Executive Summary / Key Takeaways

• Getty Realty Corp. is a net lease REIT specializing in convenience and automotive retail real estate, strategically diversifying its portfolio beyond traditional gas stations into car washes, auto service centers, and drive-thru QSRs.
• The company demonstrated solid recent financial performance, with Q1 2025 AFFO per share increasing 3.5% year-over-year, driven by acquisitions and contractual rent escalations, contributing to an 11.2% rise in annualized base rent.
• A key strength is the company's balance sheet and liquidity, highlighted by the refinancing of its Credit Facility and Senior Notes, resulting in no debt maturities until June 2028 and over $450 million in total liquidity as of Q1 2025.
• Getty's competitive advantages stem from its specialized focus, relationship-based direct transaction model (over 90% direct deals), and strategic real estate locations, rather than technological differentiation, operating in fragmented, consolidating sectors.
• While macroeconomic uncertainty, environmental liabilities, and specific tenant issues like the Zips Car Wash bankruptcy (representing 1.8% of ABR, with an expected 70% ABR recovery) present risks, the company's 2025 AFFO guidance of $2.38 to $2.41 reflects confidence in its resilient portfolio and strategic execution.

The Foundation: Essential Retail and a Strategic Evolution

Getty Realty Corp. operates as a specialized net lease real estate investment trust, deeply embedded in the convenience and automotive retail sectors. Its portfolio, comprising convenience stores, express tunnel car washes, automotive service centers, and other freestanding retail properties like drive-thru quick service restaurants, is strategically concentrated in high-density or growing metropolitan areas across 42 states and Washington, D.C. These properties are predominantly leased under long-term, triple-net agreements, where tenants bear responsibility for taxes, maintenance, insurance, and environmental costs. This structure provides Getty with a stable, predictable revenue stream.

The company's strategic narrative is one of evolution and diversification, particularly accelerating over the past five years. Historically rooted in traditional gas station properties, notably through a significant master lease with Getty Petroleum Marketing Inc. until its bankruptcy in 2012, the company has since broadened its investment focus. This strategic pivot was not a departure from the convenience store sector but rather an expansion into adjacent, complementary retail verticals. The goal has been to scale the business by acquiring real estate with similar desirable attributes – high traffic, visibility, and essential consumer services – occupied by tenants operating in sectors characterized by similar growth dynamics and fragmentation ripe for consolidation. This diversification effort has been demonstrably successful, increasing annualized base rent (ABR) from non-convenience and gas properties from less than 3% to 28% of total ABR by the end of 2024, while growing total ABR by approximately 70% since the end of 2019.

Getty's competitive positioning is primarily built on its deep industry relationships, specialized underwriting expertise within its target niches, and a disciplined approach to acquiring well-located real estate. The company emphasizes a direct sale-leaseback model, with over 90% of recent investments being direct transactions with tenants. This relationship-based approach allows Getty to source off-market opportunities and structure deals that align with its investment criteria. Unlike some larger, more technologically advanced peers who may leverage sophisticated digital platforms for portfolio management or tenant interaction, Getty's competitive edge does not appear to stem from proprietary technological differentiation. Instead, its strength lies in its focused market knowledge and the tangible attributes of its physical assets, such as securing properties in high-visibility corner locations. While larger, more diversified retail REITs like Kimco Realty (KIM) or Realty Income (O) benefit from scale and potentially broader access to capital markets, Getty carves out its niche through specialization and direct tenant partnerships in sectors supported by enduring consumer trends for speed, convenience, and vehicle-related services.

Portfolio Strength and Operational Execution

As of March 31, 2025, Getty's leased portfolio comprised 1,115 net leased properties, alongside one active redevelopment site, maintaining a high occupancy rate of 99.7%. The weighted average remaining lease term stood at a healthy 10 years, excluding renewal options. This stability is underpinned by a trailing 12-month tenant rent coverage ratio of 2.5x as of Q1 2025, a metric that has remained consistently strong over the past four to five years, demonstrating the resilience of the tenant base even amidst macroeconomic volatility.

The portfolio's geographic footprint is diversified across 42 states and Washington, D.C., with a significant concentration in the Northeast and Mid-Atlantic regions, which management views as a unique and valuable asset. Approximately 61% of ABR is derived from the top 50 MSAs, and 76% from the top 100 MSAs, aligning with the strategy of investing in high-density or growing urban markets.

Operational efficiency is a focus area, with management actively working to moderate general and administrative (G&A) dollar increases and improve G&A ratios as the company scales. For the three months ended March 31, 2025, total G&A as a percentage of total revenue was 13.2%, a 40-basis point improvement over the prior year quarter. G&A excluding stock-based compensation and non-recurring costs, as a percentage of cash rental income and interest income, was 10.5%, a 10-basis point improvement. These trends suggest ongoing efforts to manage overhead effectively.

The company also pursues a redevelopment strategy for certain legacy properties, particularly former gas and repair sites, aiming to reposition them for higher-value uses like modern convenience stores, automotive parts retailers, or quick service restaurants. Since the program's inception in 2015, 32 redevelopment and revenue-enhancing capital expenditure projects have been completed. As of Q1 2025, one property was under active redevelopment, with others in various stages of planning. This strategy seeks to unlock embedded value within the existing portfolio.

Financial Performance and Investment Activity

Getty's financial results for the first quarter of 2025 reflect the impact of its investment strategy and stable portfolio operations. Revenues from rental properties increased to $51.7 million for the three months ended March 31, 2025, up from $47.2 million in the prior year period. This $4.5 million increase was primarily driven by additional base rental income from properties acquired over the preceding 12 months, rent commencements from completed redevelopments, and contractual rent increases on existing leases. This growth was partially offset by the impact of property dispositions and a decrease in tenant reimbursement income as certain tenants transitioned to paying real estate taxes directly.

Net earnings for the quarter were $14.8 million, or $0.25 per diluted share, compared to $16.7 million, or $0.30 per diluted share, in Q1 2024. The decrease in net earnings was influenced by higher operating expenses, notably a $3.4 million increase in depreciation and amortization due to portfolio growth, and a $2.6 million increase in interest expense driven by higher average borrowings and interest rates. These increases more than offset the growth in rental revenues.

Adjusted Funds From Operations (AFFO), a key non-GAAP metric favored by REIT analysts as a measure of core operating performance, showed positive growth. AFFO for Q1 2025 was $33.8 million, or $0.59 per diluted share, an increase of 3.5% compared to $31.4 million, or $0.57 per diluted share, in Q1 2024. This growth underscores the underlying operational strength and the accretive impact of recent investments, despite fluctuations in GAAP net earnings influenced by non-cash items like depreciation and certain environmental adjustments.

Investment activity in Q1 2025 was more modest than prior quarters but aligned with expectations, totaling $10.9 million across six properties at an initial cash yield of 7.8%. This included acquisitions of drive-thru QSRs, an express tunnel car wash, and an auto service center. For the full year 2024, Getty invested $209 million across 78 properties at an initial cash yield of 8.3%, with investments diversified across convenience stores (41%), car washes (33%), auto service (21%), and QSRs (5%). This marked 2024 as the most balanced investment year since the diversification strategy began. As of April 23, 2025, the company had a committed investment pipeline exceeding $110 million for 29 properties, expected to fund over the next nine to twelve months at an average initial yield in the high 7% area. Management notes that while macroeconomic uncertainty has created volatility and material bid-ask spreads persist, their relationship-based approach continues to generate actionable opportunities.

Balance Sheet Strength and Capital Management

Getty maintains a strong balance sheet and robust liquidity position, which provides significant financial flexibility for funding its growth strategy and managing liabilities. As of March 31, 2025, total assets were $1.97 billion, with real estate assets (net) totaling $1.83 billion. Total liabilities were $1.01 billion, resulting in total stockholders' equity of $961.1 million.

A key highlight of recent capital management activities is the proactive refinancing of debt maturities. In January 2025, Getty entered into a Third Amended and Restated Credit Agreement, upsizing its unsecured revolving credit facility to $450 million and extending its maturity to January 2029 (with options for two six-month extensions). This increased capacity was immediately utilized to repay the $150 million senior unsecured term loan that was scheduled to mature in October 2025. Furthermore, in February 2025, the company funded $125 million of new Senior Unsecured Notes, using the proceeds to repay $50 million of notes that matured in February 2025 and reduce borrowings under the Credit Facility. These actions have successfully addressed all near-term debt maturities, resulting in no debt maturities until June 2028.

As of March 31, 2025, total debt (net of unamortized debt issuance costs) was $901.4 million. The company's net debt to EBITDA stood at 5.2x (or 4.4x taking into account unsettled forward equity), within its stated target leverage range of 4.5x to 5.5x. Fixed charge coverage for Q1 2025 was 3.5x.

Liquidity is ample, with $292.5 million of availability under the Credit Facility as of March 31, 2025. Additionally, the company had 5 million shares of common stock subject to outstanding forward sales agreements under its ATM Program, anticipated to generate approximately $153.4 million in gross proceeds upon settlement. Available cash and cash equivalents totaled $6.3 million. This significant liquidity position provides more than sufficient capital to fund the current investment pipeline and pursue additional opportunities.

Outlook, Guidance, and Key Risks

Getty reaffirmed its 2025 AFFO per share guidance range of $2.38 to $2.41. This outlook incorporates completed transaction activity as of the earnings release date but does not include assumptions for any prospective acquisitions, dispositions, or future capital markets activities, including the settlement of outstanding forward sales agreements. Primary factors influencing the guidance include the finalization of the anticipated resolution regarding the Zips Car Wash bankruptcy, variability in uncollectible rent, certain operating expenses, transaction-related costs, and the timing of demolition costs for redevelopment projects.

The Zips Car Wash situation, representing 1.8% of ABR across 12 sites, is the first tenant credit issue since 2011. Management views the overall issue as a balance sheet problem for Zips rather than a fundamental site-level performance issue for most locations. The anticipated resolution involves Zips remaining a tenant at six properties, releasing five sites to new regional operators, and disposing of one property. Management expects to recover approximately 70% of the ABR previously generated by Zips, with downtime limited to less than one quarter for the re-leased assets and no tenant improvement costs associated with these re-leasing efforts. This expected outcome is within the range of potential scenarios assumed in the 2025 guidance, and management is pleased with the progress towards resolution.

While the outlook is positive, several risks warrant investor attention. Macroeconomic uncertainties, including potential inflation, recession, and geopolitical conflicts, could adversely impact real estate values, tenant performance, and the transaction market. Rising interest rates pose a risk, although a significant portion of variable-rate debt is hedged through October 2026, and the recent refinancing has pushed out maturities. Environmental liabilities, particularly related to legacy properties and ongoing litigation (Lower Passaic River, MTBE), remain a significant contingent risk, with potential future expenditures possibly exceeding current accruals. Tenant concentration, while managed through diversification efforts, still exists with major tenants like ARKO Corp. (ARKO) and Global Partners LP (GLP) contributing significant portions of revenue. Industry-specific risks include the long-term impact of EV adoption and improved fuel efficiency on revenue derived from fuel stations, although the diversification into car washes and auto service centers helps mitigate this. Material bid-ask spreads in the transaction market could also limit the pace of accretive acquisitions.

Conclusion

Getty Realty Corp. presents a compelling investment narrative centered on its specialized focus within the resilient convenience and automotive retail sectors. The company has successfully navigated historical challenges, including a major tenant bankruptcy, to emerge as a more diversified and strategically positioned REIT. Its disciplined approach to direct sale-leaseback acquisitions, coupled with a focus on high-quality real estate locations, provides a solid foundation for generating reliable and growing rental income.

Recent financial performance, marked by growth in ABR and AFFO per share, underscores the effectiveness of its strategy. The proactive management of its balance sheet, highlighted by the recent debt refinancing and resulting absence of near-term maturities, provides significant financial strength and flexibility. While the company faces ongoing risks from macroeconomic factors, environmental liabilities, and tenant-specific issues like the Zips bankruptcy, management's reaffirmed 2025 guidance reflects confidence in the portfolio's resilience and the anticipated positive resolution of current challenges. Getty's competitive advantages, rooted in its niche expertise and relationship-driven model rather than technological leadership, position it to continue sourcing accretive investment opportunities in fragmented markets. For investors seeking yield and exposure to essential retail real estate, Getty Realty offers a differentiated proposition supported by a strong balance sheet and a clear strategic direction.