JERICHO, N.Y. -- In reporting Getty Realty Corp.'s financial results for the quarter ended March 31, 2011, David Driscoll, the company's president and CEO, said, "With the acquisition of two real-estate portfolios including 125 properties, an equity offering and a number of developments with our largest tenant, Getty Petroleum Marketing Inc., it was an exceptionally productive quarter for us. I expect that the full effect of this activity will be realized in the quarters to come."
He added, "We also remain active on the acquisition and financing fronts and are concentrating [image-nocss] a lot of energy and attention into our discussions with GPMI. We believe the recent change of ownership of GPMI has created a meaningful opportunity to make mutually beneficial progress reducing the size of the GPMI portfolio and thereby potentially reducing our exposure to GPMI."
Driscoll continued, "All of our earnings metrics in the first quarter were negatively affected by an approximately $2 million charge for property acquisition costs incurred and expensed in accordance with generally accepted accounting principles during the quarter related to the property portfolios acquired. In addition, our per share metrics for the current quarter were lower partially as a result of having more shares outstanding during the current quarter following the company's common share offerings in May 2010 and January 2011, and not as a result of erosion in our core operating business."
On January 13, 2011, the company acquired 59 Mobil branded gasoline station and convenience store properties located in and around northern suburbs of New York City (including Westchester and Rockland Counties) and the lower Hudson Valley, funding a total investment of $111.3 million. The 59 properties were acquired in a simultaneous transaction among ExxonMobil, CPD NY Energy Corp. (a subsidiary of Chestnut Petroleum Distributors) and Getty Realty whereby CPD acquired a portfolio of 65 gas station and convenience stores from ExxonMobil and simultaneously completed a sale/leaseback of substantially all of the acquired properties with Getty Realty. Approximately 85% of the funding was provided to CPD by Getty via a sale/leaseback transaction with a long-term triple net unitary lease having an initial term of 15 years plus renewal options. Additional funding was provided by Getty to CPD under a secured, self-amortizing loan having a 10-year term.
On March 31, 2011, the company acquired 66 Shell branded gasoline station and convenience store properties located in and around the Greater Boston and Southern New Hampshire area for approximately $86.1 million, in a sale/leaseback transaction with Nouria Energy Ventures I LLC, a subsidiary of Nouria Energy Group. The 66 properties were acquired in a simultaneous transaction among Motiva Enterprises LLC (Shell), Nouria and Getty Realty Corp. whereby Nouria acquired 66 gasoline station and convenience stores from Shell and simultaneously completed a sale/leaseback with Getty of the 66 properties under a long-term triple-net unitary lease having an initial term of 20-years plus renewal options.
Net earnings for the quarter ended March 31, 2011 decreased by $500,000 to $11.4 million, or 35 cents on a fully diluted per share basis, as compared to $11.9 million for the quarter ended March 31, 2010. Earnings from continuing operations for the quarter ended March 31, 2011 decreased by $300,000 to $11.3 million, or 35 cents on a fully diluted per share basis, as compared to $11.6 million for the quarter ended March 31, 2010. Earnings from discontinued operations were $100,000 for the quarter ended March 31, 2011 as compared to $300,000 for the quarter ended March 31, 2010. The results of discontinued operations are primarily comprised of gains on dispositions of real estate.
The $300,000 decrease in earnings from continuing operations reported for the quarter ended March 31, 2011, as compared to the prior year period, was also primarily due to the property acquisition costs included in operating expenses associated with the company's portfolio acquisitions of 125 properties this quarter which was partially offset by an increase in revenues from rental properties. The $200,000 decrease in earnings from discontinued operations for the quarter ended March 31, 2011, as compared to the prior year period, was principally due to lower gains on dispositions of real estate.
Revenues from rental properties included in continuing operations increased by $2.6 million to $25 million for the quarter ended March 31, 2011, as compared to $22.4 million for the quarter ended March 31, 2010. Rent received increased by $2.7 million to $24.8 million for the quarter ended March 31, 2011, as compared to $22.1 million for the prior year period. The increase in rental income received for the quarter ended March 31, 2011, as compared to the prior year period, was primarily due to rental income from 59 properties acquired from, and leased back to, CPD NY Energy Corp. in January 2011 and, to a lesser extent, due to rent escalations, partially offset by the effect of dispositions of real estate and lease expirations.
There was no revenue or earnings contribution realized in the quarter ended March 31, 2011 from the 66 unit Nouria acquisition because that acquisition closed on the last day of the quarter. Rental revenue from continuing operations includes noncash revenue recognition adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line basis over the current lease term, net amortization of above-market and below-market leases and recognition of rental income under a direct financing lease using the effective interest rate method which produces a constant periodic rate of return on the net investment in the leased property which cause the company's reported revenues from rental properties to vary from the amount of rent payments contractually due or received by the company. Revenue recognition adjustments increased rental revenue by $200,000 and $300,000 for the quarters ended March 31, 2011 and 2010, respectively.
Noncash impairment charges of $1 million recorded in the quarter ended March 31, 2011 result from reductions in real estate valuations due to the removal or scheduled removal of underground storage tanks by GPMI, the company's largest tenant, or a reduction in the assumed holding period used to test for impairment at additional locations that have been requested to be removed from the master lease by GPMI. There was no impairment charge recorded in the quarter ended March 31, 2010.
Environmental expenses, net of estimated recoveries from UST funds included in continuing operations for the quarter ended March 31, 2011 decreased by $0.5 million to $1.1 million, as compared to $1.6 million for the quarter ended March 31, 2010. The decrease in net environmental expenses for the quarter ended March 31, 2011 was primarily due to a lower provision for estimated environmental remediation costs. The company recorded a $400,000 provision for estimated environmental remediation costs for the quarter ended March 31, 2011, which decreased by $500,000 as compared to a $900,000 provision recorded for the quarter ended March 31, 2010.
General and administrative expenses increased by $2.6 million to $4.9 million for the quarter ended March 31, 2011, as compared to $2.3 million for the quarter ended March 31, 2010. The increase in general and administrative expenses was principally due to the aforementioned property acquisition costs and higher corporate overhead expenses.
On February 28, 2011, Lukoil, one of the largest integrated Russian oil companies, transferred its ownership interest in GPMI to Cambridge Petroleum Holdings Inc. The company continues to engage in discussions with the new owners and management of GPMI. Thus far, these discussions have not resulted in a definitive agreement on any specific issues. It is possible that these discussions could result in material changes to our leases with GPMI in the near term, which could adversely impact the company's cash flow. During second-quarter 2011 or thereafter, the company may be required to significantly increase or decrease the deferred rent receivable reserve, record additional impairment charges related to its properties, or accrue for environmental liabilities as a result of the potential or actual modification or termination of the leases with GPMI.
During first-quarter 2011, the company completed a public stock offering of 3.45 million shares of common stock. Substantially all of the $92 million net proceeds from the offering were used in part to repay a portion of the outstanding balance under the company's revolving credit agreement which had been drawn in January 2011 to fund the acquisition and leaseback transaction with CPD and ExxonMobil Corp., and the remainder was used for general corporate purposes. Since May of 2010, the company has issued a total of 8.6 million shares of common stock, which additional shares are not included in the determination of net earnings, FFO or AFFO per share for the quarter ended March 31, 2010.
Getty Realty Corp. is the leading publicly traded real-estate investment trust (REIT) 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 1,170 properties nationwide.
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