Executive Summary / Key Takeaways

• Getty Realty has fundamentally transformed from a Northeast gas station REIT into a diversified convenience and automotive retail platform, driving 70% growth in annualized base rent since 2019 while expanding non-gas properties from under 3% to 28% of total rent.
• The company's financial fortress features 99.8% occupancy, stable 2.6x rent coverage, a 12-year dividend growth streak, and investment-grade credit with no debt maturities until 2028, providing exceptional resilience in volatile markets.
• Management's disciplined, relationship-driven acquisition strategy prioritizes accretive deals over volume, delivering year-to-date investments of $236.8 million at a 7.9% initial cash yield while maintaining leverage at the low end of its 4.5-5.5x target range.
• The swift resolution of the Zips Car Wash bankruptcy—recovering 70% of rent with minimal downtime—demonstrates effective credit risk management, though environmental liabilities and tenant concentration remain material risks that could impact future earnings.
• Trading at $28.35 with a 6.86% dividend yield, GTY offers a compelling income proposition supported by recession-resistant tenants providing essential goods and services, though investors must weigh this against the company's smaller scale and specialized niche relative to larger net lease REITs.

Setting the Scene: A 70-Year Journey to Niche Dominance

Getty Realty's story begins in 1955, but the company's modern identity emerged from a crucible of crisis. When predecessor Getty Petroleum Marketing—its largest tenant since 1997 and the holder of a unitary triple-net master lease—filed for bankruptcy in April 2012, Getty Realty faced an existential threat. The resolution forced management to confront a hard truth: dependence on a single tenant and a narrow geographic footprint created fragility beneath the surface of steady rental income. This painful lesson catalyzed a strategic renaissance that began in earnest around 2019 and continues to reshape the company today.

The transformation involved a deliberate pivot beyond traditional convenience stores and gas stations into express tunnel car washes, automotive service centers, and drive-thru quick-service restaurants. This diversification wasn't merely additive—it was revolutionary. By September 30, 2025, rental income from non-convenience and gas properties had surged to 28% of total annualized base rent, up from less than 3% before the strategy began. The numbers tell a stark story: total ABR has grown more than 70% since the end of 2019, while the tenant roster expanded by 35 new tenants and the geographic footprint pushed into several new markets.

This transformation converted Getty Realty from a one-dimensional gas station landlord into a multi-platform convenience and automotive retail REIT, tapping into sectors that serve mobile consumers' non-discretionary needs. The company's portfolio now spans 1,160 properties across 44 states and Washington, D.C., with 61% of annualized base rent generated from the top 50 metropolitan statistical areas and 77% from the top 100. This concentration in dense, high-traffic markets provides both defensive characteristics and growth optionality that a pure gas station portfolio could never achieve.

Business Model: The Triple-Net Advantage

Getty Realty operates as a single-reportable-segment net lease REIT, a structure that underpins its entire investment thesis. In a triple-net lease arrangement, tenants bear virtually all property-level costs—real estate taxes, insurance, maintenance, and utilities—while Getty collects predictable rental income with minimal operational responsibilities. This model creates a bond-like cash flow stream with built-in inflation protection through contractual rent escalations that generally hover around 2% annually.

The company's investment strategy centers on three primary channels: sale-leaseback transactions with growing regional and national operators, forward commitments for new-to-industry construction, and acquiring assets with in-place leases. This multi-pronged approach provides flexibility to capture opportunities across different market conditions while maintaining discipline on pricing and asset quality. Management emphasizes acquiring well-located, freestanding properties that support automobility and provide convenience to consumers, leveraging underwriting expertise, real estate selection, and lease structuring to mitigate credit risks.

This structure transforms Getty into a financing partner for its tenants rather than a traditional landlord. Tenants gain access to capital to fund expansion or monetize real estate, while Getty secures long-term, inflation-protected income streams backed by essential retail businesses. The weighted average lease term of 9.9 years as of September 30, 2025, provides exceptional visibility into future cash flows, while the 99.8% occupancy rate demonstrates the durability of this model even in uncertain economic environments.

Financial Performance: Evidence of Strategic Success

Getty's financial results serve as compelling evidence that the diversification strategy is working. Annualized base rent reached approximately $204 million as of September 30, 2025, representing more than 10% year-over-year growth for the nine-month period. Adjusted funds from operations per share grew 5.1% in the third quarter to $0.62, building on a 4% increase for the full year 2024. These growth rates, while modest compared to some technology companies, are substantial for a REIT with Getty's risk profile and dividend yield.

The composition of this growth reveals management's execution prowess. Revenue increases stem from three sources: additional base rental income from properties acquired in the prior 12 months, rent commencements from completed redevelopments, and contractual rent increases for in-place leases. This multi-source growth engine provides stability—if acquisition activity slows, contractual escalations and redevelopment completions continue driving organic expansion.

Profitability metrics demonstrate operational efficiency. The trailing 12-month tenant rent coverage ratio remained consistent at 2.6x for tenants reporting site-level financials, indicating tenants generate more than two-and-a-half times the rent they pay to Getty—a healthy cushion against economic downturns. Meanwhile, the ratio of general and administrative expenses to cash rental and interest income improved 30 basis points year-over-year to 8.8% in the third quarter, with management expecting further improvement as the company scales. This operational leverage means incremental revenue flows more directly to the bottom line, enhancing dividend sustainability and growth potential.

Environmental expense management provides another example of strategic progress. During the third quarter, Getty removed $4.1 million of unknown reserve liabilities, with $28.3 million removed year-to-date, as "Lookback Periods" expired for properties previously leased to Getty Petroleum Marketing. This transfer of environmental risk to tenants represents a permanent improvement in the company's risk profile, though $7.7 million in unknown reserve liabilities remains for certain properties where preexisting contamination risk persists.

The Zips Car Wash Resolution: A Stress Test Passed

In February 2025, Zips Car Wash filed for bankruptcy, affecting 12 of Getty's sites representing 1.8% of total ABR. This marked the company's first tenant credit issue since 2011, serving as a real-world test of Getty's underwriting and asset management capabilities. The market's initial reaction likely reflected concerns about whether this was the first crack in a supposedly stable tenant base.

Management's response demonstrated the resilience of their approach. By the third quarter, the situation was largely resolved: Zips remained a tenant at six properties, five sites were re-leased to two new experienced car wash operators, and one property was under contract for sale. The company 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 required.

This resolution validates Getty's underwriting discipline and relationship-driven model. The company didn't panic or accept fire-sale terms. Instead, it leveraged its market knowledge to identify qualified replacement operators and structure deals that preserved most of the rental income stream. The 70% recovery rate, while representing a loss, is far better than typical bankruptcy outcomes and demonstrates that Getty's properties are desirable assets with strong residual value. This experience also explains why management has been refining underwriting standards, particularly for car washes, requiring higher coverage levels than five or six years ago—a proactive improvement to the investment process.

Capital Allocation: Discipline in a Volatile Market

Getty's balance sheet management reflects a conservative, long-term orientation that serves investors well during periods of economic uncertainty. In January 2025, the company entered into a Third Amended and Restated Credit Agreement, providing a $450 million unsecured revolving credit facility with an accordion feature allowing up to an additional $300 million. The facility matures in January 2029, with two six-month extension options, and was immediately used to repay the $150 million term loan due in October 2025.

This refinancing eliminated all debt maturities until June 2028, creating a four-year runway of balance sheet stability. As of September 30, 2025, scheduled debt maturities totaled $940 million, with $100 million due in 2028, $365 million in 2029 (including the credit facility), and $475 million thereafter. The weighted average debt maturity stood at 4.8 years with a weighted average cost of 4.5%, while the spot cost of capital was estimated in the low to mid-7% range.

The extended maturity profile insulates Getty from near-term refinancing risk in a potentially volatile interest rate environment, while the investment-grade credit profile provides access to capital at competitive rates. Management's preference for long-term fixed-rate debt is evident in their September 2024 issuance of $125 million in long-term notes and the February 2025 issuance of $50 million in 5.7% Series T notes to repay 4.75% Series C notes. However, they are being opportunistic, noting that with no maturities until 2028, there is no urgency to term out the revolver balance immediately, especially with 10-year debt pricing in the high 5% range.

Liquidity remains ample. As of September 30, 2025, Getty had $260 million available under its credit facility, $113.1 million in potential gross proceeds from 3.7 million shares subject to forward sale agreements, and $5.2 million in cash equivalents, totaling over $375 million in liquidity. This firepower positions the company to capitalize on acquisition opportunities that may arise from market dislocations, while the forward equity program allows for efficient capital raising without immediate share dilution.

Competitive Positioning: Quality Over Quantity

Getty Realty occupies a specialized niche in the net lease REIT landscape, competing with larger, more diversified players like Agree Realty (ADC), National Retail Properties (NNN), Realty Income (O), and Four Corners Property Trust (FCPT). Management explicitly rejects the "volume shop" label, emphasizing that growth must be accretive rather than merely large. This discipline is evident in the company's investment yields: third quarter acquisitions generated an 8% initial cash yield with a weighted average lease term of 18.2 years, while year-to-date investments totaled $236.8 million at a 7.9% yield.

In a competitive acquisition environment where cap rates have compressed across the net lease sector, Getty's specialized knowledge and relationship-driven approach allow it to source off-market deals and underwrite complex assets that larger, more generalized REITs might overlook. The company's deep expertise in convenience store operations and automotive retail enables it to identify established, growth-oriented operators and structure long-term unitary net leases that mitigate credit risk.

The competitive landscape has remained generally stable, though consolidation is evident in certain sectors. In the car wash industry, operators like Whistle and Circle K have made significant acquisitions, creating larger, more sophisticated tenants. While this consolidation could increase tenant credit quality, it also raises the specter of tenant concentration risk. Getty has responded by diversifying across property types and geographic markets, ensuring no single tenant or region dominates the portfolio.

Financial comparisons reveal Getty's unique positioning. With a 6.86% dividend yield, GTY offers the highest current income among its immediate peers, whose yields range from 4.24% (ADC) to 6.21% (FCPT). The company's debt-to-equity ratio of 0.94 sits comfortably between ADC's 0.58 and NNN's 1.10, while its return on equity of 7.54% compares favorably to ADC's 3.48% and O's 2.49%, though trailing NNN's 8.91%. These metrics suggest Getty strikes an attractive balance between income generation, leverage management, and profitability that appeals to yield-focused investors.

Risk Factors: What Could Break the Thesis

While Getty's transformation has been impressive, several material risks could undermine the investment case. The most significant is environmental liability. Despite removing $28.3 million in reserves year-to-date due to expired Lookback Periods, the company still maintains $7.7 million in unknown reserve liabilities for certain properties where preexisting contamination risk remains. More concerning are the ongoing Lower Passaic River and MTBE litigations in Pennsylvania and Maryland, which management acknowledges could cause a material adverse effect on business, financial condition, and liquidity.

The Lower Passaic River situation illustrates the complexity. While the EPA concluded that Getty and other settling parties were responsible for only a minor share of response costs, and a Modified Consent Decree was granted in December 2024, the decree remains subject to appeals by intervening parties that may extend into 2026. If the District Court's order is overturned, Getty could face additional liability, though management believes resolution is not reasonably likely to have a material impact based on currently known facts. The MTBE litigation accruals, while recorded based on probable and estimable losses, carry ultimate uncertainty that could result in future adjustments.

Environmental liabilities represent a contingent claim on cash flows that could divert capital from dividends and acquisitions to remediation costs. While the risk transfer to tenants through triple-net leases has improved the profile, legacy sites remain a potential drag on valuation and could create earnings volatility from litigation accruals.

Tenant concentration presents another risk. Although diversification has improved, the company's top tenants still represent a meaningful portion of ABR. The Zips Car Wash bankruptcy, while resolved effectively, demonstrates that even specialized operators can face financial distress. A broader economic downturn affecting convenience store or automotive service operators could test the resilience of Getty's tenant base and rent coverage ratios.

Interest rate risk remains relevant despite the fixed-rate debt profile. With $40 million in variable-rate borrowings as of September 30, 2025, a 1% increase in market interest rates would decrease net income and cash flows by approximately $0.3 million annually. More significantly, rising rates could compress acquisition cap rates and increase the cost of future debt issuances, potentially slowing growth or reducing investment spreads.

Finally, the economic and political uncertainty dominating recent headlines has created volatility in transaction and capital markets, translating into headwinds for closing deals. While management notes that their assets are not tied to clothing or other manufacturing sectors heavily exposed to tariffs, the indirect impact on consumer spending could affect tenant performance. The company's tenants provide essential goods and services that have historically performed well during slower economic growth, but sustained consumer weakness could pressure rent coverage and limit rental rate growth.

Market Drivers and Outlook: Riding the Convenience Wave

Getty's strategic positioning aligns with powerful secular trends in convenience and automotive retail. The convenience store sector continues to evolve, with operators expanding in-store profit margins and maintaining stable fuel volumes despite the gradual energy transition. Travel centers represent a growing subsector, and Getty's acquisition of three such assets year-to-date at an average purchase price of $11 million demonstrates the ability to identify value in this emerging category. These large-format properties, featuring substantial food offerings and branded QSRs, cater to both professional drivers and recreational travelers, creating multiple revenue streams for tenants.

The express tunnel car wash sector has shown remarkable resilience, with rent coverage improving for three consecutive quarters as new-to-industry sites mature and operators focus on profitability through subscription models. The consolidation activity—highlighted by Whistle's acquisition of Driven and Circle K's entry into the space—suggests a maturing industry where scale and operational efficiency drive performance. Getty's ability to replace Zips with experienced operators positions the company to benefit from this trend.

The drive-thru QSR segment, while currently representing only 5% of 2024 transaction volume, is gaining traction. Management has acquired more than 25 properties year-to-date, viewing QSRs as aligned with macroeconomic pressures on consumers seeking value, quality, and convenience. The automotive service center pipeline remains robust, with the majority of opportunities allocated to this sector, reflecting the essential nature of vehicle maintenance and repair services.

Management's guidance reflects confidence in the strategy. Full-year 2025 AFFO per share guidance was raised to $2.42-$2.43 in the third quarter, up from the initial $2.40-$2.42 range set in the fourth quarter of 2024. This increase is largely attributable to approximately $140 million of acquisition activity included in current guidance that was not in prior estimates. The guidance includes a prudent 15 basis points loss factor for uncollectible rents, or approximately $300,000, demonstrating conservative underwriting assumptions.

Valuation Context: Income with Growth Optionality

At a current stock price of $28.35, Getty Realty trades at an attractive valuation for income-oriented investors seeking exposure to essential retail real estate. The 6.86% dividend yield stands well above the 10-year Treasury yield and exceeds most net lease REIT peers, providing compelling current income. With annualized base rent of approximately $204 million and AFFO per share guidance of $2.42-$2.43, the stock trades at roughly 11.7x forward AFFO, a reasonable multiple for a company with Getty's growth trajectory and asset quality.

The payout ratio of 146.88% appears elevated at first glance, but this metric must be understood in the context of REIT accounting. As a REIT, Getty is required to distribute at least 90% of taxable income, but AFFO—a better measure of cash available for dividends—often exceeds accounting earnings due to depreciation and other non-cash charges. The company's ability to grow the dividend for 12 consecutive years while maintaining a strong balance sheet suggests the payout is sustainable from a cash flow perspective.

Enterprise value to EBITDA of 14.18 and price-to-free-cash-flow of 12.64 compare favorably to the broader REIT sector, particularly given Getty's specialized positioning and above-average yield. The price-to-book ratio of 1.62 reflects the market's recognition of the company's ability to create value through strategic acquisitions and redevelopment, while the debt-to-equity ratio of 0.94 indicates a conservative capital structure that supports the dividend and growth initiatives.

Relative to peers, Getty's valuation appears reasonable. Agree Realty trades at a 4.24% yield with higher leverage to growth but lower current income. Realty Income, the sector's blue-chip name, offers a 5.62% yield but trades at a premium valuation reflecting its scale and diversification. National Retail Properties provides a 5.91% yield with similar occupancy metrics but less exposure to the growing convenience and automotive sectors. Four Corners Property Trust, at a 6.21% yield, offers comparable income but with heavier restaurant exposure that may be more vulnerable to consumer spending shifts.

Conclusion: A Specialized Compounder in Essential Retail

Getty Realty has executed a remarkable transformation over the past six years, evolving from a vulnerable gas station landlord into a diversified convenience and automotive retail REIT with multiple growth vectors. The 70% increase in annualized base rent since 2019, combined with the expansion into car washes, auto service centers, and QSRs, has created a more resilient and scalable business model without sacrificing the defensive characteristics that make net lease REITs attractive.

The company's financial performance validates the strategy. Strong occupancy, stable rent coverage, consistent AFFO per share growth, and a 12-year dividend growth streak demonstrate effective execution. The resolution of the Zips Car Wash bankruptcy with minimal impact further proves management's underwriting discipline and asset management capabilities. Meanwhile, the fortress balance sheet—with no debt maturities until 2028, $375 million in liquidity, and investment-grade credit—provides both defensive strength and offensive flexibility.

However, investors must remain vigilant about the risks. Environmental liabilities, while diminished, still pose a contingent threat to cash flows. Tenant concentration, though improved, remains a vulnerability in a severe economic downturn. The gradual transition away from fossil fuels could eventually impact gas station properties, requiring continued redevelopment and reinvestment.

Trading at $28.35 with a 6.86% dividend yield, Getty Realty offers a compelling proposition for income-focused investors seeking exposure to essential retail real estate. The specialized niche provides a competitive moat that larger, more diversified REITs cannot easily replicate, while the disciplined capital allocation strategy ensures that growth accretes to shareholder value. For investors comfortable with the environmental overhang and tenant concentration risks, Getty represents a high-quality, growing net lease REIT that has successfully reinvented itself for the modern convenience economy.