Increased Rental Income Buoyed Getty Realty in 2Q '11

Published in CSP Daily News

125 acquired station properties continue to boost earnings

JERICHO, N.Y. -- Getty Realty Corp. has reported its preliminary financial results for second-quarter 2011. Net earnings for the quarter ended June 30, 2011, increased by $1.2 million to $15.2 million, or 46 cents per diluted share, as compared to $14 million for the quarter ended June 30, 2010. Net earnings for the six months ended June 30, 2011, increased by $700,000 to $26.6 million, or 80 cents per diluted share, as compared to $25.9 million for the six months ended June 30, 2010.

Earnings from continuing operations for the quarter ended June 30, 2011, increased by $2.4 [image-nocss] million to $15 million, or 45 cents per share, as compared to $12.6 million for the quarter ended June 30, 2010. Earnings from continuing operations for the six months ended June 30, 2011, increased by $2.1 million to $26.3 million, or 79 cents per diluted share, as compared to $24.2 million for the six months ended June 30, 2010.

The $2.4 million increase in earnings from continuing operations for the quarter ended June 30, 2011, as compared to the prior year period, was primarily due to increased rental income from 125 properties acquired in 2011, partially offset by net higher operating expenses including noncash impairment charges of $1.5 million.

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. Abouty 85% of the funding was provided to CPD by Getty Realty 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 Realty 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 $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 whereby Nouria acquired 66 gasoline station and convenience stores from Shell and simultaneously completed a sale/leaseback with Getty Realty of the 66 properties under a long-term triple-net unitary lease having an initial term of 20-years plus renewal options.

Earnings from discontinued operations, primarily comprised of gains on dispositions of real estate, were $200,000 for the quarter ended June 30, 2011, as compared to $1.4 million for the quarter ended June 30, 2010. Earnings from discontinued operations were $300,000 for the six months ended June 30, 2011, as compared to $1.7 million for the six months ended June 30, 2010.

The $1.2 million decrease in earnings from discontinued operations for the quarter ended June 30, 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 $5.4 million to $27.1 million for the quarter ended June 30, 2011, as compared to $21.7 million for the prior year period. Rent received increased by $4.9 million to $26.4 million for the quarter ended June 30, 2011 as compared to the prior year period. The increase in rental income received was primarily due to rental income from investments in 125 properties made in 2011 and, to a lesser extent, due to rent escalations, partially offset by the effect of dispositions of real estate and lease expirations.

Rental property expenses included in continuing operations increased by $1.4 million to $3.7 million for the quarter ended June 30, 2011, as compared to $2.3 million for the prior year period. The increase in rental property expenses as compared to the prior year period was primarily due to rent expense related to leasehold interests acquired in 2011.

During the quarter ended June 30, 2011, the company recorded impairment charges aggregating $1.5 million resulting from reductions in real-estate valuations or reductions in the assumed holding period used to test for impairment.

On July 28, 2011, Getty learned that the arbitration panel that had been convened to hear the dispute between Getty Petroleum Marketing Inc., Getty's largest tenant, and Bionol Clearfield LLC, issued an award in favor of Bionol for approximately $230 million dollars. Getty Petroleum Marketing has filed a motion to vacate this award and has indicated that it believes that it has a number of meritorious arguments to overturn and mitigate the award.

Jericho, N.Y.-based Getty Realty is a leading publicly traded U.S. real-estate investment trust (REIT) specializing in ownership and leasing of convenience store/gas station properties and petroleum distribution terminals. The company owns and leases approximately 1,160 properties nationwide.