHO, N.Y. -- Getty Realty Corp. continues to deal with the fallout from Getty Petroleum Marketing Inc.'s (GPMI) Dec. 5 bankruptcy, Getty Realty CEO David B. Driscoll said during this morning's 2012 fiscal second-quarter earnings conference call.
According to the chief executive, Getty Realty is still incurring legal costs due to the bankruptcy of what was formerly the largest tenant for its gas stations and convenience stores. Getty Realty has to either sell or sign new leases with the individual operators who subleased from GPMI.
Because of this, Driscoll categorized the real estate investment trust's latest quarter as a "transitional period." However, he said significant progress is being made to distance itself from GPMI, and that much better times lay ahead.
"This is the last quarter our results will be directly affected by results from [GPMI]," said Driscoll. "Earnings should return to traditional levels by our [fiscal] third or fourth quarter."
As for its 2012 fiscal second quarter, for the period ending June 30, Getty Realty earned a net profit of $3.6 million, compared to a profit of $15.2 million in the same period last year.
Revenues from rental properties were virtually unchanged at $26.8 million vs. a year ago. Getty Realty, though, shelled out $6.5 million in bad debt reserves in general and administrative expenses, virtually all of which was related to the GPMI bankruptcy, the company said.
The company has also incurred $1.1 million in environmental remediation costs thus far this calendar year, something which GPMI used to be responsible for, according to Driscoll. Getty Realty took out a $50 million insurance policy that covers any unknown environmental issue at any property it owns. Any environmental issue it is currently aware of is excluded from the policy.
"It's a 10-year policy with a high deductible, but it covers any catastrophic event that could occur in the future," noted Driscoll.
Getty Realty owns roughly 1,300 gas stations and c-stores. Of those, 799 were formerly leased to GPMI. Driscoll announced today that among the 799 properties, 13 were sold in its latest fiscal quarter at a $4.4-million price tag. Getty Realty entered into triple-net leases for another 282 of the properties with affiliates of Lehigh Gas, Chestnut Petroleum Distributors, Ramoco Fuels and Sam's Food Stores. It also inked month-to-month license agreements for another 330 properties or so.
The company has begun the eviction process at 40 locations, where it says "tenants have not entered into new agreements and therefore occupy these properties without right."
"We made more progress in the latest quarter. We continue to make more progress every day," Driscoll said.
To prove that Getty Realty is confident in its future, the CEO noted that the company reinstituted its quarterly dividend, something he called a "sign of stability."