JERICHO, N.Y. -- Getty Realty Corp. is continuing a process of disposing of assets that do not meet the long-term growth criteria of its core portfolio, David Driscoll, president, CEO and director said during the real-estate investment trust's (REIT) third-quarter 2014 earnings call. But the company is "exceptionally well-positioned to execute on opportunities as they arise."
Jericho, N.Y.-based Getty Realty is a leading publicly traded REIT specializing in ownership, leasing and financing of convenience store and gas station properties. The company owns and leases approximately 875 properties nationwide.
"Our repositioning work continues, and even after we complete the major work, on some level, asset repositioning will always be a part of what we do in a portfolio as big as ours, as we continually strive for additional incremental improvement over time," he said.
"As we move forward, we will remain disciplined and are committed to focusing on margins and operating expense leverage as we continue our repositioning and redeployment process. The majority of the cost that we think we can positively impact include property taxes, maintenance cost, utility charges and professional fees," he added. "During the past few years, most of our activity in the portfolio has focused on leasing and dispositions. Moving forward, we foresee some very good opportunities to redevelop and reposition properties for higher and better uses to increase our returns on these properties."
During the quarter ended Sept. 30, 2014, the company purchased two properties for a total cost of $4 million. And during the quarter, it sold 22 properties for a total of $11.8 million.
As of September 30, the company had 46 properties classified as held for sale. Subsequently, it has sold 12 additional properties for a total of $3.6 million.
The company reported net earnings for the quarter ended Sept. 30, 2014 of $10.2 million, compared to net earnings of $41.9 million for the quarter ended Sept. 30, 2013. It reported net earnings for the nine months ended Sept. 30, 2014, of $26.5 million, compared to net earnings of $65 million for the nine months ended Sept. 30, 2013.
"Our third-quarter results continues to reflect our steady progress repositioning our portfolio to improve our operating results," said Driscoll.
Results for both the 2103 quarter and nine months included a benefit from the settlement of a litigation brought by Getty Petroleum Marketing Inc. against Lukoil of approximately $17.1 million, and $23.7 million, respectively, as well as from gains on dispositions of real estate.
While "harvesting growth from our current portfolio," by trimming non-core assets, Getty Realty is also looking at "growing through accretive acquisitions," said Driscoll. "We are, by nature, a long-term investor focused on long-term returns. Today, the environment for acquisitions is highly competitive. There are larger companies that compete with us that have lower cost of capital than ours and other investors, even individuals that measure their cost of capital differently from us. Those factors make finding good investment more difficult in this unusually low-interest rate environment. But it is not in our nature just to put capital to work for the sake of doing deals. We will stay disciplined and focused on executing only qualified opportunities that meet our investment criteria while being mindful of our cost of capital, risks and return thresholds."
He added, "We continue to evaluate and make offers on a large volume of perspective opportunities, but we cannot predict the volume of acquisitions that we may consummate or the returns that we may achieve. I want to emphasize, however, that our conservative balance sheet is exceptionally well positioned to execute on opportunities as they arise."
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