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Getty Realty Ready to Buy More

Recent Exxon acquisition cited as "top-notch" addition to portfolio
JERICHO, N.Y. -- After racking up 36 "top-notch" sites for $24.5 million from ExxonMobil in late September, convenience store property owner Getty Realty Corp. is keeping the door open for additional acquisitions from Exxon and the other major oil companies.

"They intend to divest themselves of much of their retail operations or distributor operations," Getty Realty CEO Leo Liebowitz said on an earnings call with investors this week, "and we are approached continuously and do have opportunities to make additional acquisitions."

Liebowitz agreed with an analyst on [image-nocss] the call who noted that the Exxon sites in Washington, D.C./Maryland metropolitan area are welcome, high-quality additions to Getty Realty's portfolio. The sites were immediately leased to Washington-based White Oak Petroleum.

"We believe these newly acquired properties are high-quality sites, and we are pleased to have White Oak among our roster of tenants," Liebowitz said. "In addition, we expect this transaction to be immediately accretive to our [earnings]."

The Sept. 25 purchase "minimally impacted" Getty Realty's results for the third quarter, which ended five days later. However, the consolidated balance sheet as of Sept. 30 includes an aggregate of approximately $49.0 million related to the acquisition in land and net investment in direct financing leases, as well as the $49.0 million of debt incurred to finance the transaction.

"This transaction reflects our long-term commitment to profitable growth through strategic acquisitions, Liebowitz said.

Getty Realty's net earnings for the quarter increased by $1.7 million to $12.2 million, as compared to $10.5 million for the quarter ended Sept. 30, 2008. Net earnings increased by $3.2 million to $35.7 million for the nine months ended Sept. 30, 2009, as compared to $32.5 million for the same prior year period.

Earnings from continuing operations increased by $800,000 to $10.7 million for the quarter, as compared to $9.9 million for the previous year. Earnings from continuing operations increased by $800,000 to $30.8 million for the nine months ended Sept. 30, 2009, as compared to $30 million for the previous year.

Earnings from discontinued operations, primarily comprised of gains on dispositions of real estate, were $1.5 million and $5 million for the quarter and nine months ended Sept. 30, 2009, respectively, as compared to $600,000 and $2.5 million for the respective prior year periods. The $1.7 million and $3.2 million increase in net earnings for the quarter and the nine months ended Sept. 30, 2009, respectively, were principally due to increased gains on dispositions of real estate, lower interest expense and reductions in various operating expenses as compared to the respective prior year periods, partially offset by $1.1 million of impairment charges included in the nine months ended Sept. 30, 2009.

Revenues from rental properties included in continuing operations for the quarters ended Sept. 30, 2009, and Sept. 30, 2008, were $20.2 million and decreased by $200,000 for the nine months ended Sept. 30, 2009 to $60.3 million, as compared to $60.5 million for the prior year period. Rent received increased by $200,000 to $19.8 million for the quarter and by $700,000 to $59.3 million for the nine-month period.

The increases in rent received were primarily due to rent escalations and rental income from properties acquired offset by the effect of dispositions of real estate and lease expirations. In addition to rent received, revenues from rental properties include adjustments recorded for deferred rental revenue, partially due to the recognition of rental income on a straight-line basis and net amortization of above-market and below-market leases.

The company previously disclosed that for the year ended Dec. 31, 2008, major tenant Getty Petroleum Marketing, East Meadow, N.Y., reported a significant loss, accelerating a trend of reporting progressively larger losses in recent years. Liebowitz noted, "[Getty Petroleum] Marketing has not reported to us significant improvement in its interim financial results for 2009, and we are not aware of any other factor, which would indicate that [Getty Petroleum] Marketing is not dependent on continuing financial support from OAO LUKoil, its parent. There has not been any meaningful progress made regarding possible modifications to our master lease with [Getty Petroleum] Marketing, although we continue to remove individual locations from the master lease on a consensual basis with [Getty Petroleum] Marketing as opportunities arise."

Getty Realty reported that [Getty Petroleum] Marketing recently agreed to permit the company to list with brokers and to show to prospective purchasers or lessees, 75 of the properties where [Getty Petroleum] Marketing has removed, or has scheduled to remove, the underground gasoline storage tanks and related equipment.

Jericho, N.Y.-based Getty Realty Corp. is the largest publicly traded real estate-investment trust in the United States specializing in ownership and leasing of convenience-store/gas-station properties and petroleum distribution terminals. The company owns and leases approximately 1,100 properties nationwide.

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