Executive Summary / Key Takeaways

• Strategic Diversification Driving Growth: Getty Realty Corp. has successfully transformed from a regional gas station REIT into a diversified convenience and automotive retail powerhouse, expanding its Annualized Base Rent (ABR) by approximately 70% since 2019 and increasing non-convenience/gas income to 28% of ABR.
• Robust Financial Performance: The company reported strong Q3 2025 results with over 10% year-over-year ABR growth and a 5.1% increase in quarterly Adjusted Funds From Operations (AFFO) per share to $0.62, driven by accretive investment activity and a highly occupied, resilient portfolio.
• Disciplined Capital Management: Getty maintains a strong liquidity position with over $375 million available as of Q3 2025, no debt maturities until 2028, and a net debt-to-EBITDA ratio within its target range of 4.5x to 5.5x, enabling consistent funding of its growing investment pipeline.
• Consistent Shareholder Returns: The Board approved a 3.2% increase in the quarterly dividend to $0.485 per share in Q3 2025, marking the 12th consecutive year of dividend growth, reflecting confidence in the company's earnings power and strategic capital allocation.
• Favorable Outlook with Managed Risks: Management raised its full-year 2025 AFFO per share guidance to $2.42-$2.43, underpinned by strong acquisition momentum and effective resolution of tenant-specific challenges like the Zips Car Wash bankruptcy, while actively managing environmental and interest rate exposures.

Getty Realty's Strategic Evolution and Market Niche

Getty Realty Corp. (NYSE:GTY) has carved out a distinct and increasingly diversified niche within the real estate investment trust (REIT) landscape. Founded in 1955 and publicly listed in 1997, Getty initially specialized in convenience and automotive retail properties, with a significant focus on gas stations. This foundational expertise, however, has evolved dramatically since 2019, as the company embarked on a strategic diversification to broaden its investment scope. This shift has propelled Getty into a leading position in the "automobility" retail sector, encompassing convenience stores, express tunnel car washes, automotive service centers, and drive-thru quick-service restaurants (QSRs).

The company's overarching strategy is to acquire well-located, freestanding properties that cater to mobile consumers' needs for convenience, speed, and service. This approach is rooted in the belief that these businesses are largely recession-resistant and provide non-discretionary goods and services. Getty's portfolio, comprising 1160 properties across 44 states and Washington, D.C. as of September 30, 2025, is predominantly leased on a triple-net basis. This structure places the responsibility for taxes, maintenance, repairs, insurance, and environmental contamination on the tenants, providing Getty with a stable and predictable income stream.

Getty Realty's competitive edge is rooted in its specialized analytical and operational platform, which leverages deep industry knowledge and a data-driven underwriting process. This is not a physical product technology but a sophisticated approach to real estate investment and management within its niche. The company has "invested in technology" to enhance its acquisitions team's capabilities, enabling a more efficient and informed capital deployment strategy. This platform allows Getty to consistently identify and acquire "well-located, freestanding properties that support automobility and provide convenience and service to consumers in major markets across the country." It facilitates "relationship-based sale leasebacks at accretive investment spreads" and allows the company to "effectively broaden our investable universe while maintaining the distinctive advantages of our platform, including our broad network of operators, thorough underwriting process and unmatched knowledge of the convenience and automotive retail sectors." This translates into a portfolio that delivers "durable rental income and stable rent coverage" and supports an "investment-grade credit profile."

The company's redevelopment program, initiated in 2015, acts as an internal innovation engine, transforming older assets into modern, higher-value retail uses. A recent example is a Q3 2025 redevelopment project for a Take 5 Oil franchisee in the Philadelphia metro area, which generated an 11.6% return on $1.2 million invested. The company is also actively exploring "large-format convenience store also referred to as a travel center" opportunities, having acquired three such assets year-to-date Q3 2025 at an average purchase price of $11 million, demonstrating an adaptive strategy to evolving consumer needs. This specialized approach and continuous asset optimization contribute significantly to Getty's competitive moat. It drives consistent accretive investment spreads, enhances asset quality and resilience, and ultimately underpins the company's strong financial performance, including consistent AFFO and dividend growth. It allows Getty to extract value from its niche that might be overlooked by broader market participants.

A Foundation of Resilient Performance

Getty Realty's strategic evolution has translated into robust financial performance. For the third quarter of 2025, the company reported an impressive over 10% year-over-year growth in annualized base rent (ABR) and a 5.1% increase in quarterly Adjusted Funds From Operations (AFFO) per share, reaching $0.62. Year-to-date through September 30, 2025, AFFO per share stood at $1.80, a 3.5% increase over the prior year period. This consistent growth is underpinned by an in-place portfolio that boasts a near-perfect occupancy rate of 99.8% as of Q3 2025 and a healthy weighted average remaining lease term of 9.9 years.

The company's operational effectiveness is further evidenced by its trailing 12-month tenant rent coverage ratio, which remained stable at 2.6x for tenants reporting site-level financials. This stability reflects strong performance across its diversified asset classes. Notably, rent coverage from express tunnel car wash assets increased for the third consecutive quarter, driven by the maturation of new-to-industry sites and operators' focus on profitability. The efficiency of Getty's operations is also improving, with the ratio of General & Administrative (G&A) expenses (excluding stock-based compensation and nonrecurring retirement costs) to cash rental and interest income improving to 8.8% for Q3 2025, a 30 basis point improvement year-over-year. Management anticipates further improvements in this ratio as the company continues to scale.

Revenue from rental properties has seen a significant boost, primarily from additional base rental income generated by properties acquired over the past 12 months, coupled with rent commencements from completed redevelopments and contractual rent increases on existing leases. While tenant reimbursement income saw a decrease due to a transition of certain tenants to direct payment of real estate taxes, this shift streamlines operations for Getty. The increase in interest expense reflects higher average borrowings and interest rates, a common trend in the current macroeconomic environment. However, this has been largely offset by strategic capital management.

Disciplined Capital Deployment and Robust Liquidity

Getty Realty's growth strategy is fueled by disciplined capital deployment and a robust liquidity profile. Year-to-date through Q3 2025, the company invested over $235 million, surpassing its full-year 2024 activity of $209 million. These investments, primarily through relationship-based sale-leaseback transactions, were executed at accretive initial cash yields, averaging 8.0% in Q3 2025. The investment pipeline remains strong, with over $75 million under contract, expected to fund over the next 9 to 12 months at average initial cash yields in the high 7% area.

The company's liquidity position is formidable. As of September 30, 2025, Getty Realty commanded $260 million of availability under its Credit Facility, anticipated gross proceeds of approximately $113.10 million from 3.70 million shares subject to forward sales agreements, and $5.20 million in cash and cash equivalents, totaling over $375 million in liquidity. This strong capital position ensures the company can fund its committed investment pipeline without needing to raise additional capital.

Getty has strategically managed its debt, with no maturities until 2028. The $150 million Term Loan, originally due in October 2025, was fully repaid in January 2025 using borrowings from the Third Restated Credit Agreement. The Credit Facility itself is an unsecured revolving credit facility of $450 million, with an accordion feature for an additional $300 million, maturing in January 2029 (with extension options). The company targets a net debt-to-EBITDA ratio of 4.5x to 5.5x, a level it is well-positioned to maintain. The weighted average cost of debt was 4.5% as of Q3 2025. The CFO noted that capital raised and currently being deployed is in the mid-high-6s range, providing an attractive investment spread of 100-120 basis points over pipeline yields.

Managing Risks and Cultivating Growth

While Getty Realty demonstrates strong operational and financial health, it actively manages several pertinent risks. Environmental liabilities, particularly those stemming from its historical operations in areas like the Lower Passaic River and MTBE litigations in Pennsylvania and Maryland, remain a focus. Although accruals have been made based on management's judgment, the ultimate liability in these complex proceedings remains uncertain. The company mitigates this through contractual allocations with tenants and environmental insurance policies. In Q3 2025, Getty removed $4.10 million of previously accrued unknown reserve liabilities for certain properties, reflecting a reduction in perceived risk as responsibilities shifted to tenants.

Interest rate risk is another consideration, primarily from unhedged variable-rate borrowings under the Credit Facility. As of Q3 2025, a 1% increase in market interest rates on the unhedged $40 million could decrease 2025 net income and cash flows by approximately $0.30 million. However, $150 million of the Credit Facility is subject to interest rate swaps, fixing SOFR at a weighted average of 4.73% until October 2026, providing a degree of insulation.

Tenant concentration is a factor, with ARKO Corp. (ARKO) and Global Partners LP (GLP) representing 12% and 10% of total revenues, respectively, as of September 30, 2025. However, Getty's long-standing relationships and the essential nature of these tenants' businesses provide stability. The company's first tenant credit issue since 2011, the Zips Car Wash bankruptcy in February 2025, affected 12 sites (1.8% of ABR). Getty effectively concluded the repositioning of this portfolio by Q2 2025, with Zips remaining a tenant at six properties, five sites re-leased to new operators, and one property slated for sale. This resolution is expected to recover approximately 70% of the ABR with minimal downtime, demonstrating Getty's proactive asset management capabilities.

Growth initiatives continue to be a strategic priority. The company's investment activity in 2025 has been notably diverse, with significant traction in the drive-thru QSR segment, where over 25 properties have been acquired. In early October 2025, Getty acquired a $100 million, 12-unit convenience store portfolio in Houston, including three "travel center" format properties, further expanding its footprint and tenant base. These larger format stores, averaging $11 million in purchase price, represent a selective expansion within the convenience store sector, leveraging Getty's deep understanding of the market.

Competitive Dynamics in a Fragmented Landscape

Getty Realty operates within a competitive landscape that includes larger, more diversified retail REITs such as Realty Income (O), National Retail Properties (NNN), Spirit Realty Capital (SRC), and Essential Properties Realty Trust (EPRT). While these competitors often boast greater scale and broader retail portfolios, Getty differentiates itself through its specialized focus on convenience and automotive retail. This niche expertise allows Getty to penetrate specific market segments effectively, often through direct sale-leaseback transactions that may be less competitive than broadly marketed deals.

Comparing financial performance, Getty's TTM Gross Profit Margin of 88.27% and EBITDA Margin of 84.10% demonstrate strong operational efficiency. Its TTM P/E ratio of 21.15 is competitive, sitting below Realty Income's 59.89 and Essential Properties Realty Trust's 26.27, and comparable to National Retail Properties' 20.23 and Spirit Realty Capital's 24.06. This suggests a potentially attractive valuation relative to its earnings power. Getty's TTM Dividend Yield of 6.66% is also compelling for income-focused investors.

The "automobility" sector, particularly the travel center segment, remains highly fragmented, with the top three operators owning only about 30% of the approximately 5,000 units in the U.S. This fragmentation presents a significant opportunity for Getty to leverage its sale-leaseback model and relationships with growth-oriented regional and national operators. The company's disciplined underwriting process, combined with its deep knowledge of these sectors, allows it to identify and acquire assets at accretive spreads, even in a market where sellers' pricing expectations are still adjusting to higher interest rates.

Getty's customer and supplier dynamics are characterized by long-term triple-net leases with tenants responsible for most property-related expenses. This structure minimizes Getty's direct operational exposure and provides stable cash flows. The company's ability to attract and retain new tenants, with 10 new tenants added in 2025, further diversifies its revenue base and strengthens its competitive standing. The ongoing redevelopment program also allows Getty to enhance the value and utility of its existing assets, ensuring they remain competitive and attractive to modern retail operators.

Conclusion

Getty Realty Corp. stands as a compelling investment proposition, having successfully executed a strategic transformation that has diversified its portfolio and strengthened its financial foundation. The company's focused approach on the resilient convenience and automotive retail sectors, underpinned by a specialized analytical and operational platform, continues to drive consistent growth in ABR and AFFO per share. With a robust liquidity position, a well-managed debt profile with no near-term maturities, and a commitment to increasing shareholder returns through a growing dividend, Getty Realty is well-positioned for continued success.

The company's ability to source accretive investments, effectively manage tenant-specific challenges, and continuously optimize its asset base through initiatives like the redevelopment program highlights its operational excellence. While environmental liabilities and interest rate fluctuations present ongoing considerations, Getty's proactive risk management and strong competitive positioning in a fragmented market underscore its long-term investment thesis. The increased 2025 AFFO guidance reflects management's confidence in its strategy and the inherent strength of its diversified portfolio, making Getty Realty an attractive option for discerning investors seeking durable income and growth in the specialized real estate sector.