2014 ANNUAL REPORT
G ET T Y R EA LT Y LO CATI O N AT 1ST AV EN U E N EW YO R K , NY
FELLOW S HAREH O LD ERS
Progress!
We are excited that we have overcome the adversity that challenged the Company for the past several
years. To put that into some perspective, since the end of 2011 when our biggest lessee (GPMI) filed
Chapter 11,
We have:
• Entered into 13 long-term triple-net leases covering 440 properties,
• Sold 295 locations,
• Reinvested $90 million of proceeds, and
• Successfully pursued a legal action against GPMI’s parent that generated more than $1 per share of proceeds
with more to come.
All of this activity was executed to pursue additional value in our portfolio but it also created additional overhead
costs. Much of the work was completed in 2013 and, as a result, our 2014 performance began to reap the benefits
of our efforts.
While our 2014 revenue from rental properties in continuing operations was only up slightly to $96.7 million
from $96.3 million in 2013, our AFFO per share of $1.26 was almost double our 2013 AFFO per share, excluding
the payments we received in 2013 from the Lukoil Settlement and GPMI bankruptcy estate. These results also
supported a dividend increase of 10% to 88 cents per share annualized and in addition we paid a special dividend
of 14 cents per share at year end.
Our repositioning activity continues but it is transitioning into an ongoing “portfolio optimization” process that
we believe is a perpetual effort in a large and dynamic real estate portfolio like ours. Much of this focus is on our
internal growth initiatives concentrated on “higher and better” uses. This is a one by one process. Few individual
optimizations will materially improve results by themselves, but in the aggregate, over time, we anticipate these
activities will provide a steady tail wind both in terms of improving returns and increasing the underlying credit
quality for our portfolio.
We also continued the tireless efforts of our environmental remediation work during 2014. During the year
we spent approximately $13.5 million on remediation activities. While not directly related, we also obtained 59
“No Further Action” letters in 2014, which is our standard for completing remediation at a site. As we look ahead,
we expect our environmental remediation efforts to be in line with historical trends and cash expenditures.
As we previously reported, we have been removing or replacing a significant number of USTs at sites previously
leased to Marketing, and we anticipate this trend to continue over the next decade. The Company previously
disclosed that it has accrued an additional $49.7 million of environmental liabilities bringing our total environmental
liability to $91.6 million for remediation costs related to environmental contamination at former GPMI sites.
This new non-cash accrual represents our estimate of the amount we will spend over the next ten years on future
environmental clean-ups. The new accrual will not directly impact our net earnings, FFO or AFFO. It is an estimate,
and as we spend to reduce our remediation liabilities in the future, our environmental liability will be reduced by
the amount we spend. This may be viewed in the same way as principal repayments on borrowings which also
reduce liabilities as they are made. Principal payments are not a reduction to income but they do reduce liabilities
as they are made thereby actually increasing equity value.
Beyond the material improvements in our operating results during 2014, our pursuit of additional properties
through new acquisitions was deliberately slow during 2014. A number of factors affected our decisions to
remain disciplined ranging from:
• Continued demand by individual investors in the 1031 market, which artificially inflated values and resulted in
returns that were not acceptable for Getty,
• Increased activity from large, well-capitalized private and public REITs, where we found ourselves consistently
refraining from entering into bidding wars, and
• The presence of well capitalized MLPs in our target marketplaces which also have many of the same
“single-level” tax advantages that we have, thus creating a highly competitive environment for assets.
Some of this competitive pressure has seemingly eased late in the year and we have seen a resultant increase
in our prospective acquisitions pipeline that we hope will yield positive results in 2015.
All of these activities can be supported by our conservatively leveraged balance sheet. Our balance sheet
affords us meaningful capacity and flexibility to support our growth initiatives. At year end our net debt was
less than $120 million which is its lowest level in more than three years. Our current net debt to EBITDA
ratio is approximately 2.3x.
In summary, we remain invigorated by both the organic and external growth opportunities we continue to
pursue. We are: well-capitalized, with significant financial flexibility, which together with our building pipeline
of opportunities and enhanced operating infrastructure should enable us to continue building value for our
shareholders in 2015 and beyond.
David B. Driscoll
Chief Executive Officer and President
F I NAN C IAL H I G H LI G H T S
Financial Summary (Years ended December 31) (a)
Number of Properties
Total Revenues
Net Income
(Per Share)
Funds from Operations
(Per Share)
Adjusted Funds from Operations
(Per Share)
Dividends per Share
2014
863
2013
2012
965
1,081
99,867
102,791
95,384
23,418
70,011
12,447
0.69
2.08
0.37
45,283
47,858
33,223
1.34
1.43
0.99
42,636
44,992
27,749
1.26
0.96
1.34
0.86
0.85
0.375
(a) See “Item 6. Selected Financial Data”, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Item 8. Financial Statements and Supplementary Data” for additional information
2014 Quarterly Performance
Dividends Declared Growth
AFFO (Per Share in parentheses)
Regular Special
9,320
(0.28)
10,116
(0.30)
11,796
(0.35)
11,404
(0.34)
0.375
0.85
0.96
12,000
10,000
8,000
6,000
4,000
2,000
Q1
Q2
Q3
Q4
2012
2013
2014
Geographic Growth
Geographic Market Strength (810 Properties)
Growth Markets (32 Properties)
Additional Markets (21 Properties)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
OR
" TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13777
GETTY REALTY CORP.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
Two Jericho Plaza, Suite 110, Jericho, New York
(Address of principal executive offices)
11-3412575
(I.R.S. employer
identification no.)
11753
(Zip Code)
Registrant’s telephone number, including area code: (516) 478-5400
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
Common Stock, $0.01 par value
NAME OF EACH EXCHANGE ON WHICH REGISTERED
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ⌧ No "
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes " No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes " No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ⌧ No "
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. "
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer "
Accelerated filer
⌧
Non-accelerated filer
" (Do not check if a smaller reporting company)
Smaller reporting company
"
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes " No ⌧
The aggregate market value of common stock held by non-affiliates (25,604,124 shares of common stock) of the Company was $488,527,000 as of
June 30, 2014.
The registrant had outstanding 33,417,203 shares of common stock as of March 13, 2015.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT
PART OF
FORM 10-K
Selected Portions of Definitive Proxy Statement for the 2014 Annual Meeting of Stockholders (the “Proxy Statement”), which will be
filed by the registrant on or prior to 120 days following the end of the registrant’s year ended December 31, 2014 pursuant to
Regulation 14A.
III
Item
Description
Cautionary Note Regarding Forward-Looking Statements
TABLE OF CONTENTS
1 Business
1A Risk Factors
1B Unresolved Staff Comments
2
Properties
3
Legal Proceedings
4 Mine Safety Disclosures
PART I
PART II
Selected Financial Data
5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
6
7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A Quantitative and Qualitative Disclosures About Market Risk
8
9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A Controls and Procedures
9B Other Information
Financial Statements and Supplementary Data
PART III
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
10 Directors, Executive Officers and Corporate Governance
11
12
13 Certain Relationships and Related Transactions, and Director Independence
14
Principal Accountant Fees and Services
15
Exhibits and Financial Statement Schedules
Signatures
Exhibit Index
PART IV
Page
3
5
9
20
21
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25
26
28
29
43
44
71
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73
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73
93
94
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. When we use the words “believes,” “expects,” “plans,” “projects,” “estimates,”
“anticipates,” “predicts” and similar expressions, we intend to identify forward-looking statements. (All capitalized and undefined
terms used in this section shall have the same meanings hereafter defined in this Annual Report on Form 10-K.)
Examples of forward-looking statements included in this Annual Report on Form 10-K include, but are not limited to,
statements regarding: our network of retail motor fuel and convenience store properties; substantial compliance of our properties with
federal, state and local provisions enacted or adopted pertaining to environmental matters; the impact of existing legislation and
regulations on our competitive position; our prospective future environmental liability resulting from preexisting unknown
environmental contamination; quantifiable trends, which we believe allow us to make reasonable estimates of fair value for the future
costs of environmental remediation resulting from the removal and replacement of USTs; our efforts, expectations and ability to
reposition our remaining transitional properties; our expectations that we may receive additional distributions from the Marketing
Estate to partially satisfy our remaining general unsecured claims against the Marketing Estate; our beliefs regarding the amount of
revenue we expect to realize from our properties; our belief that our owned and leased properties are adequately covered by casualty
and liability insurance; AFFO and its utility in comparing the sustainability of our operating performance with the sustainability of the
operating performance of other REITs; our expectations regarding incurring costs associated with repositioning our remaining
transitional properties including, but not limited to, Property Expenditures, environmental costs and potential capital expenditures; our
expectations regarding eviction proceedings initiated to take control of our properties; our expectations regarding lease restructurings,
including the NECG Lease and the Ramoco Lease; our expectation about corporate-level federal income taxes; the impact of the
developments related to the repositioning of our properties on our business and ability to pay dividends or our stock price; the
reasonableness of and assumptions used regarding our accounting estimates, judgments, assumptions and beliefs; our beliefs about our
critical accounting policies; our exposure and liability due to and our estimates and assumptions regarding our environmental
liabilities and remediation costs; our beliefs about loan loss reserves or allowances; our belief that our accruals for environmental and
litigation matters including matters related to our former Newark, New Jersey Terminal and the Lower Passaic River and MTBE
multi-district litigation cases in the states of New Jersey and Pennsylvania, were appropriate based on the information then available;
compliance with federal, state and local provisions enacted or adopted pertaining to environmental matters; our beliefs about the
settlement proposals we receive and the probable outcome of litigation or regulatory actions and their impact on us; our expected
recoveries from underground storage tank funds; our expectations regarding our indemnification obligations and the indemnification
obligations of others; our expectations about our investment strategy and its impact on our financial performance; the adequacy of our
current and anticipated cash flows from operations, borrowings under our Credit Agreement and available cash and cash equivalents;
our expectation as to our continued compliance with the covenants in our Credit Agreement and Prudential Loan Agreement; our
belief that certain environmental liabilities can be allocated to others under various agreements; our belief that our real estate assets are
not carried at amounts in excess of their estimated net realizable fair value amounts; and our ability to maintain our federal tax status
as a REIT.
These forward-looking statements are based on our current beliefs and assumptions and information currently available to us,
and involve known and unknown risks (including the risks described below in “Item 1A. Risk Factors” and in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” herein, and other risks that we describe from time to time
in this and our other filings with the SEC), uncertainties and other factors which may cause our actual results, performance and
achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-
looking statements.
These risks include, but are not limited to risks associated with: complying with federal, state and local environmental laws and
regulations and the costs associated with complying with such laws and regulations; counterparty risk; the creditworthiness of our
tenants; our tenants performing their lease obligations, renewal of existing leases and our ability to either re-let or sell our transitional
properties; our dependence on external sources of capital; repositioning our properties that were previously subject to the Master
Lease and the adverse impact such repositioning may have on our cash flows and ability to pay dividends; our ability to obtain
favorable terms on any properties that we sell or re-let; our estimates and assumptions regarding expenses, claims and accruals relating
to pre-petition and post-petition claims against Marketing; the uncertainty of our estimates, judgments, projections and assumptions
associated with our accounting policies and methods; our business operations generating sufficient cash for distributions or debt
service; potential future acquisitions and our ability to successfully manage our investment strategy; adverse developments in general
business, economic or political conditions; substantially all of our tenants depending on the same industry for their revenues; property
taxes; potential exposure related to pending lawsuits and claims; owning real estate primarily concentrated in the Northeast and Mid-
Atlantic regions of the United States; the liquidation of the Marketing Estate; expenses not covered by insurance; owning and leasing
real estate generally; the impact of our electing to be treated as a REIT under the federal income tax laws, including failure to qualify
as a REIT and paying taxes, penalties, interest or a deficiency dividend; changes in interest rates and our ability to manage or mitigate
this risk effectively; dilution as a result of future issuances of equity securities; our dividend policy and ability to pay dividends;
changes in market conditions; changes to our dividend policy; changes in market conditions; provisions in our charter; Maryland law
discouraging a third-party takeover; adverse effect of inflation; the loss of a member or members of our management team; changes in
3
accounting standards that may adversely affect our financial position; future impairment charges and our investors’ ability to
determine the creditworthiness of our tenants; terrorist attacks and other acts of violence and war; and our information systems.
As a result of these and other factors, we may experience material fluctuations in future operating results on a quarterly or
annual basis, which could materially and adversely affect our business, financial condition, operating results, ability to pay dividends
or stock price. An investment in our stock involves various risks, including those mentioned above and elsewhere in this Annual
Report on Form 10-K and those that are described from time to time in our other filings with the SEC.
You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. We
undertake no obligation to publicly release revisions to these forward-looking statements that reflect future events or circumstances or
reflect the occurrence of unanticipated events.
4
Item 1. Business
Company Profile
PART I
Getty Realty Corp., a Maryland corporation, is the leading publicly-traded real estate investment trust (“REIT”) in the United
States specializing in the ownership, leasing and financing of retail motor fuel and convenience store properties. Our properties are
located in 19 states across the United States and Washington, D.C., with concentrations in the Northeast and the Mid-Atlantic regions.
Our properties are operated under a variety of brands including Getty, BP, Exxon, Mobil, Shell, Chevron, Valero and Aloha. We own
the Getty® trademark and trade name in connection with our real estate and the petroleum marketing business in the United States.
We are self-administered and self-managed by our management team, which has extensive experience in owning, leasing and
managing retail motor fuel and convenience store properties. We have invested, and will continue to invest, in real estate and real
estate related investments when appropriate opportunities arise.
Company Operations
As of December 31, 2014, we owned 757 properties and leased 106 properties from third-party landlords. Our typical property
is used as a retail motor fuel outlet and convenience store, and is located on between one-half and three quarters of an acre of land in a
metropolitan area. The properties that we have acquired since 2007 are generally located on larger parcels of land. In addition, many
of our properties are located at highly trafficked urban intersections or conveniently close to highway entrances or exit ramps. We
believe our network of retail motor fuel and convenience store properties across the Northeast and the Mid-Atlantic regions of the
United States is unique and that comparable networks of properties are not readily available for purchase or lease from other owners
or landlords.
Substantially all of our properties are leased on a triple-net basis primarily to petroleum distributors and, to a lesser extent, to
individual operators. Generally our tenants supply fuel and either operate our properties directly or sublet our properties to operators
who operate their gas stations, convenience stores, automotive repair service facilities or other businesses at our properties. Retail
motor fuel and convenience store properties are an integral component of the transportation infrastructure supported by highly
inelastic demand for petroleum products and day-to-day consumer goods and convenience foods. Substantially all of our tenants’
financial results depend on the sale of refined petroleum products and rental income from their subtenants. As a result, our tenants’
financial results are highly dependent on the performance of the petroleum marketing industry, which is highly competitive and
subject to volatility. During the terms of our leases, we monitor the credit quality of our triple-net tenants by reviewing their published
credit rating, if available, reviewing publicly available financial statements, or financial or other operating statements which are
delivered to us pursuant to applicable lease agreements, monitoring news reports regarding our tenants and their respective businesses,
and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases.
• Core Net Lease Portfolio. As of December 31, 2014, we leased 696 properties to tenants under long-term triple-net
leases. Our core net lease portfolio consists of 609 properties leased to approximately 20 regional and national fuel
distributor tenants under unitary or master triple-net leases and 87 properties leased pursuant to single unit triple-net
leases.
Our triple-net leases generally provide for initial terms of 15 years with options for successive renewal terms of up to 20
years and include provisions for rental increases during the initial and renewal terms of the lease. As of December 31,
2014, our average lease term including month-to-month license agreements (described below), weighted by the number of
underlying properties, was approximately 10.7 years excluding renewal options. Our triple-net tenants are responsible for
the payment of all taxes, maintenance, repairs, insurance and other operating expenses relating to our properties, and are
also responsible for environmental contamination occurring during the terms of their leases and in certain cases also for
environmental contamination that existed before their leases commenced.
Several of our leases provide for additional rent based on the aggregate volume of fuel sold. In addition, certain of our
leases require the tenants to make capital expenditures at our properties, substantially all of which are related to the
replacement of underground storage tanks that are owned by our tenants during the terms of their leases. As of December
31, 2014, we have a remaining commitment to co-invest as much as $14.2 million in the aggregate with our tenants for a
portion of such capital expenditures within the next approximately five years.
• Transitional Properties. We periodically evaluate our portfolio of properties and, as of December 31, 2014, we had two
groups of properties, which we consider transitional: (i) 46 properties, which are either subject to month-to-month license
agreements, or which are vacant; and (ii) 121 properties, which are currently subject to two unitary triple-net leases that
are in the process of being restructured.
5
o Month-to-Month License Agreements / Vacancies. As of December 31, 2014 we have reduced the number of
properties subject to month-to-month license agreements from 90 to 26. Our month-to-month license agreements
allow the licensees (substantially all of whom were former tenants of Getty Petroleum Marketing, Inc.
(“Marketing”)) to occupy and use these properties as gas stations, convenience stores, automotive repair service
facilities or other businesses. Our month-to-month license agreements differ from our triple-net lease
arrangements in that, among other things, we receive monthly occupancy payments directly from the licensees
while we remain responsible for certain costs associated with the properties. These month-to-month license
agreements are intended as interim occupancy arrangements until these properties are sold or leased on a triple-
net basis. Under our month-to-month license agreements we are responsible for the payment of certain operating
expenses such as maintenance, repairs and real estate taxes (“Property Expenditures”), certain environmental
compliance costs and costs associated with any environmental remediation. In the aggregate, Property
Expenditures and environmental costs exceed the licensing revenues we receive for transitional properties
occupied under month-to-month license agreements. We will continue to be responsible for such Property
Expenditures and environmental costs until these properties are sold or leased on a triple-net basis, and under
certain leases and agreements thereafter. The incurrence of these expenses may materially negatively impact our
cash flow and ability to pay dividends. As of December 31, 2014 we have reduced the number of vacant
transitional properties from 36 to 20. We are responsible for the payment of all Property Expenditures,
environmental compliance costs and costs associated with any environmental remediation until these properties
are sold, or leased on a triple-net basis.
o Lease Restructurings. As of December 31, 2014, the 60 remaining properties subject to a unitary triple-net lease
with NECG Holdings Corp. (“NECG”) continue to be transitional. Certain of the properties included in our
unitary lease with NECG (the “NECG Lease”) were subject to eviction proceedings against former subtenants of
Marketing who continued to occupy these properties after the termination of our master lease with Marketing.
As of December 31, 2014, we have removed 24 of the original 84 properties from the NECG Lease and agreed to
defer portions of rent due to us under the NECG Lease. We continue to be engaged in discussions with NECG
about potential modifications to the NECG Lease, which will likely include the removal of additional properties
from the NECG Lease. Our discussions with NECG are ongoing and we cannot predict the ultimate outcome of
these discussions and their impact on the final size of the portfolio or future rental income associated with the
NECG Lease. (For additional information regarding NECG and the NECG Lease, see note 2 of this Annual
Report on Form 10-K.)
In addition, as of December 31, 2014, we categorized as transitional 61 properties located in Southern New
Jersey and Eastern Pennsylvania, which are subject to a unitary triple-net lease (the “Ramoco Lease”) with
Hanuman Business, Inc. (d/b/a “Ramoco”). We have entered into a lease modification agreement with Ramoco
whereby we have agreed to defer portions of rent due to us under the Ramoco Lease. We are engaged in ongoing
discussions with Ramoco about additional modifications to the Ramoco Lease, which we anticipate will include
the removal of certain properties from the Ramoco Lease. We cannot predict the ultimate outcome of these
discussions and their impact on the final size of the portfolio or future rental income associated with the Ramoco
Lease. (For additional information regarding Ramoco and the Ramoco Lease, see note 2 of this Annual Report on
Form 10-K.)
We continue to reposition our transitional properties and expect that we will either sell, enter into new leases or modify
existing leases on the remaining transitional properties over time. We are also reviewing select opportunities for capital
expenditures, redevelopment and alternative uses for certain of our transitional properties. Although we are currently working
on repositioning these transitional properties, the timing of pending or anticipated transactions may be affected by factors
beyond our control and we cannot predict when or on what terms sales or leases will ultimately be consummated. During the
year ended December 31, 2014, we sold 93 properties (89 transitional properties and four core properties) for $31.2 million in
the aggregate. During the year ended December 31, 2013, we sold 145 transitional properties for $83.1 million in the
aggregate. Subsequent to December 31, 2014, through the date of this Annual Report on Form 10-K, we have sold 5
transitional properties for $1.6 million in the aggregate.
Investment Strategy and Activity
As part of our overall growth strategy, we regularly review acquisition and financing opportunities to invest in additional retail
motor fuel and convenience store properties, and we expect to continue to pursue investments that we believe will benefit our financial
performance. Our investment strategy seeks to generate current income and benefit from long-term appreciation in the underlying
value of our real estate. To achieve that goal we seek to invest in high quality individual properties and real estate portfolios that will
promote our geographic diversity. A key element of our investment strategy is to invest in properties in strong primary markets that
serve high density population centers. In addition to traditional sale/leaseback and other real estate acquisitions, our investments may
also include purchase money mortgages or loans relating to our leasehold portfolios and recapture and redevelopment of existing
6
properties for alternative uses. We cannot provide any assurance that we will be successful making additional investments, that
investments will be available which meet our investment criteria or that our current sources of liquidity will be sufficient to fund such
investments.
•
•
2014. For the year ended December 31, 2014, we acquired fee or leasehold title to ten gasoline station and convenience
store properties in separate transactions at an aggregate purchase price of $17.6 million.
2013. On May 9, 2013, we acquired 16 Mobil-branded gasoline station and convenience store properties in the metro New
York region and 20 Exxon- and Shell-branded gasoline station and convenience store properties located within the
Washington, D.C. “Beltway” for $72.5 million in two sale/leaseback transactions with subsidiaries of Capitol Petroleum
Group, LLC (“Capitol”). In addition, in 2013, we acquired fee or leasehold title to three gasoline station and convenience
store properties in separate transactions at an aggregate purchase price of $0.8 million.
Over the last five years, we have acquired approximately 180 properties in various states at an aggregate purchase price of
approximately $300 million. These acquisitions include single property transactions and portfolio transactions ranging in size up to a
portfolio comprised of 59 properties with an aggregate purchase price of approximately $112 million.
The History of Our Company
Our founders started the business in 1955 with the ownership of one gasoline service station in New York City and combined
real estate ownership, leasing and management with service station operation and petroleum distribution. We held our initial public
offering in 1971 under the name Power Test Corp. In 1985, we acquired from Texaco the petroleum distribution and marketing assets
of Getty Oil Company in the Northeast United States along with the Getty® name and trademark in connection with our real estate
and the petroleum marketing business in the United States. We became one of the leading independent owner/operators of petroleum
marketing assets in the country, serving retail and wholesale customers through a distribution and marketing network of Getty® and
other branded retail motor fuel and convenience store properties and petroleum distribution terminals.
Marketing was formed to facilitate the spin-off of our petroleum marketing business to our shareholders, which was completed
in 1997. Marketing was acquired by a U.S. subsidiary of OAO Lukoil (“Lukoil”) in December 2000. In connection with Lukoil’s
acquisition of Marketing, we renegotiated our long-term unitary triple-net lease (the “Master Lease”) with Marketing. In December
2011, Marketing filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court (the “Bankruptcy Court”). The Master Lease
was terminated effective April 30, 2012, and in July 2012, the Bankruptcy Court approved Marketing’s Plan of Liquidation and
appointed a trustee (the “Liquidating Trustee”) to oversee liquidation of the Marketing estate (the “Marketing Estate”). Approximately
490 of the properties we own or lease as of December 31, 2014 were previously leased to Marketing pursuant to the Master Lease.
We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. A REIT is a corporation, or a
business trust that would otherwise be taxed as a corporation, which meets certain requirements of the Internal Revenue Code. The
Internal Revenue Code permits a qualifying REIT to deduct dividends paid, thereby effectively eliminating corporate level federal
income tax and making the REIT a pass-through vehicle for federal income tax purposes. To meet the applicable requirements of the
Internal Revenue Code, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including
mortgages and other REITs) or cash and government securities, derive most of its income from rents from real property or interest on
loans secured by mortgages on real property, and distribute to shareholders annually a substantial portion of its otherwise taxable
income. As a REIT, we are required to distribute at least 90% of our taxable income to our shareholders each year and would be
subject to corporate level federal income taxes on any taxable income that is not distributed.
Major Tenants
As of December 31, 2014, we had two groups of major tenants. (For information regarding factors that could adversely affect us
relating to our lessees, see “Part I, Item 1A. Risk Factors.)
As of December 31, 2014, we leased 118 gasoline station and convenience store properties in two separate unitary leases to
subsidiaries of Chestnut Petroleum Dist. Inc.: We lease 58 properties to CPD NY Energy Corp. (“CPD NY”) and 60 properties to
NECG. CPD NY and NECG together represented 19%, 21% and 18% of our rental revenues for the years ended December 31, 2014,
2013 and 2012, respectively. Although we have separate, non-cross defaulted leases with each of these subsidiaries, because such
subsidiaries are affiliated with one another and under common control, a material adverse impact on one subsidiary, or failure of one
subsidiary to perform its rental and other obligations to us, may contribute to a material adverse impact on the other subsidiary and/or
failure of the other subsidiary to perform its rental and other obligations to us. See “Company Operations – Transitional Properties –
Lease Restructuring” above.
In addition, as of December 31, 2014, we leased 97 gasoline station and convenience store properties in four separate unitary
leases to subsidiaries of Capitol Petroleum Group, LLC (“Capitol”): We lease 37 properties to White Oak Petroleum, LLC, 24
properties to Hudson Petroleum Realty, LLC, 20 properties to Dogwood Petroleum Realty, LLC and 16 properties to Big Apple
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Petroleum Realty, LLC. In aggregate, these Capitol affiliates represented 18%, 15% and 7% of our rental revenues for the years ended
December 31, 2014, 2013 and 2012, respectively. Although we have separate, non-cross defaulted leases with each of these
subsidiaries, because such subsidiaries are affiliated with one another and under common control, a material adverse impact on one
subsidiary, or failure of one subsidiary to perform its rental and other obligations to us, may contribute to a material adverse impact on
one or more of the other subsidiaries and/or failure of one or more of the other subsidiaries to perform its rental and other obligations
to us.
Competition
The sector of the real estate industry in which we operate is highly competitive. In addition, we expect major real estate
investors with significant capital will continue to compete with us for attractive acquisition opportunities. These competitors include
petroleum manufacturing, distributing and marketing companies, other REITs, public and private investment funds and other
individual and institutional investors.
Trademarks
We own the Getty® name and trademark in connection with our real estate and the petroleum marketing business in the United
States and we permit certain of our tenants and licensees to use the Getty® trademarks at properties that they lease from us.
Regulation
Our properties are subject to numerous federal, state and local laws and regulations including matters related to the protection of
the environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived
assets including buildings containing hazardous materials, underground storage tanks (“UST” or “USTs”) and other equipment. These
laws have included: (i) requirements to report to governmental authorities discharges of petroleum products into the environment and,
under certain circumstances, to remediate the soil and groundwater contamination pursuant to governmental order and directive,
(ii) requirements to remove and replace USTs that have exceeded governmental-mandated age limitations and (iii) the requirement to
provide a certificate of financial responsibility with respect to potential claims relating to UST failures. Our triple-net lease tenants are
directly responsible for compliance with various environmental laws and regulations as the operators of our properties.
We believe that our properties are in substantial compliance with federal, state and local provisions enacted or adopted
pertaining to environmental matters. Although we are unable to predict what legislation or regulations may be adopted in the future
with respect to environmental protection and waste disposal, we do not believe that existing legislation and regulations will have a
material adverse effect on our competitive position. (For additional information with respect to pending environmental lawsuits and
claims see “Item 3. Legal Proceedings”.)
Environmental expenses are principally attributable to remediation costs which include removing USTs, excavation of
contaminated soil and water, installing, operating, maintaining and decommissioning remediation systems, monitoring contamination
and governmental agency compliance reporting incurred in connection with contaminated properties. We seek reimbursement from
state UST remediation funds related to these environmental expenses where available. We enter into leases and various other
agreements which allocate between the parties responsibility for known and unknown environmental liabilities at or relating to the
subject premises. We are contingently liable for these environmental obligations in the event that the counterparty to the agreement
does not satisfy them.
For all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and
regulations, removal of USTs at the end of their lease term and remediation of any environmental contamination that arises during the
term of their tenancy. Under the terms of our leases covering properties previously leased to Marketing, we have agreed to be
responsible for environmental contamination at the premises that was known at the time the lease commenced, and that existed prior
to commencement of the lease and is discovered (other than as a result of a voluntary site investigation) during the first ten years of
the lease term. After expiration of such ten year period, responsibility for all newly discovered contamination, even if it relates to
periods prior to commencement of the lease, is contractually allocated to our tenant. Our tenants at properties previously leased to
Marketing are in all cases responsible for the cost of any remediation of contamination that results from their use and occupancy of
our properties. Under substantially all of our other triple-net leases, responsibility for remediation of all environmental contamination
discovered during the term of the lease (including known and unknown contamination that existed prior to commencement of the
lease) is the responsibility of our tenant.
For additional information please refer to “Item 1A. Risk Factors” and to “Liquidity and Capital Resources,” “Environmental
Matters” and “Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” which appear in Item 7. and note 5 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated
Financial Statements.” in this Annual Report on Form 10-K.
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Personnel
As of March 13, 2015, we had 32 employees.
Access to our filings with the Securities and Exchange Commission and Corporate Governance Documents
Our website address is www.gettyrealty.com. Our address, phone number and a list of our officers is available on our website.
Our website contains a hyperlink to the EDGAR database of the Securities and Exchange Commission (the “SEC”) at www.sec.gov
where you can access, free-of-charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and all amendments to these reports as soon as reasonably practicable after such reports are filed. Our website also contains our
business conduct guidelines (“Code of Ethics”), corporate governance guidelines and the charters of the Compensation,
Nominating/Corporate Governance and Audit Committees of our Board of Directors. We intend to make available on our website any
future amendments or waivers to our Code of Ethics within four business days after any such amendments or waivers become
effective. We also will provide copies of these reports and corporate governance documents free-of-charge upon request, addressed to
Getty Realty Corp., Two Jericho Plaza, Suite 110, Jericho, NY 11753, Attn: Investor Relations. Information available on or accessible
through our website shall not be deemed to be a part of this Annual Report on Form 10-K. You may read and copy any materials that
we file with the Securities and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at 100 F
Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330.
Item 1A. Risk Factors
We are subject to various risks, many of which are beyond our control. As a result of these and other factors, we may experience
material fluctuations in our future operating results on a quarterly or annual basis, which could materially and adversely affect our
business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. An investment in our stock
involves various risks, including those mentioned below and elsewhere in this Annual Report on Form 10-K and those that are
described from time to time in our other filings with the SEC.
We incur significant operating costs as a result of environmental laws and regulations which costs could significantly rise and
reduce our profitability.
We are subject to numerous federal, state and local laws and regulations, including matters relating to the protection of the
environment. Under certain environmental laws, a current or previous owner or operator of real estate may be liable for contamination
resulting from the presence or discharge of hazardous or toxic substances or petroleum products at, on, or under, such property, and
may be required to investigate and clean-up such contamination. Such laws typically impose liability and clean-up responsibility
without regard to whether the owner or operator knew of or caused the presence of the contaminants, or the timing or cause of the
contamination, and the liability under such laws has been interpreted to be joint and several unless the harm is divisible and there is a
reasonable basis for allocation of responsibility. For example, liability may arise as a result of the historical use of a property or from
the migration of contamination from adjacent or nearby properties. Any such contamination or liability may also reduce the value of
the property. In addition, the owner or operator of a property may be subject to claims by third-parties based on injury, damage and/or
costs, including investigation and clean-up costs, resulting from environmental contamination present at or emanating from a property.
The properties owned or controlled by us are leased primarily as retail motor fuel and convenience store properties, and therefore may
contain, or may have contained, USTs for the storage of petroleum products and other hazardous or toxic substances, which creates a
potential for the release of such products or substances. Some of our properties may be subject to regulations regarding the retirement
and decommissioning or removal of long-lived assets including buildings containing hazardous materials, USTs and other equipment.
Some of the properties may be adjacent to or near properties that have contained or currently contain USTs used to store petroleum
products or other hazardous or toxic substances. In addition, certain of the properties are on, adjacent to, or near properties upon which
others have engaged or may in the future engage in activities that may release petroleum products or other hazardous or toxic
substances. There may be other environmental problems associated with our properties of which we are unaware. These problems may
make it more difficult for us to re-let or sell our properties on favorable terms, or at all.
For additional information with respect to pending environmental lawsuits and claims, and environmental remediation
obligations and estimates see “Item 3. Legal Proceedings”, “Environmental Matters” in “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and notes 3 and 5 in “Item 8. Financial Statements and Supplementary
Data — Notes to Consolidated Financial Statements” in this Annual Report on Form 10-K.
We enter into leases and various other agreements which contractually allocate responsibility between the parties for known and
unknown environmental liabilities at or relating to the subject properties. We are contingently liable for these environmental
obligations in the event that the counterparty to the lease or other agreement does not satisfy them. It is possible that our assumptions
regarding the ultimate allocation method and share of responsibility that we used to allocate environmental liabilities may change,
which may result in material adjustments to the amounts recorded for environmental litigation accruals and environmental remediation
9
liabilities. We are required to accrue for environmental liabilities that we believe are allocable to others under our leases and other
agreements if we determine that it is probable that the counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if the counterparty fails to pay them. As a result of Marketing’s
bankruptcy filing, we accrued for significant additional environmental liabilities because we concluded that Marketing would not be
able to perform them. A liability has not been accrued for environmental obligations that are the responsibility of any other current
tenants based on those tenant’s history of paying such obligations and/or our assessment of their financial ability and intent to pay
such costs. However, there can be no assurance that our assessments or estimates are correct or that our tenants who have paid their
obligations in the past will continue to do so. The ultimate resolution of these matters could cause a material adverse effect on our
business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
For all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and
regulations, removal of USTs at the end of their lease term and remediation of any environmental contamination that arises during the
term of their tenancy. Under the terms of our leases covering properties previously leased to Marketing, we have agreed to be
responsible for environmental contamination at the premises that was known at the time the lease commenced, and that existed prior
to commencement of the lease and is discovered (other than as a result of a voluntary site investigation) during the first ten years of
the lease term. After expiration of such ten year period, responsibility for all newly discovered contamination, even if it relates to
periods prior to commencement of the lease, is contractually allocated to our tenant. Our tenants at properties previously leased to
Marketing are in all cases responsible for the cost of any remediation of contamination that results from their use and occupancy of
our properties. Under substantially all of our other triple-net leases, responsibility for remediation of all environmental contamination
discovered during the term of the lease (including known and unknown contamination that existed prior to commencement of the
lease) is the responsibility of our tenant.
We anticipate that a majority of the USTs at properties previously leased to Marketing will be replaced over the next decade
because these USTs are either at or near the end of their useful lives. For long-term, triple-net leases covering sites previously leased
to Marketing, our tenants are responsible for the cost of removal and replacement of USTs and for remediation of contamination found
during such UST removal and replacement, unless such contamination was found during the first ten years of the lease term and also
existed prior to commencement of the lease. In those cases, we are responsible for costs associated with the remediation of such
contamination. For our transitional properties occupied under month-to-month license agreements, or which are vacant, we are
responsible for costs associated with UST removals and for the cost of remediation of contamination found during the removal of
USTs. We have also agreed to be responsible for environmental contamination that existed prior to the sale of certain properties
assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the first five years after the
sale of the properties. (For additional information regarding our transitional properties, see “Item 1. Business — Company
Operations” and “Transitional Properties” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” which appear in this Annual Report on Form 10-K.)
After the termination of the Master Lease, we commenced a process to take control of our properties and to reposition them. A
substantial portion of these properties had USTs which were either at or near the end of their useful lives. For properties that we sold,
we elected to remove certain of these USTs and in the course of re-letting properties, we made lease concessions to reimburse our
tenants at operating gas stations for certain capital expenditures including UST replacements. In the course of these UST removals and
replacements, previously unknown environmental contamination has been and continues to be discovered. As a result of these
developments, we began to assess our prospective future environmental liability resulting from preexisting unknown environmental
contamination which we believe might be discovered during removal and replacement of USTs at properties previously leased to
Marketing in the future.
We are now able to develop a reasonable estimate of fair value for the prospective future environmental liability resulting from
preexisting unknown environmental contamination. These estimates are based primarily upon quantifiable trends, which we believe
allow us to make reasonable estimates of fair value for the future costs of environmental remediation resulting from the removal and
replacement of USTs. As a result, at December 31, 2014, we accrued for these estimated costs. Our accrual of the additional liability
represents the best estimate of the fair value of cost for each component of the liability net of estimated recoveries from state UST
remediation funds considering estimated recovery rates developed from prior experience with the funds. In arriving at our accrual, we
analyzed the ages of USTs at properties where we would be responsible for preexisting contamination found within the ten years after
commencement of a lease (for properties subject to long-term triple-net leases) or five years from a sale (for divested properties), and
projected a cost to closure for new environmental contamination. Based on these estimates, along with relevant economic and risk
factors, at December 31, 2014, we accrued $49.7 million for these future environmental liabilities related to preexisting unknown
contamination. In conjunction with the accrual for preexisting unknown environmental contamination, we have increased the carrying
value of our properties and simultaneously recorded impairment charges of $8.3 million where the increased carrying value of the
property exceeded its estimated fair value. Our estimates are based upon facts that are known to us at this time and an assessment of
the possible ultimate remedial action outcomes. It is possible that our assumptions, which form the basis of our estimates, regarding
our ultimate environmental liabilities may change, which may result in our providing an accrual, or adjustments to the amounts
recorded, for environmental remediation liabilities. Among the many uncertainties that impact the estimates are our assumptions, the
necessary regulatory approvals for, and potential modifications of remediation plans, the amount of data available upon initial
10
assessment of contamination, changes in costs associated with environmental remediation services and equipment, the availability of
state UST remediation funds and the possibility of existing legal claims giving rise to additional claims. Additional environmental
liabilities could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay
dividends or stock price.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the extent of contamination,
alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations
and their interpretations, as well as the time it takes to remediate contamination and receive regulatory approval. In developing our
liability for estimated environmental remediation obligations on a property by property basis, we consider among other things, enacted
laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available
technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates
which are subject to significant change, and are adjusted as the remediation treatment progresses, as circumstances change and as
environmental contingencies become more clearly defined and reasonably estimable. We expect to adjust the accrued liabilities for
environmental remediation obligations reflected in our consolidated financial statements as they become probable and a reasonable
estimate of fair value can be made.
We measure our environmental remediation liability at fair value based on expected future net cash flows, adjusted for inflation,
and then discount them to present value. We adjust our environmental remediation liability quarterly to reflect changes in projected
expenditures, changes in present value due to the passage of time and reductions in estimated liabilities as a result of actual
expenditures incurred during each quarter. As of December 31, 2014, we had accrued a total of $91.6 million for our prospective
environmental remediation liability. This accrual includes (a) $41.9 million, which was our best estimate of reasonably estimable
environmental remediation obligations and obligations to remove USTs for which we are the title owner, net of estimated recoveries
and (b) $49.7 million for future environmental liabilities related to preexisting unknown contamination.
We cannot predict what environmental legislation or regulations may be enacted in the future, or how existing laws or
regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied.
We cannot predict if state UST fund programs will be administered and funded in the future in a manner that is consistent with past
practices and if future environmental spending will continue to be eligible for reimbursement at historical recovery rates under these
programs. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory
agencies or stricter interpretation of existing laws, which may develop in the future, could have an adverse effect on our financial
position, or that of our tenants, and could require substantial additional expenditures for future remediation.
As a result of the factors discussed above, or others, compliance with environmental laws and regulations could have a material
adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
We are exposed to counterparty risk and there can be no assurances that we will effectively manage or mitigate this risk.
We regularly interact with counterparties in various industries. The types of counterparties most common to our transactions and
agreements include, but are not limited to, landlords, tenants, vendors and lenders. We also enter into agreements to acquire and sell
properties which allocate responsibility for certain costs to the counterparty. Our most significant counterparties include, but are not
limited to the members of the Bank Syndicate related to our Credit Agreement, the lender that is the counterparty to the Prudential
Loan Agreement and our major tenants from whom we derive a significant amount of rental revenue. The default, insolvency or other
inability or unwillingness of a significant counterparty to perform its obligations under an agreement or transaction, including, without
limitation, as a result of the rejection of an agreement or transaction in bankruptcy proceedings, is likely to have a material adverse
effect on us. As of December 31, 2014, we leased 118 gasoline station and convenience store properties in two separate unitary leases
to subsidiaries of Chestnut Petroleum Dist. Inc., CPD NY Energy Corp. (“CPD NY”) and NECG Holdings Corp. (“NECG”). We lease
58 properties to CPD NY and 60 properties to NECG. CPD NY and NECG together represented 19%, 21% and 18% of our rental
revenues for the years ended December 31, 2014, 2013 and 2012, respectively. It is possible that as a result of either leasing additional
properties to Chestnut Petroleum Dist. or as a result of disposing some of our existing properties, Chestnut Petroleum Dist. could
account for a greater percentage of our rental revenues. In addition, as of December 31, 2014, we leased 97 gasoline station and
convenience store properties in four separate unitary leases to subsidiaries of Capitol Petroleum Group, LLC (“Capitol”). We lease 37
properties to White Oak Petroleum, LLC, 24 properties to Hudson Petroleum Realty, LLC, 20 properties to Dogwood Petroleum
Realty, LLC and 16 properties to Big Apple Petroleum Realty, LLC. In aggregate, these Capitol affiliates represented 18%, 15% and
7% of our rental revenues for the years ended December 31, 2014, 2013 and 2012, respectively. It is possible that as a result of either
leasing additional properties to Capitol or as a result of disposing some of our existing properties, Capitol could account for a greater
percentage of our rental revenues. We may also undertake additional transactions with our other existing tenants which would further
concentrate our sources of rental revenues. Although we have separate, non-cross defaulted leases with each of these subsidiaries,
because such subsidiaries are affiliated with one another and under common control, a material adverse impact on one subsidiary, or
failure of one subsidiary to perform its rental and other obligations to us, may contribute to a material adverse impact on one or more
of the other subsidiaries and/or failure of one or more of the other subsidiaries to perform its rental and other obligations to us.
Additionally, our material tenants are part of larger corporate organizations and the financial distress of other affiliated companies or
11
businesses in those organizations may negatively impact the ability or willingness of our tenant to perform its obligations under its
lease with us. The failure of a major tenant or their default in their rental and other obligations to us is likely to have a material
adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
Because our tenants are not rated and their financial information is not available to you, it may be difficult for our investors to
determine their creditworthiness.
The majority of our properties are leased to tenants who are not rated by any nationally recognized statistical rating
organizations. In addition, our tenant’s financial information is not generally available to our investors. Additionally, our material
tenants are part of larger corporate organizations and we do not receive financial information for the other entities in those
organizations. The financial distress of other affiliated companies or businesses in those organizations may negatively impact the
ability or willingness of our tenant to perform its obligations under its lease with us. Because of the lack of financial information or
credit ratings it is, therefore, difficult for our investors to assess the creditworthiness of our tenants and to determine the ability of a
tenant to meet its obligations to us. It is possible that the assumptions and estimates we make after reviewing publicly and privately
obtained information about our tenants are not accurate and that we may be required to increase reserves for bad debts, record
allowances for deferred rent receivable or record additional expenses if our tenants are unable or unwilling to meet their obligations to
us.
Our future cash flow is dependent on the performance of our tenants of their lease obligations, renewal of existing leases and
either re-letting or selling our transitional properties.
We are subject to risks that financial distress, default or bankruptcy of our tenants may lead to vacancy at our properties or
disruption in rent receipts as a result of partial payment or nonpayment of rent or that expiring leases may not be renewed. Under
unfavorable general economic conditions, there can be no assurance that our tenants’ level of sales and financial performance
generally will not be adversely affected, which in turn, could negatively impact our rental revenues. We are subject to risks that the
terms governing renewal or re-letting of our properties (including, compliance with numerous federal, state and local laws and
regulations related to the protection of the environment, such as the remediation of contamination and the retirement and
decommissioning or removal of long-lived assets, the cost of required renovations, or replacement of USTs and related equipment)
may be less favorable than current lease terms (or prior lease terms in the case of vacant properties). We are also subject to the risk
that we may receive less net proceeds from the properties we sell as compared to their current carrying value or that the value of our
properties may be adversely affected by unfavorable general economic conditions. Unfavorable general economic conditions may also
negatively impact our ability to re-let or sell our transitional properties. Numerous properties compete with our properties in attracting
tenants to lease space. The number of available or competitive properties in a particular area could have a material adverse effect on
our ability to lease or sell our properties and on the rents we are able to charge. In addition to the risk of disruption in rent receipts, we
are subject to the risk of incurring real estate taxes, maintenance, environmental and other expenses at vacant properties.
The financial distress, default or bankruptcy of our tenants may also lead to protracted and expensive processes for retaking
control of our properties than would otherwise be the case, including, eviction or other legal proceedings related to or resulting from
the tenant’s default. These risks are greater with respect to certain of our tenants who lease multiple properties from us. See –
“Business – Company Operations – Transitional Properties” for additional details. If a tenant files for bankruptcy protection it is
possible that we would recover substantially less than the full value of our claims against the tenant. If our tenants do not perform their
lease obligations; or we are unable to renew existing leases and promptly recapture and re-let or sell our transitional properties; or if
lease terms upon renewal or re-letting are less favorable than current or historical lease terms; or if the values of properties that we sell
are adversely affected by market conditions; or if we incur significant costs or disruption related to or resulting from tenant financial
distress, default or bankruptcy; then our cash flow could be significantly adversely affected.
We are dependent on external sources of capital which may not be available on favorable terms, or at all.
We are dependent on external sources of capital to maintain our status as a REIT and must distribute to our shareholders each
year at least 90% of our net taxable income, excluding any net capital gain. Because of these distribution requirements, it is not likely
that we will be able to fund all future capital needs, including acquisitions, from income from operations. Therefore, we will have to
continue to rely on third-party sources of capital, which may or may not be available on favorable terms, or at all.
Our principal sources of liquidity are our cash flows from operations, funds available under our $175.0 million senior secured
revolving credit agreement (the “Credit Agreement”) with a group of commercial banks led by JPMorgan Chase Bank, N.A. (the
“Bank Syndicate”) that matures in August 2015 and available cash and cash equivalents. On February 25, 2013, we entered into the
Credit Agreement with the Bank Syndicate and a $100.0 million senior secured term loan agreement with the Prudential Insurance
Company of America (the “Prudential Loan Agreement”), which matures in February 2021. For additional information, please refer to
“Credit Agreement” and “Prudential Loan Agreement” in “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Liquidity and Capital Resources” which appears in this Annual Report on Form 10-K.
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Each of the Credit Agreement and the Prudential Loan Agreement contains customary financial and other covenants such as
loan to value, leverage and coverage ratios and minimum tangible net worth, as well as limitations on restricted payments, which may
limit our ability to incur additional debt or pay dividends. The Credit Agreement contains customary events of default, including
default under the Prudential Loan Agreement, change of control and failure to maintain REIT status. The Prudential Loan Agreement
contains customary events of default, including default under the Credit Agreement and failure to maintain REIT status. Our ability to
meet the terms of the agreements is dependent on our continued ability to meet certain criteria as further described in note 4 in “Item
8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements,” the performance of our tenants and
the other risks described in this section. If we are not in compliance with one or more of our covenants, which could result in an event
of default under our Credit Agreement or our Prudential Loan Agreement, there can be no assurance that our lenders would waive
such non-compliance. This could have a material adverse effect on our business, financial condition, results of operation, liquidity,
ability to pay dividends or stock price.
Our access to third-party sources of capital depends upon a number of factors including general market conditions, the market’s
perception of our growth potential, financial stability, our current and potential future earnings and cash distributions, covenants and
limitations imposed under our Credit Agreement and Prudential Loan Agreement and the market price of our common stock.
We are repositioning our properties that were previously leased to Marketing. We expect to incur significant costs associated with
repositioning these properties and we expect to generate less net revenue after leasing or selling these properties than previously
received from Marketing. The incurrence of these costs and receipt of less net revenue may materially negatively impact our cash
flow and ability to pay dividends.
We are continuing to reposition the properties that were previously leased to Marketing pursuant to the Master Lease and expect
that we will sell and lease these properties over time. As of December 31, 2014, we had two groups of properties, which we consider
transitional: (i) 46 properties, which are either subject to month-to-month license agreements, or which are vacant; and (ii) 121
properties, which are currently subject to two unitary triple-net leases that are in the process of being restructured.
As of December 31, 2014, 26 of our transitional properties were subject to month-to-month license agreements allowing the
licensees (substantially all of whom were former tenants of Marketing) to occupy and use these properties as gas stations, convenience
stores, automotive repair service facilities or other businesses. Under our month-to-month license agreements we are responsible for
the payment of operating expenses such as maintenance, repairs and real estate taxes (“Property Expenditures”), certain environmental
compliance costs and costs associated with any environmental remediation. In the aggregate, Property Expenditures and
environmental costs exceed the licensing revenues we receive for transitional properties occupied under month-to-month license
agreements. We will continue to be responsible for such Property Expenditures and environmental costs until these properties are sold
or leased on a triple-net basis, and under certain leases and agreements thereafter. The incurrence of these expenses may materially
negatively impact our cash flow and ability to pay dividends. As of December 31, 2014, 20 of our transitional properties were vacant.
We are responsible for the payment of all Property Expenditures, environmental compliance costs and costs associated with any
environmental remediation until these properties are sold, or leased on a triple-net basis.
As of December 31, 2014, the 60 remaining properties subject to a unitary triple-net lease with NECG continue to be
transitional. Certain of the properties included in the NECG Lease were subject to eviction proceedings against former subtenants of
Marketing who continued to occupy these properties after the termination of the Master Lease. As of December 31, 2014, we have
removed 24 of the original 84 properties from the NECG Lease and agreed to defer portions of rent due to us under the NECG Lease.
We continue to be engaged in discussions with NECG about potential modifications to the NECG Lease, which will likely include the
removal of additional certain properties from the NECG Lease. Our discussions with NECG are ongoing and we cannot predict the
ultimate outcome of these discussions and their impact on the final size of the portfolio and future rental income associated with the
NECG Lease. (For more information regarding NECG and the NECG Lease, see note 2 of this Annual Report on Form 10-K.)
In addition, as of December 31, 2014, we categorized as transitional 61 properties located in Southern New Jersey and Eastern
Pennsylvania, which are subject to the Ramoco Lease with Ramoco. We have entered into a lease modification agreement with
Ramoco whereby we have agreed to defer portions of rent due to us under the Ramoco Lease. We are engaged in ongoing discussions
with Ramoco about additional modifications to the Ramoco Lease, which we anticipate will include the removal of certain properties
from the Ramoco Lease. We cannot predict the ultimate outcome of these discussions and their impact on the final size of the portfolio
and future rental income associated with the Ramoco Lease. (For additional information regarding Ramoco and the Ramoco Lease,
see note 2 of this Annual Report on Form 10-K.)
We continue to reposition our transitional properties and expect that we will sell, enter into new leases or modify existing leases
on these properties over time. Although we are currently working on repositioning these transitional properties, the timing of pending
or anticipated transactions may be affected by factors beyond our control and we cannot predict when or on what terms sales or leases
will ultimately be consummated.
We are currently generating less net revenue from the leasing of these transitional properties and we expect that following the
completion of the repositioning process, we will continue to generate less net revenue from the properties that were previously leased
13
to Marketing than previously received from Marketing. The incurrence of these costs and receipt of less net revenue from our
properties that were subject to the Master Lease may materially negatively impact our cash flow and ability to pay dividends. In
addition, it is possible that issues involved in re-letting or repositioning these properties may require significant management attention
that would otherwise be devoted to our ongoing business.
We are continuing our efforts to sell certain properties. We cannot predict the terms or timing of any such property dispositions. If
we do not obtain favorable terms on such dispositions, our operations and financial performance may be negatively impacted.
We are continuing our efforts to sell properties, including those properties which are accounted for as held for sale. While we
have dedicated considerable effort designed to increase sales activity, we cannot predict if or when property dispositions will close and
whether the terms of any such disposition will be favorable to us. It is likely that we will retain environmental liabilities that exist with
respect to that property or group of properties prior to the date of sale. If we do not obtain favorable terms on such dispositions, our
operations and financial performance will be negatively impacted.
We maintain significant pre-petition and post-petition unsecured claims against Marketing. We cannot provide any assurance that
our claims will be accepted or paid.
As part of Marketing’s bankruptcy proceeding, we maintained significant pre-petition and post-petition unsecured claims
against Marketing. On March 3, 2015, we entered into a settlement agreement (the “Settlement Agreement”) with the Liquidating
Trustee of the Marketing Estate, which resolved the claims we asserted in Marketing’s bankruptcy case in the Bankruptcy Court. The
Settlement Agreement is subject to the approval of the Bankruptcy Court at a hearing that is scheduled to be held on April 7, 2015.
Pursuant to the terms of the Settlement Agreement, we will receive an interim distribution from the Marketing Estate of approximately
$6.0 million (the “Interim Distribution”) within 15 days of the approval of the Settlement Agreement by the Bankruptcy Court. In
addition, if the Settlement Agreement is approved by the Bankruptcy Court, we expect to receive additional distributions from the
Marketing Estate during 2015 on account of our claims. The Interim Distribution and any subsequent distributions received by us from
the Marketing Estate depend on our percentage of the total amount of allowed general unsecured claims against Marketing. The
Liquidating Trustee and the Bankruptcy Court have not yet completed the process of determining the total amount of allowed general
unsecured claims against Marketing. We anticipate that the sum of all additional distributions will not materially exceed the amount of
the Interim Distribution. We cannot provide any assurance as to whether the Settlement Agreement will be approved, or, if approved,
the total amount of the distributions we will receive from the Marketing Estate on account of our claims or timing of such future
distributions.
Our accounting policies and methods are fundamental to how we record and report our financial position and results of
operations, and they require management to make estimates, judgments and assumptions about matters that are inherently
uncertain.
Our accounting policies and methods are fundamental to how we record and report our financial position and results of
operations. We have identified several accounting policies as being critical to the presentation of our financial position and results of
operations because they require management to make particularly subjective or complex judgments about matters that are inherently
uncertain and because of the likelihood that materially different amounts would be recorded under different conditions or using
different assumptions. We cannot provide any assurance that we will not make subsequent significant adjustments to our consolidated
financial statements. Estimates, judgments and assumptions underlying our consolidated financial statements include, but are not
limited to, receivables and related reserves, deferred rent receivable, income under direct financing leases, asset retirement obligations
including environmental remediation obligations and future environmental liabilities for pre-existing unknown environmental
contamination,, real estate, depreciation and amortization, carrying value of our properties, impairment of long-lived assets, litigation,
accrued liabilities, income taxes and allocation of the purchase price of properties acquired to the assets acquired and liabilities
assumed.
If our accounting policies, methods, judgments, assumptions, estimates and allocations prove to be incorrect, or if circumstances
change, our business, financial condition, revenues, operating expense, results of operations, liquidity, ability to pay dividends or stock
price may be materially adversely affected.
Our business operations may not generate sufficient cash for distributions or debt service.
There is no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be
available to us in an amount sufficient to enable us to pay dividends on our common stock, to pay our indebtedness or to fund our
other liquidity needs. We may not be able to repay or refinance existing indebtedness on favorable terms, which could force us to
dispose of properties on disadvantageous terms (which may also result in losses) or accept financing on unfavorable terms.
14
We may acquire new properties, and this may create risks.
We may acquire or develop properties when we believe that an acquisition or development matches our business and investment
strategies. These properties may have characteristics or deficiencies currently unknown to us that affect their value or revenue
potential. It is possible that the operating performance of these properties may decline after we acquire them, they may not perform as
expected and, if financed by the Company using debt or new equity issuances, may result in shareholder dilution. Our acquisition of
properties will expose us to the liabilities of those properties, some of which we may not be aware of at the time of acquisition. We
face competition in pursuing these acquisitions and we may not succeed in leasing acquired properties at rents sufficient to cover their
costs of acquisition and operations.
Newly acquired properties may require significant management attention that would otherwise be devoted to our ongoing
business. We may not succeed in consummating desired acquisitions. Consequences arising from or in connection with any of the
foregoing could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay
dividends or stock price.
We may not be able to successfully implement our investment strategy.
We may not be able to successfully implement our investment strategy. We cannot assure you that our portfolio of properties
will expand at all, or if it will expand at any specified rate or to any specified size. As part of our overall growth strategy, we regularly
review acquisition and financing opportunities to invest in additional retail motor fuel and convenience store properties, and we expect
to continue to pursue investments that we believe will benefit our financial performance. We cannot assure you that investment
opportunities will be available which meet our investment criteria. Acquisitions of properties we acquire through the issuance of new
equity securities may initially be dilutive to our net income, and such properties may not perform as we expect or produce the returns
that we anticipate (including, without limitation, as a result of tenant bankruptcies, tenant concessions, our inability to collect rents and
higher than anticipated operating expenses). Further, we may not successfully integrate one or more of these property acquisitions into
our existing portfolio without operating disruptions or unanticipated costs. To the extent that our current sources of liquidity are not
sufficient to fund such acquisitions, we will require other sources of capital, which may or may not be available on favorable terms or
at all. Additionally, to the extent we increase the size of our portfolio, we may not be able to adapt our management, administrative,
accounting and operational systems, or hire and retain sufficient operational staff to integrate acquired properties into our portfolio or
manage any future acquisitions of properties without operating disruptions or unanticipated costs. Moreover, our continued growth
will require increased investment in management personnel, professional fees, other personnel, financial and management systems and
controls and facilities, which will result in additional operating expenses. Under the circumstances described above, our results of
operations, financial condition and growth prospects may be materially and adversely affected.
We are subject to risks inherent in owning and leasing real estate.
We are subject to varying degrees of risk generally related to leasing and owning real estate many of which are beyond our
control. In addition to general risks applicable to us, our risks include, among others:
• our liability as a lessee for long-term lease obligations regardless of our revenues,
• deterioration in national, regional and local economic and real estate market conditions,
• potential changes in supply of, or demand for, rental properties similar to ours,
• competition for tenants and declining rental rates,
• difficulty in selling or re-letting properties on favorable terms or at all,
• impairments in our ability to collect rent or other payments due to us when they are due,
• increases in interest rates and adverse changes in the availability, cost and terms of financing,
• uninsured property liability,
•
the impact of present or future environmental legislation and compliance with environmental laws,
• adverse changes in zoning laws and other regulations,
• acts of terrorism and war,
• acts of God,
• the potential risk of functional obsolescence of properties over time,
• the need to periodically renovate and repair our properties, and
15
• physical or weather-related damage to our properties.
Certain significant expenditures generally do not change in response to economic or other conditions, including: (i) debt service,
(ii) real estate taxes and (iii) operating and maintenance costs. The combination of variable revenue and relatively fixed expenditures
may result, under certain market conditions, in reduced earnings and could have an adverse effect on our financial condition.
Each of the factors listed above could cause a material adverse effect on our business, financial condition, results of operations,
liquidity, ability to pay dividends or stock price. In addition, real estate investments are relatively illiquid, which means that our ability
to vary our portfolio of properties in response to changes in economic and other conditions may be limited.
Adverse developments in general business, economic or political conditions could have a material adverse effect on us.
Adverse developments in general business and economic conditions, including through recession, downturn or otherwise, either
in the economy generally or in those regions in which a large portion of our business is conducted, could have a material adverse
effect on us and significantly increase certain of the risks we are subject to. Among other effects, adverse economic conditions could
depress real estate values, impact our ability to re-let or sell our properties and have an adverse effect on our tenants’ level of sales and
financial performance generally. Our revenues are dependent on the economic success of our tenants and any factors that adversely
impact our tenants could also have a material adverse effect on our business, financial condition and results of operations, liquidity,
ability to pay dividends or stock price.
Substantially all of our tenants depend on the same industry for their revenues.
We derive substantially all of our revenues from leasing, primarily on a triple-net basis, and financing retail motor fuel and
convenience store properties to tenants in the petroleum marketing industry. Accordingly, our revenues are substantially dependent on
the economic success of the petroleum marketing industry, and any factors that adversely affect that industry, such as disruption in the
supply of petroleum or a decrease in the demand for conventional motor fuels due to conservation, technological advancements in
petroleum-fueled motor vehicles or an increase in the use of alternative fuel vehicles, or “green technology” could have a material
adverse effect on our business, financial condition and results of operations, liquidity, ability to pay dividends or stock price. The
success of participants in the petroleum marketing industry depends upon the sale of refined petroleum products at margins in excess
of fixed and variable expenses. The petroleum marketing industry is highly competitive and volatile. Petroleum products are
commodities, the prices of which depend on numerous factors that affect supply and demand. The prices paid by our tenants and other
petroleum marketers for products are affected by global, national and regional factors. A large, rapid increase in wholesale petroleum
prices would adversely affect the profitability and cash flows of our tenants if the increased cost of petroleum products could not be
passed on to their customers or if automobile consumption of gasoline was to decline significantly. We cannot be certain how these
factors will affect petroleum product prices or supply in the future, or how in particular they will affect our tenants.
Property taxes on our properties may increase without notice.
Each of the properties we own or lease is subject to real property taxes. The leases for certain of the properties that we lease
from third-parties obligate us to pay real property taxes with regard to those properties. The real property taxes on our properties and
any other properties that we acquire or lease in the future may increase as property tax rates change and as those properties are
assessed or reassessed by tax authorities. To the extent that our tenants are not responsible for property taxes pursuant to their
contractual arrangements with us or are unable or unwilling to pay such increase in accordance with their leases, our net operating
expenses may increase.
We are defending pending lawsuits and claims and are subject to material losses.
We are subject to various lawsuits and claims, including litigation related to environmental matters, such as those arising from
leaking USTs, contamination of groundwater with methyl tertiary butyl ether (a fuel derived from methanol, commonly referred to as
“MTBE”) and releases of motor fuel into the environment, and toxic tort claims. For example, we are currently involved in several
proceedings described in “Item 3. Legal Proceedings” in this Annual Report on Form 10-K. The ultimate resolution of certain matters
cannot be predicted because considerable uncertainty exists both in terms of the probability of loss and the estimate of such loss. Our
ultimate liabilities resulting from the lawsuits and claims we face could cause a material adverse effect on our business, financial
condition, results of operations, liquidity, ability to pay dividends or stock price. For additional information with respect to pending
environmental lawsuits and claims and environmental remediation obligations and estimates see “Item 3. Legal Proceedings” and
“Environmental Matters” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
notes 3 and 5 in “Item 8. Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements” in this Annual
Report on Form 10-K.
16
A significant portion of our properties are concentrated in the Northeast and Mid-Atlantic regions of the United States, and
adverse conditions in those regions, in particular, could negatively impact our operations.
A significant portion of the properties we own and lease are located in the Northeast and Mid-Atlantic regions of the United
States and approximately 60% of our properties are concentrated in three states (New York, Massachusetts and Connecticut). Because
of the concentration of our properties in those regions, in the event of adverse economic conditions in those regions, we would likely
experience higher risk of default on payment of rent to us than if our properties were more geographically diversified. Additionally,
the rents on our properties may be subject to a greater risk of default than other properties in the event of adverse economic, political
or business developments or natural hazards that may affect the Northeast or Mid-Atlantic United States and the ability of our lessees
to make rent payments. This lack of geographical diversification could have a material adverse effect on our business, financial
condition, results of operations, liquidity, ability to pay dividends or stock price.
We are in a competitive business.
The real estate industry is highly competitive. Where we own properties, we compete for tenants with a large number of real
estate property owners and other companies that sublet properties. Our principal means of competition are rents we are able to charge
in relation to the income producing potential of the location. In addition, we expect other major real estate investors, some with much
greater financial resources or more experienced personnel than we have, will compete with us for attractive acquisition opportunities.
These competitors include petroleum manufacturing, distributing and marketing companies, other REITs, public and private
investment funds and other individual and institutional investors. This competition has increased prices for properties we seek to
acquire and may impair our ability to make suitable property acquisitions on favorable terms in the future.
We are subject to losses that may not be covered by insurance.
We, and certain of our tenants, carry insurance against certain risks and in such amounts as we believe are customary for
businesses of our kind. However, as the costs and availability of insurance change, we may decide not to be covered against certain
losses (such as certain environmental liabilities, earthquakes, hurricanes, floods and civil disorder) where, in the judgment of
management, the insurance is not warranted due to cost or availability of coverage or the remoteness of perceived risk. Furthermore,
there are certain types of losses, such as losses resulting from wars, terrorism or certain acts of God, that generally are not insured
because they are either uninsurable or not economically insurable. There is no assurance that the existing insurance coverages are or
will be sufficient to cover actual losses incurred. The destruction of, or significant damage to, or significant liabilities arising out of
conditions at, our properties due to an uninsured loss would result in an economic loss and could result in us losing both our
investment in, and anticipated profits from, such properties. When a loss is insured, the coverage may be insufficient in amount or
duration, or a lessee’s customers may be lost, such that the lessee cannot resume its business after the loss at prior levels or at all,
resulting in reduced rent or a default under its lease. Any such loss relating to a large number of properties could have a material
adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
Failure to qualify as a REIT under the federal income tax laws would have adverse consequences to our shareholders. Uncertain
tax matters may have a significant impact on the results of operations for any single fiscal year or interim period or may cause us
to fail to qualify as a REIT.
We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. To qualify for taxation as a
REIT, we must, among other requirements such as those related to the composition of our assets and gross income, distribute annually
to our stockholders at least 90% of our taxable income, including taxable income that is accrued by us without a corresponding receipt
of cash. Accordingly, we generally will not be subject to federal income tax on qualifying REIT income, provided that distributions to
our shareholders equal at least the amount of our taxable income as defined under the Internal Revenue Code.
Many of the REIT requirements are highly technical and complex. If we were to fail to meet the requirements, or if the Internal
Revenue Service were to successfully assert that our earnings and profits were greater than the amount distributed, we may be subject
to federal income tax, excise taxes, penalties and interest or we may have to pay a deficiency dividend to eliminate any earnings and
profits that were not distributed. We may have to borrow money or sell assets to pay such a deficiency dividend.
We cannot guarantee that we will continue to qualify in the future as a REIT. We cannot give any assurance that new legislation,
regulations, administrative interpretations or court decisions will not significantly change the requirements relating to our
qualification. If we fail to qualify as a REIT, we would not be allowed a deduction for distributions to shareholders in computing our
taxable income and will again be subject to federal income tax at regular corporate rates, we could be subject to the federal alternative
minimum tax, we could be required to pay significant income taxes and we would have less money available for our operations and
distributions to shareholders. This would likely have a significant adverse effect on the value of our securities. We could also be
precluded from treatment as a REIT for four taxable years following the year in which we lost the qualification, and all distributions to
shareholders would be taxable as regular corporate dividends to the extent of our current and accumulated earnings and profits. Loss
17
of our REIT status could have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to
pay dividends or stock price.
We are exposed to interest rate risk and there can be no assurances that we will manage or mitigate this risk effectively.
We are exposed to interest rate risk, primarily as a result of our Credit Agreement. Borrowings under our Credit Agreement bear
interest at a floating rate. Accordingly, an increase in interest rates will increase the amount of interest we must pay under our Credit
Agreement. Our interest rate risk may materially change in the future if we increase our borrowings under the Credit Agreement, or
amend our Credit Agreement or Prudential Loan Agreement, seek other sources of debt or equity capital or refinance our outstanding
debt. A significant increase in interest rates could also make it more difficult to find alternative financing on desirable terms. (For
additional information with respect to interest rate risk, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk,”
as filed with this Annual Report on Form 10-K.)
Future issuances of equity securities could dilute the interest of holders of our equity securities.
Our future growth will depend upon our ability to raise additional capital. If we were to raise additional capital through the
issuance of equity securities, we could dilute the interest of holders of our common stock. The interest of our common stockholders
could also be diluted by the issuance of shares of common stock pursuant to stock incentive plans. Accordingly, the Board of
Directors may authorize the issuance of equity securities that could dilute, or otherwise adversely affect, the interest of holders of our
common stock.
We may change our dividend policy and the dividends we pay may be subject to significant volatility.
The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount and composition of
any such future dividends, will be at the sole discretion of our Board of Directors and will depend on such factors as the Board of
Directors deems relevant. In addition, our Credit Agreement and our Prudential Loan Agreement prohibit the payments of dividends
during certain events of default. No assurance can be given that our financial performance in the future will permit our payment of any
dividends or that the amount of dividends we pay, if any, will not fluctuate significantly.
Under the Maryland General Corporation Law, our ability to pay dividends would be restricted if, after payment of the dividend,
(1) we would not be able to pay indebtedness as it becomes due in the usual course of business or (2) our total assets would be less
than the sum of our liabilities plus the amount that would be needed, if we were to be dissolved, to satisfy the rights of any
shareholders with liquidation preferences. There currently are no shareholders with liquidation preferences.
To qualify for taxation as a REIT, we must, among other requirements such as those related to the composition of our assets and
gross income, distribute annually to our stockholders at least 90% of our taxable income, including taxable income that is accrued by
us without a corresponding receipt of cash. We cannot provide any assurance that our cash flows will permit us to continue paying
cash dividends.
The Internal Revenue Service (“IRS”) has allowed the use of a procedure, as a result of which we could satisfy the REIT income
distribution requirement by making a distribution on our common stock comprised of (i) shares of our common stock having a value
of up to 80% of the total distribution and (ii) cash in the remaining amount of the total distribution, in lieu of paying the distribution
entirely in cash. In January 2015, we received a private letter ruling from the IRS that allows us to make a distribution on our common
stock comprised of (i) shares of our common stock having a value of up to 80% of the total distribution and (ii) cash in the remaining
amount of the total distribution, in lieu of paying the distribution entirely in cash. As of the date of this Annual Report on Form 10-K,
we are not planning to make a distribution using our common stock.
It is also possible that instead of distributing 100% of our taxable income on an annual basis, we may decide to retain a portion
of our taxable income and to pay taxes on such amounts as permitted by the IRS. In the event that we pay a portion of a dividend in
shares of our common stock, taxable U.S. shareholders would be required to pay tax on the entire amount of the dividend, including
the portion paid in shares of common stock, in which case such shareholders might have to pay the tax using cash from other sources.
If a U.S. shareholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount
included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale.
Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such dividend, including
in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our shareholders sell
shares of our common stock in order to pay taxes owed on dividends, such sales would put downward pressure on the market price of
our common stock.
As a result of the factors described herein and elsewhere in this Annual Report on Form 10-K and those that are described from
time to time in our other filings with the SEC, we may experience material fluctuations in future operating results on a quarterly or
annual basis, which could materially and adversely affect our business, financial condition, revenues, operating expenses, results of
operations, liquidity, ability to pay dividends or our stock price.
18
Changes in market conditions could adversely affect the market price of our publicly traded common stock.
As with other publicly traded securities, the market price of our publicly traded common stock depends on various market
conditions, which may change from time-to-time. Among the market conditions that may affect the market price of our publicly traded
common stock are the following:
• our financial condition and performance and that of our significant tenants,
• the market’s perception of our growth potential and potential future earnings,
•
the reputation of REITs generally and the reputation of REITs with portfolios similar to us,
• the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by
other real estate companies),
• an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to
the price paid for publicly traded securities,
• the extent of institutional investor interest in us, and
• general economic and financial market conditions.
In order to preserve our REIT status, our charter limits the number of shares a person may own, which may discourage a takeover
that could result in a premium price for our common stock or otherwise benefit our stockholders.
Our charter, with certain exceptions, authorizes our Board of Directors to take such actions as are necessary and desirable to
preserve our qualification as a REIT for federal income tax purposes. Unless exempted by our Board of Directors, no person may
actually or constructively own more than 5% (by value or number of shares, whichever is more restrictive) of the outstanding shares of
our common stock or the outstanding shares of any class or series of our preferred stock, which may inhibit large investors from
desiring to purchase our stock. This restriction may have the effect of delaying, deferring or preventing a change in control, including
an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a
premium price for our common stock or otherwise be in the best interest of our stockholders.
Maryland law may discourage a third-party from acquiring us.
We are subject to the provisions of the Maryland Business Combination Act (the “Business Combination Act”) which prohibits
transactions between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder for five years
after the most recent date on which the interested stockholder becomes an interested stockholder. Generally, pursuant to the Business
Combination Act, an “interested stockholder” is a person who, together with affiliates and associates, beneficially owns, directly or
indirectly, 10% or more of a Maryland corporation’s voting stock. These provisions could have the effect of delaying, preventing or
deterring a change in control of our Company or reducing the price that certain investors might be willing to pay in the future for
shares of our capital stock. Additionally, the Maryland Control Share Acquisition Act may deny voting rights to shares involved in an
acquisition of one-tenth or more of the voting stock of a Maryland corporation. In our charter and bylaws, we have elected not to have
the Maryland Control Share Acquisition Act apply to any acquisition by any person of shares of stock of our Company. However, in
the case of the control share acquisition statute, our Board of Directors may opt to make this statute applicable to us at any time by
amending our bylaws, and may do so on a retroactive basis. Finally, the “unsolicited takeovers” provisions of the Maryland General
Corporation Law permit our Board of Directors, without stockholder approval and regardless of what is currently provided in our
charter or bylaws, to implement certain provisions that may have the effect of inhibiting a third-party from making an acquisition
proposal for our Company or of delaying, deferring or preventing a change in control of our Company under circumstances that
otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then current market price
or that stockholders may otherwise believe is in their best interests.
Inflation may adversely affect our financial condition and results of operations.
Although inflation has not materially impacted our results of operations in the recent past, increased inflation could have a more
pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when
inflation is greater than increases in rent, as provided for in our leases, rent increases may not keep up with the rate of inflation.
Likewise, even though our triple-net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary
pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in
revenue, which may adversely affect our tenants’ ability to pay rent.
The loss of certain members of our management team could adversely affect our business.
19
Our future success and ability to implement our business and investment strategy depends, in part, on our ability to attract and
retain key management personnel and on the continued contributions of members of our senior management team, each of whom
would be difficult to replace. As a REIT, we employ only 32 employees and have a cost-effective management structure. Except for
the employment agreement with our President and Chief Executive Officer, David B. Driscoll, we do not have employment
agreements with any of our executives. In the event of the loss of key management personnel, or upon unexpected death, disability or
retirement, we may not be able to find replacements with comparable skill, ability and industry expertise which could have a material
adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
Amendments to the Accounting Standards Codification made by the Financial Accounting Standards Board (the “FASB”) or
changes in accounting standards issued by other standard-setting bodies may adversely affect our reported revenues, profitability
or financial position.
Our consolidated financial statements are subject to the application of Generally Accepted Accounting Principles (“GAAP”) in
accordance with the Accounting Standards Codification, which is periodically amended by the FASB. The application of GAAP is
also subject to varying interpretations over time. Accordingly, we are required to adopt amendments to the Accounting Standards
Codification or comply with revised interpretations that are issued from time-to-time by recognized authoritative bodies, including the
FASB and the SEC. Those changes could adversely affect our reported revenues, profitability or financial position.
Our assets may be subject to impairment charges.
We periodically evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the
existence of impairment indicators is based on GAAP, and includes a variety of factors such as market conditions, the accumulation of
asset retirement costs as a result of increases in estimated environmental liabilities, the status of significant leases, the financial
condition of major tenants and other assumptions and factors that could affect the cash flow from or fair value of our properties.
During the years ended December 31, 2014 and 2013, we incurred $21.5 million and $13.4 million, respectively, of non-cash
impairment charges. We may be required to take similar non-cash impairment charges, which could affect the implementation of our
current business strategy and have a material adverse effect on our financial condition and results of operations.
Terrorist attacks and other acts of violence or war may affect the market on which our common stock trades, the markets in which
we operate, our operations and our results of operations.
Terrorist attacks or other acts of violence or war could affect our business or the businesses of our tenants. The consequences of
armed conflicts are unpredictable, and we may not be able to foresee events that could have a material adverse effect on us. More
generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United
States and worldwide financial markets and economy. Terrorist attacks also could be a factor resulting in, or a continuation of, an
economic recession in the United States or abroad. Any of these occurrences could have a material adverse effect on our business,
financial condition, results of operations, liquidity, ability to pay dividends or stock price.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or security failure of that
technology could harm our business.
We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic
information and to manage or support a variety of our business processes, including financial transactions and maintenance of records,
which may include personal identifying information of tenants and lease data. We rely on commercially available systems, software,
tools and monitoring to provide security for processing, transmitting and storing confidential tenant information, such as individually
identifiable information relating to financial accounts. Although we have taken steps to protect the security of the data maintained in
our information systems, it is possible that our security measures will not be able to prevent the systems’ improper functioning, or the
improper disclosure of personally identifiable information such as in the event of cyber attacks. Security breaches, including physical
or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or
unauthorized disclosure of confidential information. Any failure to maintain proper function, security and availability of our
information systems could interrupt our operations, damage our reputation, subject us to liability claims or regulatory penalties and
could materially and adversely affect us.
Item 1B. Unresolved Staff Comments
None.
20
Item 2. Properties
Substantially all our properties are leased or sublet to petroleum distributors and retailers engaged in the sale of gasoline and
other motor fuel products, convenience store products and automotive repair services who are responsible for the operations conducted
at these properties and for the payment of taxes, maintenance, repair, insurance and other operating expenses relating to our properties.
In those instances where we determine that the best use for a property is no longer as a retail motor fuel outlet, we will seek an
alternative tenant or buyer for the property.
The following table summarizes the geographic distribution of our properties at December 31, 2014. The table also identifies the
number and location of properties we lease from third-parties. In addition, we lease approximately 8,900 square feet of office space at
Two Jericho Plaza, Jericho, New York, which is used for our corporate headquarters, which we believe will remain suitable and
adequate for such purposes for the immediate future.
New York
Massachusetts
Connecticut
New Jersey
Pennsylvania
New Hampshire
Virginia
Maryland
Texas
Rhode Island
Hawaii
California
Maine
Delaware
Ohio
Florida
North Carolina
Arkansas
Washington, D.C.
North Dakota
Total
OWNED
BY
GETTY
REALTY
239
110
78
63
57
46
45
41
19
10
10
9
9
4
4
4
3
3
2
1
757
LEASED
BY
GETTY
REALTY
54
15
14
12
2
3
3
2
—
—
—
—
—
1
—
—
—
—
—
—
106
TOTAL
PROPERTIES
BY STATE
PERCENT
OF TOTAL
PROPERTIES
293
125
92
75
59
49
48
43
19
10
10
9
9
5
4
4
3
3
2
1
863
34.0%
14.5
10.7
8.7
6.8
5.7
5.5
5.0
2.2
1.2
1.2
1.0
1.0
0.6
0.5
0.5
0.3
0.3
0.2
0.1
100.0%
The properties that we lease from third-parties have a remaining lease term, including renewal option terms, averaging over 11
years. The following table sets forth information regarding lease expirations, including renewal and extension option terms, for
properties that we lease from third-parties:
CALENDAR YEAR
2015
2016
2017
2018
2019
Subtotal
Thereafter
Total
NUMBER OF
LEASES
EXPIRING
PERCENT
OF TOTAL
LEASED
PROPERTIES
PERCENT
OF TOTAL
PROPERTIES
6
5
5
3
6
25
81
106
5.66%
4.72
4.72
2.83
5.66
23.59
76.41
0.69%
0.58
0.58
0.35
0.69
2.89
9.39
100.00%
12.28%
21
We have rights-of-first refusal to purchase or lease 68 of the properties we lease from third-parties. Approximately 70% of the
properties we lease from third-parties are subject to automatic renewal or extension options.
Revenues from rental properties included in continuing and discontinued operations for the year ended December 31, 2014 were
$99.1 million with respect to 905 average rental properties held during the year for an average revenue per rental property of
approximately $110,000. Revenues from rental properties included in continuing and discontinued operations for the year ended
December 31, 2013 were $100.9 million with respect to 1,028 average rental properties held during the year for an average revenue
per rental property of approximately $98,000.
Rental unit expirations and the annualized contractual rent as of December 31, 2014 are as follows (in thousands, except for the
number of rental units data):
CALENDAR YEAR
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Thereafter
Total
NUMBER OF
RENTAL
UNITS
EXPIRING (a)
41
17
31
19
57
36
39
7
13
9
587
856
ANNUALIZED
CONTRACTUAL
RENT(b)
PERCENTAGE
OF TOTAL
ANNUALIZED
RENT
$
$
1,877
1,388
1,800
2,229
5,863
4,291
3,222
350
1,545
1,059
57,368
80,992
2.3%
1.7
2.2
2.8
7.2
5.3
4.0
0.4
1.9
1.3
70.9
100.00%
(a) Rental units include properties subdivided into multiple premises with separate tenants. Rental units also include individual properties
comprising a single “premises” as such term is defined under a unitary master lease related to such properties. With respect to a unitary
master lease that includes properties that we lease from third-parties, the expiration dates for rental units refers to the dates that the
leases with the third-parties expire and upon which date our tenant must vacate those properties, not the expiration date of the unitary
master lease itself.
(b) Represents the monthly contractual rent due from tenants under existing leases as of December 31, 2014 multiplied by 12. This amount
excludes real estate tax reimbursements which are billed to the tenant when paid.
We believe that most of our owned and leased properties are adequately covered by casualty and liability insurance. In addition,
we generally require our tenants, which exclude our month-to-month licensees, to provide insurance for all properties they lease from
us, including casualty, liability, pollution legal liability, fire and extended coverage in amounts and on other terms satisfactory to us.
We are reviewing select opportunities for capital expenditures, redevelopment and alternative uses for transitional properties that were
previously subject to the Master Lease. We have no current plans to make material improvements to any of our properties other than
the properties previously subject to the Master Lease with Marketing. However, our tenants frequently make improvements to the
properties leased from us at their expense. In certain of our new leases, we have a remaining commitment to co-invest as much as
$14.2 million in capital improvements in our properties.
As of December 31, 2014, 148 of our fee owned properties are encumbered by mortgages. These mortgages provide security for
our $175.0 million senior secured revolving credit agreement (the “Credit Agreement”) with a group of commercial banks led by
JPMorgan Chase Bank, N.A. and our $100.0 million senior secured term loan agreement with the Prudential Insurance Company of
America (the “Prudential Loan Agreement”). The parties to the Credit Agreement and the Prudential Loan Agreement share the
security pursuant to the terms of an inter-creditor agreement.
Item 3. Legal Proceedings
We are engaged in a number of legal proceedings, many of which we consider to be routine and incidental to our business.
Many of these legal proceedings involve claims relating to alleged discharges of petroleum into the environment at current and former
gas stations. We routinely assess our liabilities and contingencies in connection with these matters based upon the latest available
information. The following is a description of material legal proceedings, including those involving private parties and governmental
authorities under federal, state and local laws regulating the discharge of materials into the environment. We are vigorously defending
all of the legal proceedings involving us, including each of the legal proceedings matters listed below. As of December 31, 2014 and
2013, we had accrued $11.0 million and $11.4 million, respectively, for certain of these matters which accruals we believe were
appropriate based on information then currently available. It is possible that losses related to these proceedings could result in a loss in
excess of the amount accrued as of December 31, 2014 and such additional losses could cause a material adverse effect on our
business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
22
In 1991, the State of New York commenced an action in the Supreme Court, Albany County, against Kingston Oil Supply Corp.
(our former heating oil subsidiary), Charles Baccaro and Amos Post, Inc. The action seeks recovery for reimbursement of
investigation and remediating costs incurred by the New York Environmental Protection and Spill Compensation Fund, together with
interest and statutory penalties under the New York Navigation Law. We answered the complaint on behalf of Kingston Oil Supply
Corp. and Amos Post Inc. Thereafter, from approximately 1993 to November 2011, the case remained dormant except for a brief
period in 2002 when the State of New York indicated an intention to prosecute the lawsuit. In November 2011, the State of New York
recommenced efforts to pursue its claims for reimbursement of costs, interest and statutory penalties under the Navigation Law. In
2013, we reevaluated this case and determined that Kingston Oil Supply Corp. (ownership of which was transferred in 2009 by
Marketing to Lukoil North America LLC), should be defending the action on behalf of itself and its Amos Post division, and we
therefore made a demand to Kingston Oil Supply Corp. that it be responsible for the action. Although Kingston Oil Supply Corp.
consented to the substitution of its law firm in place of our law firm as the attorneys for Kingston Oil Supply Corp. (and in January
2014 the substitution was confirmed by order of the Court), Kingston Oil Supply Corp. nevertheless disputes our position as to its
defense responsibilities and maintains that we should be providing full defense and indemnity to Kingston Oil Supply Corp. for this
matter.
In September 2004, the State of New York commenced an action against us, United Gas Corp., Costa Gas Station, Inc., The
Ingraham Bedell Corporation, Exxon Mobil Corporation, Shell Oil Company, Shell Oil Products Company, Motiva Enterprises, LLC,
and related parties, in New York Supreme Court in Albany County seeking recovery for reimbursement of investigation and
remediation costs claimed to have been incurred by the New York Environmental Protection and Spill Compensation Fund relating to
contamination it alleges emanated from various retail motor fuel properties located in the same vicinity in Uniondale, N.Y., including
a site formerly owned by us and at which a petroleum release and cleanup occurred. The complaint also seeks future costs for
remediation, as well as interest and penalties. We have served an answer to the complaint denying responsibility. Discovery in this
case is ongoing.
In September 2008, we received a directive and notice of violation from the New Jersey Department of Environmental
Protection (“NJDEP”) calling for a remedial investigation and cleanup, to be conducted by us and Gary and Barbara Galliker (the
“Gallikers”), individually and trading as Millstone Auto Service (“Millstone”), Auto Tech and other named parties, of petroleum-
related contamination found at a retail motor fuel property located in Millstone Township, New Jersey. We did not own or lease this
property, but in 1985 we did acquire ownership of certain USTs located at the property. In 1986 we tried to remove these USTs and
were refused access by the Gallikers to do so. We believe the USTs were transferred to the Gallikers by operation of law not later than
1987 and responded to the NJDEP’s directive and notice by denying liability. In November 2009, the NJDEP issued an Administrative
Order and Notice of Civil Administrative Penalty Assessment (the “Order and Assessment”) to us, Marketing and the Gallikers,
individually and trading as Millstone. We filed a request for a hearing to contest the allegations of the Order and Assessment, but the
date of the hearing has not yet been scheduled. In 2014, the NJDEP issued a notice of violation directed to the Gallikers and Millstone
to register and remove the contents of the USTs at the property. Thereafter, the Gallikers made written demand of us to investigate
and remediate all contamination at the property. We have rejected the Gallikers’ demand on the basis that we are not responsible for
the alleged contamination.
MTBE Litigation – State of New Jersey
We are a party to a case involving a large number of gas station sites throughout the State of New Jersey brought by various
governmental agencies of the State of New Jersey, including the NJDEP. This New Jersey case (the “New Jersey MDL Proceedings”)
are among the more than one hundred cases that were transferred from various state and federal courts throughout the country and
consolidated in the United States District Court for the Southern District of New York for coordinated Multi-District Litigation
(“MDL”) proceedings. The New Jersey MDL Proceedings allege various theories of liability due to contamination of groundwater
with methyl tertiary butyl ether (a fuel derived from methanol, commonly referred to as “MTBE”) as the basis for claims seeking
compensatory and punitive damages. New Jersey is seeking reimbursement of significant clean-up and remediation costs arising out of
the alleged release of MTBE containing gasoline in the State of New Jersey and is asserting various natural resource damage claims as
well as liability against the owners and operators of gas station properties from which the releases occurred. The New Jersey MDL
Proceedings name us as a defendant along with approximately fifty petroleum refiners, manufacturers, distributors and retailers of
MTBE, or gasoline containing MTBE, several of which have already settled, including Atlantic Richfield Company, BP America,
Inc., BP Amoco Chemical Company, BP Products North America, Inc., Chevron Corporation, Chevron U.S.A., Inc., Citgo Petroleum
Corporation, ConocoPhillips Company, Cumberland Farms, Inc., Duke Energy Merchants, LLC, ExxonMobil Corporation,
ExxonMobil Oil Corporation, Getty Petroleum Marketing, Inc., Gulf Oil Limited Partnership, Hess Corporation, Lyondell Chemical
Company, Lyondell-Citgo Refining, LP, Lukoil Americas Corporation, Marathon Oil Corporation, Mobil Corporation, Motiva
Enterprises, LLC, Shell Oil Company, Shell Oil Products Company LLC, Sunoco, Inc., Unocal Corporation, Valero Energy
Corporation, and Valero Refining & Marketing Company. Although the ultimate outcome of the New Jersey MDL Proceedings
cannot be ascertained at this time, we believe it is probable that this litigation will be resolved in a manner that is unfavorable to us.
Preliminary settlement communications from the plaintiffs indicated that they were seeking $88.0 million collectively from us,
Marketing and Lukoil. Subsequent communications from the plaintiffs indicate that they are seeking approximately $24.0 million
from us. We have countered with a settlement offer on behalf of the Company only, which was rejected. We do not believe that
23
plaintiffs’ settlement proposal is realistic given the legal theories and facts applicable to our activities and gas stations, and affirmative
defenses available to us, all of which we believe have not been sufficiently developed in the proceedings. We continue to engage in a
settlement negotiation and a dialogue to educate the plaintiff’s counsel on the unique nature of the Company and our business as
compared to other defendants in the litigation. In addition, we are pursuing claims for reimbursement of monies expended in the
defense and settlement of certain MTBE cases under pollution insurance policies previously obtained by Marketing and under which
we believe we are entitled to coverage, however, we have not yet confirmed whether and to what extent such coverage may actually
be available. We are unable to estimate the range of loss in excess of the amount accrued with certainty for the New Jersey MDL
Proceedings as we do not believe that plaintiffs’ settlement proposal is realistic and there remains uncertainty as to the allegations in
this case as they relate to us, our defenses to the claims, our rights to indemnification or contribution from other parties and the
aggregate possible amount of damages for which we may be held liable. It is possible that losses related to the New Jersey MDL
Proceedings in excess of the amounts accrued as of December 31, 2014 could cause a material adverse effect on our business,
financial condition, results of operations, liquidity, ability to pay dividends or stock price.
MTBE Litigation – State of Pennsylvania
On July 7, 2014, Getty Properties Corp. was served with a complaint filed by the Commonwealth of Pennsylvania (the “State”)
in the Court of Common Pleas, Philadelphia County relating to alleged statewide MTBE contamination in Pennsylvania (the
“Complaint”). The named plaintiffs are the State, by and through Pennsylvania Attorney General Kathleen G. Kane (as Trustee of the
waters of the State), the Pennsylvania Insurance Department (which governs and administers the Underground Storage Tank
Indemnification Fund), the Pennsylvania Department of Environmental Protection (vested with the authority to protect the
environment), and the Pennsylvania Underground Storage Tank Indemnification Fund.
The Complaint names us and more than 50 other defendants, including but not limited to Exxon Mobil, various BP entities,
Chevron, Citgo, Gulf, Lukoil Americas, Getty Petroleum Marketing Inc., Marathon, Hess, Shell Oil, Texaco, Valero, as well as other
smaller petroleum refiners, manufacturers, distributors and retailers of MTBE or gasoline containing MTBE who are alleged to have
distributed, stored and sold MTBE gasoline in Pennsylvania.
The Complaint seeks compensation for natural resource damages and for injuries sustained as a result of “defendants’ unfair and
deceptive trade practices and act in the marketing of MTBE and gasoline containing MTBE.” The plaintiffs also seek to recover costs
paid or incurred by the State to detect, treat and remediate MTBE from public and private water wells and groundwater. The plaintiffs
assert causes of action against all defendants based on multiple theories, including strict liability – defective design; strict liability –
failure to warn; public nuisance; negligence; trespass; and violation of consumer protection law.
The case was filed in the Court of Common Pleas, Philadelphia County, but was transferred to the United States District Court
for the Southern District of New York so that it may be managed as part of the ongoing MTBE Multi-District Litigation. Plaintiffs
have recently filed an amended Complaint asserting additional causes of action against the defendants. We have joined with other
defendants in filing motions to dismiss the claims against us, which remain pending with the Court.
We intend to defend vigorously against the Complaint. Our ultimate liability, if any, in this proceeding is uncertain and subject
to numerous contingencies which cannot be predicted and the outcome of which are not yet known.
Matters related to our former Newark, New Jersey Terminal and the Lower Passaic River
In September 2003, we received a directive (the “Directive”) issued by the NJDEP under the New Jersey Spill Compensation
and Control Act. The Directive indicated that we are one of approximately 66 potentially responsible parties for alleged natural
resource damages (“NRD” or “NRDs”) resulting from the discharges of hazardous substances along the lower Passaic River (the
“Lower Passaic River”). Other named recipients of the Directive are 360 North Pastoria Environmental Corporation, Amerada Hess
Corporation, American Modern Metals Corporation, Apollo Development and Land Corporation, Ashland Inc., AT&T Corporation,
Atlantic Richfield Assessment Company, Bayer Corporation, Benjamin Moore & Company, Bristol Myers-Squibb, Chemical Land
Holdings, Inc., Chevron Texaco Corporation, Diamond Alkali Company, Diamond Shamrock Chemicals Company, Diamond
Shamrock Corporation, Dilorenzo Properties Company, Dilorenzo Properties, L.P., Drum Service of Newark, Inc., E.I. Dupont De
Nemours and Company, Eastman Kodak Company, Elf Sanofi, S.A., Fine Organics Corporation, Franklin-Burlington Plastics, Inc.,
Franklin Plastics Corporation, Freedom Chemical Company, H.D. Acquisition Corporation, Hexcel Corporation, Hilton Davis
Chemical Company, Kearny Industrial Associates, L.P., Lucent Technologies, Inc., Marshall Clark Manufacturing Corporation,
Maxus Energy Corporation, Monsanto Company, Motor Carrier Services Corporation, Nappwood Land Corporation, Noveon Hilton
Davis Inc., Occidental Chemical Corporation, Occidental Electro-Chemicals Corporation, Occidental Petroleum Corporation, Oxy-
Diamond Alkali Corporation, Pitt-Consol Chemical Company, Plastics Manufacturing Corporation, PMC Global Inc., Propane Power
Corporation, Public Service Electric & Gas Company, Public Service Enterprise Group, Inc., Purdue Pharma Technologies, Inc., RTC
Properties, Inc., S&A Realty Corporation, Safety-Kleen Envirosystems Company, Sanofi S.A., SDI Divestiture Corporation, Sherwin
Williams Company, SmithKline Beecham Corporation, Spartech Corporation, Stanley Works Corporation, Sterling Winthrop, Inc.,
STWB Inc., Texaco Inc., Texaco Refining and Marketing Inc., Thomasset Colors, Inc., Tierra Solution, Incorporated, Tierra
Solutions, Inc., and Wilson Five Corporation.
24
The Directive provided, among other things, that the recipients thereof must conduct an assessment of the natural resources that
have been injured by the discharges into the Lower Passaic River and must implement interim compensatory restoration for the
injured natural resources. The NJDEP alleges that our liability arises from alleged discharges originating from our former Newark,
New Jersey Terminal site (which was sold in October 2013). We responded to the Directive by asserting that we were not liable. There
has been no material activity and/or communications by the NJDEP with respect to the Directive since early after its issuance.
In May 2007, the United States Environmental Protection Agency (“EPA”) entered into an Administrative Settlement
Agreement and Order on Consent (“AOC”) with over 70 parties, most of which are also members of a Cooperating Parties Group
(“CPG”) who have collectively agreed to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for a 17 mile stretch of the
Lower Passaic River in New Jersey. We are a party to the AOC and are a member of the CPG. The RI/FS is intended to address the
investigation and evaluation of alternative remedial actions with respect to alleged damages to the Lower Passaic River, which is
currently scheduled to be completed in 2015. Subsequently, certain members of the CPG entered into an Administrative Settlement
Agreement and Order on Consent (“10.9 AOC”) effective June 18, 2012 to perform certain remediation activities, including removal
and capping of sediments at the river mile 10.9 area and certain testing. The EPA also issued a Unilateral Order to Occidental
Chemical Corporation (“Occidental”) directing Occidental to participate and contribute to the cost of the river mile 10.9 work. On
April 11, 2014, the EPA issued a Focused Feasibility Study (“FFS”) with proposed remedial alternatives to address cleanup of the
lower 8-mile stretch of the Lower Passaic River. While the EPA’s preferred approach would involve bank-to-bank dredging and
installing an engineered cap, the FFS is subject to public comments and/or objections that must be considered by the EPA before a
final remedial approach is selected and thus many uncertainties remain with respect to the final proposed remedy for the lower 8-miles
of the Lower Passaic River. The FFS, RI/FS, AOC and 10.9 AOC do not resolve liability issues for remedial work or the restoration of
or compensation for alleged NRDs to the Lower Passaic River, which are not known at this time. Our ultimate liability, if any, in the
pending and possible future proceedings pertaining to the Lower Passaic River is uncertain and subject to numerous contingencies
which cannot be predicted and the outcome of which are not yet known.
We have made a demand upon Chevron/Texaco for indemnity under certain agreements between us and Chevron/Texaco that
allocate environmental liabilities for the Newark Terminal site between the parties. In response, Chevron/Texaco has asserted that the
proceedings and claims are still not yet developed enough to determine the extent to which indemnities apply. We have engaged in
discussions with Chevron/Texaco regarding our demands for indemnification. To facilitate said discussions, in October 2009, the
parties entered into a Tolling/Standstill Agreement which tolls all claims by and among Chevron/Texaco and us that relate to the
various Lower Passaic River matters from May 8, 2007, until either party terminates such Tolling/Standstill Agreement.
Item 4. Mine Safety Disclosures
None.
25
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Capital Stock
Our common stock is traded on the New York Stock Exchange (symbol: “GTY”). There were approximately 10,330 beneficial
holders of our common stock as of March 13, 2015, of which approximately 1,070 were holders of record. The price range of our
common stock and cash dividends declared with respect to each share of common stock during the years ended December 31, 2014
and 2013 was as follows:
QUARTER ENDED
March 31, 2013
June 30, 2013
September 30, 2013
December 31, 2013
March 31, 2014
June 30, 2014
September 30, 2014
December 31, 2014
PRICE RANGE
CASH
DIVIDENDS
HIGH
LOW
PER SHARE
21.99
23.00
22.09
19.96
20.00
20.39
19.43
18.99
17.97
19.50
17.99
17.73
18.00
18.44
17.00
17.00
.2000
.2000
.2000
.2500(a)
.2000
.2000
.2000
.3600(b)
(a)
(b)
Includes a $0.05 per share special dividend declared in the quarter ended December 31, 2013.
Includes a $0.14 per share special dividend declared in the quarter ended December 31, 2014.
For a discussion of potential limitations on our ability to pay future dividends see “Item 1A. Risk Factors – We may change our
dividend policy and the dividends we pay may be subject to significant volatility,” and “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”.
Issuer Purchases of Equity Securities
None.
Sales of Unregistered Securities
None.
26
Stock Performance Graph
Comparison of Five-Year Cumulative Total Return*
Getty Realty Corp.
Standard & Poors 500
Peer Group
$140.09
$137.37
$129.10
$115.06
$117.49
$67.44
$221.34
$205.13
$180.43
$170.33
$160.03
$136.29
$89.15
$93.82
$97.98
$250.00
$200.00
$150.00
$100.00
$100.00
$50.00
$0.00
12/31/2009
12/31/2010
12/31/2011
12/31/2012
12/31/2013
12/31/2014
Source: Value Line Publishing LLC
Getty Realty Corp.
Standard & Poors 500
Peer Group
12/31/2009
12/31/2010
12/31/2011
12/31/2012
12/31/2013
12/31/2014
100.00
100.00
100.00
140.09
115.06
129.10
67.44
117.49
137.37
89.15
136.29
160.03
93.82
180.43
170.33
97.98
205.13
221.34
Assumes $100 invested at the close of the last day of trading on the New York Stock Exchange on December 31, 2009 in Getty
Realty Corp. common stock, Standard & Poors 500 and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
We have chosen as our Peer Group the following companies: National Retail Properties, Entertainment Properties Trust, Realty
Income Corp. and Hospitality Properties Trust. We have chosen these companies as our Peer Group because a substantial segment of
each of their businesses is owning and leasing commercial properties. We cannot assure you that our stock performance will continue
in the future with the same or similar trends depicted in the graph above. We do not make or endorse any predictions as to future stock
performance.
This performance graph and related information shall not be deemed filed for the purposes of Section 18 of the Exchange Act or
otherwise subject to the liability of that Section and shall not be deemed to be incorporated by reference into any filing that we make
under the Securities Act or the Exchange Act.
27
Item 6. Selected Financial Data
GETTY REALTY CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(in thousands, except per share amounts and number of properties)
2014(a)
2013(b)
2012
2011(c)
2010
FOR THE YEARS ENDED DECEMBER 31,
OPERATING DATA:
Total revenues
Earnings from continuing operations
Earnings (loss) from discontinued operations
Net earnings
Diluted earnings per common share:
Earnings from continuing operations
Net earnings
Diluted weighted-average common shares outstanding
Cash dividends declared per share
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS
FROM OPERATIONS (h):
Net earnings
Depreciation and amortization of real estate assets
Gains on dispositions of real estate
Impairment charges
Funds from operations
Revenue recognition adjustments
Allowance for deferred rental revenue/mortgage receivable
Acquisition costs
Non-cash changes in environmental estimates
Accretion expense
Adjusted funds from operations
BALANCE SHEET DATA (AT END OF YEAR):
Real estate before accumulated depreciation and amortization
Total assets
Debt
Shareholders’ equity
NUMBER OF PROPERTIES:
Owned
Leased
Total properties
$ 99,867
20,529
2,889
$ 102,792(d)
27,416(e)
42,595
$ 96,086
$ 94,238
23,418
0.60
0.69
33,409
0.960
23,418
10,549
(10,218)
21,534
45,283
(5,372)
2,331
104
(2,756)
3,046
42,636
70,011
0.81
2.08
33,397
0.850
70,011
9,927
(45,505)
13,425
47,858
(8,379)
4,775
480
(2,956)
3,214
2,331
13,775(f)
(1,328)
12,447
0.41
0.37
33,395
0.375
12,447
13,700
(6,866)
13,942
33,223
(4,433)
—
—
(4,215)
3,174
4,775
9,252(g)
3,204
12,456
0.27
0.37
33,172
1.46
12,456
10,336
(968)
20,226
42,050
(1,163)
19,758
2,034
—
775
63,454
44,992
27,749
$ 595,959
687,501
125,000
407,024
$ 570,275
682,402
158,000
415,091
$ 562,316
640,581
172,320
372,749
$ 615,854
635,089
170,510
372,169
757
106
863
840
125
965
946
135
1,081
996
153
1,149
$ 69,996
33,645
18,055
51,700
1.21
1.84
27,953
1.91
51,700
9,738
(1,705)
—
59,733
(1,487)
—
—
—
884
59,130
$ 504,587
423,178
64,890
314,935
907
145
1,052
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Includes the effect of a $2.2 million non-cash allowance for deferred rent receivable and the effect of a $21.5 million impairment charge.
Includes (from the date of the acquisition) the effect of the $72.5 million acquisition of 16 Mobil-branded gasoline station and convenience store
properties and 20 Exxon- and Shell-branded gasoline station and convenience store properties in two sale/leaseback transactions with subsidiaries
of Capitol Petroleum Group, LLC which were acquired on May 9, 2013.
Includes (from the respective dates of the acquisition) the effect of the $111.6 million acquisition of 59 Mobil-branded gasoline station and
convenience store properties in a sale/leaseback and loan transaction with CPD NY Energy Corp. which were acquired on January 13, 2011 and the
effect of the $87.0 million acquisition of 66 Shell-branded gasoline station and convenience store properties in a sale/leaseback transaction with
Nouria Energy Ventures I, LLC which were acquired on March 31, 2011.
Includes $3.1 million of other revenue recorded in 2013 for the partial recovery of damages stemming from Marketing’s default of its obligations
under the Master Lease, which was received as a result of the Lukoil Settlement.
Includes the effect of a $15.2 million net credit for bad debt expense primarily related to receiving funds from the Marketing Estate and the
Litigation Funding Agreement (both defined below), the effect of a $9.6 million increase in provisions for environmental litigation losses, the effect
of a $4.3 million non-cash allowance for deferred rent receivable and the effect of a $3.6 million impairment charge.
Includes the effect of a $12.0 million accounts receivable reserve and the effect of a $5.1 million impairment charge, which are primarily related to
properties previously leased to Marketing (for additional information regarding Marketing and the Master Lease, see “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations – General – Marketing and the Master Lease”.)
Includes the effect of a $16.7 million non-cash allowance for deferred rent receivable, the effect of a $6.6 million accounts receivable reserve and
the effect of a $12.7 million impairment charge, which are primarily related to properties previously leased to Marketing (For additional
information regarding Marketing and the Master Lease, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – General – Marketing and the Master Lease”.)
(h) See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – General – Supplemental Non-GAAP
Measures”).
(i)
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the “Cautionary Note Regarding Forward-Looking
Statements”; the sections in Part I entitled “Item 1A. Risk Factors”; the selected financial data in in Part II entitled “Item 6. Selected
Financial Data”; and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary
Data”.
GENERAL
Real Estate Investment Trust
We are a real estate investment trust (“REIT”) specializing in the ownership, leasing and financing of retail motor fuel and
convenience store properties. As of December 31, 2014, we owned 757 properties and leased 106 properties from third-party
landlords. As a REIT, we are not subject to federal corporate income tax on the taxable income we distribute to our shareholders. In
order to continue to qualify for taxation as a REIT, we are required, among other things, to distribute at least 90% of our ordinary
taxable income to our shareholders each year.
Our Retail Petroleum Marketing Assets
Substantially all of our properties are leased on a triple-net basis primarily to petroleum distributors and, to a lesser extent,
individual operators. Generally our tenants supply fuel and either operate our properties directly or sublet our properties to operators
who operate their gas stations, convenience stores, automotive repair service facilities or other businesses at our properties. Our triple-
net tenants are contractually responsible for the payment of all taxes, maintenance, repairs, insurance and other operating expenses
relating to our properties, and are also responsible for environmental contamination occurring during the terms of their leases and in
certain cases also for environmental contamination that existed before their leases commenced. Substantially all of our tenants’
financial results depend on the sale of refined petroleum products and rental income from their subtenants. As a result, our tenants’
financial results are highly dependent on the performance of the petroleum marketing industry, which is highly competitive and
subject to volatility. During the terms of our leases, we monitor the credit quality of our triple-net tenants by reviewing their published
credit rating, if available, reviewing publicly available financial statements, or financial or other operating statements which are
delivered to us pursuant to applicable lease agreements, monitoring news reports regarding our tenants and their respective businesses,
and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases. (For additional
information regarding our real estate business, our properties and environmental matters, see “Item 1. Business — Company
Operations” and “Item 2. Properties” and “Environmental Matters” below.)
Investment Strategy and Activity
As part of our overall growth strategy, we regularly review acquisition and financing opportunities to invest in additional retail
motor fuel and convenience store properties, and we expect to continue to pursue investments that we believe will benefit our financial
performance. Our investment strategy seeks to generate current income and benefit from long-term appreciation in the underlying
value of our real estate. To achieve that goal we seek to invest in high quality individual properties and real estate portfolios that will
promote geographic diversity. A key element of our investment strategy is to invest in properties in strong primary markets that serve
high density population centers. In addition to traditional sale/leaseback and other real estate acquisitions, our investments may also
include purchase money mortgages or loans relating to our leasehold portfolios and recapture and redevelopment of existing properties
for alternative uses. We cannot provide any assurance that we will be successful making additional investments, that investments will
be available which meet our investment criteria or that our current sources of liquidity will be sufficient to fund such investments.
Core Net Lease Portfolio
As of December 31, 2014, we leased 696 properties to tenants under long-term triple-net leases. Our core net lease portfolio
consists of 609 properties leased to approximately 20 regional and national fuel distributor tenants under unitary or master triple-net
leases and 87 properties leased as single unit triple-net leases. These leases generally provide for initial terms of 15 years with options
for successive renewal terms of up to 20 years and periodic rent escalations. Several of our leases covering properties previously
leased to Getty Petroleum Marketing, Inc. (“Marketing”) also provide for additional rent based on the aggregate volume of fuel sold.
Certain leases require our tenants to invest capital in our properties.
Transitional Properties
We periodically evaluate our portfolio of properties and, as of December 31, 2014, we had two groups of properties, which we
consider transitional: (i) 46 properties, which are either subject to month-to-month license agreements, or which are vacant; and (ii)
121 properties, which are currently subject to two unitary triple-net leases that are in the process of being restructured.
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As of December 31, 2014, we have reduced the number of properties subject to month-to-month license agreements from 90 to
26. Our month-to-month license agreements allow the licensees (substantially all of whom were former tenants of Marketing) to
occupy and use these properties as gas stations, convenience stores, automotive repair service facilities or other businesses. These
month-to-month license agreements are intended as interim occupancy arrangements until these properties are sold or leased on a
triple-net basis. Under our month-to-month license agreements we are responsible for the payment of operating expenses such as
maintenance, repairs and real estate taxes (“Property Expenditures”), certain environmental compliance costs and costs associated
with any environmental remediation. In the aggregate, Property Expenditures and environmental costs exceed the licensing revenues
we receive for transitional properties occupied under month-to-month license agreements. We will continue to be responsible for such
Property Expenditures and environmental costs until these properties are sold or leased on a triple-net basis, and under certain leases
and agreements thereafter. The incurrence of these various expenses may materially negatively impact our cash flow and ability to pay
dividends. As of December 31, 2014, we have reduced the number of vacant transitional properties from 36 to 20. We are responsible
for the payment of all Property Expenditures, environmental compliance costs and costs associated with environmental remediation
until these properties are sold, or leased on a triple-net basis.
As of December 31, 2014, the 60 remaining properties subject to a unitary triple-net lease with NECG Holdings Corp.
(“NECG”) continue to be transitional. Certain of the properties included in our unitary lease with NECG (the “NECG Lease”) were
subject to eviction proceedings against former subtenants of Marketing who continued to occupy these properties after the termination
of the Master Lease. As of December 31, 2014, we have removed 24 of the original 84 properties from the NECG Lease and agreed to
defer portions of rent due to us under the NECG Lease. We continue to be engaged in discussions with NECG about potential
modifications to the NECG Lease, which will likely include the removal of additional properties from the NECG Lease. Our
discussions with NECG are ongoing and we cannot predict the ultimate outcome of these discussions and their impact on the final size
of the portfolio or future rental income associated with the NECG Lease.
In addition, as of December 31, 2014, we categorized as transitional 61 properties located in Southern New Jersey and Eastern
Pennsylvania, which are subject to a unitary triple-net lease (the “Ramoco Lease”) with Hanuman Business, Inc. (d/b/a “Ramoco”).
We have entered into a lease modification agreement with Ramoco whereby we have agreed to defer portions of rent due to us under
the Ramoco Lease. We are engaged in ongoing discussions with Ramoco about additional modifications to the Ramoco Lease, which
we anticipate will include the removal of certain properties from the Ramoco Lease. We cannot predict the ultimate outcome of these
discussions and their impact on the final size of the portfolio and future rental income associated with the Ramoco Lease.
During the year ended December 31, 2014, we sold 93 properties (89 transitional properties and four core properties) for $31.2
million in the aggregate. Subsequent to December 31, 2014, we have sold 5 additional transitional properties for $1.6 million in the
aggregate. We continue to reposition our transitional properties and expect that we will either sell, enter into new leases or modify
existing leases on these transitional properties over time. Although we are currently working on repositioning these transitional
properties, the timing of pending or anticipated transactions may be affected by factors beyond our control and we cannot predict
when or on what terms sales or leases will ultimately be consummated.
Our estimates, judgments, assumptions and beliefs regarding our properties affect the amounts reported in our consolidated
financial statements and are subject to change. Actual results could differ from these estimates, judgments and assumptions and such
differences could be material. If we are unable to re-let or sell our properties upon terms that are favorable to us, if the amounts
realized from the disposition of assets held for sale vary significantly from our estimates of fair value, or if we change our estimates,
judgments, assumptions and beliefs, our business, financial condition, revenues, operating expenses, results of operations, liquidity,
ability to pay dividends and stock price may be materially adversely affected or adversely affected to a greater extent than we have
experienced.
Marketing and the Master Lease
Approximately 490 of the properties we own or lease as of December 31, 2014 were previously leased to Marketing pursuant to
the Master Lease. In December 2011, Marketing filed for Chapter 11 bankruptcy protection in the Bankruptcy Court. The Master
Lease was terminated effective April 30, 2012, and in July 2012, the Bankruptcy Court approved Marketing’s Plan of Liquidation and
appointed the Liquidating Trustee to oversee liquidation of the Marketing Estate. We incurred significant costs associated with
Marketing’s bankruptcy, including legal expenses, of which $0.8 million, $3.7 million and $2.6 million, respectively, are included in
general and administrative expenses for the years ended December 31, 2014, 2013 and 2012.
In December 2011, the Marketing Estate filed a lawsuit (the “Lukoil Complaint”) against Marketing’s former parent, Lukoil
Americas Corporation, and certain of its affiliates (collectively, “Lukoil”). In October 2012, we entered into an agreement with the
Marketing Estate to make loans and otherwise fund up to an aggregate amount of $6.7 million to prosecute the Lukoil Complaint and
for certain other expenses incurred in connection with the wind-down of the Marketing Estate (the “Litigation Funding Agreement”).
We ultimately advanced $6.5 million in the aggregate to the Marketing Estate pursuant to the Litigation Funding Agreement. The
Litigation Funding Agreement also provided that we were entitled to be reimbursed for up to $1.3 million of our legal fees incurred in
connection with the Litigation Funding Agreement.
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On July 29, 2013, the Bankruptcy Court approved a settlement of the claims made in the Lukoil Complaint (the “Lukoil
Settlement”). The terms of the Lukoil Settlement included a collective payment to the Marketing Estate of $93.0 million. In August
2013, the settlement payment was received by the Marketing Estate of which $25.1 million was distributed to us pursuant to the
Litigation Funding Agreement and $6.6 million was distributed to us in full satisfaction of our post-petition priority claims related to
the Master Lease.
As part of Marketing’s bankruptcy proceeding, we maintained significant pre-petition and post-petition unsecured claims
against Marketing. On March 3, 2015, we entered into a settlement agreement (the “Settlement Agreement”) with the Liquidating
Trustee of the Marketing Estate, which resolved the claims we asserted in Marketing’s bankruptcy case in the Bankruptcy Court. The
Settlement Agreement is subject to the approval of the Bankruptcy Court at a hearing that is scheduled to be held on April 7, 2015.
Pursuant to the terms of the Settlement Agreement, we will receive an interim distribution from the Marketing Estate of approximately
$6.0 million (the “Interim Distribution”) within 15 days of the approval of the Settlement Agreement by the Bankruptcy Court. In
addition, if the Settlement Agreement is approved by the Bankruptcy Court, we expect to receive additional distributions from the
Marketing Estate during 2015 on account of our claims. The Interim Distribution and any subsequent distributions received by us from
the Marketing Estate depend on our percentage of the total amount of allowed general unsecured claims against Marketing. The
Liquidating Trustee and the Bankruptcy Court have not yet completed the process of determining the total amount of allowed general
unsecured claims against Marketing. We anticipate that the sum of all additional distributions will not materially exceed the amount of
the Interim Distribution. We cannot provide any assurance as to whether the Settlement Agreement will be approved, or, if approved,
the total amount of the distributions we will receive from the Marketing Estate on account of our claims or timing of such future
distributions.
Asset Impairment
We perform an impairment analysis for the carrying amount of our properties in accordance with GAAP when indicators of
impairment exist. We reduced the carrying amount to fair value, and recorded in continuing and discontinued operations, non-cash
impairment charges aggregating $21.5 million and $13.4 million for the years ended December 31, 2014 and 2013, respectively,
where the carrying amount of the property exceeds the estimated undiscounted cash flows expected to be received during the assumed
holding period which includes the estimated sales value expected to be received at disposition. The non-cash impairment charges were
attributable to reductions in estimated undiscounted cash flows expected to be received during the assumed holding period, reductions
in our estimates of value for properties held for sale and the accumulation of asset retirement costs as a result of increases in estimated
environmental liabilities which increased the carrying value of certain properties in excess of their fair value. The evaluation of and
estimates of anticipated cash flows used to conduct our impairment analysis are highly subjective and actual results could vary
significantly from our estimates.
Supplemental Non-GAAP Measures
In addition to measurements defined by GAAP, we also focus on funds from operations available to common shareholders
(“FFO”) and adjusted funds from operations available to common shareholders (“AFFO”) to measure our performance. FFO is
generally considered to be an appropriate supplemental non-GAAP measure of the performance of REITs. FFO is defined by the
National Association of Real Estate Investment Trusts as net earnings before depreciation and amortization of real estate assets, gains
or losses on dispositions of real estate, non-cash impairment charges, extraordinary items and cumulative effect of accounting change.
Other REITs may use definitions of FFO and/or AFFO that are different from ours and, accordingly, may not be comparable.
FFO and AFFO are not in accordance with, or a substitute for measures prepared in accordance with GAAP. In addition, FFO
and AFFO are not based on any comprehensive set of accounting rules or principles. Neither FFO nor AFFO represent cash generated
from operating activities calculated in accordance with GAAP and therefore these measures should not be considered an alternative
for GAAP net earnings or as a measure of liquidity. These measures should only be used to evaluate our performance in conjunction
with corresponding GAAP measures.
We believe that FFO and AFFO are helpful to investors in measuring our performance because both FFO and AFFO exclude
various items included in GAAP net earnings that do not relate to, or are not indicative of, our fundamental operating performance.
Our assessment of our operations is focused on long-term sustainability and not on non-cash items, which may cause short-term
fluctuations in net income but have no impact on cash flows. FFO excludes various items such as gains or losses on property
dispositions, depreciation and amortization of real estate assets and non-cash impairment charges. In our case, however, GAAP net
earnings and FFO typically include the impact of Revenue Recognition Adjustments comprised of deferred rental revenue (straight-
line rental revenue), the net amortization of above-market and below-market leases, income recognized from direct financing leases on
revenues from rental properties and the amortization of deferred lease incentives, as offset by the impact of related collection reserves.
Deferred rental revenue results primarily from fixed rental increases scheduled under certain leases with our tenants. In accordance
with GAAP, the aggregate minimum rent due over the current term of these leases are recognized on a straight-line (or average) basis
rather than when payment is contractually due. The present value of the difference between the fair market rent and the contractual
rent for in-place leases at the time properties are acquired is amortized into revenue from rental properties over the remaining lives of
the in-place leases. Income from direct financing leases is recognized over the lease terms using the effective interest method which
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produces a constant periodic rate of return on the net investments in the leased properties. The amortization of deferred lease
incentives represents our co-investment commitment in certain leases, which deferred expense is recognized on a straight-line basis as
a reduction of rental revenue. GAAP net earnings and FFO also include non-cash environmental accretion expense and non-cash
changes in environmental estimates, which do not impact our recurring cash flow. GAAP net earnings and FFO from time to time may
also include property acquisition costs or other unusual items. Property acquisition costs are expensed, generally in the period when
properties are acquired, and are not reflective of recurring operations. Other unusual items are not reflective of recurring operations.
We pay particular attention to AFFO, a supplemental non-GAAP performance measure that we believe best represents our
recurring financial performance. Beginning in the fourth quarter of 2014, we revised our definition of AFFO to exclude non-cash
environmental accretion expense and non-cash changes in environmental estimates as these items do not impact our recurring cash
flow. AFFO for all periods presented has been restated to conform to our revised definition.
Our revised definition of AFFO is defined as FFO less Revenue Recognition Adjustments (net of allowances), acquisition costs,
non-cash environmental accretion expense and non-cash changes in environmental estimates and other unusual items. In our view,
AFFO provides a more accurate depiction than FFO of our fundamental operating performance as AFFO removes non-cash Revenue
Recognition Adjustments related to: (i) scheduled rent increases from operating leases, net of related collection reserves; (ii) the rental
revenue earned from acquired in-place leases; (iii) rent due from direct financing leases; and (iv) the amortization of deferred lease
incentives. Our definition of AFFO also excludes non-cash, or non-recurring items such as: (i) non-cash environmental accretion
expense and non-cash changes in environmental estimates, (ii) costs expensed related to property acquisitions; and (iii) other unusual
items. By providing AFFO, we believe we are presenting useful information that assists investors and analysts to better assess the
sustainability of our operating performance. Further, we believe AFFO is useful in comparing the sustainability of our operating
performance with the sustainability of the operating performance of other real estate companies. For a reconciliation of FFO and
AFFO to GAAP net earnings, see “Item 6. Selected Financial Data”.
2014 and 2013 Acquisitions
In 2014, we acquired fee or leasehold title to ten gasoline station and convenience store properties in separate transactions for an
aggregate purchase price of $17.6 million.
On May 9, 2013, we acquired 16 Mobil-branded gasoline station and convenience store properties in the metro New York
region and 20 Exxon- and Shell-branded gasoline station and convenience store properties located within the Washington, D.C.
“Beltway” for $72.5 million in two sale/leaseback transactions with subsidiaries of Capitol. The two new triple-net unitary leases have
an initial term of 15 years plus three renewal options with provisions for rent escalations during the initial and renewal terms. As
triple-net lessees, our tenants are required to pay all expenses pertaining to the properties subject to the unitary leases, including
environmental expenses, taxes, assessments, licenses and permit fees, charges for public utilities and all governmental charges. We
utilized $11.5 million of proceeds from 1031 exchanges, $57.5 million of borrowings under our Credit Agreement and cash on hand to
fund this acquisition.
In addition, in 2013, we acquired fee or leasehold title to three gasoline station and convenience store properties in separate
transactions for an aggregate purchase price of $0.8 million.
RESULTS OF OPERATIONS
Our results for the years ended December 31, 2013 and 2012 were materially affected by events surrounding the bankruptcy of
Marketing including the benefit derived from our participation in the Lukoil Settlement, which provided for the payment to the
Marketing Estate of $93.0 million of which $25.1 million was distributed to us pursuant to the Litigation Funding Agreement and $6.6
million was distributed to us in full satisfaction of our post-petition priority claims related to the Master Lease. Of the $25.1 million
received by us in the third quarter of 2013 pursuant to the Litigation Funding Agreement, $8.0 million was applied to the advances
made to the Marketing Estate plus accrued interest; $14.0 million was applied to unpaid rent and real estate taxes due from Marketing
and the related bad debt reserve was reversed of which $8.1 million and $5.9 million was included in continuing operations and
discontinued operations, respectively, as a reversal of bad debt expense and the remainder of $3.1 million was recorded as additional
income attributed to the partial recovery of damages resulting from Marketing’s default of its obligations under the Master Lease and
is reflected in continuing operations in our consolidated statements of operations as other revenue. In addition, legal costs associated
with Marketing’s bankruptcy and the Lukoil Complaint, eviction proceedings, gains realized from dispositions of properties and
impairment charges primarily related to anticipated property dispositions and elevated operating expenses related to properties
previously leased to Marketing materially impacted our results. For these reasons, comparisons of our performance for the years ended
December 31, 2014, 2013 and 2012 are less meaningful.
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Year ended December 31, 2014 compared to year ended December 31, 2013
Total revenues included in continuing operations decreased by $2.9 million to $99.9 million for the year ended December 31,
2014, as compared to $102.8 million for the year ended December 31, 2013. The decrease in total revenues for the year ended
December 31, 2014 was primarily due to the impact of $3.1 million of additional income from the Lukoil Settlement received during
the year ended 2013 and a decrease in Revenue Recognition Adjustments. The decline was partially offset by increases in rental
revenues from our existing portfolio of rental properties, including our 2014 acquisitions and leasing activities and the full year impact
of rental revenues from our acquisition of 36 properties from Capitol in May 2013. Revenues from rental properties included in
continuing operations were $96.7 million and $96.3 million for the years ended December 31, 2014 and 2013, respectively. Rental
income contractually due or received from our tenants, including amounts realized under our prior interim fuel supply agreement,
included in revenues from rental properties in continuing operations was $77.7 million for the year ended December 31, 2014, as
compared to $73.0 million for the year ended December 31, 2013. Revenues from rental properties and rental property expenses
included $13.8 million and $15.4 million for the years ended December 31, 2014 and 2013, respectively, of “pass-through” real estate
taxes and other municipal charges paid by us and reimbursable by our tenants pursuant to their triple-net lease agreements. Interest
income on notes and mortgages receivable was $3.1 million for the year ended December 31, 2014, as compared to $3.4 million for
the year ended December 31, 2013. Total revenue from continuing operations for the year ended December 31, 2013 also includes
$3.1 million of additional income, which was received as a result of the Lukoil Settlement.
In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent
contractually due or received during the periods presented. As a result, revenues from rental properties include Revenue Recognition
Adjustments comprised of non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a
straight-line basis over the current lease term, the net amortization of above-market and below-market leases, recognition of rental
income under direct financing leases using the effective interest rate method which produces a constant periodic rate of return on the
net investments in the leased properties and the amortization of deferred lease incentives. Revenues from rental properties included in
continuing operations includes Revenue Recognition Adjustments which increased rental revenue by $5.3 million for the year ended
December 31, 2014 and $7.9 million for the year ended December 31, 2013.
Rental property expenses included in continuing operations, which are primarily comprised of rent expense, real estate and
other state and local taxes and maintenance expense, were $23.8 million for the year ended December 31, 2014, as compared to $29.4
million for the year ended December 31, 2013. The decrease in rental property expenses is principally due to declines in rent expense,
real estate taxes and maintenance expenses paid by us resulting from the cumulative effect of leasing an increasing number of
properties on a triple-net basis and our disposition efforts.
Non-cash impairment charges included in continuing operations were $12.8 million for the year ended December 31, 2014, as
compared to $3.6 million for the year ended December 31, 2013. Impairment charges are recorded when the carrying value of a
property is reduced to fair value. The non-cash impairment charges in continuing operations for the years ended December 31, 2014
and 2013 were primarily attributable to the effect of adding asset retirement costs as a result of increases in our environmental
liabilities, which increased the carrying value of certain properties in excess of their fair value, and reductions in estimated
undiscounted cash flows expected to be received during the assumed holding period for certain of our properties.
Environmental expenses included in continuing operations for the year ended December 31, 2014 decreased by $7.5 million to
$4.6 million, as compared to $12.1 million for the year ended December 31, 2013. The decrease in environmental expenses for the
year ended December 31, 2014 was principally due to an $8.5 million reduction in litigation losses and legal fees partially offset by
$1.0 million of increases in environmental remediation costs. Environmental expenses vary from period to period and, accordingly,
undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for one period, as
compared to prior periods.
General and administrative expenses included in continuing operations decreased by $4.6 million to $15.8 million for the year
ended December 31, 2014, as compared to $20.4 million for the year ended December 31, 2013. The decrease in general and
administrative expenses for the year ended December 31, 2014 was principally due to a $4.3 million decline in legal and professional
fees. The decrease in legal and professional fees was primarily due to reductions in costs incurred in connection with Marketing’s
bankruptcy and the Lukoil Settlement.
Allowance (recoveries) for uncollectible accounts included in continuing operations increased by $14.4 million to $3.4 million
for the year ended December 31, 2014, as compared to a recovery of $11.0 million for the year ended December 31, 2013. The
allowances for the year ended December 31, 2014 consisted of $2.1 million in allowances for deferred rent receivable related to the
NECG Lease and Ramoco Lease, $1.2 million in reserves for bad debts and $0.1 million in allowances for mortgage receivables. The
recoveries to allowances for the year ended December 31, 2013 were primarily related to reversals of previously provided bad debt
reserves associated with receiving funds from the Marketing Estate and the Lukoil Settlement.
Depreciation and amortization expense included in continuing operations was $10.5 million for the year ended December 31,
2014, as compared to $9.3 million for the year ended December 31, 2013. The increase was primarily due to depreciation charges
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related to asset retirement costs and properties acquired offset by the effect of certain assets becoming fully depreciated, lease
terminations and dispositions of real estate.
Gains on dispositions of real estate included in continuing operations were $1.2 million for the year ended December 31, 2014.
The gains were the result of the sale of four properties during the year ended December 31, 2014.
Interest expense was $9.8 million for the year ended December 31, 2014, as compared to $11.7 million for the year ended
December 31, 2013. The decrease was due to a decrease in the weighted-average interest rate on borrowings outstanding and lower
average borrowings outstanding for the year ended December 31, 2014, as compared to the year ended December 31, 2013.
We report as discontinued operations the results of 20 properties accounted for as held for sale in accordance with GAAP as of
December 31, 2014 and certain properties disposed of during the periods presented that were previously classified as held for sale. The
operating results and gains on dispositions of real estate sold during the first six months of 2014 have been classified as discontinued
operations. The operating results of such properties for the years ended December 31, 2013 and 2012 have also been reclassified to
discontinued operations to conform to the 2014 presentation. Earnings from discontinued operations decreased by $39.7 million to
$2.9 million for the year ended December 31, 2014, as compared to $42.6 million for the year ended December 31, 2013. The
decrease was primarily due to lower gains on dispositions of real estate and an increase in losses from operating activities in
discontinued operations. Gains on dispositions of real estate included in discontinued operations were $9.0 million for the year ended
December 31, 2014 and $45.5 million for the year ended December 31, 2013. For the year ended December 31, 2014, there were 89
property dispositions recorded in discontinued operations. For the year ended December 31, 2013, there were 145 property
dispositions recorded in discontinued operations. The non-cash impairment charges recorded in discontinued operations during the
years ended December 31, 2014 and 2013 of $8.7 million and $9.8 million, respectively, were attributable to reductions in our
estimates of value for properties held for sale and the accumulation of asset retirement costs as a result of increases in estimated
environmental liabilities which increased the carrying value of certain properties above their fair value. Gains on disposition of real
estate and impairment charges vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or
the directions of change in reported gains and impairment charges for one period, as compared to prior periods.
For the year ended December 31, 2014, FFO decreased by $2.6 million to $45.3 million, as compared to $47.9 million for the
year ended December 31, 2013, and AFFO decreased by $2.4 million to $42.6 million, as compared to $45.0 million for the prior year.
The decrease in FFO for the year ended December 31, 2014 was primarily due to the changes in net earnings but excludes an
$8.1 million increase in impairment charges, a $0.6 million increase in depreciation and amortization expense and a $35.3 million
decrease in gains on dispositions of real estate. The decrease in AFFO for the year ended December 31, 2014 also excludes a $2.6
million decrease in the allowance for deferred rental revenue, a $32 thousand increase in non-cash environmental expenses and
credits, a $0.4 million decrease in acquisition costs and a $3.0 million decrease in Rental Revenue Adjustments which cause our
reported revenues from rental properties to vary from the amount of rent payments contractually due or received by us during the
periods presented (which are included in net earnings and FFO but are excluded from AFFO).
Diluted earnings per share were $0.69 per share for the year ended December 31, 2014, as compared to $2.08 per share for the
year ended December 31, 2013. Diluted FFO per share for the year ended December 31, 2014 was $1.34 per share, as compared to
$1.43 per share for the year ended December 31, 2013. Diluted AFFO per share for the year ended December 31, 2014 was $1.26 per
share, as compared to $1.34 per share for the year ended December 31, 2013.
Year ended December 31, 2013 compared to year ended December 31, 2012
Total revenues included in continuing operations increased by $6.7 million to $102.8 million for the year ended December 31,
2013, as compared to $96.1 million for the year ended December 31, 2012. The increase in total revenues for the year ended
December 31, 2013 was primarily due to additional rental revenues received from our acquisition of 36 properties from Capitol in
May 2013, $3.1 million of additional income from the Lukoil Settlement and an increase in “pass-through” real estate taxes and other
municipal charges we paid and billed to tenants pursuant to their triple-net lease agreements. Revenues from rental properties included
in continuing operations were $96.3 million and $93.2 million for the years ended December 31, 2013 and 2012, respectively. Rental
income contractually due or received from our tenants, including amounts realized under our prior interim fuel supply agreement,
included in revenues from rental properties in continuing operations was $73.0 million for the year ended December 31, 2013, as
compared to $77.9 million for the year ended December 31, 2012. Revenues from rental properties and rental property expenses
included $15.4 million and $10.9 million for the years ended December 31, 2013 and 2012, respectively, of “pass-through” real estate
taxes and other municipal charges paid by us and reimbursable by our tenants pursuant to their triple-net lease agreements. Interest
income from notes and mortgages receivable was $3.4 million for the year ended December 31, 2013, as compared to $2.9 million for
the year ended December 31, 2012. Total revenue from continuing operations for the year ended December 31, 2013 also includes
$3.1 million of additional income, which was received as a result of the Lukoil Settlement. Revenues from rental properties for the
year ended December 31, 2012 included $17.0 million in rent contractually due or received from Marketing under the Master Lease
(for which bad debt reserves of $10.4 million were provided and are included in allowance for uncollectible accounts in our
consolidated statements of operations).
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In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent
contractually due or received during the periods presented. As a result, revenues from rental properties include Revenue Recognition
Adjustments comprised of non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a
straight-line basis over the current lease term, the net amortization of above-market and below-market leases, recognition of rental
income under direct financing leases using the effective interest rate method which produces a constant periodic rate of return on the
net investments in the leased properties and the amortization of deferred lease incentives. Revenues from rental properties included in
continuing operations includes Revenue Recognition Adjustments which increased rental revenue by $7.9 million for the year ended
December 31, 2013 and $4.4 million for the year ended December 31, 2012.
Rental property expenses included in continuing operations, which are primarily comprised of rent expense, real estate and other
state and local taxes and maintenance expense, were $29.4 million for the year ended December 31, 2013, as compared to $28.7
million for the year ended December 31, 2012. The increase in rental property expenses is principally due to an increase in “pass-
through” real estate taxes and other municipal charges we paid and billed to tenants pursuant to their triple-net lease agreements offset
by lower rent and maintenance expenses paid by us resulting from the cumulative effect of leasing an increasing number of properties
on a triple-net basis and our disposition efforts.
Non-cash impairment charges included in continuing operations were $3.6 million for the year ended December 31, 2013, as
compared to $5.1 million for the year ended December 31, 2012. Impairment charges are recorded when the carrying value of a
property is reduced to fair value. The non-cash impairment charges in continuing operations for the years ended December 31, 2013
and 2012 were attributable to reductions in estimated undiscounted cash flows expected to be received during the assumed holding
period and the accumulation of asset retirement costs as a result of increases in estimated environmental liabilities which increased the
carrying value of certain properties in excess of their fair value.
Environmental expenses included in continuing operations for the year ended December 31, 2013 increased by $11.2 million, to
$12.1 million, as compared to $0.9 million for the year ended December 31, 2012. The increase in environmental expenses for the
year ended December 31, 2013 was primarily due to a higher provision for litigation losses and legal fees, which increased by $9.4
million for the year ended December 31, 2013 and a change in the provision for estimated environmental remediation obligations,
which increased by $1.8 million for the year ended December 31, 2013. Environmental expenses vary from period to period and,
accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for
one period, as compared to prior periods.
General and administrative expenses included in continuing operations increased by $4.8 million to $20.4 million for the year
ended December 31, 2013, as compared to $15.6 million for the year ended December 31, 2012. The increase in general and
administrative expenses for the year ended December 31, 2013 was principally due a $3.7 million increase in legal and professional
fees and a $0.8 million increase in employee related expenses. The increase in legal and professional fees was primarily due to
additional costs incurred in connection with Marketing’s bankruptcy and the Lukoil Settlement.
Allowance (recoveries) for uncollectible accounts included in continuing operations decreased by $23.0 million to a recovery of
$11.0 million for the year ended December 31, 2013, as compared to an allowance of $12.0 million for the year ended December 31,
2012. The recoveries to allowances for the year ended December 31, 2013 were related to reversals of previously provided bad debt
reserves associated with receiving funds from the Marketing Estate and the Lukoil Settlement.
Depreciation and amortization expense included in continuing operations was $9.3 million for the year ended December 31,
2013, as compared to $10.6 million for the year ended December 31, 2012. The decrease was primarily due to the effect of certain
assets becoming fully depreciated, lease terminations and dispositions of real estate offset by depreciation charges related to asset
retirement costs and properties acquired.
Interest expense was $11.7 million for the year ended December 31, 2013, as compared to $9.9 million for the year ended
December 31, 2012. The increase was due to an increase in the weighted average interest rate on borrowings outstanding and higher
average borrowings outstanding for the year ended December 31, 2013, as compared to the year ended December 31, 2012.
The operating results and gains on dispositions of real estate sold during the first six months of 2014 have been classified as
discontinued operations. The operating results of such properties for the years ended December 31, 2013 and 2012 have also been
reclassified to discontinued operations to conform to the 2014 presentation. Earnings from discontinued operations increased by $43.9
million to $42.6 million for the year ended December 31, 2013, as compared to a loss of $1.3 million for the year ended December 31,
2012. The increase was primarily due to increases in gains on dispositions of real estate and a reduction in losses from operating
activities in discontinued operations. Gains on dispositions of real estate included in discontinued operations were $45.5 million for
the year ended December 31, 2013 and $6.9 million for the year ended December 31, 2012. For the year ended December 31, 2013,
there were 145 property dispositions recorded in discontinued operations. For the year ended December 31, 2012, there were 54
property dispositions recorded in discontinued operations. The non-cash impairment charges recorded in discontinued operations
during the years ended December 31, 2013 and 2012 of $9.8 million and $8.8 million, respectively, were attributable to reductions in
our estimates of value for properties held for sale and the accumulation of asset retirement costs as a result of increases in estimated
environmental liabilities which increased the carrying value of certain properties above their fair value. Gains on disposition of real
35
estate and impairment charges vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or
the directions of change in reported gains and impairment charges for one period, as compared to prior periods.
For the year ended December 31, 2013, FFO increased by $14.7 million to $47.9 million, as compared to $33.2 million for the
year ended December 31, 2012, and AFFO increased by $17.3 million to $45.0 million, as compared to $27.7 million for the prior
year. The increase in FFO for the year ended December 31, 2013 was primarily due to the changes in net earnings but excludes a $0.5
million decrease in impairment charges, a $3.8 million decrease in depreciation and amortization expense and a $38.6 million increase
in gains on dispositions of real estate. The increase in AFFO for the year ended December 31, 2013 also excludes a $4.8 million
increase in the allowance for deferred rental revenue, a $1.3 million decrease in non-cash environmental expenses and credits, a $0.5
million increase in acquisition costs and a $4.0 million increase in Rental Revenue Adjustments which cause our reported revenues
from rental properties to vary from the amount of rent payments contractually due or received by us during the periods presented
(which are included in net earnings and FFO but are excluded from AFFO).
Diluted earnings per share were $2.08 per share for the year ended December 31, 2013, as compared to $0.37 per share for the
year ended December 31, 2012. Diluted FFO per share for the year ended December 31, 2013 was $1.43 per share, as compared to
$0.99 per share for the year ended December 31, 2012. Diluted AFFO per share for the year ended December 31, 2013 was $1.34 per
share, as compared to $0.86 per share for the year ended December 31, 2012.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are the cash flows from our operations, funds available under our Credit Agreement that
matures in August 2015 (described below) and available cash and cash equivalents. Our business operations and liquidity are
dependent on our ability to generate cash flow from our properties. We believe that our operating cash needs for the next twelve
months can be met by cash flows from operations, borrowings under our Credit Agreement and available cash and cash equivalents.
Our cash flow activities for the years ended December 31, 2014, 2013 and 2012 are summarized as follows (in thousands):
Net cash flow provided by operating activities
Net cash flow provided by /(used in) investing activities
Net cash flow (used in) financing activities
Operating Activities
YEAR ENDED DECEMBER 31,
2014
$ 29,237
$ 23,505
$ (61,666)
2013
$ 43,678
$ (6,847)
$ (41,672)
2012
$ 15,885
$
3,551
$ (10,258)
133,965
Cash flow from operating activities decreased by $14.5 million for the year ended December 31, 2014 to $29.2 million, as
compared to $43.7 million for the year ended December 31, 2013. The decrease was primarily due to receiving funds from the
Marketing Estate and the Lukoil Settlement during the year ended December 31, 2013. The decline was partially offset by increases
in our operating cash flows from our existing portfolio of rental properties, including our 2014 acquisitions and leasing activities and
the full year impact of cash flows from our acquisition of 36 properties from Capitol in May 2013.
Investing Activities
Our investing activities are primarily real estate-related transactions. Since we generally lease our properties on a triple-net
basis, we have not historically incurred significant capital expenditures other than those related to investments in real estate. Cash
flows from investing activities increased by $30.3 million for the year ended December 31, 2014 to $23.5 million, as compared to a
use of $6.8 million for the year ended December 31, 2013. The increase was primarily due to (i) a decrease in property acquisitions,
investment in direct financing leases and capital expenditures of $56.2 million, (ii) a decrease in issuance of notes and mortgages
receivable of $4.1 million, (iii) an increase in cash held for property acquisitions of $32.7 million due to the return of disposition
proceeds held in escrow offset by (iv) a decrease in proceeds from the sale of rental properties of $46.2 million and (v) an $18.0
million decrease in collection of notes and mortgages receivable primarily related to the prepayment of a note receivable in 2013.
Financing Activities
Cash flows from financing activities decreased by $20.0 million for the year ended December 31, 2014 to a use of $61.7 million,
as compared to a use of $41.7 million for the year ended December 31, 2013. The decrease was primarily due to (i) net repayments of
the Credit Agreement of $33.0 million for the year ended December 31, 2014, as compared to net repayments of the Credit
Agreement, Prudential Loan Agreement and our prior credit agreement and term loan agreement of $14.3 million for the year ended
December 31, 2013 and (ii) an increase in dividends paid on common stock of $4.3 million.
36
Credit Agreement
On February 25, 2013, we entered into a $175.0 million senior secured revolving credit agreement (the “Credit Agreement”)
with a group of commercial banks led by JPMorgan Chase Bank, N.A. (the “Bank Syndicate”), which is scheduled to mature in
August 2015. Subject to the terms of the Credit Agreement, we have the option to extend the term of the Credit Agreement for one
additional year to August 2016. The Credit Agreement allocates $25.0 million of the total Bank Syndicate commitment to a term loan
and $150.0 million to a revolving credit facility. Subject to the terms of the Credit Agreement, we have the option to increase by $50.0
million the amount of the revolving credit facility to $200.0 million. The Credit Agreement permits borrowings at an interest rate
equal to the sum of a base rate plus a margin of 1.50% to 2.00% or a LIBOR rate plus a margin of 2.50% to 3.00% based on our
leverage at the end of each quarterly reporting period. The annual commitment fee on the undrawn funds under the Credit Agreement
is 0.30% to 0.40% based on our leverage at the end of each quarterly reporting period. The Credit Agreement does not provide for
scheduled reductions in the principal balance prior to its maturity. As of December 31, 2014 and 2013, borrowings under the Credit
Agreement were $25.0 million and $58.0 million, respectively.
The Credit Agreement provides for security in the form of, among other items, mortgage liens on certain of our properties. The
parties to the Credit Agreement and the Prudential Loan Agreement (as defined below) share the security pursuant to the terms of an
inter-creditor agreement. On December 23, 2013, we amended the Credit Agreement to change certain definitions and financial
covenant calculations provided for in the agreement. The Credit Agreement contains customary financial covenants such as loan to
value, leverage and coverage ratios and minimum tangible net worth, as well as limitations on restricted payments, which may limit
our ability to incur additional debt or pay dividends. The Credit Agreement contains customary events of default, including default
under the Prudential Loan Agreement, change of control and failure to maintain REIT status. Any event of default, if not cured or
waived, would increase by 200 basis points (2.00%) the interest rate we pay under the Credit Agreement and prohibit us from drawing
funds against the Credit Agreement and could result in the acceleration of our indebtedness under the Credit Agreement and could also
give rise to an event of default and could result in the acceleration of our indebtedness under the Prudential Loan Agreement. We may
be prohibited from drawing funds against the revolving credit facility if there is a material adverse effect on our business, assets,
prospects or condition.
Prudential Loan Agreement
On February 25, 2013, we entered into a $100.0 million senior secured term loan agreement with the Prudential Insurance
Company of America (the “Prudential Loan Agreement”), which matures in February 2021. The parties to the Credit Agreement and
the Prudential Loan Agreement share the security described above pursuant to the terms of an inter-creditor agreement. The Prudential
Loan Agreement bears interest at 6.00%. The Prudential Loan Agreement does not provide for scheduled reductions in the principal
balance prior to its maturity. On December 23, 2013, we amended the Prudential Loan Agreement to change certain definitions and
financial covenant calculations provided for in the agreement. The Prudential Loan Agreement contains customary financial covenants
such as loan to value, leverage and coverage ratios and minimum tangible net worth, as well as limitations on restricted payments,
which may limit our ability to incur additional debt or pay dividends. The Prudential Loan Agreement contains customary events of
default, including default under the Credit Agreement and failure to maintain REIT status. Any event of default, if not cured or
waived, would increase by 200 basis points (2.00%) the interest rate we pay under the Prudential Loan Agreement and could result in
the acceleration of our indebtedness under the Prudential Loan Agreement and could also give rise to an event of default and could
result in the acceleration of our indebtedness under our Credit Agreement. As of December 31, 2014 and 2013, borrowings under the
Prudential Loan Agreement were $100.0 million.
As of December 31, 2014, we are in compliance with all of the material terms of the Credit Agreement and Prudential Loan
Agreement, including the various financial covenants described above.
Property Acquisitions and Capital Expenditures
Since we generally lease our properties on a triple-net basis, we have not historically incurred significant capital expenditures
other than those related to acquisitions. As part of our overall business strategy, we regularly review opportunities to acquire
additional properties and we expect to continue to pursue acquisitions that we believe will benefit our financial performance. Our
property acquisitions and capital expenditures for the year ended December 31, 2014 were $17.7 million, substantially all of which
was for the acquisition of ten properties. Our property acquisitions and capital expenditures for the year ended December 31, 2013
were $73.4 million, substantially all of which was for our $72.5 million acquisition of 36 properties from Capitol in May 2013.
We are reviewing select opportunities for capital expenditures, redevelopment and alternative uses for properties that were
previously subject to the Master Lease with Marketing and which are not currently subject to long-term triple-net leases. We have no
current plans to make material improvements to any of our properties other than the properties previously subject to the Master Lease
with Marketing. However, our tenants frequently make improvements to the properties leased from us at their expense. As of
December 31, 2014, we have a remaining commitment to co-invest as much as $14.2 million in the aggregate in capital improvements
in certain properties previously subject to the Master Lease with Marketing. (For additional information regarding capital expenditures
related to the properties previously subject to the Master Lease, see “Item 2. Properties” which appears in this Annual Report on Form
37
10-K.) To the extent that our sources of liquidity are not sufficient to fund acquisitions and capital expenditures, we will require other
sources of capital, which may or may not be available on favorable terms or at all.
Dividends
We elected to be treated as a REIT under the federal income tax laws with the year beginning January 1, 2001. To qualify for
taxation as a REIT, we must, among other requirements such as those related to the composition of our assets and gross income,
distribute annually to our stockholders at least 90% of our taxable income, including taxable income that is accrued by us without a
corresponding receipt of cash. We cannot provide any assurance that our cash flows will permit us to continue paying cash dividends.
The Internal Revenue Service (“IRS”) has allowed the use of a procedure, as a result of which we could satisfy the REIT income
distribution requirement by making a distribution on our common stock comprised of (i) shares of our common stock having a value
of up to 80% of the total distribution and (ii) cash in the remaining amount of the total distribution, in lieu of paying the distribution
entirely in cash. In January 2015, we received a private letter ruling from the IRS that allows us to make a distribution on our common
stock comprised of (i) shares of our common stock having a value of up to 80% of the total distribution and (ii) cash in the remaining
amount of the total distribution, in lieu of paying the distribution entirely in cash. As of the date of this Annual Report on Form 10-K,
we are not planning to make a distribution using our common stock.
It is also possible that instead of distributing 100% of our taxable income on an annual basis, we may decide to retain a portion
of our taxable income and to pay taxes on such amounts as permitted by the IRS. Payment of dividends is subject to market
conditions, our financial condition, including but not limited to, our continued compliance with the provisions of the Credit
Agreement and the Prudential Loan Agreement and other factors, and therefore is not assured. In particular, our Credit Agreement and
Prudential Loan Agreement prohibit the payment of dividends during certain events of default. Cash dividends paid to our
shareholders aggregated $28.7 million, $24.4 million and $8.4 million, for the years ended December 31, 2014, 2013 and 2012,
respectively. There can be no assurance that we will continue to pay cash dividends at historical rates.
CONTRACTUAL OBLIGATIONS
Our significant contractual obligations and commitments as of December 31, 2014 were comprised of borrowings under the
Credit Agreement and the Prudential Loan Agreement, operating lease payments due to landlords, estimated environmental
remediation expenditures and co-investing with our tenants in capital improvements at properties previously leased to Marketing. The
aggregate maturity of the Credit Agreement and the Prudential Loan Agreement is as follows: 2015 — $25.0 million and 2021 —
$100.0 million.
In addition, as a REIT, we are required to pay dividends equal to at least 90% of our taxable income in order to continue to
qualify as a REIT. Our contractual obligations and commitments as of December 31, 2014 are summarized below (in thousands):
Operating leases
Borrowings under the Credit Agreement (a)
Borrowings under the Prudential Loan Agreement (a)
Estimated environmental remediation expenditures (b)
Capital improvements (c)
Total
TOTAL
$ 28,005
25,000
100,000
91,566
14,180
$ 258,751
LESS
THAN-
ONE YEAR
6,648
$
25,000
—
24,437
—
$ 56,085
ONE-TO
THREE
YEARS
$ 10,395
—
—
28,441
14,180
$ 53,016
MORE
THAN
FIVE
YEARS
THREE
TO
FIVE
YEARS
$ 5,882 $ 5,080
—
—
100,000
—
23,673
15,015
—
—
$20,897 $ 128,753
(a) Excludes related interest payments. (See “Liquidity and Capital Resources” above and “Item 7A. Quantitative and Qualitative
Disclosures About Market Risk” for additional information.)
(b) Estimated environmental remediation expenditures have been adjusted for inflation and discounted to present value.
(c) The actual timing of co-investing with our tenants in capital improvements is dependent on the timing of such capital
improvement projects and the terms of our leases. We expect that substantially all of such expenditures will be incurred within
five years. Our commitment provides us with the option to either reimburse our tenants, or to offset rent when these capital
expenditures are made.
Generally, leases with our tenants are “triple-net” leases, with the tenant responsible for the operations conducted at these
properties and for the payment of taxes, maintenance, repair, insurance, environmental remediation and other operating expenses.
38
We have no significant contractual obligations not fully recorded on our consolidated balance sheets or fully disclosed in the
notes to our consolidated financial statements. We have no off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K promulgated by the Exchange Act.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The consolidated financial statements included in this Annual Report on Form 10-K have been prepared in conformity with
accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements in
accordance with GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in our consolidated
financial statements. Although we have made estimates, judgments and assumptions regarding future uncertainties relating to the
information included in our consolidated financial statements, giving due consideration to the accounting policies selected and
materiality, actual results could differ from these estimates, judgments and assumptions and such differences could be material.
Estimates, judgments and assumptions underlying the accompanying consolidated financial statements include, but are not
limited to, receivables, deferred rent receivable, income under direct financing leases, environmental remediation obligations, real
estate, depreciation and amortization, impairment of long-lived assets, litigation, accrued liabilities, income taxes and allocation of the
purchase price of properties acquired to the assets acquired and liabilities assumed. The information included in our consolidated
financial statements that is based on estimates, judgments and assumptions is subject to significant change and is adjusted as
circumstances change and as the uncertainties become more clearly defined.
Our accounting policies are described in note 1 of Notes to Consolidated Financial Statements in “Item 8. Financial Statements
and Supplementary Data — Notes to Consolidated Financial Statements”. We believe that the more critical of our accounting policies
relate to revenue recognition and deferred rent receivable and related reserves, direct financing leases, impairment of long-lived assets,
income taxes, environmental remediation obligations, allocation of the purchase price of properties acquired to the assets acquired and
liabilities assumed and litigation as described below:
Revenue recognition — We earn revenue primarily from operating leases with our tenants. We recognize income under leases
with our tenants, on the straight-line method, which effectively recognizes contractual lease payments evenly over the current term of
the leases. The present value of the difference between the fair market rent and the contractual rent for in-place leases at the time
properties are acquired is amortized into revenue from rental properties over the remaining lives of the in-place leases. A critical
assumption in applying the straight-line accounting method is that the tenant will make all contractual lease payments during the
current lease term and that the net deferred rent receivable of $21.0 million recorded as of December 31, 2014 will be collected when
the payment is due, in accordance with the annual rent escalations provided for in the leases. Historically our tenants, other than
Marketing, NECG and Ramoco, with leases that are material to our financial results have generally made rent payments when due.
However, we may be required to reverse, or provide reserves for a portion of the recorded deferred rent receivable if it becomes
apparent that the tenant may not make all of its contractual lease payments when due during the current term of the lease.
Direct financing leases — Income under direct financing leases is included in revenues from rental properties and is recognized
over the lease terms using the effective interest rate method which produces a constant periodic rate of return on the net investments in
the leased properties. Net investment in direct financing leases represents the investments in leased assets accounted for as direct
financing leases. The investments are reduced by the receipt of lease payments, net of interest income earned and amortized over the
life of the leases.
Impairment of long-lived assets — Real estate assets represent “long-lived” assets for accounting purposes. We review the
recorded value of long-lived assets for impairment in value whenever any events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable. We may become aware of indicators of potentially impaired assets upon tenant
or landlord lease renewals, upon receipt of notices of potential governmental takings and zoning issues, or upon other events that
occur in the normal course of business that would cause us to review the operating results of the property. We believe our real estate
assets are not carried at amounts in excess of their estimated net realizable fair value amounts.
Income taxes — Our financial results generally do not reflect provisions for current or deferred federal income taxes since we
elected to be treated as a REIT under the federal income tax laws effective January 1, 2001. Our intention is to operate in a manner
that will allow us to continue to be treated as a REIT and, as a result, we do not expect to pay substantial corporate-level federal
income taxes. Many of the REIT requirements; however, are highly technical and complex. If we were to fail to meet the
requirements, we may be subject to federal income tax, excise taxes, penalties and interest or we may have to pay a deficiency
dividend to eliminate any earnings and profits that were not distributed. Certain states do not follow the federal REIT rules and we
have included provisions for these taxes in rental property expenses.
Environmental remediation obligations — We provide for the estimated fair value of future environmental remediation
obligations when it is probable that a liability has been incurred and a reasonable estimate of fair value can be made. (See
“Environmental Matters” below for additional information). Environmental liabilities net of related recoveries are measured based on
39
their expected future cash flows which have been adjusted for inflation and discounted to present value. Since environmental
exposures are difficult to assess and estimate and knowledge about these liabilities is not known upon the occurrence of a single event,
but rather is gained over a continuum of events, we believe that it is appropriate that our accrual estimates are adjusted as the
remediation treatment progresses, as circumstances change and as environmental contingencies become more clearly defined and
reasonably estimable. A critical assumption in accruing for these liabilities is that the state environmental laws and regulations will be
administered and enforced in the future in a manner that is consistent with past practices. Environmental liabilities are estimated net of
recoveries of environmental costs from state UST remediation funds, with respect to past and future spending based on estimated
recovery rates developed from our experience with the funds when such recoveries are considered probable. A critical assumption in
accruing for these recoveries is that the state UST fund programs will be administered and funded in the future in a manner that is
consistent with past practices and that future environmental spending will be eligible for reimbursement at historical rates under these
programs. We accrue environmental liabilities based on our share of responsibility as defined in our lease contracts with our tenants
and under various other agreements with others or if circumstances indicate that the counterparty may not have the financial resources
to pay its share of the costs. It is possible that our assumptions regarding the ultimate allocation method and share of responsibility
that we used to allocate environmental liabilities may change, which may result in material adjustments to the amounts recorded for
environmental litigation accruals and environmental remediation liabilities. We may ultimately be responsible to pay for
environmental liabilities as the property owner if our tenants or other counterparties fail to pay them. In certain environmental matters
the effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists both in terms of the
probability of loss and the estimate of such loss. The ultimate liabilities resulting from such lawsuits and claims, if any, may be
material to our results of operations in the period in which they are recognized.
Allocation of the purchase price of properties acquired — Upon acquisition of real estate and leasehold interests, we estimate
the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant” and identified intangible
assets and liabilities (consisting of leasehold interests, above-market and below-market leases, in-place leases and tenant relationships)
and assumed debt. Based on these estimates, we allocate the purchase price to the applicable assets and liabilities.
Litigation — Legal fees related to litigation are expensed as legal services are performed. We provide for litigation reserves,
including certain environmental litigation (see “Environmental Matters” below for additional information), when it is probable that a
liability has been incurred and a reasonable estimate of the liability can be made. If the estimate of the liability can only be identified
as a range, and no amount within the range is a better estimate than any other amount, the minimum of the range is accrued for the
liability.
ENVIRONMENTAL MATTERS
General
We are subject to numerous federal, state and local laws and regulations, including matters relating to the protection of the
environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets
including buildings containing hazardous materials, USTs and other equipment. Environmental costs are principally attributable to
remediation costs which include removing USTs, excavation of contaminated soil and water, installing, operating, maintaining and
decommissioning remediation systems, monitoring contamination and governmental agency compliance reporting incurred in
connection with contaminated properties. We seek reimbursement from state UST remediation funds related to these environmental
costs where available. In July 2012, we purchased a ten-year pollution legal liability insurance policy covering all of our properties for
preexisting unknown environmental liabilities and new environmental events. The policy has a $50.0 million aggregate limit and is
subject to various self-insured retentions and other conditions and limitations. Our intention in purchasing this policy is to obtain
protection predominantly for significant events. No assurances can be given that we will obtain a net financial benefit from this
investment.
The estimated future costs for known environmental remediation requirements are accrued when it is probable that a liability has
been incurred and a reasonable estimate of fair value can be made. The accrued liability is the aggregate of the best estimate of the fair
value of cost for each component of the liability net of estimated recoveries from state UST remediation funds considering estimated
recovery rates developed from prior experience with the funds.
We enter into leases and various other agreements which contractually allocate responsibility between the parties for known and
unknown environmental liabilities at or relating to the subject properties. We are contingently liable for these environmental
obligations in the event that the counterparty to the lease or other agreement does not satisfy them. It is possible that our assumptions
regarding the ultimate allocation method and share of responsibility that we used to allocate environmental liabilities may change,
which may result in material adjustments to the amounts recorded for environmental litigation accruals and environmental remediation
liabilities. We are required to accrue for environmental liabilities that we believe are allocable to others under our leases and other
agreements if we determine that it is probable that the counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if the counterparty fails to pay them. As a result of Marketing’s
40
bankruptcy filing, we accrued for significant additional environmental liabilities because we concluded that Marketing would not be
able to perform them. A liability has not been accrued for environmental obligations that are the responsibility of any other current
tenants based on those tenant’s history of paying such obligations and/or our assessment of their financial ability and intent to pay
such costs. However, there can be no assurance that our assessments are correct or that our tenants who have paid their obligations in
the past will continue to do so. The ultimate resolution of these matters could cause a material adverse effect on our business, financial
condition, results of operations, liquidity, ability to pay dividends or stock price.
For all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and
regulations, removal of USTs at the end of their lease term and remediation of any environmental contamination that arises during the
term of their tenancy. Under the terms of our leases covering properties previously leased to Marketing, we have agreed to be
responsible for environmental contamination at the premises that was known at the time the lease commenced, and that existed prior
to commencement of the lease and is discovered (other than as a result of a voluntary site investigation) during the first ten years of
the lease term. After expiration of such ten year period, responsibility for all newly discovered contamination, even if it relates to
periods prior to commencement of the lease, is contractually allocated to our tenant. Our tenants at properties previously leased to
Marketing are in all cases responsible for the cost of any remediation of contamination that results from their use and occupancy of
our properties. Under substantially all of our other triple-net leases, responsibility for remediation of all environmental contamination
discovered during the term of the lease (including known and unknown contamination that existed prior to commencement of the
lease) is the responsibility of our tenant.
We anticipate that a majority of the USTs at properties previously leased to Marketing will be replaced over the next decade
because these USTs are either at or near the end of their useful lives. For long-term, triple-net leases covering sites previously leased
to Marketing, our tenants are responsible for the cost of removal and replacement of USTs and for remediation of contamination found
during such UST removal and replacement, unless such contamination was found during the first ten years of the lease term and also
existed prior to commencement of the lease. In those cases, we are responsible for costs associated with the remediation of such
contamination. For our transitional properties occupied under month-to-month license agreements, or which are vacant, we are
responsible for costs associated with UST removals and for the cost of remediation of contamination found during the removal of
USTs. We have also agreed to be responsible for environmental contamination that existed prior to the sale of certain properties
assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the first five years after the
sale of the properties. (For additional information regarding our transitional properties, see “Item 1. Business — Company
Operations” and “Transitional Properties” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” which appear in this Annual Report on Form 10-K.)
After the termination of the Master Lease, we commenced a process to take control of our properties and to reposition them. A
substantial portion of these properties had USTs which were either at or near the end of their useful lives. For properties that we sold,
we elected to remove certain of these USTs and in the course of re-letting properties, we made lease concessions to reimburse our
tenants at operating gas stations for certain capital expenditures including UST replacements. In the course of these UST removals and
replacements, previously unknown environmental contamination has been and continues to be discovered. As a result of these
developments, we began to assess our prospective future environmental liability resulting from preexisting unknown environmental
contamination which we believe might be discovered during removal and replacement of USTs at properties previously leased to
Marketing in the future.
We are now able to develop a reasonable estimate of fair value for the prospective future environmental liability resulting from
preexisting unknown environmental contamination. These estimates are based primarily upon quantifiable trends, which we believe
allow us to make reasonable estimates of fair value for the future costs of environmental remediation resulting from the removal and
replacement of USTs. As a result, at December 31, 2014, we accrued for these estimated costs. Our accrual of the additional liability
represents the best estimate of the fair value of cost for each component of the liability net of estimated recoveries from state UST
remediation funds considering estimated recovery rates developed from prior experience with the funds. In arriving at our accrual, we
analyzed the ages of USTs at properties where we would be responsible for preexisting contamination found within the ten years after
commencement of a lease (for properties subject to long-term triple-net leases) or five years from a sale (for divested properties), and
projected a cost to closure for new environmental contamination. Based on these estimates, along with relevant economic and risk
factors, at December 31, 2014, we accrued $49.7 million for these future environmental liabilities related to preexisting unknown
contamination. In conjunction with the accrual for preexisting unknown environmental contamination, we have increased the carrying
value of our properties and simultaneously recorded impairment charges of $8.3 million where the increased carrying value of the
property exceeded its estimated fair value. Our estimates are based upon facts that are known to us at this time and an assessment of
the possible ultimate remedial action outcomes. It is possible that our assumptions, which form the basis of our estimates, regarding
our ultimate environmental liabilities may change, which may result in our providing an accrual, or adjustments to the amounts
recorded, for environmental remediation liabilities. Among the many uncertainties that impact the estimates are our assumptions, the
necessary regulatory approvals for, and potential modifications of remediation plans, the amount of data available upon initial
assessment of contamination, changes in costs associated with environmental remediation services and equipment, the availability of
state UST remediation funds and the possibility of existing legal claims giving rise to additional claims. Additional environmental
41
liabilities could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay
dividends or stock price.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the extent of contamination,
alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations
and their interpretations, as well as the time it takes to remediate contamination and receive regulatory approval. In developing our
liability for estimated environmental remediation obligations on a property by property basis, we consider among other things, enacted
laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available
technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates
which are subject to significant change, and are adjusted as the remediation treatment progresses, as circumstances change and as
environmental contingencies become more clearly defined and reasonably estimable. We expect to adjust the accrued liabilities for
environmental remediation obligations reflected in our consolidated financial statements as they become probable and a reasonable
estimate of fair value can be made.
We measure our environmental remediation liability at fair value based on expected future net cash flows, adjusted for inflation
(using a range of 2.0% to 2.75%), and then discount them to present value (using a range of 4.0% to 7.0%). We adjust our
environmental remediation liability quarterly to reflect changes in projected expenditures, changes in present value due to the passage
of time and reductions in estimated liabilities as a result of actual expenditures incurred during each quarter. As of December 31,
2014, we had accrued a total of $91.6 million for our prospective environmental remediation liability. This accrual includes (a) $41.9
million, which was our best estimate of reasonably estimable environmental remediation obligations and obligations to remove USTs
for which we are the title owner, net of estimated recoveries and (b) $49.7 million for future environmental liabilities related to
preexisting unknown contamination. As of December 31, 2013, we had accrued $43.5 million as our best estimate of the fair value of
reasonably estimable environmental remediation obligations and obligations to remove USTs for which we are the title owner, net of
estimated recoveries.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $3.0 million,
$3.2 million and $3.2 million of net accretion expense was recorded for the years ended December 31, 2014, 2013 and 2012,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2014, 2013 and 2012, we
recorded credits to environmental expenses included in continuing operations and to earnings from operating activities in discontinued
operations in our consolidated statements of operations aggregating $2.8 million, $3.0 million and $4.2 million, respectively, where
decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.
Environmental expenses also include project management fees, legal fees and provisions for environmental litigation losses.
During the years ended December 31, 2014 and 2013, we increased the carrying value of certain of our properties by $62.5
million (consisting of $12.8 million of known environmental liabilities and $49.7 million of reserves for future environmental
liabilities) and $12.4 million, respectively, due to increases in estimated environmental remediation costs. The recognition and
subsequent changes in estimates in environmental liabilities and the increase or decrease in carrying value of the properties are non-
cash transactions which do not appear on the face of the consolidated statements of cash flows. We recorded non-cash impairment
charges aggregating $16.9 million (consisting of $8.6 million for known environmental liabilities and $8.3 million for future
environmental liabilities) and $8.0 million for the years ended December 31, 2014 and 2013, respectively, in continuing operations
and in discontinued operations for capitalized asset retirement costs. Capitalized asset retirement costs are being depreciated over the
estimated remaining life of the UST, a ten year period if the increase in carrying value is related to environmental remediation
obligations or such shorter period if circumstances warrant, such as the remaining lease term for properties we lease from others.
Depreciation and amortization expense included in continuing operations and earnings from discontinued operations in our
consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012 included $1.6 million, $2.0 million and
$5.4 million, respectively, of depreciation related to capitalized asset retirement costs. Capitalized asset retirement costs were $59.8
(consisting of $18.4 million of known environmental liabilities and $41.4 million of reserves for future environmental liabilities) and
$18.3 million as of December 31, 2014 and 2013, respectively.
As part of the triple-net leases for properties previously leased to Marketing, we transferred title of the USTs to our tenants, and
the obligation to pay for the retirement and decommissioning or removal of USTs at the end of their useful life or earlier if
circumstances warranted was fully or partially transferred to our new tenants. We remain contingently liable for this obligation in the
event that our tenants do not satisfy their responsibilities. Accordingly, through December 31, 2014, we removed $12.9 million of
asset retirement obligations and $10.5 million of net asset retirement costs related to USTs from our balance sheet. The cumulative net
amount of $2.4 million is recorded as deferred rental revenue and will be recognized on a straight-line basis as additional revenues
from rental properties over the terms of the various leases. (See note 2 for additional information.)
We cannot predict what environmental legislation or regulations may be enacted in the future or how existing laws or
regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied.
We cannot predict if state UST fund programs will be administered and funded in the future in a manner that is consistent with past
practices and if future environmental spending will continue to be eligible for reimbursement at historical recovery rates under these
programs. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory
42
agencies or stricter interpretation of existing laws, which may develop in the future, could have an adverse effect on our financial
position, or that of our tenants, and could require substantial additional expenditures for future remediation.
In light of the uncertainties associated with environmental expenditure contingencies, we are unable to estimate ranges in excess
of the amount accrued with any certainty; however, we believe it is possible that the fair value of future actual net expenditures could
be substantially higher than amounts currently recorded by us. Adjustments to accrued liabilities for environmental remediation
obligations will be reflected in our consolidated financial statements as they become probable and a reasonable estimate of fair value
can be made. Future environmental expenses could cause a material adverse effect on our business, financial condition, results of
operations, liquidity, ability to pay dividends or stock price.
Environmental Litigation
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of December 31,
2014 and 2013, we had accrued an aggregate $11.0 million and $11.4 million, respectively, for certain of these matters which we
believe were appropriate based on information then currently available. It is possible that our assumptions regarding the ultimate
allocation method and share of responsibility that we used to allocate environmental liabilities may change, which may result in our
providing an accrual, or adjustments to the amounts recorded, for environmental litigation accruals. Matters related to our former
Newark, New Jersey Terminal and Lower Passaic River and MTBE litigations in the states of New Jersey and Pennsylvania, in
particular, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay
dividends or stock price. (See “Item 3. Legal Proceedings” and note 3 to our consolidated financial statements for additional
information with respect to these and other pending environmental lawsuits and claims.)
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk, primarily as a result of our $175.0 million senior secured revolving credit agreement (the
“Credit Agreement”) entered into on February 25, 2013 with a group of commercial banks led by JPMorgan Chase Bank, N.A. (the
“Bank Syndicate”), which is scheduled to mature in August 2015. Subject to the terms of the Credit Agreement, we have the option to
extend the term of the Credit Agreement for one additional year to August 2016. The Credit Agreement allocates $25.0 million of the
total Bank Syndicate commitment to a term loan and $150.0 million to a revolving credit facility. Subject to the terms of the Credit
Agreement, we have the option to increase by $50.0 million the amount of the revolving credit facility to $200.0 million. The Credit
Agreement permits borrowings at an interest rate equal to the sum of a base rate plus a margin of 1.50% to 2.00% or a LIBOR rate
plus a margin of 2.50% to 3.00% based on our leverage at the end of each quarterly reporting period. We use borrowings under the
Credit Agreement to finance acquisitions and for general corporate purposes. Borrowings outstanding at floating interest rates under
the Credit Agreement as of December 31, 2014 were $25.0 million.
We manage our exposure to interest rate risk by minimizing, to the extent feasible, our overall borrowings and monitoring
available financing alternatives. We reduced our interest rate risk on February 25, 2013 by repaying floating interest rate debt with the
proceeds of a $100.0 million senior secured term loan agreement with the Prudential Insurance Company of America (the “Prudential
Loan Agreement”), which matures in February 2021. The Prudential Loan Agreement bears interest at 6.00%. The Prudential Loan
Agreement does not provide for scheduled reductions in the principal balance prior to its maturity. Our interest rate risk may
materially change in the future if we seek other sources of debt or equity capital or refinance our outstanding debt.
Based on our average outstanding borrowings under the Credit Agreement projected at $25.0 million for 2015, an increase in
market interest rates of 0.50% for 2015 would decrease our 2015 net income and cash flows by $0.1 million. This amount was
determined by calculating the effect of a hypothetical interest rate change on our borrowings floating at market rates, and assumes that
the $25.0 million outstanding borrowings under the Credit Agreement is indicative of our future average floating interest rate
borrowings for 2015 before considering additional borrowings required for future acquisitions or repayment of outstanding
borrowings from proceeds of future equity offerings. The calculation also assumes that there are no other changes in our financial
structure or the terms of our borrowings. Our exposure to fluctuations in interest rates will increase or decrease in the future with
increases or decreases in the outstanding amount under our Credit Agreement and with increases or decreases in amounts outstanding
under borrowing agreements entered into with interest rates floating at market rates.
In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments
with high-credit-quality institutions. Temporary cash investments, if any, are currently held in an overnight bank time deposit with
JPMorgan Chase Bank, N.A.
43
Item 8. Financial Statements and Supplementary Data
GETTY REALTY CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012
Consolidated Balance Sheets as of December 31, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
(PAGES)
45
46
47
49
70
44
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenues:
Revenues from rental properties
Interest on notes and mortgages receivable
Other revenue
Total revenues
Operating expenses:
Rental property expenses
Impairment charges
Environmental expenses
General and administrative expenses
Allowance (recoveries) for uncollectible accounts
Depreciation and amortization expense
Total operating expenses
Operating income
Gains on dispositions of real estate
Other income, net
Interest expense
Earnings from continuing operations
Discontinued operations:
Loss from operating activities
Gains on dispositions of real estate
Earnings (loss) from discontinued operations
Net earnings
Basic and diluted earnings per common share:
Earnings from continuing operations
Earnings (loss) from discontinued operations
Net earnings
Weighted average shares outstanding:
Basic
Stock options
Diluted
YEAR ENDED DECEMBER 31,
2014
2013
2012
$ 96,722
3,145
—
$ 96,269
3,397
3,126
$ 93,204
2,882
—
99,867
102,792
96,086
23,752
12,806
4,611
15,777
3,407
10,549
29,369
3,630
12,055
20,369
(10,952)
9,340
28,664
5,133
863
15,648
11,950
10,642
70,902
63,811
72,900
28,965
1,223
147
(9,806)
38,981
—
102
(11,667)
23,186
—
520
(9,931)
20,529
27,416
13,775
(6,106)
8,995
(2,910)
45,505
(8,208)
6,880
2,889
42,595
(1,328)
$ 23,418
$ 70,011
$ 12,447
$
$
$
0.60
0.09
0.69
$
.81
$ 1.27
$ 2.08
$
$
$
.41
(.04)
.37
33,409
—
33,397
—
33,395
—
33,409
33,397
33,395
The accompanying notes are an integral part of these consolidated financial statements.
45
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS:
Real Estate:
Land
Buildings and improvements
Less — accumulated depreciation and amortization
Real estate held for use, net
Real estate held for sale, net
Real estate, net
Net investment in direct financing leases
Deferred rent receivable (net of allowance of $7,009 at December 31, 2014 and $4,775 at December 31,
2013)
Cash and cash equivalents
Restricted cash
Notes and mortgages receivable, net
Accounts receivable (net of allowance of $4,160 at December 31, 2014 and $3,248 at December 31,
2013)
Prepaid expenses and other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Borrowings under credit line
Term loan
Mortgage payable, net
Environmental remediation obligations
Dividends payable
Accounts payable and accrued liabilities
Total liabilities
Commitments and contingencies (notes 2, 3, 4 and 5)
Shareholders’ equity:
Common stock, par value $.01 per share; authorized 50,000,000 shares; issued 33,417,203 at
December 31, 2014 and 33,397,260 at December 31, 2013
Paid-in capital
Dividends paid in excess of earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
DECEMBER 31,
2014
2013
$ 344,324
246,112
$342,944
196,607
590,436
(99,510)
539,551
(95,712)
490,926
4,343
495,269
95,764
21,049
3,111
713
34,226
4,395
32,974
443,839
22,984
—
466,823
97,147
16,893
12,035
1,000
28,793
5,106
54,605
$ 687,501
$ 682,402
$ 25,000
100,000
344
91,566
12,150
51,417
$ 58,000
100,000
—
43,472
8,423
57,416
280,477
267,311
—
—
334
463,314
(56,624)
334
462,397
(47,640)
407,024
415,091
$ 687,501
$ 682,402
100,000
The accompanying notes are an integral part of these consolidated financial statements.
46
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings
Adjustments to reconcile net earnings to net cash flow provided by operating activities:
Depreciation and amortization expense
Continuing operations
Discontinued operations
Impairment charges
Gains on dispositions of real estate
Continuing operations
Discontinued operations
Deferred rent receivable, net of allowance
Bad debt expense (recoveries)
Amortization of above-market and below-market leases
Amortization of credit line and term loan origination costs
Accretion expense
Stock-based employee compensation expense
Changes in assets and liabilities:
Accounts receivable
Prepaid expenses and other assets
Environmental remediation obligations
Accounts payable and accrued liabilities
Net cash flow provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Property acquisitions and capital expenditures
Investment in direct financing leases
Proceeds from dispositions of real estate
Continuing operations
Discontinued operations
Change in cash held for property acquisitions
Change in restricted cash
Amortization of investment in direct financing leases
Issuance of notes, mortgages and other receivables
Collection of notes and mortgages receivable
Net cash flow provided by /(used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit line
Repayments under credit line
Borrowings under term loan
Repayments under term loan
Payments of capital lease obligations
Principal payments of mortgage notes
Payments of cash dividends
Payments of loan origination costs
Cash paid in settlement of restricted stock units
Security deposits received
Net cash flow (used in) financing activities
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
47
YEAR ENDED DECEMBER 31,
2014
2013
2012
$ 23,418
$ 70,011
$ 12,447
10,549
—
21,534
9,340
587
13,425
(1,223)
(8,995)
(4,156)
1,278
(28)
1,068
3,046
917
(730)
3,934
(16,368)
(5,007)
29,237
—
(45,505)
(4,445)
(20,854)
160
1,650
3,214
971
20,847
(201)
(15,611)
10,089
43,678
(17,238)
—
(67,174)
(6,267)
4,776
15,289
16,226
287
1,382
—
2,783
23,505
3,000
(36,000)
—
—
(255)
(50)
(28,675)
—
—
314
(61,666)
(8,924)
12,035
3,111
$
—
66,349
(16,467)
(1,000)
1,025
(4,138)
20,825
(6,847)
130,400
(222,690)
100,000
(22,030)
(220)
—
(24,419)
(2,842)
—
129
(41,672)
(4,841)
16,876
$ 12,035
10,642
3,058
13,942
—
(6,866)
(4,368)
15,903
(285)
3,396
3,174
757
(15,848)
(8,004)
(9,009)
(3,054)
15,885
(4,148)
—
—
9,855
(1,615)
—
728
(2,972)
1,703
3,551
4,000
(1,410)
—
(780)
(152)
—
(8,404)
(4,144)
(18)
650
(10,258)
9,178
7,698
$ 16,876
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest paid
Income taxes
Environmental remediation obligations
Non-cash transactions
Issuance of notes and mortgage receivables related to property dispositions
Mortgage payable, net related to property acquisition
YEAR ENDED DECEMBER 31,
2014
2013
2012
$
8,735
316
13,448
$ 9,563
173
12,396
$
8,278
390
8,714
—
6,293
810
4,889
4,568
—
The accompanying notes are an integral part of these consolidated financial statements.
48
GETTY REALTY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include the accounts of Getty Realty Corp. and its wholly-owned
subsidiaries. We are a real estate investment trust (“REIT”) specializing in the ownership, leasing and financing of retail motor fuel
and convenience store properties. The accompanying consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (“GAAP”). We do not distinguish our principal business or
our operations on a geographical basis for purposes of measuring performance. We manage and evaluate our operations as a single
segment. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates, Judgments and Assumptions: The consolidated financial statements have been prepared in conformity with
GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and
expenses during the period reported. Estimates, judgments and assumptions underlying the accompanying consolidated financial
statements include, but are not limited to, receivables, deferred rent receivable, net investment in direct financing leases,
environmental remediation costs, real estate, depreciation and amortization, impairment of long-lived assets, litigation, environmental
remediation obligations, accrued liabilities, income taxes and the allocation of the purchase price of properties acquired to the assets
acquired and liabilities assumed. Application of these estimates and assumptions requires exercise of judgment as to future
uncertainties and, as a result, actual results could differ materially from these estimates.
Subsequent Events: We evaluated subsequent events and transactions for potential recognition or disclosure in our consolidated
financial statements.
New Accounting Pronouncement: In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):
Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). This guidance
defines a discontinued operation as a component or group of components disposed or classified as held for sale that represents a
strategic shift that has (or will have) a major effect on an entity’s operations and financial results; the guidance states that a strategic
shift could include a disposal of a major geographical area of operations, a major line of business, a major equity method investment
or other major parts of an entity. The guidance also provides for additional disclosure requirements in connection with both
discontinued operations and other dispositions not qualifying as discontinued operations. The guidance will be effective for annual and
interim periods beginning on or after December 15, 2014. The guidance applies prospectively to new disposals and new classifications
of disposal groups as held for sale after the effective date. We elected to early adopt this standard effective with the interim period
beginning July 1, 2014. Prior to July 1, 2014 properties identified as held for sale and/or disposed of were presented in discontinued
operations for all periods presented.
In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU
2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods
or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In
adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective
for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted.
We are currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on our financial position or results of
operations.
In August 2014, the FASB issued guidance ASU 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance requires management to evaluate whether there
is substantial doubt about the entity’s ability to continue as a going concern and, if so, disclose that fact. This guidance is effective for
annual periods ending after December 15, 2016, including interim reporting periods thereafter. The new guidance affects disclosures
only and is not expected to have a material impact on our consolidated financial position, results of operations or cash flows.
Fair Value Hierarchy: The preparation of consolidated financial statements in accordance with GAAP requires management to
make estimates of fair value that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date
of the consolidated financial statements and revenues and expenses during the period reported using a hierarchy (the “Fair Value
Hierarchy”) that prioritizes the inputs to valuation techniques used to measure the fair value. The Fair Value Hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). The levels of the Fair Value Hierarchy are as follows: “Level 1”-inputs that
reflect unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the
measurement date; “Level 2”-inputs other than quoted prices that are observable for the asset or liability either directly or indirectly,
including inputs in markets that are not considered to be active; and “Level 3”-inputs that are unobservable. Certain types of assets and
liabilities are recorded at fair value either on a recurring or non-recurring basis. Assets required or elected to be marked-to-market and
reported at fair value every reporting period are valued on a recurring basis. Other assets not required to be recorded at fair value every
49
period may be recorded at fair value if a specific provision or other impairment is recorded within the period to mark the carrying
value of the asset to market as of the reporting date. Such assets are valued on a non-recurring basis.
We had a receivable of $2,972,000 as of December 31, 2012, that was measured at fair value on a recurring basis using Level 3
inputs. Pursuant to the terms of the Litigation Funding Agreement (as defined below), in the third quarter of 2013, we received a
payment of $25,096,000 related to this receivable. We elected to account for the advances, accrued interest and litigation
reimbursements due to us pursuant to the Litigation Funding Agreement on a fair value basis. We used unobservable inputs based on
comparable transactions when determining the fair value of the Litigation Funding Agreement. We concluded that the terms of the
Litigation Funding Agreement were within a range of terms representing the market for such arrangements when considering the
unique circumstances particular to the counterparties to such funding agreements. These inputs included the potential outcome of the
litigation related to the Lukoil Complaint including the probability of the Marketing Estate prevailing in its lawsuit and the potential
amount that may be recovered by the Marketing Estate from Lukoil (as such capitalized terms are defined below). We also applied a
discount factor commensurate with the risk that the Marketing Estate may not prevail in its lawsuit. We considered that fair value is
defined as an amount of consideration that would be exchanged between a willing buyer and seller. Please refer to note 2 of our
accompanying consolidated financial statements for additional information regarding Marketing and the Master Lease.
We have mutual fund assets that are measured at fair value on a recurring basis using Level 1 inputs. We have a Supplemental
Retirement Plan for executives and other senior management employees. The amounts held in trust under the Supplemental
Retirement Plan using Level 2 inputs may be used to satisfy claims of general creditors in the event of our or any of our subsidiaries’
bankruptcy. We have liability to the employees participating in the Supplemental Retirement Plan for the participant account balances
equal to the aggregate of the amount invested at the employees’ direction and the income earned in such mutual funds.
We have certain real estate assets that are measured at fair value on a non-recurring basis using Level 3 inputs as of December
31, 2014 and 2013 of $9,266,000 and $9,590,000, respectively, where impairment charges have been recorded. Due to the subjectivity
inherent in the internal valuation techniques used in estimating fair value, the amounts realized from the sale of such assets may vary
significantly from these estimates.
The following summarizes as of December 31, 2014 our assets and liabilities measured at fair value on a recurring basis by level
within the Fair Value Hierarchy:
(in thousands)
Assets:
Mutual funds
Liabilities:
Level 1
Level 2
Level 3
Total
$ 785
$ —
$ —
$ 785
Deferred compensation
$ —
$ 785
$ —
$ 785
The following summarizes as of December 31, 2013 our assets and liabilities measured at fair value on a recurring basis by level
within the Fair Value Hierarchy:
(in thousands)
Assets:
Mutual funds
Liabilities:
Level 1
Level 2
Level 3
Total
$ 3,275
$ —
$ —
$ 3,275
Deferred compensation
$ —
$ 3,275
$ —
$ 3,275
Fair Value Disclosure of Financial Instruments: All of our financial instruments are reflected in the accompanying consolidated
balance sheets at amounts which, in our estimation based upon an interpretation of available market information and valuation
methodologies, reasonably approximate their fair values, except those separately disclosed in the notes to our consolidated financial
statements.
Discontinued Operations and Assets Held-for-Sale: We report as discontinued operations 20 properties which meet the criteria
to be accounted for as held for sale in accordance with GAAP as of the end of the current year and certain properties disposed of
during the years presented. All results of these discontinued operations are included in a separate component of income on the
consolidated statements of operations under the caption discontinued operations. This has resulted in certain amounts related to
discontinued operations in 2013 and 2012 being reclassified to conform to the 2014 presentation. We elected to early adopt ASU
2014-08 effective July 1, 2014 and, as a result, the results of operations for all qualifying disposals and properties classified as held for
sale that were not previously reported in discontinued operations as of June 30, 2014 are presented within income from continuing
operations in our consolidated statements of income.
For the year ended December 31, 2014, we sold four properties resulting in a gain of $1,223,000 that previously did not meet the
criteria to be classified as held for sale. We determined that the four properties sold did not represent a strategic shift in our operations
50
as defined in ASU 2014-08 and, as a result, the gains on dispositions of real estate for the four properties were not reflected in our
earnings from discontinued operations.
As a result of a change in circumstances that were previously considered unlikely, we reclassified eight properties from held for
sale to held and used as the properties no longer met the criteria to be held for sale during 2014. A property that is reclassified to held
and used is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted
for any depreciation expense that would have been recognized had the property been continuously classified as held and used, or (ii)
the fair value at the date of the subsequent decision not to sell.
Real estate held for sale consisted of the following at December 31:
(in thousands)
Land
Buildings and improvements
Accumulated depreciation and amortization
Real estate held for sale, net
December
2014
2013
$ 2,383
3,140
5,523
(1,180)
$ 15,586
15,138
30,724
(7,740)
$ 4,343
$ 22,984
The revenue from rental properties, impairment charges, other operating expenses and gains from dispositions of real estate
related to these properties are as follows:
(in thousands)
Revenues from rental properties
Impairment charges
Other operating income/(expenses)
Loss from operating activities
Gains from dispositions of real estate
Earnings (loss) from discontinued operations
Year ended December 31,
2014
2013
2012
$ 2,398
(8,728)
224
(6,106)
8,995
$ 4,609
(9,795)
2,276
(2,910)
45,505
$ 11,567
(8,809)
(10,966)
(8,208)
6,880
$ 2,889
$ 42,595
$ (1,328)
Real Estate: Real estate assets are stated at cost less accumulated depreciation and amortization. Upon acquisition of real estate
and leasehold interests, we estimate the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if
vacant” and identified intangible assets and liabilities (consisting of leasehold interests, above-market and below-market leases, in-
place leases and tenant relationships) and assumed debt. Based on these estimates, we allocate the estimated fair value to the
applicable assets and liabilities. Fair value is determined based on an exit price approach, which contemplates the price that would be
received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. We expense transaction costs associated with business combinations in the period incurred. When real estate assets
are sold or retired, the cost and related accumulated depreciation and amortization is eliminated from the respective accounts and any
gain or loss is credited or charged to income. We evaluate real estate sale transactions where we provide seller financing to determine
sale and gain recognition in accordance with GAAP. Expenditures for maintenance and repairs are charged to income when incurred.
(See note 10 for additional information regarding property acquisitions.)
Depreciation and Amortization: Depreciation of real estate is computed on the straight-line method based upon the estimated
useful lives of the assets, which generally range from 16 to 25 years for buildings and improvements, or the term of the lease if
shorter. Asset retirement costs are depreciated over the shorter of the remaining useful lives of underground storage tanks (“UST” or
“USTs”) or ten years for asset retirement costs related to environmental remediation obligations, which costs are attributable to the
group of assets identified at a property. Leasehold interests and in-place leases are amortized over the remaining term of the
underlying lease.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of: Assets are written down to fair value when events
and circumstances indicate that the assets might be impaired and the projected undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount of those assets. We review and adjust as necessary our depreciation estimates and
method when long-lived assets are tested for recoverability. Assets held for disposal are written down to fair value less estimated
disposition costs.
51
We recorded non-cash impairment charges aggregating $21,534,000 and $13,425,000 for the years ended December 31, 2014
and 2013, respectively, in continuing operations and in discontinued operations. Our estimated fair values, as it relates to property
carrying values were primarily based upon (i) estimated sales prices from third-party offers based on signed contracts, letters of intent
or indicative bid and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence
(this method was used to determine $4,916,000 of the $21,534,000 in impairments recognized during the year ended December 31,
2014), for which we do not have access to the unobservable inputs used to determine these estimated fair values, (ii) discounted cash
flow models (this method was used to determine $8,117,000 of the $21,534,000 in impairments recognized during the year ended
December 31, 2014) and (iii) the accumulation of asset retirement costs as a result of increases in estimated environmental liabilities
which increased the carrying value of certain properties in excess of their fair value (this method was used to determine $8,501,000 of
the $21,534,000 in impairments recognized during the year ended December 31, 2014). The non-cash impairment charges recorded
during the years ended December 31, 2014 and 2013 were attributable to reductions in estimated undiscounted cash flows expected to
be received during the assumed holding period, reductions in our estimates of value for properties held for sale and the accumulation
of asset retirement costs as a result of increases in estimated environmental liabilities which increased the carrying value of certain
properties in excess of their fair value. The estimated fair value of real estate is based on the price that would be received from the sale
of the property in an orderly transaction between market participants at the measurement date. In general, we consider multiple
internal valuation techniques when measuring the fair value of a property, all of which are based on unobservable inputs and
assumptions that are classified within Level 3 of the Fair Value Hierarchy. These unobservable inputs include assumed holding
periods ranging up to 15 years, assumed average rent increases of 2.0% annually, income capitalized at a rate of 8.0% and cash flows
discounted at a rate of 7.0%. These assessments have a direct impact on our net income because recording an impairment loss results
in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part
on assumptions regarding future rental rates and operating expenses that could differ materially from actual results in future periods.
Where properties held for use have been identified as having a potential for sale, additional judgments are required related to the
determination as to the appropriate period over which the projected undiscounted cash flows should include the operating cash flows
and the amount included as the estimated residual value. This requires significant judgment. In some cases, the results of whether
impairment is indicated are sensitive to changes in assumptions input into the estimates, including the holding period until expected
sale.
Deferred Rent Receivable and Revenue Recognition: We earn rental income under operating and direct financing leases with
tenants. Minimum lease payments from operating leases are recognized on a straight-line basis over the term of the leases. The
cumulative difference between lease revenue recognized under this method and the contractual lease payment terms is recorded as
deferred rent receivable on our consolidated balance sheets. We provide reserves for a portion of the recorded deferred rent receivable
if circumstances indicate that it is not reasonable to assume that the tenant will make all of its contractual lease payments when due
during the current term of the lease. We make estimates of the collectability of our accounts receivable related to revenue from rental
properties. We analyze accounts receivable and historical bad debt levels, customer creditworthiness and current economic trends
when evaluating the adequacy of the allowance for doubtful accounts. Additionally, with respect to tenants in bankruptcy, we estimate
the expected recovery through bankruptcy claims and increase the allowance for amounts deemed uncollectible. If our assumptions
regarding the collectability of accounts receivable prove incorrect, we could experience write-offs of the accounts receivable or
deferred rent receivable in excess of our allowance for doubtful accounts. Lease termination fees are recognized as rental income
when earned upon the termination of a tenant’s lease and relinquishment of space in which we have no further obligation to the tenant.
The present value of the difference between the fair market rent and the contractual rent for above-market and below-market leases at
the time properties are acquired is amortized into revenue from rental properties over the remaining lives of the in-place leases.
Direct Financing Leases: Income under direct financing leases is included in revenues from rental properties and is recognized
over the lease terms using the effective interest rate method which produces a constant periodic rate of return on the net investments in
the leased properties. The investments in direct financing leases are increased for interest income earned and amortized over the life of
the leases and reduced by the receipt of lease payments. We consider direct financing leases to be past-due or delinquent when a
contractually required payment is not remitted in accordance with the provisions of the underlying agreement. We evaluate each
account individually and set up an allowance when, based upon current information and events, it is probable that we will be unable to
collect all amounts due according to the existing contractual terms, and the amount can be reasonably estimated.
We review our direct financing leases at least annually to determine whether there has been an-other-than-temporary decline in
the current estimate of residual value of the property. The residual value is our estimate of what we could realize upon the sale of the
property at the end of the lease term, based on market information and third-party estimates where available. If this review indicates
that a decline in residual value has occurred that is other-than-temporary, we recognize an impairment charge. There were no
impairments of any of our direct financing leases during the years ended December 31, 2014, 2013 and 2012.
When we enter into a contract to sell properties that are recorded as direct financing leases, we evaluate whether we believe it is
probable that the disposition will occur. If we determine that the disposition is probable and therefore the property’s holding period is
reduced, we record an allowance for credit losses to reflect the change in the estimate of the undiscounted future rents. Accordingly,
the net investment balance is written down to fair value.
52
Cash and Cash Equivalents: We consider highly liquid investments purchased with an original maturity of three months or less
to be cash equivalents. Our cash and cash equivalents are held in the custody of several financial institutions, and these balances, at
times, exceed federally insurable limits.
Restricted Cash: Restricted cash consists of cash that is contractually restricted or held in escrow pursuant to various agreements
with counterparties. At December 31, 2014, restricted cash of $713,000 consisted of $463,000 for an escrow account established to
guarantee our environmental remediation obligations at several of our properties and $250,000 for tax withholdings related to a
property acquisition. At December 31, 2013, restricted cash of $1,000,000 consisted of an escrow account established in conjunction
with the sale of one of our terminal properties.
Notes and Mortgages Receivable: Notes and mortgages receivable consists of loans originated by us in conjunction with
property dispositions and funding provided to tenants in conjunction with property acquisitions. Notes and mortgages receivable are
recorded at stated principal amounts. We evaluate the collectability of both interest and principal on each loan to determine whether it
is impaired. A loan is considered to be impaired when, based upon current information and events, it is probable that we will be unable
to collect all amounts due under the existing contractual terms. When a loan is considered to be impaired, the amount of loss is
calculated by comparing the recorded investment to the fair value determined by discounting the expected future cash flows at the
loan’s effective interest rate or to the fair value of the underlying collateral, if the loan is collateralized. Interest income on performing
loans is accrued as earned. Interest income on impaired loans is recognized on a cash basis. We do not provide for an additional
allowance for loan losses based on the grouping of loans as we believe the characteristics of the loans are not sufficiently similar to
allow an evaluation of these loans as a group for a possible loan loss allowance. As such, all of our loans are evaluated individually for
impairment purposes.
Environmental Remediation Obligations: We record the fair value of a liability for an environmental remediation obligation as
an asset and liability when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can
be reasonably estimated. Environmental remediation obligations are estimated based on the level and impact of contamination at each
property. The accrued liability is the aggregate of the best estimate of the fair value of cost for each component of the liability. The
accrued liability is net of recoveries of environmental costs from state underground storage tank (“UST” or “USTs”) remediation
funds with respect to both past and future environmental spending based on estimated recovery rates developed from prior experience
with the funds. Net environmental liabilities are currently measured based on their expected future cash flows which have been
adjusted for inflation and discounted to present value. We accrue for environmental liabilities that we believe are allocable to other
potentially responsible parties if it becomes probable that the other parties will not pay their environmental remediation obligations.
Litigation: Legal fees related to litigation are expensed as legal services are performed. We provide for litigation accruals,
including certain litigation related to environmental matters, when it is probable that a liability has been incurred and a reasonable
estimate of the liability can be made. If the estimate of the liability can only be identified as a range, and no amount within the range is
a better estimate than any other amount, the minimum of the range is accrued for the liability. We accrue our share of environmental
litigation liabilities based on our assumptions of the ultimate allocation method and share that will be used when determining our share
of responsibility.
Income Taxes: We and our subsidiaries file a consolidated federal income tax return. Effective January 1, 2001, we elected to
qualify, and believe we are operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, we generally will not
be subject to federal income tax on qualifying REIT income, provided that distributions to our shareholders equal at least the amount
of our taxable income as defined under the Internal Revenue Code. We accrue for uncertain tax matters when appropriate. The accrual
for uncertain tax positions is adjusted as circumstances change and as the uncertainties become more clearly defined, such as when
audits are settled or exposures expire. Tax returns for the years 2011, 2012 and 2013, and tax returns which will be filed for the year
ended 2014, remain open to examination by federal and state tax jurisdictions under the respective statute of limitations.
In the third quarter of 2013, we submitted to the Internal Revenue Service (“IRS”) a request seeking a ruling that a portion of the
payments we received from the Marketing Estate, including amounts related to the Litigation Funding Agreement (see note 2 for
additional information regarding the Lukoil Settlement and the Litigation Funding Agreement), be treated either as qualifying income
or excluded from gross income for the purposes of the REIT qualification gross income tests either as a matter of law or pursuant to
the discretionary authority granted by Congress to the IRS to determine whether certain types of income are an outgrowth of a REIT’s
business of owning and operating real estate. In January 2014, we received a favorable ruling from the IRS indicating that a portion of
the payments received from the Marketing Estate will be treated as qualifying income and the remainder will be excluded from gross
income for the purposes of the REIT qualification gross income tests. Therefore, none of the cash flow received from the Marketing
Estate, including amounts related to the Litigation Funding Agreement, will be treated as non-qualifying income for purposes of the
REIT qualification gross income tests.
Earnings per Common Share: Basic earnings per common share gives effect, utilizing the two-class method, to the potential
dilution from the issuance of common shares in settlement of restricted stock units (“RSU” or “RSUs”) which provide for non-
forfeitable dividend equivalents equal to the dividends declared per common share. Basic earnings per common share is computed by
dividing net earnings less dividend equivalents attributable to RSUs by the weighted-average number of common shares outstanding
during the year. Diluted earnings per common share, also gives effect to the potential dilution from the exercise of stock options
53
utilizing the treasury stock method. There were 5,000 stock options excluded from the earnings per share calculations below as they
were anti-dilutive as of December 31, 2014, 2013 and 2012, respectively.
(in thousands):
Earnings from continuing operations
Less dividend equivalents attributable to RSUs outstanding
Earnings from continuing operations attributable to common
shareholders
Earnings (loss) from discontinued operations
Less dividend equivalents attributable to RSUs outstanding
Earnings (loss) from discontinued operations attributable to common
Year ended December 31,
2014
$ 20,529
(320)
2013
$ 27,416
(252)
20,209
2,889
(71)
27,164
42,595
(392)
2012
$ 13,775
(89)
13,686
(1,328)
(45)
shareholders
2,818
42,203
(1,373)
Net earnings attributable to common shareholders used for basic and
diluted earnings per share calculation
$ 23,027
$ 69,367
$ 12,313
Weighted-average number of common shares outstanding:
Basic
Stock options
Diluted
RSUs outstanding at the end of the period
33,409
—
33,409
33,397
—
33,397
33,395
—
33,395
333
296
216
Stock-Based Compensation: Compensation cost for our stock-based compensation plans using the fair value method was
$917,000, $971,000 and $757,000 for the years ended December 31, 2014, 2013 and 2012, respectively, and is included in general and
administrative expenses in the accompanying consolidated statements of operations.
Reclassifications: Certain amounts related to discontinued operations for 2013 and 2012 have been reclassified to conform to
the 2014 presentation.
Dividends: For the year ended December 31, 2014, we paid cash dividends of $28,675,000 or $0.85 per share (which consisted
of $26,990,000 or $0.80 per share of regular quarterly cash dividends and a $1,685,000 or $0.05 per share special cash dividend). For
the year ended December 31, 2013, we paid cash dividends of $24,419,000 or $0.725 per share.
Out-of-Period Adjustment: We corrected a misstatement in our recording of prepaid real estate taxes and real estate tax expense
for the year ended 2013, which decreased our net earnings by $420,000 during the quarter ended March 31, 2014. We concluded that
this adjustment was not material to our results for this or any of the prior periods.
2. LEASES
As of December 31, 2014, we owned 757 properties and leased 106 properties from third-party landlords. Our 863 properties are
located in 19 states across the United States and Washington, D.C., with concentrations in the Northeast and Mid-Atlantic regions.
Substantially all of our properties are leased on a triple-net basis primarily to petroleum distributors and, to a lesser extent, individual
operators. Generally our tenants supply fuel and either operate our properties directly or sublet our properties to operators who operate
their gas stations, convenience stores, automotive repair service facilities or other businesses at our properties. Our triple-net tenants
are responsible for the payment of all taxes, maintenance, repairs, insurance and other operating expenses relating to our properties,
and are also responsible for environmental contamination occurring during the terms of their leases and in certain cases also for
environmental contamination that existed before their leases commenced. (See note 5 for additional information regarding
environmental obligations.) Substantially all of our tenants’ financial results depend on the sale of refined petroleum products and
rental income from their subtenants. As a result, our tenants’ financial results are highly dependent on the performance of the
petroleum marketing industry, which is highly competitive and subject to volatility. During the terms of our leases, we monitor the
credit quality of our triple-net tenants by reviewing their published credit rating, if available, reviewing publicly available financial
statements, or financial or other operating statements which are delivered to us pursuant to applicable lease agreements, monitoring
news reports regarding our tenants and their respective businesses, and monitoring the timeliness of lease payments and the
performance of other financial covenants under their leases.
Revenues from rental properties included in continuing operations for the years ended December 31, 2014, 2013 and 2012 were
$96,722,000, $96,269,000 and $93,204,000, respectively. Rental income contractually due or received from our tenants, including
amounts realized under our prior interim fuel supply agreements, included in revenues from rental properties in continuing operations
was $77,695,000, $72,964,000 and $77,904,000 for the years ended December 31, 2014, 2013 and 2012, respectively. “Pass-through”
54
real estate taxes and other municipal charges paid by us which were reimbursable by our tenants pursuant to the terms of triple-net
lease agreements included in revenues from rental properties and rental property expenses in continuing operations totaled
$13,777,000, $15,405,000 and $10,867,000 for the years ended December 31, 2014, 2013 and 2012, respectively. Total revenues for
the year ended December 31, 2013 included $3,126,000 of other revenue recorded for the partial recovery of damages stemming from
Marketing’s default of its obligations under the Master Lease (as described in more detail below). Revenues from rental properties
contractually due or received from Marketing under the Master Lease through its termination on April 30, 2012 (as described in more
detail below) were $17,004,000 for the year ended December 31, 2012. Revenues from rental properties included in continuing
operations for the year ended December 31, 2013 also include a net loss of $1,374,000 for amounts realized under interim fuel supply
agreements through the termination of the agreements, as compared to a net gain of $1,763,000 for the year ended December 31, 2012.
In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due or
received during the periods presented. As a result, revenues from rental properties include non-cash adjustments recorded for deferred
rental revenue due to the recognition of rental income on a straight-line (or average) basis over the current lease term, the net
amortization of above-market and below-market leases, recognition of rental income recorded under direct financing leases using the
effective interest method which produces a constant periodic rate of return on the net investments in the leased properties and the
amortization of deferred lease incentives (the “Revenue Recognition Adjustments”). Revenue Recognition Adjustments included in
revenues from rental properties in continuing operations were $5,251,000, $7,900,000 and $4,433,000 for the years ended December
2014, 2013 and 2012, respectively. We provide reserves for a portion of the recorded deferred rent receivable if circumstances indicate
that a tenant will not make all of its contractual lease payments during the current lease term. Our assessments and assumptions
regarding the recoverability of the deferred rent receivable are reviewed on an ongoing basis and such assessments and assumptions
are subject to change.
The components of the $95,764,000 net investment in direct financing leases as of December 31, 2014 are minimum lease
payments receivable of $191,491,000 plus unguaranteed estimated residual value of $13,979,000 less unearned income of
$109,706,000. The components of the $97,147,000 net investment in direct financing leases as of December 31, 2013 were minimum
lease payments receivable of $203,438,000 plus unguaranteed estimated residual value of $13,979,000 less unearned income of
$120,270,000.
Future contractual minimum annual rentals receivable from our tenants, which have terms in excess of one year as of
December 31, 2014, are as follows (in thousands):
YEAR ENDING
DECEMBER 31,
2015
2016
2017
2018
2019
Thereafter
OPERATING LEASES
70,998
$
71,045
70,538
69,609
68,642
456,466
DIRECT
FINANCING
LEASES
$
12,121
12,308
12,622
12,872
13,078
128,490
TOTAL(a)
$ 83,119
83,353
83,160
82,481
81,720
584,956
(a)
Includes $74,559,000 of future minimum annual rentals receivable under subleases.
We have obligations to lessors under non-cancelable operating leases which have terms in excess of one year, principally for
gasoline stations and convenience stores. The leased properties have a remaining lease term averaging over ten years, including
renewal options. Future minimum annual rentals payable under such leases, excluding renewal options, are as follows: 2015 —
$6,648,000, 2016 — $5,869,000, 2017 — $4,526,000, 2018 — $3,497,000, 2019 — $2,385,000 and $5,080,000 thereafter.
Rent expense, substantially all of which consists of minimum rentals on non-cancelable operating leases, amounted to
$6,088,000, $7,092,000 and $7,903,000 for the years ended December 31, 2014, 2013 and 2012, respectively, and is included in rental
property expenses using the straight-line method. Rent received under subleases for the years ended December 31, 2014, 2013 and
2012 was $10,358,000, $10,715,000 and $11,809,000, respectively.
Marketing and the Master Lease
Approximately 490 of the properties we own or lease as of December 31, 2014 were previously leased to Getty Petroleum
Marketing Inc. (“Marketing”) pursuant to a master lease (the “Master Lease”). In December 2011, Marketing filed for Chapter 11
bankruptcy protection in the U.S. Bankruptcy Court. The Master Lease was terminated effective April 30, 2012, and in July 2012, the
Bankruptcy Court approved Marketing’s Plan of Liquidation and appointed a trustee (the “Liquidating Trustee”) to oversee liquidation
of the Marketing estate (the “Marketing Estate”). We incurred significant costs associated with Marketing’s bankruptcy, including
legal expenses, of which $772,000, $3,700,000 and $2,600,000, respectively, are included in general and administrative expenses for
the years ended December 31, 2014, 2013 and 2012, respectively.
55
In December 2011, the Marketing Estate filed a lawsuit (the “Lukoil Complaint”) against Marketing’s former parent, Lukoil
Americas Corporation, and certain of its affiliates (collectively, “Lukoil”). In October 2012, we entered into an agreement with the
Marketing Estate to make loans and otherwise fund up to an aggregate amount of $6,725,000 to prosecute the Lukoil Complaint and
for certain other expenses incurred in connection with the wind-down of the Marketing Estate (the “Litigation Funding Agreement”).
We ultimately advanced $6,526,000 in the aggregate to the Marketing Estate pursuant to the Litigation Funding Agreement. The
Litigation Funding Agreement also provided that we were entitled to be reimbursed for up to $1,300,000 of our legal fees incurred in
connection with the Litigation Funding Agreement.
On July 29, 2013, the Bankruptcy Court approved a settlement of the claims made in the Lukoil Complaint (the “Lukoil
Settlement”). The terms of the Lukoil Settlement included a collective payment to the Marketing Estate of $93,000,000. In August
2013, the settlement payment was received by the Marketing Estate of which $25,096,000 was distributed to us pursuant to the
Litigation Funding Agreement and $6,585,000 was distributed to us in full satisfaction of our post-petition priority claims related to
the Master Lease.
Of the $25,096,000 received by us in the third quarter of 2013 pursuant to the Litigation Funding Agreement, $7,976,000 was
applied to the advances made to the Marketing Estate plus accrued interest; $13,994,000 was applied to unpaid rent and real estate
taxes due from Marketing and the related bad debt reserve was reversed in full; and the remainder of $3,126,000 was recorded as
additional income attributed to the partial recovery of damages resulting from Marketing’s default of its obligations under the Master
Lease and is reflected in continuing operations in our consolidated statements of operations as other revenue.
In accordance with GAAP, we recognized in revenue from rental properties in our consolidated statements of operations the full
contractual rent and real estate obligations due to us by Marketing during the term of the Master Lease and provided bad debt reserves
included in allowance for uncollectible accounts and in earnings (loss) from discontinued operations in our consolidated statements of
operations for our estimate of uncollectible amounts due from Marketing. During the year ended December 31, 2013, we received
$34,251,000 of funds from the Marketing Estate from our post-petition priority claims and the Lukoil Settlement thereby eliminating
the previously provided reserves. The reduction in our bad debt reserve for uncollectible amounts due from Marketing for the year
ended December 31, 2013 of $22,782,000 is reflected in our consolidated statements of operations by reducing allowance for
uncollectible accounts in continuing operations by $16,963,000 and increasing earnings from operating activities included in
discontinued operations by $5,819,000.
During the year ended December 31, 2012 we had a net increase in our bad debt reserves related to Marketing and the Master
Lease of $13,980,000. The increase was related to $16,428,000 of uncollected rent and real estate taxes due from Marketing offset by
$2,448,000 received from the Marketing Estate pursuant to our post-petition priority claims related to the Master Lease. The net
increase in our bad debt reserve for uncollectible amounts due from Marketing for the year ended December 31, 2012 of $13,980,000
is reflected in our consolidated statements of operations by increasing allowance for uncollectible accounts in continuing operations
by $10,409,000 and decreasing earnings from operating activities included in discontinued operations by $3,571,000.
As part of Marketing’s bankruptcy proceeding, we maintained significant pre-petition and post-petition unsecured claims
against Marketing. On March 3, 2015, we entered into a settlement agreement (the “Settlement Agreement”) with the Liquidating
Trustee of the Marketing Estate, which resolved the claims we asserted in Marketing’s bankruptcy case in the Bankruptcy Court. The
Settlement Agreement is subject to the approval of the Bankruptcy Court at a hearing that is scheduled to be held on April 7, 2015.
Pursuant to the terms of the Settlement Agreement, we will receive an interim distribution from the Marketing Estate of approximately
$6,000,000 (the “Interim Distribution”) within 15 days of the approval of the Settlement Agreement by the Bankruptcy Court. In
addition, if the Settlement Agreement is approved by the Bankruptcy Court, we expect to receive additional distributions from the
Marketing Estate during 2015 on account of our claims. The Interim Distribution and any subsequent distributions received by us from
the Marketing Estate depend on our percentage of the total amount of allowed general unsecured claims against Marketing. The
Liquidating Trustee and the Bankruptcy Court have not yet completed the process of determining the total amount of allowed general
unsecured claims against Marketing. We anticipate that the sum of all additional distributions will not materially exceed the amount of
the Interim Distribution. We cannot provide any assurance as to whether the Settlement Agreement will be approved, or, if approved,
the total amount of the distributions we will receive from the Marketing Estate on account of our claims or timing of such future
distributions.
Leasing Activities
As of December 31, 2014, we have entered into long-term triple-net leases with petroleum distributors for 13 separate property
portfolios comprising approximately 440 properties in the aggregate that were previously leased to Marketing. We have also entered
into month-to-month license agreements with occupants of 26 properties previously leased to Marketing (substantially all of whom
were former tenants of Marketing) allowing such occupants to continue to occupy and use these properties as gas stations,
convenience stores, automotive repair service facilities or other businesses. These month-to-month license agreements are intended as
interim occupancy arrangements until these properties are sold or leased on a triple-net basis. Under our month-to-month license
agreements, we receive monthly licensing fees and are responsible for the payment of Property Expenditures, certain environmental
compliance costs and costs associated with any environmental remediation.
56
The long-term triple-net leases with petroleum distributors are unitary triple-net lease agreements generally with an initial term
of 15 years, and options for successive renewal terms of up to 20 years. Rent is scheduled to increase at varying intervals of up to five
years on the anniversary of the commencement date of the leases. Several of the leases provide for additional rent based on the
aggregate volume of fuel sold. In addition, the majority of the leases require the tenants to make capital expenditures at our properties
substantially all of which are related to the replacement of USTs that are owned by our tenants. As of December 31, 2014, we have a
remaining commitment to co-invest as much as $14,181,000 in the aggregate with our tenants for a portion of such capital
expenditures within the next approximately five years. Our commitment provides us with the option to either reimburse our tenants, or
to offset rent when these capital expenditures are made. This deferred expense is recognized on a straight-line basis as a reduction of
rental revenue in our consolidated statements of operations over the terms of the various leases.
As part of the triple-net leases for properties previously leased to Marketing, we transferred title of the USTs to our tenants, and
the obligation to pay for the retirement and decommissioning or removal of USTs at the end of their useful life or earlier if
circumstances warranted was fully or partially transferred to our new tenants. We remain contingently liable for this obligation in the
event that our tenants do not satisfy their responsibilities. Accordingly, through December 31, 2014, we removed $12,878,000 of asset
retirement obligations and $10,538,000 of net asset retirement costs related to USTs from our balance sheet. The cumulative net
amount of $2,340,000 is recorded as deferred rental revenue and will be recognized on a straight-line basis as additional revenues
from rental properties over the terms of the various leases. We incurred $60,000, $365,000 and $3,147,000 of lease origination costs
for the years ended December 31, 2014, 2013 and 2012, respectively, which deferred expense is recognized on a straight-line basis as
amortization expense in our consolidated statements of operations over the terms of the various leases.
Chestnut Petroleum Dist. Inc.
As of December 31, 2014, we leased 118 gasoline station and convenience store properties in two separate unitary leases to
subsidiaries of Chestnut Petroleum Dist. Inc. We lease 58 properties to CPD NY Energy Corp. (“CPD NY”) and 60 properties to
NECG Holdings Corp. (“NECG”). CPD NY and NECG together represented 19%, 21% and 18% of our rental revenues for the years
ended December 31, 2014, 2013 and 2012, respectively. Although we have separate, non-cross defaulted leases with each of these
subsidiaries, because such subsidiaries are affiliated with one another and under common control, a material adverse impact on one
subsidiary, or failure of one subsidiary to perform its rental and other obligations to us, may contribute to a material adverse impact on
the other subsidiary and/or failure of the other subsidiary to perform its rental and other obligations to us.
The selected combined audited financial data of CPD NY and NECG, which has been prepared by Chestnut Petroleum Dist.
Inc.’s management and audited by a third-party accounting firm, is provided below:
(in thousands)
Operating Data:
Total revenue
Gross profit
Net income
Balance Sheet Data:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
2014
$ 439,392
32,836
2,012
Year ended
December 31,
2013
$ 451,145
28,721
229
2012
$ 424,519
26,616
1,968
December 31,
2014
December 31,
2013
$
13,520
28,995
2,531
28,204
$
10,944
28,852
13,985
16,043
Eviction proceedings against a holdover group of former Marketing subtenants who continued to occupy properties in the State
of Connecticut which are subject to our unitary lease with NECG (the “NECG Lease”) had a material adverse impact on NECG’s
operations and profitability. In June 2013, the Connecticut Superior Court ruled in our favor with respect to all 24 locations involved
in these proceedings. However, in July 2013, a majority of the operators against whom these Superior Court rulings were made
appealed the decisions. Following the Superior Court ruling, 16 of the 24 former operators against whom eviction proceedings were
brought either reached agreements with NECG to remain at their properties or voluntarily vacated them, and in either case their
appeals were withdrawn. Eight of the operators remained in contested occupancy of the subject sites during the pendency of their
appeal. On January 27, 2015, the Connecticut Supreme Court, in a written opinion, affirmed the Superior Court rulings in favor of
NECG and us. As a result, we anticipate that in the immediate future we will be regaining possession of the eight locations that were
still subject to appeal.
57
In August 2013, we entered into an agreement to modify the NECG Lease and, as part of such agreement, we deferred portions
of the scheduled rent payments due from NECG. This lease modification agreement also included provisions under which we can
recapture and sever properties from the NECG Lease and, as of December 31, 2014, we have removed 24 of the original 84 properties
from the NECG Lease. As a result of the disruption and costs associated with the holdover litigation, NECG was not current in its rent
and certain other obligations to us under the NECG Lease. As of December 31, 2014, we have a total accounts receivable bad debt
reserve related to the NECG Lease of $1,704,000 for amounts which we do not believe we will collect from NECG.
As a result of the developments with NECG described above, we concluded that it was probable that we would not receive from
NECG the entire amount of the contractual lease payments owed to us under the NECG Lease. Accordingly, during the year ended
December 31, 2014, we recorded a non-cash allowance for deferred rent receivable related to the NECG Lease of $1,540,000. As of
December 31, 2014, we have fully reserved for the outstanding deferred rent receivable balance of $6,315,000. This non-cash
allowance reduced our net earnings for the year ended December 31, 2014, but did not impact our cash flow from operating activities.
We continue to be engaged in discussions with NECG about additional modifications to the NECG Lease, which will likely
include the removal of additional properties from the NECG Lease. Our discussions with NECG are ongoing and we cannot predict
the ultimate outcome of these discussions and their impact on the final size of the portfolio or future rental income associated with the
NECG Lease. As of December 31, 2014, and the date of this Annual Report on Form 10-K, NECG is current in its rent payments to
us, as amended.
Capitol Petroleum Group
As of December 31, 2014, we leased 97 gasoline station and convenience store properties in four separate unitary leases to
subsidiaries of Capitol Petroleum Group, LLC (“Capitol”). We lease 37 properties to White Oak Petroleum, LLC, 24 properties to
Hudson Petroleum Realty, LLC, 20 properties to Dogwood Petroleum Realty, LLC and 16 properties to Big Apple Petroleum Realty,
LLC. In aggregate, these Capitol affiliates represented 18%, 15% and 7% of our rental revenues for the years ended December 31,
2014, 2013 and 2012, respectively. Although we have separate, non-cross defaulted leases with each of these subsidiaries, because
such subsidiaries are affiliated with one another and under common control, a material adverse impact on one subsidiary, or failure of
one subsidiary to perform its rental and other obligations to us, may contribute to a material adverse impact on one or more of the
other subsidiaries and/or failure of one or more of the other subsidiaries to perform its rental and other obligations to us.
The selected combined audited financial data of White Oak Petroleum, LLC, Hudson Petroleum Realty, LLC, Dogwood
Petroleum Realty, LLC and Big Apple Petroleum Realty, LLC, which has been prepared by Capitol’s management and audited by a
third-party accounting firm, is provided below:
(in thousands)
Operating Data:
Total revenue
Gross profit
Net (loss) income
Balance Sheet Data:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Hanuman Business, Inc.
2014
$ 344,820
9,566
(3,343)
December 31,
2014
$
9,288
108,491
13,793
134,700
Year ended
December 31,
2013
$ 356,004
10,500
(4,011)
2012
$ 189,958
7,436
1,115
December 31,
2013
$
9,165
112,502
10,880
135,210
As of December 31, 2014, we have a portfolio of 61 operating properties located in Southern New Jersey and Eastern
Pennsylvania, which are subject to a unitary triple-net lease (the “Ramoco Lease”) with Hanuman Business, Inc. (d/b/a “Ramoco”).
We have entered into a lease modification agreement with Ramoco whereby we have agreed to defer portions of rent due to us under
the Ramoco Lease. As a result of the developments with Ramoco, we concluded that it was probable that we would not receive from
Ramoco the entire amount of the contractual lease payments owed to us under the Ramoco Lease. Accordingly, during the fourth
quarter of 2014, we fully reserved for the outstanding deferred rent receivable balance by recording a non-cash allowance for deferred
58
rent receivable related to the Ramoco Lease of $694,000. This non-cash allowance reduced our net earnings for the year ended
December 31, 2014, but did not impact our cash flow from operating activities.
We are engaged in ongoing discussions with Ramoco about additional modifications to the Ramoco Lease, which we anticipate
will include the removal of properties from the Ramoco Lease. We cannot predict the ultimate outcome of these discussions and their
impact on the final size of the portfolio or future rental income associated with the Ramoco Lease. As of December 31, 2014, and the
date of this Annual Report on Form 10-K, Ramoco is current in its rent payments to us, as amended.
3. COMMITMENTS AND CONTINGENCIES
Credit Risk
In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments,
if any, with high credit quality institutions. Temporary cash investments, if any, are currently held in an overnight bank time deposit
with JPMorgan Chase Bank, N.A. and these balances, at times, exceed federally insurable limits.
Legal Proceedings
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of December 31,
2014 and 2013, we had accrued $11,040,000 and $11,423,000, respectively, for certain of these matters which we believe were
appropriate based on information then currently available. We have recorded provisions for litigation losses aggregating $130,000 and
$7,956,000 for certain of these matters during the years ended December 31, 2014 and 2013, respectively. We are unable to estimate
ranges in excess of the amount accrued with any certainty for these matters. It is possible that our assumptions regarding the ultimate
allocation method and share of responsibility that we used to allocate environmental liabilities may change, which may result in our
providing an accrual, or adjustments to the amounts recorded, for environmental litigation accruals. Matters related to our former
Newark, New Jersey Terminal and the Lower Passaic River and MTBE litigations in the states of New Jersey and Pennsylvania, in
particular, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay
dividends or stock price.
Matters related to our former Newark, New Jersey Terminal and the Lower Passaic River
In September 2003, we received a directive (the “Directive”) issued by the New Jersey Department of Environmental Protection
(“NJDEP”) under the New Jersey Spill Compensation and Control Act. The Directive indicated that we are one of approximately 66
potentially responsible parties for alleged natural resource damages (“NRD” or “NRDs”) resulting from the discharges of hazardous
substances along the lower Passaic River (the “Lower Passaic River”). The Directive provided, among other things, that the recipients
thereof must conduct an assessment of the natural resources that have been injured by the discharges into the Lower Passaic River and
must implement interim compensatory restoration for the injured natural resources. The NJDEP alleges that our liability arises from
alleged discharges originating from our former Newark, New Jersey Terminal site (which was sold in October 2013). We responded to
the Directive by asserting that we were not liable. There has been no material activity and/or communications by the NJDEP with
respect to the Directive since early after its issuance.
In May 2007, the United States Environmental Protection Agency (“EPA”) entered into an Administrative Settlement
Agreement and Order on Consent (“AOC”) with over 70 parties, most of which are also members of a Cooperating Parties Group
(“CPG”) who have collectively agreed to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for a 17 mile stretch of the
Lower Passaic River in New Jersey. We are a party to the AOC and are a member of the CPG. The RI/FS is intended to address the
investigation and evaluation of alternative remedial actions with respect to alleged damages to the Lower Passaic River, which is
currently scheduled to be completed in 2015. Subsequently, certain members of the CPG entered into an Administrative Settlement
Agreement and Order on Consent (“10.9 AOC”) effective June 18, 2012 to perform certain remediation activities, including removal
and capping of sediments at the river mile 10.9 area and certain testing. The EPA also issued a Unilateral Order to Occidental
Chemical Corporation (“Occidental”) directing Occidental to participate and contribute to the cost of the river mile 10.9 work. On
April 11, 2014, the EPA issued a Focused Feasibility Study (“FFS”) with proposed remedial alternatives to address cleanup of the
lower 8-mile stretch of the Lower Passaic River. While the EPA’s preferred approach would involve bank-to-bank dredging and
installing an engineered cap, the FFS is subject to public comments and/or objections that must be considered by the EPA before a
final remedial approach is selected and thus many uncertainties remain with respect to the final proposed remedy for the lower 8-miles
of the Lower Passaic River. The FFS, RI/FS, AOC and 10.9 AOC do not resolve liability issues for remedial work or the restoration of
or compensation for alleged natural resource damages to the Lower Passaic River, which are not known at this time. Our ultimate
liability, if any, in the pending and possible future proceedings pertaining to the Lower Passaic River is uncertain and subject to
numerous contingencies which cannot be predicted and the outcome of which are not yet known.
59
MTBE Litigation – State of New Jersey
We are defending against a lawsuit brought by various governmental agencies of the State of New Jersey, including the NJDEP
alleging various theories of liability due to contamination of groundwater with methyl tertiary butyl ether (a fuel derived from
methanol, commonly referred to as “MTBE”) involving multiple locations throughout the State of New Jersey (the “New Jersey MDL
Proceedings”). The complaint names as defendants approximately 50 petroleum refiners, manufacturers, distributors and retailers of
MTBE or gasoline containing MTBE. The State of New Jersey is seeking reimbursement of significant clean-up and remediation costs
arising out of the alleged release of MTBE containing gasoline in the State of New Jersey and is asserting various natural resource
damage claims as well as liability against the owners and operators of gas station properties from which the releases occurred.
Although the ultimate outcome of the New Jersey MDL Proceedings cannot be ascertained at this time, we believe it is probable that
this litigation will be resolved in a manner that is unfavorable to us. Preliminary settlement communications from the plaintiffs
indicated that they were seeking $88,000,000 collectively from us, Marketing and Lukoil. Subsequent communications from the
plaintiffs indicate that they are seeking approximately $24,000,000 from us. We have countered with a settlement offer on behalf of
the Company only, which was rejected. We do not believe that plaintiffs’ settlement proposal is realistic given the legal theories and
facts applicable to our activities and gas stations, and affirmative defenses available to us, all of which we believe have not been
sufficiently developed in the proceedings. We continue to engage in a settlement negotiation and a dialogue to educate the plaintiff’s
counsel on the unique nature of the Company and our business as compared to the other defendants in the litigation. In addition, we
are pursuing claims for reimbursement of monies expended in the defense and settlement of certain MTBE cases under pollution
insurance policies previously obtained by Marketing and under which we believe we are entitled to coverage; however, we have not
yet confirmed whether and to what extent such coverage may actually be available. We are unable to estimate with certainty the
amount of possible loss in excess of the amount accrued for the New Jersey MDL Proceedings as we do not believe that plaintiffs’
settlement proposal is realistic and there remains uncertainty as to the allegations in this case as they relate to us, our defenses to the
claims, our rights to indemnification or contribution from other parties and the aggregate possible amount of damages for which we
may be held liable. Our best estimate of the loss within a range of loss has been accrued for; however, it is possible that losses related
to the New Jersey MDL Proceedings could result in a loss in excess of the amount accrued as of December 31, 2014 and such
additional losses could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to
pay dividends or stock price.
MTBE Litigation – State of Pennsylvania
On June 19, 2014, the Commonwealth of Pennsylvania filed a complaint in the Court of Common Pleas, Philadelphia County
alleging various theories of liability due to alleged statewide MTBE contamination in Pennsylvania (the “Complaint”).
The Complaint names us and more than 50 other defendants, including but not limited to Exxon Mobil, various BP entities,
Chevron, Citgo, Gulf, Lukoil Americas, Getty Petroleum Marketing Inc., Marathon, Hess, Shell Oil, Texaco, Valero, as well as other
smaller petroleum refiners, manufacturers, distributors and retailers of MTBE or gasoline containing MTBE.
The Complaint seeks compensation, among other asserted causes of action, for NRDs and for injuries sustained as a result of
“defendants’ unfair and deceptive trade practices and acts in the marketing of MTBE and gasoline containing MTBE.” Plaintiffs also
seek to recover costs paid or incurred by the State of Pennsylvania to detect, treat and remediate MTBE from public and private water
wells and groundwater. Plaintiffs have recently filed an amended Complaint asserting additional causes of action against the
defendants. We have joined with other defendants in filing motions to dismiss the claims against us, which remain pending with the
Court.
We intend to defend vigorously against the Complaint. Our ultimate liability, if any, in this proceeding is uncertain and subject
to numerous contingencies which cannot be predicted and the outcome of which are not yet known.
4. CREDIT AGREEMENT AND PRUDENTIAL LOAN AGREEMENT
Credit Agreement
On February 25, 2013, we entered into a $175,000,000 senior secured revolving credit agreement (the “Credit Agreement”) with
a group of commercial banks led by JPMorgan Chase Bank, N.A. (the “Bank Syndicate”), which is scheduled to mature in August
2015. Subject to the terms of the Credit Agreement, we have the option to extend the term of the Credit Agreement for one additional
year to August 2016. The Credit Agreement allocates $25,000,000 of the total Bank Syndicate commitment to a term loan and
$150,000,000 to a revolving credit facility. Subject to the terms of the Credit Agreement, we have the option to increase by
$50,000,000 the amount of the revolving credit facility to $200,000,000. The Credit Agreement permits borrowings at an interest rate
equal to the sum of a base rate plus a margin of 1.50% to 2.00% or a LIBOR rate plus a margin of 2.50% to 3.00% based on our
leverage at the end of each quarterly reporting period. The annual commitment fee on the undrawn funds under the Credit Agreement
60
is 0.30% to 0.40% based on our leverage at the end of each quarterly reporting period. The Credit Agreement does not provide for
scheduled reductions in the principal balance prior to its maturity. As of December 31, 2014 and 2013, borrowings under the Credit
Agreement were $25,000,000 and $58,000,000, respectively. The interest rate on Credit Agreement borrowings at December 31, 2014
was approximately 2.7% per annum.
The Credit Agreement provides for collateral in the form of, among other items, mortgage liens on certain of our properties. As
of December 31, 2014 and 2013, the mortgaged properties had an aggregate net book value of $153,741,000 and $154,117,000,
respectively. The parties to the Credit Agreement and the Prudential Loan Agreement (as defined below) share the collateral pursuant
to the terms of an inter-creditor agreement. On December 23, 2013, we amended the Credit Agreement to change certain definitions
and financial covenant calculations provided for in the agreement. The Credit Agreement contains customary financial covenants such
as loan to value, leverage and coverage ratios and minimum tangible net worth, as well as limitations on restricted payments, which
may limit our ability to incur additional debt or pay dividends. The Credit Agreement contains customary events of default, including
default under the Prudential Loan Agreement, change of control and failure to maintain REIT status. Any event of default, if not cured
or waived, would increase by 200 basis points (2.00%) the interest rate we pay under the Credit Agreement and prohibit us from
drawing funds against the Credit Agreement and could result in the acceleration of our indebtedness under the Credit Agreement and
could also give rise to an event of default and could result in the acceleration of our indebtedness under the Prudential Loan
Agreement. We may be prohibited from drawing funds against the revolving credit facility if there is a material adverse effect on our
business, assets, prospects or condition.
Prudential Loan Agreement
On February 25, 2013, we entered into a $100,000,000 senior secured term loan agreement with the Prudential Insurance
Company of America (the “Prudential Loan Agreement”), which matures in February 2021. The Prudential Loan Agreement bears
interest at 6.00%. The Prudential Loan Agreement does not provide for scheduled reductions in the principal balance prior to its
maturity. The parties to the Credit Agreement and the Prudential Loan Agreement share the collateral described above pursuant to the
terms of an inter-creditor agreement. On December 23, 2013, we amended the Prudential Loan Agreement to change certain
definitions and financial covenant calculations provided for in the agreement. The Prudential Loan Agreement contains customary
financial covenants such as loan to value, leverage and coverage ratios and minimum tangible net worth, as well as limitations on
restricted payments, which may limit our ability to incur additional debt or pay dividends. The Prudential Loan Agreement contains
customary events of default, including default under the Credit Agreement and failure to maintain REIT status. Any event of default,
if not cured or waived, would increase by 200 basis points (2.00%) the interest rate we pay under the Prudential Loan Agreement and
could result in the acceleration of our indebtedness under the Prudential Loan Agreement and could also give rise to an event of
default and could result in the acceleration of our indebtedness under our Credit Agreement. As of December 31, 2014 and 2013,
borrowings under the Prudential Loan Agreement were $100,000,000.
As of December 31, 2014, we are in compliance with all of the material terms of the Credit Agreement and Prudential Loan
Agreement, including the various financial covenants described above.
The aggregate maturity of the Credit Agreement and the Prudential Loan Agreement as of December 31, 2014, is as follows:
2015 — $25,000,000 and 2021 — $100,000,000.
As of December 31, 2014 and 2013, the carrying value of the borrowings outstanding under the Credit Agreement approximated
fair value. As of December 31, 2014, the fair value of borrowings outstanding under the Prudential Loan Agreement was
$106,527,000 and, as of December 31, 2013, the carrying value of the borrowings outstanding under the Prudential Loan Agreement
approximated fair value. The fair value of the borrowings outstanding as of December 31, 2014 and 2013 was determined using a
discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality, risk profile
and projected average borrowings outstanding or borrowings outstanding, which are based on unobservable inputs within Level 3 of
the Fair Value Hierarchy.
5. ENVIRONMENTAL OBLIGATIONS
We are subject to numerous federal, state and local laws and regulations, including matters relating to the protection of the
environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets
including buildings containing hazardous materials, USTs and other equipment. Environmental costs are principally attributable to
remediation costs which include removing USTs, excavation of contaminated soil and water, installing, operating, maintaining and
decommissioning remediation systems, monitoring contamination and governmental agency compliance reporting incurred in
connection with contaminated properties. We seek reimbursement from state UST remediation funds related to these environmental
costs where available. In July 2012, we purchased a ten-year pollution legal liability insurance policy covering all of our properties for
preexisting unknown environmental liabilities and new environmental events. The policy has a $50,000,000 aggregate limit and is
subject to various self-insured retentions and other conditions and limitations. Our intention in purchasing this policy is to obtain
61
protection predominantly for significant events. No assurances can be given that we will obtain a net financial benefit from this
investment.
The estimated future costs for known environmental remediation requirements are accrued when it is probable that a liability has
been incurred and a reasonable estimate of fair value can be made. The accrued liability is the aggregate of the best estimate of the fair
value of cost for each component of the liability net of estimated recoveries from state UST remediation funds considering estimated
recovery rates developed from prior experience with the funds.
We enter into leases and various other agreements which contractually allocate responsibility between the parties for known and
unknown environmental liabilities at or relating to the subject properties. We are contingently liable for these environmental
obligations in the event that the counterparty to the lease or other agreement does not satisfy them. It is possible that our assumptions
regarding the ultimate allocation method and share of responsibility that we used to allocate environmental liabilities may change,
which may result in material adjustments to the amounts recorded for environmental litigation accruals and environmental remediation
liabilities. We are required to accrue for environmental liabilities that we believe are allocable to others under leases and other
agreements if we determine that it is probable that the counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if the counterparty fails to pay them. As a result of Marketing’s
bankruptcy filing, we accrued for significant additional environmental liabilities because we concluded that Marketing would not be
able to perform them. A liability has not been accrued for environmental obligations that are the responsibility of any other current
tenants based on those tenant’s history of paying such obligations and/or our assessment of their financial ability and intent to pay
such costs. However, there can be no assurance that our assessments are correct or that our tenants who have paid their obligations in
the past will continue to do so. The ultimate resolution of these matters could cause a material adverse effect on our business, financial
condition, results of operations, liquidity, ability to pay dividends or stock price.
For all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and
regulations, removal of USTs at the end of their lease term and remediation of any environmental contamination that arises during the
term of their tenancy. Under the terms of our leases covering properties previously leased to Marketing, we have agreed to be
responsible for environmental contamination at the premises that was known at the time the lease commenced, and that existed prior
to commencement of the lease and is discovered (other than as a result of a voluntary site investigation) during the first ten years of
the lease term. After expiration of such ten year period, responsibility for all newly discovered contamination, even if it relates to
periods prior to commencement of the lease, is contractually allocated to our tenant. Our tenants at properties previously leased to
Marketing are in all cases responsible for the cost of any remediation of contamination that results from their use and occupancy of
our properties. Under substantially all of our other triple-net leases, responsibility for remediation of all environmental contamination
discovered during the term of the lease (including known and unknown contamination that existed prior to commencement of the
lease) is the responsibility of our tenant.
We anticipate that a majority of the USTs at properties previously leased to Marketing will be replaced over the next decade
because these USTs are either at or near the end of their useful lives. For long-term, triple-net leases covering sites previously leased
to Marketing, our tenants are responsible for the cost of removal and replacement of USTs and for remediation of contamination found
during such UST removal and replacement, unless such contamination was found during the first ten years of the lease term and also
existed prior to commencement of the lease. In those cases, we are responsible for costs associated with the remediation of such
contamination. For our transitional properties occupied under month-to-month license agreements, or which are vacant, we are
responsible for costs associated with UST removals and for the cost of remediation of contamination found during the removal of
USTs. We have also agreed to be responsible for environmental contamination that existed prior to the sale of certain properties
assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the first five years after the
sale of the properties. (For additional information regarding our transitional properties, see “Item 1. Business — Company
Operations” and “Transitional Properties” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” which appear in this Annual Report on Form 10-K.)
After the termination of the Master Lease, we commenced a process to take control of our properties and to reposition them. A
substantial portion of these properties had USTs which were either at or near the end of their useful lives. For properties that we sold,
we elected to remove certain of these USTs and in the course of re-letting properties, we made lease concessions to reimburse our
tenants at operating gas stations for certain capital expenditures including UST replacements. In the course of these UST removals and
replacements, previously unknown environmental contamination has been and continues to be discovered. As a result of these
developments, we began to assess our prospective future environmental liability resulting from preexisting unknown environmental
contamination which we believe might be discovered during removal and replacement of USTs at properties previously leased to
Marketing in the future.
We are now able to develop a reasonable estimate of fair value for the prospective future environmental liability resulting from
preexisting unknown environmental contamination. These estimates are based primarily upon quantifiable trends, which we believe
allow us to make reasonable estimates of fair value for the future costs of environmental remediation resulting from the removal and
replacement of USTs. As a result, at December 31, 2014, we accrued for these estimated costs. Our accrual of the additional liability
represents the best estimate of the fair value of cost for each component of the liability net of estimated recoveries from state UST
62
remediation funds considering estimated recovery rates developed from prior experience with the funds. In arriving at our accrual, we
analyzed the ages of USTs at properties where we would be responsible for preexisting contamination found within the ten years after
commencement of a lease (for properties subject to long-term triple-net leases) or five years from a sale (for divested properties), and
projected a cost to closure for new environmental contamination. Based on these estimates, along with relevant economic and risk
factors, at December 31, 2014, we accrued $49,700,000 for these future environmental liabilities related to preexisting unknown
contamination. In conjunction with the accrual for preexisting unknown environmental contamination, we have increased the carrying
value of our properties and simultaneously recorded impairment charges of $8,319,000 where the increased carrying value of the
property exceeded its estimated fair value. Our estimates are based upon facts that are known to us at this time and an assessment of
the possible ultimate remedial action outcomes. It is possible that our assumptions, which form the basis of our estimates, regarding
our ultimate environmental liabilities may change, which may result in our providing an accrual, or adjustments to the amounts
recorded, for environmental remediation liabilities. Among the many uncertainties that impact the estimates are our assumptions, the
necessary regulatory approvals for, and potential modifications of remediation plans, the amount of data available upon initial
assessment of contamination, changes in costs associated with environmental remediation services and equipment, the availability of
state UST remediation funds and the possibility of existing legal claims giving rise to additional claims. Additional environmental
liabilities could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay
dividends or stock price.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the extent of contamination,
alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations
and their interpretations, as well as the time it takes to remediate contamination and receive regulatory approval. In developing our
liability for estimated environmental remediation obligations on a property by property basis, we consider among other things, enacted
laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available
technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates
which are subject to significant change, and are adjusted as the remediation treatment progresses, as circumstances change and as
environmental contingencies become more clearly defined and reasonably estimable. We expect to adjust the accrued liabilities for
environmental remediation obligations reflected in our consolidated financial statements as they become probable and a reasonable
estimate of fair value can be made.
We measure our environmental remediation liability at fair value based on expected future net cash flows, adjusted for inflation
(using a range of 2.0% to 2.75%), and then discount them to present value (using a range of 4.0% to 7.0%). We adjust our
environmental remediation liability quarterly to reflect changes in projected expenditures, changes in present value due to the passage
of time and reductions in estimated liabilities as a result of actual expenditures incurred during each quarter. As of December 31,
2014, we had accrued a total of $91,566,000 for our prospective environmental remediation liability. This accrual includes (a)
$41,866,000, which was our best estimate of reasonably estimable environmental remediation obligations and obligations to remove
USTs for which we are the title owner, net of estimated recoveries and (b) $49,700,000 for future environmental liabilities related to
preexisting unknown contamination. As of December 31, 2013, we had accrued $43,472,000 as our best estimate of the fair value of
reasonably estimable environmental remediation obligations and obligations to remove USTs for which we are the title owner, net of
estimated recoveries.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $3,046,000,
$3,214,000 and $3,174,000 of net accretion expense was recorded for the years ended December 31, 2014, 2013 and 2012,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2014, 2013 and 2012, we
recorded credits to environmental expenses included in continuing operations and to earnings from operating activities in discontinued
operations in our consolidated statements of operations aggregating $2,756,000, $2,956,000 and $4,215,000, respectively, where
decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs.
Environmental expenses also include project management fees, legal fees and provisions for environmental litigation losses.
During the years ended December 31, 2014 and 2013, we increased the carrying value of certain of our properties by
$62,543,000 (consisting of $12,843,000 of known environmental liabilities and $49,700,000 for future environmental liabilities) and
$12,371,000, respectively, due to increases in estimated environmental remediation costs. The recognition and subsequent changes in
estimates in environmental liabilities and the increase or decrease in carrying value of the properties are non-cash transactions which
do not appear on the face of the consolidated statements of cash flows. We recorded non-cash impairment charges aggregating
$16,894,000 (consisting of $8,575,000 for known environmental liabilities and $8,319,000 for reserves for future environmental
liabilities) and $8,048,000 for the years ended December 31, 2014 and 2013, respectively, in continuing operations and in
discontinued operations for capitalized asset retirement costs. Capitalized asset retirement costs are being depreciated over the
estimated remaining life of the UST, a ten year period if the increase in carrying value is related to environmental remediation
obligations or such shorter period if circumstances warrant, such as the remaining lease term for properties we lease from others.
Depreciation and amortization expense included in continuing operations and earnings from discontinued operations in our
consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012 included $1,560,000, $2,009,000 and
$5,371,000, respectively, of depreciation related to capitalized asset retirement costs. Capitalized asset retirement costs were
63
$59,809,000 (consisting of $18,428,000 of known environmental liabilities and $41,381,000 of reserves for future environmental
liabilities) and $18,281,000 as of December 31, 2014 and 2013, respectively.
As part of the triple-net leases for properties previously leased to Marketing, we transferred title of the USTs to our tenants, and
the obligation to pay for the retirement and decommissioning or removal of USTs at the end of their useful life or earlier if
circumstances warranted was fully or partially transferred to our new tenants. We remain contingently liable for this obligation in the
event that our tenants do not satisfy their responsibilities. Accordingly, through December 31, 2014, we removed $12,878,000 of asset
retirement obligations and $10,538,000 of net asset retirement costs related to USTs from our balance sheet. The cumulative net
amount of $2,340,000 is recorded as deferred rental revenue and will be recognized on a straight-line basis as additional revenues
from rental properties over the terms of the various leases. (See note 2 for additional information.)
We cannot predict what environmental legislation or regulations may be enacted in the future or how existing laws or
regulations will be administered or interpreted with respect to products or activities to which they have not previously been applied.
We cannot predict if state UST fund programs will be administered and funded in the future in a manner that is consistent with past
practices and if future environmental spending will continue to be eligible for reimbursement at historical recovery rates under these
programs. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory
agencies or stricter interpretation of existing laws, which may develop in the future, could have an adverse effect on our financial
position, or that of our tenants, and could require substantial additional expenditures for future remediation.
In light of the uncertainties associated with environmental expenditure contingencies, we are unable to estimate ranges in excess
of the amount accrued with any certainty; however, we believe it is possible that the fair value of future actual net expenditures could
be substantially higher than amounts currently recorded by us. Adjustments to accrued liabilities for environmental remediation
obligations will be reflected in our consolidated financial statements as they become probable and a reasonable estimate of fair value
can be made. Future environmental expenses could cause a material adverse effect on our business, financial condition, results of
operations, liquidity, ability to pay dividends or stock price.
6. INCOME TAXES
Net cash paid for income taxes for the years ended December 31, 2014, 2013 and 2012 of $316,000, $173,000 and $810,000,
respectively, includes amounts related to state and local income taxes for jurisdictions that do not follow the federal tax rules, which
are provided for in rental property expenses in our consolidated statements of operations.
Earnings and profits (as defined in the Internal Revenue Code) are used to determine the tax attributes of dividends paid to
stockholders and will differ from income reported for financial statements purposes due to the effect of items which are reported for
income tax purposes in years different from that in which they are recorded for financial statements purposes. The federal tax
attributes of the common dividends for the years ended December 31, 2014, 2013 and 2012 were: ordinary income of 43.9%, 94.4%
and 10.0%, capital gain distributions of 56.1%, 5.6% and 61.3% and non-taxable distributions of 0.0%, 0.0% and 28.7%, respectively.
To qualify for taxation as a REIT, we, among other requirements such as those related to the composition of our assets and gross
income, must distribute annually to our stockholders at least 90% of our taxable income, including taxable income that is accrued by
us without a corresponding receipt of cash. We cannot provide any assurance that our cash flows will permit us to continue paying
cash dividends. Should the Internal Revenue Service (“IRS”) successfully assert that our earnings and profits were greater than the
amount distributed, we may fail to qualify as a REIT; however, we may avoid losing our REIT status by paying a deficiency dividend
to eliminate any remaining earnings and profits. We may have to borrow money or sell assets to pay such a deficiency dividend.
Although tax returns for the years 2011, 2012 and 2013, and tax returns which will be filed for the year ended 2014, remain open to
examination by federal and state tax jurisdictions under the respective statute of limitations, we have not currently identified any
uncertain tax positions related to those years and, accordingly, have not accrued for uncertain tax positions as of December 31, 2014
or 2013. However, uncertain tax matters may have a significant impact on the results of operations for any single fiscal year or interim
period.
The IRS has allowed the use of a procedure, as a result of which we could satisfy the REIT income distribution requirement by
making a distribution on our common stock comprised of (i) shares of our common stock having a value of up to 80% of the total
distribution and (ii) cash in the remaining amount of the total distribution, in lieu of paying the distribution entirely in cash. In January
2015, we received a private letter ruling from the IRS that allows us to make a distribution on our common stock comprised of
(i) shares of our common stock having a value of up to 80% of the total distribution and (ii) cash in the remaining amount of the total
distribution, in lieu of paying the distribution entirely in cash. As of the date of this Annual Report on Form 10-K, we are not
planning to make a distribution using our common stock.
In the third quarter of 2013, we submitted to the IRS a request seeking a ruling that a portion of the payments we received from
the Marketing Estate, including amounts related to the Litigation Funding Agreement (see note 2 for additional information regarding
the Lukoil Settlement and the Litigation Funding Agreement), be treated either as qualifying income or excluded from gross income
64
for the purposes of the REIT qualification gross income tests either as a matter of law or pursuant to the discretionary authority
granted by Congress to the IRS to determine whether certain types of income are an outgrowth of a REIT’s business of owning and
operating real estate. In January 2014, we received a favorable ruling from the IRS indicating that a portion of the payments received
from the Marketing Estate will be treated as qualifying income and the remainder will be excluded from gross income for the purposes
of the REIT qualification gross income tests. Therefore, none of the cash flow received from the Marketing Estate, including amounts
related to the Litigation Funding Agreement, will be treated as non-qualifying income for purposes of the REIT qualification gross
income tests.
7. SHAREHOLDERS’ EQUITY
A summary of the changes in shareholders’ equity for the years ended December 31, 2014, 2013 and 2012 is as follows (in
thousands, except per share amounts):
COMMON STOCK
SHARES
AMOUNT
PAID-IN
CAPITAL
DIVIDENDS
PAID
IN EXCESS
OF EARNINGS
BALANCE, DECEMBER 31, 2011
Net earnings
Dividends declared — $0.375 per share
Stock-based compensation
BALANCE, DECEMBER 31, 2012
Net earnings
Dividends declared — $0.850 per share
Stock-based compensation
BALANCE, DECEMBER 31, 2013
Net earnings
Dividends declared — $0.960 per share
Stock-based compensation
BALANCE, DECEMBER 31, 2014
33,394
$
334
$ 460,687
$
3
33,397
—
334
739
461,426
—
33,397
—
334
$
971
$ 462,397
20
33,417
—
334
$
917
$ 463,314
$
$
(88,852)
12,447
(12,606)
—
(89,011)
70,011
(28,640)
—
(47,640)
23,418
(32,402)
—
(56,624)
TOTAL
$ 372,169
12,447
(12,606)
739
372,749
70,011
(28,640)
971
$ 415,091
23,418
(32,402)
917
$ 407,024
On March 3, 2014 and May 13, 2014, respectively, our Board of Directors granted 67,125 and 5,000 restricted stock units to our
employees under our 2004 Omnibus Incentive Compensation Plan.
We are authorized to issue 20,000,000 shares of preferred stock, par value $.01 per share, of which none were issued as of
December 31, 2014, 2013 and 2012.
8. EMPLOYEE BENEFIT PLANS
The Getty Realty Corp. 2004 Omnibus Incentive Compensation Plan (the “2004 Plan”) provided for the grant of restricted stock,
restricted stock units, performance awards, dividend equivalents, stock payments and stock awards to all employees and members of
the Board of Directors. In May 2014, an Amended and Restated 2004 Omnibus Incentive Compensation Plan (the “Restated Plan”)
was approved at our annual meeting of shareholders. The Restated Plan maintained the 2004 Plan’s authorization to grant awards
with respect to an aggregate of 1,000,000 shares of common stock, and extended the term of 2004 Plan to May 2019. The Restated
Plan increased the aggregate maximum number of shares of common stock that may be subject to awards granted during any calendar
year to 100,000. The Restated Plan also included several updates to the 2004 Plan in order to comply with the current Internal
Revenue Code.
In addition, in April 2012, the Compensation Committee of the Board of Directors adopted, for 2012 only, a performance-based
incentive compensation feature to our compensation program for named executive officers (“NEOs”) and other executives. By adding
this performance-based incentive compensation feature, the Compensation Committee intended to incentivize management’s efforts
associated with achieving our business objectives and financial performance in 2012. To do so, the Compensation Committee
approved a program under which certain NEOs and other executives would be eligible to receive restricted stock units (“RSUs”)
(including dividend equivalents paid with respect to such RSUs) in 2013 contingent on the level of achievement of several financial
performance goals in 2012 and on a subjective qualitative evaluation of the performance of the executive in 2012. Under the 2012
65
performance-based incentive compensation program, the RSUs that were granted, were granted on terms substantially consistent with
the 2004 Plan, except for the relative vesting schedules: RSUs granted under the 2012 performance-based incentive compensation
program vest on a cumulative basis, with the first 20% vesting occurring on May 1, 2013, and an additional 20% vesting on each
May 1 thereafter, through May 1, 2017; while the traditional discretionary RSU awards vest on a cumulative basis ratably over a five-
year period with the first 20% vesting occurring on the first anniversary of the date of the grant. In February 2013, the Compensation
Committee granted a total of 35,000 RSUs to NEOs and other executives under the 2012 performance-based incentive compensation
program. All such RSU grants include related dividend equivalents.
We awarded to employees and directors 72,125, 79,500 (including 35,000 RSUs issued under the 2012 performance-based
incentive compensation program) and 52,125 RSUs and dividend equivalents in 2014, 2013 and 2012, respectively. RSUs granted
before 2009 provide for settlement upon termination of employment with the Company or termination of service from the Board of
Directors and RSUs granted in 2009 and thereafter upon the earlier of ten years after grant or termination. On the settlement date each
vested RSU will have a value equal to one share of common stock and may be settled, at the sole discretion of the Compensation
Committee, in cash or by the issuance of one share of common stock. The RSUs do not provide voting or other shareholder rights
unless and until the RSU is settled for a share of common stock. The RSUs vest starting one year from the date of grant, on a
cumulative basis at the annual rate of 20% of the total number of RSUs covered by the award. The dividend equivalents represent the
value of the dividends paid per common share multiplied by the number of RSUs covered by the award. For the years ended
December 31, 2014, 2013 and 2012, dividend equivalents aggregating approximately $333,000, $251,000 and $82,000, respectively,
were charged against retained earnings when common stock dividends were declared.
The following is a schedule of the activity relating to RSUs outstanding:
RSUs OUTSTANDING AT DECEMBER 31, 2011
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2012
Granted
RSUs OUTSTANDING AT DECEMBER 31, 2013
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2014
NUMBER OF
RSUs
OUTSTANDING
170,825
52,125
(2,780)
(3,820)
216,350
79,500
295,850
72,125
(19,550)
(15,900)
332,525
FAIR VALUE
AMOUNT
AVERAGE
PER RSU
$ 864,000
70,000
$
88,000
$
$ 1,439,110
$ 1,386,000
$ 360,000
$ 293,000
$
$
$
$
$
$
$
16.57
25.31
23.10
18.10
19.21
18.43
18.44
The fair values of the RSUs were determined based on the closing market price of our stock on the date of grant. The fair
value of the grants is recognized as compensation expense ratably over the five-year vesting period of the RSUs. Compensation
expense related to RSUs for the years ended December 31, 2014, 2013 and 2012 was $910,000, $962,000 and $746,000, respectively,
and is included in general and administrative expenses in our consolidated statements of operations. As of December 31, 2014, there
was $1,318,000 of unrecognized compensation cost related to RSUs granted under the 2004 Plan and the 2012 performance-based
incentive compensation program, which cost is expected to be recognized over a weighted average period of approximately 3.7 years.
The aggregate intrinsic value of the 332,525 outstanding RSUs and the 154,855 vested RSUs as of December 31, 2014 was
$6,055,000 and $2,820,000, respectively.
66
The following is a schedule of the vesting activity relating to RSUs outstanding:
RSUs VESTED AT DECEMBER 31, 2011
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2012
Vested
RSUs VESTED AT DECEMBER 31, 2013
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2014
NUMBER
OF RSUs
VESTED
66,800
29,205
(2,780)
93,225
42,910
136,135
38,270
(19,550)
154,855
FAIR
VALUE
$734,000
$ 70,000
$844,000
$697,000
$360,000
We have a retirement and profit sharing plan with deferred 401(k) savings plan provisions (the “Retirement Plan”) for
employees meeting certain service requirements and a supplemental plan for executives (the “Supplemental Plan”). Under the terms of
these plans, the annual discretionary contributions to the plans are determined by the Compensation Committee of the Board of
Directors.
Also, under the Retirement Plan, employees may make voluntary contributions and we have elected to match an amount equal
to fifty percent of such contributions but in no event more than three percent of the employee’s eligible compensation. Under the
Supplemental Plan, a participating executive may receive an amount equal to ten percent of eligible compensation, reduced by the
amount of any contributions allocated to such executive under the Retirement Plan. Contributions, net of forfeitures, under the
retirement plans approximated $261,000, $238,000 and $270,000 for the years ended December 31, 2014, 2013 and 2012,
respectively. These amounts are included in general and administrative expenses in our consolidated statements of operations. During
the year ended December 31, 2014, we distributed $2,690,000 from the Supplemental Plan to two former officers of the Company.
There were no distributions from the Supplemental Plan for the years ended December 31, 2013 and 2012.
We have a stock option plan (the “Stock Option Plan”). Our authorization to grant options to purchase shares of our common
stock under the Stock Option Plan has expired. As of December 31, 2014 and 2013, there were 5,000 options outstanding which were
exercisable at $27.68 with a remaining contractual life of four years. As of December 31, 2014 and 2013, the 5,000 options
outstanding had no intrinsic value.
9. QUARTERLY FINANCIAL DATA
The following is a summary of the quarterly results of operations for the years ended December 31, 2014 and 2013 (unaudited
as to quarterly information) (in thousands, except per share amounts):
YEAR ENDED DECEMBER 31, 2014
Revenues from rental properties
Earnings (loss) from continuing operations
Net earnings (loss)
Diluted earnings per common share:
THREE MONTHS ENDED
JUNE 30,
SEPTEMBER 30,
MARCH 31,
$
23,757 $
7,692
9,638
24,350 $
6,874
6,637
DECEMBER 31,
24,543
(3,043)
(3,092)
24,072 $
9,006
10,235
Earnings (loss) from continuing operations
Net earnings (loss)
.23
.29
.20
.20
.27
.30
(.10)
(.10)
YEAR ENDED DECEMBER 31, 2013
Revenues from rental properties
Earnings from continuing operations
Net earnings
Diluted earnings per common share:
MARCH 31,
$ 22,430
5,506
10,350
$ 23,309 $
6,968
12,739
JUNE 30,
SEPTEMBER 30,
28,067 $
13,759
41,877
DECEMBER 31,
25,589
1,183
5,045
Earnings from continuing operations
Net earnings
.16
.31
.21
.38
.41
1.25
.03
.15
67
10. PROPERTY ACQUISITIONS
2014 Activity
During the year ended December 31, 2014, we acquired fee title to ten gasoline stations and convenience store properties in
separate transactions for an aggregate purchase price of $17,598,000.
We accounted for these acquisitions as business combinations. We estimated the fair value of acquired tangible assets
(consisting of land, buildings and equipment) “as if vacant.” Based on these estimates, we allocated $16,576,000 of the purchase price
to land, buildings and equipment and $1,022,000 to in-place leases, favorable financing and other intangible assets. We incurred
transaction costs of $104,000 directly related to the acquisitions which are included in general and administrative expenses in our
consolidated statements of operations. As of December 31, 2014, our allocations of the purchase price among the assets acquired are
preliminary and subject to change.
2013 Activity
On May 9, 2013, we acquired 16 Mobil-branded gasoline station and convenience store properties in the metro New York
region and 20 Exxon- and Shell-branded gasoline station and convenience store properties located within the Washington, D.C.
“Beltway” for $72,500,000 in two sale/leaseback transactions with subsidiaries of Capitol Petroleum Group, LLC (“Capitol”). The
two new triple-net unitary leases have an initial term of 15 years plus three renewal options with provisions for rent escalations during
the initial and renewal terms. As triple-net lessees, our tenants are required to pay all expenses pertaining to the properties subject to
the unitary leases, including environmental expenses, taxes, assessments, licenses and permit fees, charges for public utilities and all
governmental charges. We utilized $11,500,000 of proceeds from 1031 exchanges, $57,500,000 of borrowings under our Credit
Agreement and cash on hand to fund this acquisition.
We accounted for these transactions as business combinations. We estimated the fair value of acquired tangible assets
(consisting of land, buildings and equipment) “as if vacant.” Based on these estimates, we allocated $62,365,000 of the purchase price
to land, buildings and equipment, $6,267,000 to direct financing leases and $3,868,000 to in-place leases and other intangible assets.
We incurred transaction costs of $480,000 directly related to the acquisition which are included in general and administrative expenses
in our consolidated statements of operations.
In addition, in 2013, we acquired fee or leasehold title to three gasoline station and convenience store properties in separate
transactions for an aggregate purchase price of $750,000.
Acquired Intangible Assets
Acquired above-market (when we are a lessor) and below-market leases (when we are a lessee) are included in prepaid expenses
and other assets and had a balance of $3,300,000 and $3,784,000 (net of accumulated amortization of $3,220,000 and $2,727,000,
respectively) at December 31, 2014 and 2013, respectively. Acquired above-market (when we are lessee) and below-market (when we
are lessor) leases are included in accounts payable and accrued liabilities and had a balance of $7,531,000 and $8,685,000 (net of
accumulated amortization of $10,036,000 and $8,940,000, respectively) at December 31, 2014 and 2013, respectively. Above-market
and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in the
case of above-market leases) to rental revenue over the remaining term of the associated lease in place at the time of purchase, when
we are a lessor. In-place leases are included in prepaid expenses and other assets and had a balance of $5,328,000 and $5,169,000 (net
of accumulated amortization of $2,773,000 and $2,290,000, respectively) at December 31, 2014 and 2013, respectively. Above-
market and below-market leases are amortized and recorded as either an increase (in the case of below-market leases) or a decrease (in
the case of above-market leases) to rental expense over the remaining term of the associated lease in place at the time of purchase,
when we are a lessee. Rental income included amortization from acquired leases of $1,239,000, $986,000 and $1,113,000 for the years
ended December 31, 2014, 2013 and 2012, respectively. Rent expense included amortization from acquired leases of $333,000,
$353,000 and $529,000 for the years ended December 31, 2014, 2013 and 2012, respectively. The value associated with in-place
leases and lease origination costs are amortized into depreciation and amortization expense over the remaining life of the lease.
Depreciation and amortization expense included amortization from in-place leases of $518,000, $408,000 and $241,000 for the years
ended December 31, 2014, 2013 and 2012, respectively.
68
The amortization for acquired intangible assets during the next five years and thereafter, assuming no early lease terminations, is
as follows:
As Lessor:
Year ending December 31,
2015
2016
2017
2018
2019
Thereafter
As Lessee:
Year ending December 31,
2015
2016
2017
2018
2019
Thereafter
Above-Market
Leases
Below-Market
Leases
In-Place
Leases
$
156,000
156,000
142,000
41,000
24,000
32,000
$ 1,039,000
1,020,000
956,000
901,000
791,000
2,824,000
$ 497,000
491,000
477,000
450,000
429,000
2,984,000
$
551,000
$ 7,531,000
$5,328,000
Below-Market
Leases
$
333,000
333,000
320,000
317,000
312,000
1,134,000
$ 2,749,000
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial information for the years ended December 31, 2013 and
2012 has been prepared utilizing our historical financial statements and the combined effect of additional revenue and expenses from
the properties acquired from Capitol in 2013 assuming that the acquisitions had occurred as of the beginning of the earliest period
presented, after giving effect to certain adjustments including: (a) rental income adjustments resulting from the straight-lining of
scheduled rent increases; and (b) rental income adjustments resulting from the recognition of revenue under direct financing leases
over the lease term using the effective interest rate method which produces a constant periodic rate of return on the net investment in
the leased properties. The following information also gives effect to the additional interest expense resulting from the assumed
increase in borrowings outstanding under the Credit Agreement to fund the acquisition and the elimination of acquisition costs. The
unaudited pro forma condensed financial information is not indicative of the results of operations that would have been achieved had
the Capitol acquisition reflected herein been consummated on the dates indicated or that will be achieved in the future.
(in thousands, except per share amounts):
Revenues
Net earnings
Basic and diluted net earnings per common share
Year ended December 31,
2013
2012
$ 104,710
$ 102,086
$ 71,277
$ 15,792
$
2.11
$
0.47
69
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Getty Realty Corp.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and of cash
flows present fairly, in all material respects, the financial position of Getty Realty Corp. and its subsidiaries at December 31, 2014 and
2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control — Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under Item 9A of this Form 10-K. Our responsibility is
to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in
all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
As discussed in Note 1 to the consolidated financial statements, the Company adopted accounting standards update No. 2014-
08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” as of July 1, 2014, which changed
the manner in which it accounts for discontinued operations.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 13, 2015
70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports filed or furnished pursuant to the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
As required by the Exchange Act Rule 13a-15(b), we have carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-
K. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of December 31, 2014.
There have been no changes in our internal control over financial reporting during the latest fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in Internal Control —
Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31,
2014.
The effectiveness of our internal control over financial reporting as of December 31, 2014, has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in “Item 8.
Financial Statements and Supplementary Data”.
There have been no changes in our internal control over financial reporting during the latest fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
71
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information with respect to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to
information under the heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement. Information with
respect to directors, the audit committee and the audit committee financial expert, and procedures by which shareholders may
recommend to nominees to the board of directors in response to this item is incorporated herein by reference to information under the
headings “Election of Directors” and “Directors’ Meetings, Committees and Executive Officers” in the Proxy Statement. The
following table lists our executive officers, their respective ages and the offices and positions held.
NAME
AGE
POSITION
OFFICER SINCE
David B. Driscoll
Mark J. Olear
Joshua Dicker
Kevin C. Shea
Christopher J. Constant
60 President, Chief Executive Officer and Director
50 Executive Vice President and Chief Investment Officer
54 Senior Vice President, General Counsel and Secretary
55 Executive Vice President
36 Vice President, Chief Financial Officer and Treasurer
2010
2014
2008
2001
2012
Mr. Driscoll was appointed to the position of President of the Company, effective April 2010. In addition, Mr. Driscoll was
appointed as the Company’s Chief Executive Officer, effective May 2010. Mr. Driscoll is also a Director of the Company.
Mr. Driscoll was previously a Managing Director at Morgan Joseph and Co. Inc. where he was a founding shareholder. Prior to his
work at Morgan Joseph, Mr. Driscoll was a Managing Director at ING Barings, where he was Global Coordinator of the real estate
practice and prior to ING Barings, Mr. Driscoll was the founder of the real estate group at Smith Barney, which he ran for more than a
decade.
Mr. Olear joined the Company in May 2014 as Executive Vice President and Chief Investment Officer. Prior to joining the
Company, Mr. Olear held various positions in real estate with TD Bank, Home Depot, Toys “R” Us and A&P.
Mr. Dicker has served as Senior Vice President, General Counsel and Secretary since 2012. He was Vice President, General
Counsel and Secretary since February 2009. Prior to joining the Company in 2008, he was a partner at the law firm Arent Fox, LLP,
resident in its New York City office, specializing in corporate and transactional matters.
Mr. Shea has been with the Company since 1984 and has served as Executive Vice President since May 2004. He was Vice
President since January 2001 and Director of National Real Estate Development prior thereto.
Mr. Constant has served as Vice President, Chief Financial Officer and Treasurer since December 2013. Mr. Constant joined the
Company in November 2010 as Director of Planning and Corporate Development and was later promoted to Treasurer in May 2012
and Vice President in May 2013. Prior to joining the Company, Mr. Constant was a Vice President in the corporate finance department
at Morgan Joseph & Co. Inc. and began his career in the corporate finance department at ING Barings.
There are no family relationships between any of the Company’s directors or executive officers.
The Getty Realty Corp. Business Conduct Guidelines (“Code of Ethics”), which applies to all employees, including our Chief
Executive Officer and Chief Financial Officer, is available on our website at www.gettyrealty.com.
Item 11. Executive Compensation
Information in response to this item is incorporated herein by reference to information under the heading “Executive
Compensation” in the Proxy Statement.
72
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information in response to this item is incorporated herein by reference to information under the heading “Beneficial Ownership
of Capital Stock” and “Executive Compensation — Compensation Discussion and Analysis — Equity Compensation — Equity
Compensation Plan Information” in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
There were no such relationships or transactions to report for the year ended December 31, 2014.
Information with respect to director independence is incorporated herein by reference to information under the heading
“Directors’ Meetings, Committees and Executive Officers — Independence of Directors” in the Proxy Statement.
Item 14. Principal Accountant Fees and Services
Information in response to this item is incorporated herein by reference to information under the heading “Ratification of
Appointment of Independent Registered Public Accounting Firm” in the Proxy Statement.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) (1) Financial Statements
Information in response to this Item is included in “Item 8. Financial Statements and Supplementary Data”.
(a) (2) Financial Statement Schedules
73
GETTY REALTY CORP.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Item 15(a)(2)
Report of Independent Registered Public Accounting Firm on Financial Statement Schedules
Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2014, 2013 and 2012
Schedule III — Real Estate and Accumulated Depreciation and Amortization as of December 31, 2014
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2014
PAGES
75
75
76
90
(a) (3) Exhibits
Information in response to this Item is incorporated herein by reference to the Exhibit Index on page 94 of this Annual Report
on Form 10-K.
74
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders of Getty Realty Corp.:
Our audits of the consolidated financial statements and of the effectiveness of internal control over financial reporting referred
to in our report dated March 13, 2015 appearing in the Item 8 of this 2014 Annual Report on Form 10-K also included an audit of the
financial statement schedules listed in Item 15(a)(2) of this Form 10-K. In our opinion, these financial statement schedules present
fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 13, 2015
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE II — VALUATION and QUALIFYING ACCOUNTS and RESERVES
for the years ended December 31, 2014, 2013 and 2012
(in thousands)
December 31, 2014:
Allowance for deferred rent receivable
Allowance for accounts receivable
Allowance for deposits held in escrow
December 31, 2013:
Allowance for deferred rent receivable
Allowance for accounts receivable
Allowance for deposits held in escrow
December 31, 2012:
Allowance for deferred rent receivable
Allowance for accounts receivable
Allowance for deposits held in escrow
BALANCE AT
BEGINNING
OF YEAR
ADDITIONS
DEDUCTIONS
BALANCE
AT END
OF YEAR
$
$
$
$
$
$
$
$
$
4,775
3,248
—
—
25,371
—
25,630
9,480
377
$
$
$
$
$
$
$
$
$
2,234
1,182
—
4,775
4,027
—
—
15,903
—
$
$
$
$
$
$
$
$
$
—
270
—
$ 7,009
$ 4,160
$ —
—
26,150
—
25,630
12
377
$ 4,775
$ 3,248
$ —
$ —
$ 25,371
$ —
75
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
As of December 31, 2014
(in thousands)
The summarized changes in real estate assets and accumulated depreciation are as follows:
Investment in real estate:
Balance at beginning of year
Acquisitions and capital expenditures
Impairment
Sales and condemnations
Lease expirations/settlements
Balance at end of year
Accumulated depreciation and amortization:
Balance at beginning of year
Depreciation and amortization expense
Impairment
Sales and condemnations
Lease expirations/settlements
Balance at end of year
2014
2013
2012
$ 570,275
79,259
(24,620)
(25,786)
(3,169)
$ 562,316
76,016
(23,238)
(42,884)
(1,935)
$ 615,854
10,976
(23,354)
(40,381)
(779)
$ 595,959
$ 570,275
$562,316
$ 103,452
9,777
(3,086)
(6,544)
(2,909)
$ 116,768
9,231
(9,813)
(11,474)
(1,260)
$ 137,117
13,375
(9,412)
(23,533)
(779)
$ 100,690
$ 103,452
$ 116,768
The properties in the table below indicated by an asterisk (*), with an aggregate net book value of approximately $153,741,000
as of December 31, 2014, are encumbered by mortgages. These mortgages provide security for our $175,000,000 senior secured
revolving credit agreement (the “Credit Agreement”) with a group of commercial banks led by JPMorgan Chase Bank, N.A. and our
$100,000,000 senior secured term loan agreement with the Prudential Insurance Company of America (the “Prudential Loan
Agreement”). The parties to the Credit Agreement and the Prudential Loan Agreement share the security pursuant to the terms of an
inter-creditor agreement. For additional information, see note 4 in “Item 8. Financial Statements and Supplementary Data — Notes to
Consolidated Financial Statements.” No other material mortgages, liens or encumbrances exist on our properties.
76
Brookland, AR
Jonesboro, AR
Jonesboro, AR
Bellflower, CA
Benicia, CA
Chula Vista, CA
Coachella, CA
Fillmore, CA
Hesperia, CA
La Palma, CA
Riverside, CA
San Dimas, CA
Avon, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bristol, CT
Bristol, CT
Bristol, CT
Brookfield, CT
Cheshire, CT
Cobalt, CT
Darien, CT
Durham, CT
East Hartford, CT
Ellington, CT
Fairfield, CT
Farmington, CT
Franklin, CT
Hartford, CT
Hartford, CT
Manchester, CT
Manchester, CT
Meriden, CT
Meriden, CT
Middletown, CT
Middletown, CT
Milford, CT
Milford, CT
Montville, CT
New Britain, CT
New Haven, CT
New Haven, CT
New Haven, CT
New Milford, CT
Newington, CT
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
1,468
868
2,985
1,369
2,224
2,385
2,235
1,354
1,643
1,971
2,737
1,941
731
346
339
59
313
350
378
360
365
1,594
58
491
396
667
994
207
1,295
430
466
51
571
665
65
110
208
1,532
132
1,039
293
57
57
391
217
1,413
539
114
954
0
0
0
0
0
0
0
0
0
0
0
0
388
12
22
380
298
330
396
0
0
0
615
(88)
0
323
0
251
0
10
0
447
0
0
214
364
339
0
577
0
45
295
332
0
297
(701)
454
168
0
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
1,319
695
2,655
459
1,166
1,496
1,018
404
794
582
1,521
1,192
716
128
141
415
407
452
528
360
128
558
653
136
396
556
994
404
453
160
163
478
200
233
214
424
463
543
578
364
147
322
365
137
373
143
642
282
334
Total
1,468
868
2,985
1,369
2,224
2,385
2,235
1,354
1,643
1,971
2,737
1,941
1,119
358
361
439
611
680
774
360
365
1,594
673
403
396
990
994
458
1,295
440
466
498
571
665
279
474
547
1,532
709
1,039
338
352
389
391
514
712
993
282
954
Land
149
173
330
910
1,058
889
1,217
950
849
1,389
1,216
749
403
230
220
24
204
228
246
0
237
1,036
20
267
0
434
0
54
842
280
303
20
371
432
65
50
84
989
131
675
191
30
24
254
141
569
351
0
620
77
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
395
219
854
191
506
6
412
167
304
237
25
419
212
128
103
142
98
139
181
360
52
227
166
18
396
272
994
184
184
112
66
201
81
95
172
88
169
227
144
148
111
49
91
56
75
13
302
245
136
2007
2007
2007
2007
2007
2014
2007
2007
2007
2007
2014
2007
2002
1985
1985
1982
1985
1985
1985
2004
2004
2004
1985
1985
2004
1985
2004
1982
2004
1985
2004
1982
2004
2004
1982
1987
1982
2004
1987
2004
1985
1985
1982
2004
1985
1985
1985
1982
2004
North Branford, CT
North Haven, CT
Norwalk, CT
Norwalk, CT
Norwalk, CT
Norwich, CT
Old Greenwich, CT
Plainville, CT
Plymouth, CT
Ridgefield, CT
Ridgefield, CT
South Windham, CT
South Windsor, CT
Southington, CT
Stamford, CT
Stamford, CT
Stamford, CT
Stratford, CT
Suffield, CT
Terryville, CT
Tolland, CT
Torrington, CT
Vernon, CT
Wallingford, CT
Waterbury, CT
Waterbury, CT
Waterbury, CT
Watertown, CT
Watertown, CT
West Haven, CT
West Haven, CT
Westbrook, CT
Westport, CT
Wethersfield, CT
Willimantic, CT
Wilton, CT
Windsor Locks, CT
Windsor Locks, CT
Washington, DC
Washington, DC
Claymont, DE
Newark, DE
Wilmington, DE
Wilmington, DE
Jacksonville, FL
Orlando, FL
Haleiwa, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
130
405
511
257
0
107
0
545
931
402
535
644
545
115
507
507
604
285
237
182
108
97
1,434
551
469
515
804
352
925
185
1,215
345
604
447
717
519
1,031
1,433
848
941
238
405
326
382
545
867
1,522
1,070
1,539
1,769
9,211
161
0
57
384
988
323
1,219
0
0
304
468
1,398
0
275
16
373
342
15
603
172
379
217
0
0
0
0
0
343
0
322
0
0
12
0
0
339
0
0
0
0
139
(3)
(11)
187
0
34
0
13
0
0
0
*
*
*
*
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
208
153
236
537
586
386
599
191
326
539
655
1,444
208
358
193
550
553
114
639
280
443
276
1,434
216
164
180
288
491
358
433
425
345
223
447
251
520
361
1,433
430
277
225
163
148
320
289
500
464
102
320
577
1,017
Total
291
405
568
641
988
430
1,219
545
931
706
1,003
2,042
545
390
523
880
946
300
840
354
487
314
1,434
551
469
515
804
695
925
507
1,215
345
616
447
717
858
1,031
1,433
848
941
377
402
315
569
545
901
1,522
1,083
1,539
1,769
9,211
Land
83
252
332
104
402
44
620
354
605
167
348
598
337
32
330
330
393
186
201
74
44
38
0
335
305
335
516
204
567
74
790
0
393
0
466
338
670
0
418
664
152
239
167
249
256
401
1,058
981
1,219
1,192
8,194
78
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
118
73
165
282
101
118
109
78
132
271
184
433
101
202
136
176
188
82
454
226
164
78
1,434
109
67
73
123
149
176
160
173
345
155
447
102
195
147
1,433
36
27
90
7
5
130
178
289
237
58
128
213
388
1982
2004
1985
1982
1988
1982
1969
2004
2004
1985
1985
2004
2004
1982
1985
1985
1985
1985
2004
1982
1982
1982
2004
2004
2004
2004
2004
1992
2004
1982
2004
2004
1985
2004
2004
1985
2004
2004
2013
2013
1985
1985
1985
1985
2000
2000
2007
2007
2007
2007
2007
Kaneohe, HI
Kaneohe, HI
Waianae, HI
Waianae, HI
Waipahu, HI
Andover, MA
Arlington, MA
Ashland, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Barre, MA
Bedford, MA
Bellingham, MA
Belmont, MA
Billerica, MA
Bradford, MA
Bridgewater, MA
Burlington, MA
Burlington, MA
Chelmsford, MA
Clinton, MA
Danvers, MA
Dedham, MA
Dracut, MA
Falmouth, MA
Fitchburg, MA
Foxborough, MA
Framingham, MA
Gardner, MA
Gardner, MA
Gardners, MA
Hingham, MA
Hyde Park, MA
Leominster, MA
Lowell, MA
Lowell, MA
Lowell, MA
Lynn, MA
Lynn, MA
Marlborough, MA
Maynard, MA
Melrose, MA
Methuen, MA
Methuen, MA
Methuen, MA
Methuen, MA
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
1,364
1,977
1,520
1,997
2,458
390
519
607
175
535
370
600
625
725
800
536
1,350
734
390
400
650
190
600
1,250
715
587
400
225
450
519
390
427
400
550
1,009
787
353
500
571
375
361
676
400
850
550
736
600
300
380
490
650
0
90
0
0
0
0
27
96
163
0
222
0
0
0
0
12
0
73
29
191
0
118
0
0
0
139
0
213
0
127
33
98
23
0
406
0
111
160
0
9
90
1
0
0
0
98
0
134
64
98
0
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
542
594
872
1,126
1,513
150
208
308
213
147
352
0
0
0
800
200
0
331
165
341
0
168
0
0
715
344
0
331
0
188
169
200
163
0
758
149
221
338
372
134
250
248
0
0
0
355
0
284
198
269
0
Total
1,364
2,067
1,520
1,997
2,458
390
546
703
338
535
592
600
625
725
800
548
1,350
807
419
591
650
308
600
1,250
715
726
400
438
450
646
423
525
423
550
1,415
787
464
660
571
384
451
677
400
850
550
834
600
434
444
588
650
Land
822
1,473
648
871
945
240
338
395
125
388
240
600
625
725
0
348
1,350
476
254
250
650
140
600
1,250
0
382
400
107
450
458
254
325
260
550
657
638
243
322
199
250
201
429
400
850
550
479
600
150
246
319
650
79
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
233
214
322
418
536
0
149
149
89
6
125
0
0
0
279
95
0
248
121
269
0
87
0
0
137
186
0
118
0
105
96
118
88
0
338
5
134
154
47
134
244
7
0
0
0
180
0
201
155
132
0
2007
2007
2007
2007
2007
2014
1985
1985
1986
2014
1991
2011
2011
2011
2011
1991
2011
1985
1985
1986
2011
1987
2011
2011
2012
1985
2011
1987
2011
1988
1992
1990
1991
2011
1985
2014
1989
1985
2012
1986
1985
2014
2011
2011
2011
1985
2011
1986
1985
1985
2011
Newton, MA
North Andover, MA
North Grafton, MA
Northborough, MA
Oxford, MA
Peabody, MA
Peabody, MA
Peabody, MA
Pittsfield, MA
Pittsfield, MA
Quincy, MA
Randolph, MA
Revere, MA
Rockland, MA
Salem, MA
Salem, MA
Seekonk, MA
Shrewsbury, MA
Shrewsbury, MA
Sterling, MA
Sutton, MA
Tewksbury, MA
Tewksbury, MA
Upton, MA
Wakefield, MA
Walpole, MA
Watertown, MA
Webster, MA
West Boylston, MA
West Roxbury, MA
Westborough, MA
Westborough, MA
Westford, MA
Wilmington, MA
Wilmington, MA
Woburn, MA
Woburn, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Accokeek, MD
Baltimore, MD
Baltimore, MD
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
691
393
245
404
293
400
550
650
97
123
200
574
1,300
579
275
600
1,073
400
450
476
714
125
1,200
429
900
450
358
1,012
312
490
312
450
275
600
1,300
350
508
275
271
276
300
285
400
500
550
548
498
978
692
802
2,259
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
376
33
35
97
94
18
0
0
175
206
159
206
0
45
24
0
(301)
0
0
2
122
193
0
114
0
92
201
334
29
83
21
0
66
0
0
147
393
9
16
17
0
44
0
0
0
10
239
8
0
0
0
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
617
170
121
238
196
166
0
0
232
279
234
350
0
247
124
0
196
0
0
169
372
243
0
264
0
249
238
687
138
254
130
0
166
0
0
297
393
105
111
114
0
144
0
0
0
202
415
350
0
802
1,537
Total
1,067
426
280
501
387
418
550
650
272
329
359
780
1,300
624
299
600
772
400
450
478
836
318
1,200
543
900
542
559
1,346
341
573
333
450
341
600
1,300
497
901
284
287
293
300
329
400
500
550
558
737
986
692
802
2,259
Land
450
256
159
263
191
252
550
650
40
50
125
430
1,300
377
175
600
576
400
450
309
464
75
1,200
279
900
293
321
659
203
319
203
450
175
600
1,300
200
508
179
176
179
300
185
400
500
550
356
322
636
692
0
722
80
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
209
126
75
78
57
166
0
0
144
191
123
189
0
182
124
0
4
0
0
80
166
97
0
95
0
117
114
333
80
152
72
0
133
0
0
198
208
54
60
62
0
91
0
0
0
99
203
168
0
311
556
1985
1985
1991
1993
1993
1986
2011
2011
1982
1982
1986
1985
2011
1985
1986
2011
1985
2011
2011
1991
1993
1986
2011
1991
2011
1985
1985
1985
1991
1985
1991
2011
1986
2011
2011
1986
1985
1992
1991
1991
2011
1991
2011
2011
2011
1991
1985
1991
2010
2007
2007
Beltsville, MD
Beltsville, MD
Beltsville, MD
Beltsville, MD
Bladensburg, MD
Bowie, MD
Capitol Heights, MD
Clinton, MD
College Park, MD
College Park, MD
District Heights, MD
District Heights, MD
Ellicott City, MD
Emmitsburg, MD
Forestville, MD
Fort Washington, MD
Greenbelt, MD
Hyattsville, MD
Hyattsville, MD
Landover, MD
Landover, MD
Landover Hills, MD
Landover Hills, MD
Lanham, MD
Laurel, MD
Laurel, MD
Laurel, MD
Laurel, MD
Laurel, MD
Laurel, MD
Oxon Hill, MD
Riverdale, MD
Riverdale, MD
Seat Pleasant, MD
Suitland, MD
Suitland, MD
Temple Hills, MD
Upper Marlboro, MD
Augusta, ME
Biddeford, ME
Lewiston, ME
South Portland, ME
Kernersville, NC
Madison, NC
New Bern, NC
Belfield, ND
Allenstown, NH
Candia, NH
Concord, NH
Concord, NH
Derry, NH
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
895
147
1,039
422
1,153
491
594
662
753
457
1,358
822
696
1,210
1,267
1,415
1,530
2,523
1,256
582
788
468
377
673
331
845
449
618
342
181
449
396
350
1,232
1,787
130
675
900
418
0
0
0
0
0
0
0
0
0
0
0
0
0
213
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(17)
8
188
197
0
0
83
0
0
189
0
0
17
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
0
0
0
0
0
0
0
0
0
0
0
0
895
258
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
230
391
308
267
111
350
243
850
1,320
239
0
0
277
Total
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
895
360
1,039
422
1,153
491
594
662
753
457
1,358
822
696
1,210
1,267
1,415
1,530
2,523
1,256
582
788
468
377
673
331
845
432
626
530
378
449
396
433
1,232
1,787
319
675
900
435
Land
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
0
102
1,039
422
1,153
491
594
662
753
457
1,358
822
696
1,210
1,267
1,415
1,530
2,523
1,256
582
788
468
377
673
331
845
202
235
222
111
338
46
190
382
467
80
675
900
158
81
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
0
0
0
0
0
0
0
0
0
0
0
0
365
131
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
19
391
170
156
80
146
103
573
530
239
0
0
275
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2007
1986
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
1991
1985
1985
1986
2007
2007
2007
2007
2007
1986
2011
2011
1987
Derry, NH
Dover, NH
Dover, NH
Dover, NH
Goffstown, NH
Hooksett, NH
Hooksett, NH
Kingston, NH
Londonderry, NH
Londonderry, NH
Manchester, NH
Milford, NH
Nashua, NH
Nashua, NH
Nashua, NH
Nashua, NH
Nashua, NH
Northwood, NH
Pelham, NH
Pelham, NH
Plaistow, NH
Portsmouth, NH
Raymond, NH
Rochester, NH
Rochester, NH
Rochester, NH
Rochester, NH
Salem, NH
Salem, NH
Seabrook, NH
Andover, NJ
Basking Ridge, NJ
Belleville, NJ
Belmar, NJ
Bergenfield, NJ
Brick, NJ
Cherry Hill, NJ
Cherry Hill, NJ
Colonia, NJ
Cranbury, NJ
Deptford, NJ
Elizabeth, NJ
Flemington, NJ
Flemington, NJ
Fort Lee, NJ
Franklin Twp., NJ
Freehold, NJ
Green Village, NJ
Hasbrouck Heights, NJ
Hillsborough, NJ
Howell, NJ
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
950
300
650
1,200
1,737
336
1,562
1,500
703
1,100
550
190
500
550
750
825
1,750
500
169
731
300
525
550
700
939
1,400
1,600
450
743
200
82
362
215
566
382
1,508
273
357
719
606
281
406
709
547
1,245
683
495
278
640
237
10
0
0
0
0
0
0
0
0
30
0
0
146
0
0
0
0
0
0
116
(1)
101
0
0
0
12
0
0
47
19
115
357
317
306
359
298
310
0
94
(21)
270
318
412
(252)
17
351
495
37
48
310
454
478
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
0
0
0
0
1,040
336
738
0
275
0
0
221
0
0
0
0
0
0
149
413
156
0
0
0
351
0
0
147
278
190
401
479
372
514
380
818
71
275
521
587
416
591
289
218
785
733
349
198
534
591
488
Total
950
300
650
1,200
1,737
336
1,562
1,500
733
1,100
550
336
500
550
750
825
1,750
500
285
730
401
525
550
700
951
1,400
1,600
497
762
315
439
679
521
925
680
1,818
273
451
698
876
599
818
457
564
1,596
1,178
532
326
950
691
488
Land
950
300
650
1,200
697
0
824
1,500
458
1,100
550
115
500
550
750
825
1,750
500
136
317
245
525
550
700
600
1,400
1,600
350
484
125
38
200
149
411
300
1,000
202
176
177
289
183
227
168
346
811
445
183
128
416
100
0
82
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
0
0
0
0
196
122
513
0
196
0
0
117
0
0
0
0
0
0
51
17
154
0
0
0
242
0
0
147
194
94
126
156
105
177
110
354
6
0
254
61
91
87
3
153
341
247
1
187
266
148
185
2011
2011
2011
2011
2012
2011
2007
2011
1985
2011
2011
1986
2011
2011
2011
2011
2011
2011
1986
2014
1987
2011
2011
2011
1985
2011
2011
1986
1985
1986
1982
1986
1986
1985
1990
2000
2013
1985
1985
1985
1985
1985
1985
1985
1985
1985
1978
1985
1985
1985
1978
Jersey City, NJ
Lake Hopatcong, NJ
Livingston, NJ
Long Branch, NJ
McAfee, NJ
Midland Park, NJ
Monmouth Beach, NJ
Mountainside, NJ
Neptune, NJ
North Bergen, NJ
North Plainfield, NJ
Nutley, NJ
Ocean City, NJ
Paramus, NJ
Parlin, NJ
Paterson, NJ
Princeton, NJ
Ridgefield, NJ
Ridgewood, NJ
Sewell, NJ
Somerville, NJ
Spring Lake, NJ
Trenton, NJ
Trenton, NJ
Trenton, NJ
Trenton, NJ
Trenton, NJ
Union, NJ
Wall Township, NJ
Washington Township, NJ
Watchung, NJ
Wayne, NJ
West Orange, NJ
Naples, NY
Perry, NY
Prattsburg, NY
Rochester, NY
Albany, NY
Alfred Station, NY
Amherst, NY
Astoria, NY
Avoca, NY
Batavia, NY
Bay Shore, NY
Bay Shore, NY
Bayside, NY
Bayside, NY
Bellaire, NY
Bethpage, NY
Brentwood, NY
Brewster, NY
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
403
1,305
872
515
671
201
134
664
455
630
228
435
845
382
418
619
703
55
703
552
253
345
373
338
467
685
1,303
436
336
912
450
474
800
1,257
1,444
553
853
406
714
223
1,684
936
684
47
157
246
470
329
211
253
303
303
0
293
332
269
442
315
(183)
229
383
708
122
(344)
44
122
17
(159)
280
341
301
41
(29)
297
337
271
319
0
182
308
155
81
(28)
621
0
0
0
0
399
0
246
0
(1)
0
280
355
39
298
38
294
49
279
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
582
505
597
512
503
493
349
347
450
603
761
274
257
177
337
233
351
302
586
497
93
192
427
455
434
559
157
379
523
473
305
232
900
430
400
250
550
543
300
296
579
300
320
327
426
125
462
152
379
177
439
Total
706
1,305
1,165
847
940
643
449
481
684
1,013
936
557
501
426
540
636
544
335
1,044
853
294
316
670
675
738
1,004
1,303
618
644
1,067
531
446
1,421
1,257
1,444
553
853
805
714
469
1,684
935
684
327
512
285
768
367
505
302
582
Land
124
800
568
335
437
150
100
134
234
410
175
283
244
249
203
403
193
33
458
356
201
124
243
220
304
445
1,146
239
121
594
226
214
521
827
1,044
303
303
262
414
173
1,105
635
364
0
86
160
306
215
126
125
143
83
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
66
388
237
146
170
110
64
13
20
233
327
157
0
114
12
164
30
64
218
159
72
0
104
152
124
200
19
16
271
243
5
0
288
152
141
88
194
242
106
38
55
106
113
323
194
124
151
115
123
177
195
1985
2000
1985
1985
1985
1989
1985
1985
1985
1985
1978
1985
1985
1985
1985
1985
1985
1980
1985
1985
1987
1985
1985
1985
1985
1985
2012
1985
1986
1985
1985
1985
1985
2006
2006
2006
2006
1985
2006
2000
2013
2006
2006
1969
1981
1985
1985
1985
1978
1968
1988
Brewster, NY
Briarcliff Manor, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronxville, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Buffalo, NY
Byron, NY
Castile, NY
Central Islip, NY
Chester, NY
Churchville, NY
Colonie, NY
Commack, NY
Corona, NY
Corona, NY
Cortland Manor, NY
Dobbs Ferry, NY
Dobbs Ferry, NY
East Hampton, NY
East Hills, NY
East Islip, NY
East Pembroke, NY
Eastchester, NY
Eastchester, NY
Ellenville, NY
Elmont, NY
Elmsford, NY
Elmsford, NY
Fishkill, NY
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
789
652
141
89
62
423
129
390
104
877
884
953
1,049
1,910
2,408
1,232
276
75
0
75
100
237
148
282
422
476
626
313
969
307
573
1,158
1,011
245
321
114
2,543
1,872
671
1,345
660
242
89
787
533
1,724
233
389
0
1,453
1,793
0
632
142
196
340
0
307
54
464
0
0
0
0
0
0
0
25
272
396
368
345
302
486
457
334
320
314
241
0
0
17
0
0
204
26
322
0
0
73
0
39
66
666
0
61
0
73
319
1,163
0
0
*
*
*
*
*
*
*
*
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
0
782
196
222
358
0
335
193
478
0
0
0
564
561
696
0
133
302
396
412
378
385
530
563
481
490
532
403
300
175
232
0
410
329
138
323
640
0
310
0
271
66
668
250
305
0
199
477
582
0
0
Total
789
1,284
283
285
402
423
436
444
568
877
884
953
1,049
1,910
2,408
1,232
301
347
396
443
445
539
634
739
756
796
940
554
969
307
590
1,158
1,011
449
347
436
2,543
1,872
744
1,345
699
308
755
787
594
1,724
306
708
1,163
1,453
1,793
Land
789
502
87
63
44
423
101
251
90
877
884
953
485
1,349
1,712
1,232
168
45
0
31
67
154
104
176
275
306
408
151
669
132
358
1,158
601
120
209
113
1,903
1,872
434
1,345
428
242
87
537
289
1,724
107
231
581
1,453
1,793
84
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
0
333
196
219
103
0
84
148
232
0
0
0
54
56
63
0
133
284
145
158
127
85
172
310
186
189
203
108
106
62
143
0
145
8
102
303
59
0
234
0
196
34
149
88
8
0
0
237
148
0
0
2011
1976
1972
1976
1976
2013
1972
1985
1985
2013
2013
2013
2013
2013
2013
2011
1978
1978
1970
1967
1972
1985
1972
1967
1985
1985
1985
2000
2006
2006
1998
2011
2006
1986
1985
1965
2013
2011
1985
2011
1985
1986
1972
2006
1985
2011
1985
1978
1971
2011
2011
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Floral Park, NY
Flushing, NY
Flushing, NY
Flushing, NY
Flushing, NY
Forrest Hill, NY
Franklin Square, NY
Friendship, NY
Garden City, NY
Garnerville, NY
Glen Head, NY
Glen Head, NY
Glendale, NY
Glendale, NY
Grand Island, NY
Great Neck, NY
Greigsville, NY
Hamburg, NY
Hartsdale, NY
Hawthorne, NY
Hopewell Junction, NY
Huntington Station, NY
Hyde Park, NY
Katonah, NY
Lagrangeville, NY
Lakeville, NY
Levittown, NY
Levittown, NY
Long Island City, NY
Long Island City, NY
Malta, NY
Mamaroneck, NY
Massapequa, NY
Mastic, NY
Middletown, NY
Middletown, NY
Middletown, NY
Millerton, NY
Millwood, NY
Mount Kisco, NY
Mount Vernon, NY
Nanuet, NY
New Paltz, NY
New Rochelle, NY
New Rochelle, NY
New Windsor, NY
New York, NY
Newburgh, NY
Newburgh, NY
Niskayuna, NY
North Lindenhurst, NY
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
616
516
1,936
1,947
2,478
1,273
153
393
362
1,508
463
235
124
369
256
500
1,018
294
1,626
2,084
1,163
141
990
1,084
129
1,028
503
547
107
2,717
190
1,429
333
313
719
751
1,281
175
1,448
1,907
985
2,316
971
189
1,887
1,084
125
527
1,192
425
295
294
241
0
0
0
0
331
0
242
0
282
566
384
280
69
252
0
0
0
0
0
284
0
0
354
0
42
86
271
0
123
0
285
110
0
274
0
134
0
0
0
0
0
270
0
0
400
0
0
35
250
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
554
437
523
542
677
0
347
350
368
0
444
698
422
413
221
302
815
130
0
0
0
341
0
0
419
825
218
277
305
1,534
248
0
401
219
0
536
0
209
0
0
0
0
0
355
0
0
447
0
0
185
353
Total
910
757
1,936
1,947
2,478
1,273
484
393
604
1,508
745
801
508
649
325
752
1,018
294
1,626
2,084
1,163
425
990
1,084
483
1,028
545
633
378
2,717
313
1,429
618
423
719
1,025
1,281
309
1,448
1,907
985
2,316
971
459
1,887
1,084
525
527
1,192
460
545
Land
356
320
1,413
1,405
1,801
1,273
137
43
236
1,508
301
103
86
236
104
450
203
164
1,626
2,084
1,163
84
990
1,084
64
203
327
356
73
1,183
65
1,429
217
204
719
489
1,281
100
1,448
1,907
985
2,316
971
104
1,887
1,084
78
527
1,192
275
192
85
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
187
129
50
48
60
0
95
124
99
0
155
337
166
127
0
74
345
80
0
0
0
109
0
0
183
352
161
186
88
122
232
0
108
184
0
210
0
203
0
0
0
0
0
123
0
0
216
0
0
185
93
1998
1998
2013
2013
2013
2013
1978
2006
1985
2011
1985
1982
1976
1985
2000
1985
2008
2000
2011
2011
2011
1978
2011
2011
1972
2008
1985
1985
1976
2013
1986
2011
1985
1985
2011
1985
2011
1986
2011
2011
2011
2011
2011
1982
2011
2011
1972
2011
2011
1986
1998
North Merrick, NY
Ossining, NY
Ossining, NY
Ossining, NY
Ozone Park, NY
Peekskill, NY
Pelham, NY
Pelham Manor, NY
Pelham Manor, NY
Pleasant Valley, NY
Port Chester, NY
Port Chester, NY
Port Jefferson, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Rego Park, NY
Rego Park, NY
Rhinebeck, NY
Riverhead, NY
Rochester, NY
Rochester, NY
Rockaway Beach, NY
Rockville Centre, NY
Rockaway Park, NY
Ronkonkoma, NY
Rye, NY
Sag Harbor, NY
Savona, NY
Sayville, NY
Scarsdale, NY
Shrub Oak, NY
Sleepy Hollow, NY
Smithtown, NY
Spring Valley, NY
St. Albans, NY
Staten Island, NY
Staten Island, NY
Staten Island, NY
Staten Island, NY
Stony Brook, NY
Tarrytown, NY
Thornwood, NY
Tuckahoe, NY
Wantagh, NY
Wappingers Falls, NY
Wappingers Falls, NY
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
510
141
231
70
57
2,207
1,035
137
127
398
941
1,015
388
33
591
1,020
1,232
1,306
1,340
1,355
34
2,783
204
724
559
595
111
350
1,605
77
872
704
1,314
344
1,301
1,061
281
88
749
330
358
390
301
350
176
956
1,389
1,650
640
452
1,488
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
404
177
158
327
481
0
0
307
329
155
0
0
293
463
0
0
0
0
0
0
275
0
172
0
0
0
307
66
0
208
0
35
0
246
0
496
370
287
0
322
35
89
331
290
281
0
0
0
0
0
0
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
582
220
272
354
493
0
0
369
380
313
941
0
435
460
0
0
0
0
0
0
286
679
312
292
400
290
339
215
0
239
0
281
350
290
0
866
521
324
0
437
163
225
436
412
352
0
1,389
0
270
452
0
Total
914
318
389
397
538
2,207
1,035
444
456
553
941
1,015
681
496
591
1,020
1,232
1,306
1,340
1,355
309
2,783
376
724
559
595
418
416
1,605
285
872
739
1,314
590
1,301
1,557
651
375
749
652
393
479
632
640
457
956
1,389
1,650
640
452
1,488
Land
332
98
117
43
45
2,207
1,035
75
76
240
0
1,015
246
36
591
1,020
1,232
1,306
1,340
1,355
23
2,104
64
432
159
305
79
201
1,605
46
872
458
964
300
1,301
691
130
51
749
215
230
254
196
228
105
956
0
1,650
370
0
1,488
86
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
231
146
49
90
125
0
0
137
130
291
221
0
158
205
0
0
0
0
0
0
153
63
0
191
141
92
83
180
0
239
0
201
124
29
0
375
292
88
0
144
123
181
148
126
115
0
288
0
178
161
0
1985
1982
1985
1977
1976
2011
2011
1985
1972
1986
2011
2011
1985
1971
2011
2011
2011
2011
2011
2011
1974
2013
2007
1998
2006
2008
1972
1985
2013
1978
2011
1985
2006
1998
2011
1985
1969
1977
2011
1985
1985
1985
1985
1985
1978
2011
2011
2011
1998
2011
2011
Warsaw, NY
Warwick, NY
West Babylon, NY
West Islip, NY
West Nyack, NY
West Taghkanic, NY
Westbury, NY
White Plains, NY
White Plains, NY
White Plains, NY
Williamsville, NY
Woodside, NY
Wyandanch, NY
Yaphank, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yorktown Heights, NY
Crestline, OH
Mansfield, OH
Mansfield, OH
Monroeville, OH
Aldan, PA
Allentown, PA
Allison Park, PA
Bryn Mawr, PA
Cliffton Heights, PA
Conshohocken, PA
Elkins Park, PA
Furlong, PA
Hamburg, PA
Harrisburg, PA
Havertown, PA
Havertown, PA
Huntingdon Valley, PA
Lancaster, PA
Lancaster, PA
Laureldale, PA
Media, PA
Mohnton, PA
Morrisville, PA
New Holland, PA
New Kensington, PA
New Oxford, PA
Norristown, PA
Philadelphia, PA
Philadelphia, PA
Philadelphia, PA
*
*
*
*
*
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
990
1,049
48
32
936
203
64
121
0
1,458
212
0
415
0
154
291
203
0
1,020
1,907
2,365
1,202
922
1,950
2,580
281
358
1,500
221
428
262
275
175
219
399
266
402
422
309
642
262
326
317
377
313
1,375
1,045
175
289
303
390
0
0
261
279
0
385
300
331
765
0
129
285
118
798
299
165
274
636
101
0
0
0
0
0
0
37
31
0
50
(110)
79
15
152
76
213
24
63
37
5
18
16
117
12
40
14
0
(231)
127
50
50
27
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
300
0
280
281
0
466
327
452
462
0
217
285
271
423
376
240
333
636
456
0
0
917
590
1,250
2,095
135
156
650
127
101
171
90
152
165
413
117
211
184
210
360
191
252
263
171
184
700
795
127
151
172
163
Total
990
1,049
309
311
936
588
364
452
765
1,458
341
285
533
798
453
456
477
636
1,121
1,907
2,365
1,202
922
1,950
2,580
318
389
1,500
271
318
341
290
327
295
612
290
465
459
314
660
278
443
329
417
327
1,375
814
302
339
353
417
Land
690
1,049
29
30
936
122
37
0
303
1,458
124
0
262
375
77
216
144
0
665
1,907
2,365
285
332
700
485
183
233
850
144
217
170
200
175
130
199
173
254
275
104
300
87
191
66
246
143
675
19
175
188
181
254
87
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
106
0
48
53
0
234
84
156
139
0
0
34
5
24
112
237
77
146
341
0
0
284
172
349
556
102
114
242
99
20
141
89
121
165
297
86
126
160
209
360
191
152
262
122
183
145
772
91
117
172
119
2006
2011
1978
1972
2011
1986
1972
1979
1972
2011
2000
1978
1998
1993
1987
1972
1986
1970
1985
2011
2011
2008
2008
2009
2009
1985
1985
2010
1985
1985
1985
1990
1985
1989
1989
1985
1985
1985
1989
1989
1989
1985
1989
1985
1989
2010
1996
1985
1985
1985
1985
Philadelphia, PA
Philadelphia, PA
Philadelphia, PA
Philadelphia, PA
Pottsville, PA
Reading, PA
Souderton, PA
Trappe, PA
Ashaway, RI
Barrington, RI
East Providence, RI
East Providence, RI
N. Providence, RI
Warwick, RI
Austin, TX
Austin, TX
Austin, TX
Bedford, TX
Ft Worth, TX
Garland, TX
Garland, TX
Harker Heights, TX
Houston, TX
Keller, TX
Lewisville, TX
Midlothian, TX
N Richland Hills, TX
San Marcos, TX
Temple, TX
The Colony, TX
Waco, TX
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
176
224
229
100
304
799
127
133
88
193
0
0
182
207
94
579
688
129
501
22
30
854
494
570
157
164
79
591
460
1,329
1,161
0
26
0
0
0
39
41
1985
1985
1985
2009
1990
1989
1985
1985
2004
1985
1985
1985
1985
1989
2007
2007
2007
2007
2007
2014
2014
2007
2007
2007
2008
2007
2007
2007
2007
2007
2007
2013
2013
2013
2013
2013
2013
2013
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
370
370
405
1,252
452
750
382
378
619
490
486
2,297
543
377
462
2,368
3,511
353
2,115
3,296
4,439
2,051
1,689
2,507
494
429
315
1,954
2,405
4,396
3,884
649
656
712
735
1,327
1,388
1,582
95
136
175
0
1
49
39
44
0
180
(208)
(1,592)
158
186
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(10)
0
0
0
0
0
0
0
0
0
Gross Amount at Which Carried
at Close of Period
Total
465
506
580
1,252
453
799
421
422
619
670
278
705
701
563
462
2,368
3,511
353
2,115
3,296
4,439
2,051
1,689
2,507
494
429
315
1,954
2,395
4,396
3,884
649
656
712
735
1,327
1,388
1,582
Land
Building and
Improvements
224
265
316
438
305
799
172
176
217
351
20
264
348
357
188
1,630
1,916
240
1,249
3,051
4,000
1,463
1,465
1,511
384
357
189
1,703
1,190
4,059
2,990
0
247
0
0
0
368
432
241
241
264
814
148
0
249
246
402
319
258
441
353
206
274
738
1,595
113
866
245
439
588
224
996
110
72
126
251
1,205
337
894
649
409
712
735
1,327
1,020
1,150
88
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
1,757
1,718
1,083
1,464
2,014
2,062
840
780
1,004
1,825
2,078
3,348
4,454
1,227
1,279
1,289
1,716
3,623
1,037
1,077
294
1,688
903
957
1,043
1,125
1,476
1,677
2,481
535
1,441
563
1,132
466
722
1,290
4,257
24,088
0
0
0
0
0
0
0
(77)
110
0
0
0
0
0
0
19
0
0
0
0
0
0
0
0
0
0
0
0
(114)
6
0
33
0
0
0
0
0
7,401
Gross Amount at Which Carried
at Close of Period
Land
1,313
1,718
1,083
1,085
1,516
1,603
840
398
385
1,190
1,365
2,351
3,370
622
469
798
996
2,828
412
322
294
1,068
273
324
223
505
876
1,157
1,612
311
816
222
547
31
102
490
2,969
10,601
Building and
Improvements
444
0
0
379
498
459
0
305
729
635
713
997
1,084
605
810
510
720
795
625
755
0
620
630
633
820
620
600
520
755
230
625
374
585
435
620
800
1,288
20,888
Total
1,757
1,718
1,083
1,464
2,014
2,062
840
703
1,114
1,825
2,078
3,348
4,454
1,227
1,279
1,308
1,716
3,623
1,037
1,077
294
1,688
903
957
1,043
1,125
1,476
1,677
2,367
541
1,441
596
1,132
466
722
1,290
4,257
31,489
Date of
Initial
Leasehold or
Acquisition
Investment (1)
Accumulated
Depreciation
45
0
0
37
47
43
0
24
626
60
58
89
97
236
316
207
281
310
244
294
0
242
246
276
320
242
234
203
294
230
244
360
228
170
242
312
114
11,941
2013
2013
2013
2013
2013
2013
2005
1990
1990
2013
2013
2013
2013
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
1990
2005
1990
2005
2005
2005
2005
2013
various
Alexandria, VA
Annandale, VA
Arlington, VA
Arlington, VA
Arlington, VA
Arlington, VA
Ashland, VA
Chesapeake, VA
Chesapeake, VA
Fairfax, VA
Fairfax, VA
Fairfax, VA
Fairfax, VA
Farmville, VA
Fredericksburg, VA
Fredericksburg, VA
Fredericksburg, VA
Fredericksburg, VA
Glen Allen, VA
Glen Allen, VA
King George, VA
King William, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Montpelier, VA
Norfolk, VA
Petersburg, VA
Portsmouth, VA
Richmond, VA
Ruther Glen, VA
Sandston, VA
Spotsylvania, VA
Springfield, VA
Miscellaneous
525,467
70,492
346,707
249,252 595,959
100,690
1)
Initial cost of leasehold or acquisition investment to company represents the aggregate of the cost incurred during the year in
which we purchased the property for owned properties or purchased a leasehold interest in leased properties. Cost capitalized
subsequent to initial investment includes investments made in previously leased properties prior to their acquisition.
2) Depreciation of real estate is computed on the straight-line method based upon the estimated useful lives of the assets, which
generally range from 16 to 25 years for buildings and improvements, or the term of the lease if shorter. Leasehold interests
are amortized over the remaining term of the underlying lease.
3) The aggregate cost for federal income tax purposes was approximately $554,934,000 at December 31, 2014.
89
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
As of December 31, 2014
(in thousands)
Description
Location(s)
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms (a)
Prior
Liens
Face Value
at
Inception
Amount of
Principal
Unpaid at
Close of Period
Type of
Loan/Borrower
Mortgage Loans:
Borrower A
Borrower B
Borrower C
Borrower D
Borrower E
Borrower F
Borrower G
Borrower H
Borrower I
Borrower J
Borrower K
Borrower L
Borrower M
Borrower N
Borrower O
Borrower P
Borrower Q
Borrower R
Borrower S
Borrower T
Borrower U
Borrower V
Borrower W
Borrower X
Borrower Y
Borrower Z
Borrower AA
Borrower AB
Borrower AC
Seller financing Horsham, PA
Seller financing Green Island, NY
Seller financing Concord, NH
Seller financing
Irvington, NJ
Seller financing Kernersville/Lexington, NC
Seller financing Wantagh, NY
Seller financing Fullerton Hts, MD
Seller financing Springfield, MA
Seller financing E. Patchogue, NY
Seller financing Manchester, NH
Seller financing Union City, NJ
Seller financing Worcester, MA
Seller financing Bronx, NY
Seller financing Seaford, NY
Seller financing Spotswood, NJ
Seller financing Clifton, NJ
Seller financing Freeport, NY
Seller financing Pleasant Valley, NY
Seller financing Fairhaven, MA
Seller financing Baldwin, NY
Seller financing Leicester, MA
Seller financing Worcester, MA
Seller financing Valley Cottage, NY
Seller financing Penndel, PA
Seller financing Ephrata, PA
Seller financing Piscataway, NJ
Seller financing Reiffton, PA
Seller financing Westfield, MA
Seller financing Kenmore, NY
10.0% 7/2024
11.0% 8/2018
9.5% 8/2028
10.0% 12/2019
8.0% 7/2026
9.0% 5/2032
9.0% 5/2019
9.0% 7/2019
9.0% 8/2019
9.5% 9/2019
9.0% 9/2019
9.0% 10/2019
9.0% 12/2019
9.0% 1/2020
9.0% 1/2020
9.0% 1/2020
9.0% 5/2020
9.0% 10/2020
9.0% 10/2020
9.0% 10/2020
9.0% 11/2020
9.0% 11/2020
9.0% 11/2020
9.0% 11/2020
9.0% 11/2020
9.0% 12/2020
9.0% 12/2020
9.0% 12/2020
9.0% 12/2020
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
$
$
237
298
210
300
568
455
225
131
200
225
800
325
240
488
306
284
206
230
458
300
268
280
431
118
265
121
108
165
200
169
145
179
191
416
431
134
125
191
215
778
311
184
469
294
273
200
224
447
293
262
272
422
115
259
119
106
162
196
90
Type of
Loan/Borrower
Borrower AD
Borrower AE
Borrower AF
Borrower AG
Borrower AH
Borrower AI
Borrower AJ
Borrower AK
Borrower AL
Borrower AM
Borrower AN
Borrower AO
Borrower AP
Borrower AQ
Borrower AR
Borrower AS
Borrower AT
Borrower AU
Borrower AV
Borrower AW
Borrower AX
Borrower AY
Borrower AZ
Borrower BA
Borrower BB
Borrower BC
Borrower BD
Borrower BE
Borrower BF
Borrower BG
Borrower BH
Borrower BI
Borrower BJ
Borrower BK
Borrower BL
Borrower BM
Borrower BN
Borrower BO
Borrower BP
Borrower BQ
Borrower BR
Borrower BS
Borrower BT
Borrower BU
Borrower BV
Borrower BW
Borrower BX
Borrower BY
Borrower BZ
Borrower CA
Description
Location(s)
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms (a)
Prior
Liens
Face Value
at
Inception
Amount of
Principal
Unpaid at
Close of Period
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Wilmington, DE
Gettysburg, PA
Marlborough, NY
Kenmore, NY
Weymouth, MA
Stafford Springs, CT
Latham, NY
Magnolia, NJ
Colonia, NJ
Jersey City, NJ
Elmont, NY
Leola, PA
Lititz/Rothsville, PA
Bayonne, NJ
Ridge, NY
Ballston, NY
Kenhorst, PA
Reading, PA
Waterbury, CT
White Plains, NY
Scarsdale, NY
York, PA
Bristol, CT
Belleville, NJ
Southbridge, MA
Warrensburg, NY
Ridgefield NJ
Glenville, NY
Great Barrington, MA
Rockland, MA
West Milford, NJ
Williamstown, NJ
Pine Hill, NJ
Belford, NJ
Swedesboro, NJ
Linwood, PA
Piermont, NY
Hatboro, PA
Middlesex, NJ
Valley Cottage, NY
Coxsackie, NY
Newburgh, NY
Providence, RI
Chatham, NY
Warwick, RI
New Bedford, MA
N. Attleboro, MA
Fitchburg, MA
S. Hadley, MA
Bristol, PA
9.0% 12/2020
9.0% 12/2020
9.0% 12/2020
9.0%
1/2021
9.0%
1/2021
9.0%
2/2021
9.0%
2/2021
9.0%
5/2020
9.0%
6/2020
9.0%
7/2018
9.0%
2/2020
9.0%
3/2020
9.0%
3/2020
9.0%
3/2020
9.0%
3/2020
9.0%
5/2020
9.0%
5/2020
9.0%
3/2021
9.0%
3/2021
9.0%
3/2021
9.0%
3/2021
9.0%
3/2021
9.0%
4/2021
9.0%
4/2021
9.0%
4/2021
9.0%
4/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
5/2021
9.0%
6/2021
9.0%
6/2021
9.0%
8/2021
9.0% 10/2021
9.0% 10/2021
9.0% 10/2021
9.0% 11/2021
9.0% 11/2021
9.0% 12/2021
9.0% 12/2021
9.0% 12/2021
9.0% 12/2021
91
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
P & I
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
84
69
214
74
390
232
169
53
320
500
450
220
180
308
413
225
200
176
171
444
337
102
230
315
300
163
172
325
58
134
50
42
115
134
77
46
42
84
255
92
153
394
184
360
357
363
243
187
346
153
82
67
150
73
383
228
166
51
311
486
399
213
174
297
393
218
194
173
169
437
331
100
226
311
296
161
170
321
57
132
49
41
114
132
76
45
42
83
253
91
152
392
183
358
356
362
242
186
346
153
Type of
Loan/Borrower
Borrower CB
Borrower CC
Borrower CD
Borrower CE
Borrower CF
Borrower CG
Borrower CH
Description
Location(s)
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Queensbury, NY
Worcester, MA
Westfield, MA
Winston Salem, NC
Hyannis, MA
S. Yarmouth, MA
Harwich Port, MA
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms (a)
Prior
Liens
Face Value
at
Inception
Amount of
Principal
Unpaid at
Close of Period
9.0% 12/2021
9.0% 12/2021
9.0% 12/2021
9.0%
1/2022
9.0%
2/2022
9.0%
2/2022
9.0%
2/2022
P & I
P & I
P & I
P & I
P & I
P & I
P & I
—
—
—
—
—
—
—
176
237
303
36
179
275
293
176
237
303
36
179
275
293
20,646
19,506
Note receivable
Purchase/leaseback Various-NY
9.5%
1/2021
I(b)
18,400
14,720
Total (c)
R
$ 39,046 $
34,226
(a) P & I = Principal and interest paid monthly.
(b)
(c) The aggregate cost for federal income tax purposes approximates the amount of principal unpaid.
I = Interest only paid monthly with principal deferred.
We review payment status to identify performing versus non-performing loans. Interest income on performing loans is accrued as
earned. A non-performing loan is placed on non-accrual status when it is probable that the borrower may be unable to meet interest
payments as they become due. Generally, loans 90 days or more past due are placed on non-accrual status unless there is sufficient
collateral to assure collectability of principal and interest. Upon the designation of non-accrual status, all unpaid accrued interest is
reserved against through current income. Interest income on non-performing loans is generally recognized on a cash basis. The
summarized changes in the carrying amount of mortgage loans are as follows:
Balance at January 1,
Additions:
New mortgage loans
Deductions:
Loan repayments
Collection of principal
Write-off of loan balance
Balance at December 31,
2014
2013
2012
$ 28,793
$ 22,333
$ 18,638
8,278
8,714
4,568
(2,294)
(489)
(62)
$ 34,226
(480)
(1,774)
—
$ 28,793
(300)
(573)
—
$ 22,333
92
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Getty Realty Corp.
(Registrant)
By:
/S/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
March 13, 2015
By:
/S/ EUGENE SHNAYDERMAN
Eugene Shnayderman
Chief Accounting Officer and Controller
(Principal Accounting Officer)
March 13, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been
signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By:
By:
By:
/S/ DAVID B. DRISCOLL
David B. Driscoll
President, Chief Executive Officer and Director
(Principal Executive Officer)
March 13, 2015
/S/ LEO LIEBOWITZ
Leo Liebowitz
Director and Chairman of the Board
March 13, 2015
/S/ MILTON COOPER
Milton Cooper
Director
March 13, 2015
By:
By:
By:
/S/ HOWARD SAFENOWITZ
Howard Safenowitz
Director
March 13, 2015
/S/ PHILIP E. COVIELLO
Philip E. Coviello
Director
March 13, 2015
/S/ RICHARD E. MONTAG
Richard E. Montag
Director
March 13, 2015
93
EXHIBIT INDEX
EXHIBIT NO.
DESCRIPTION
GETTY REALTY CORP.
Annual Report on Form 10-K
for the year ended December 31, 2014
3.1
3.2
3.3
3.4
3.5
4.1
Articles of Incorporation of Getty Realty Holding Corp.
(“Holdings”), now known as Getty Realty Corp., filed
December 23, 1997.
Articles Supplementary to Articles of Incorporation of
Holdings, filed January 21, 1998.
By-Laws of Getty Realty Corp.
Articles of Amendment of Holdings, changing its name to
Getty Realty Corp., filed January 30, 1998.
Amendment to Articles of Incorporation of Holdings, filed
August 1, 2001.
Dividend Reinvestment/Stock Purchase Plan.
10.1*
Retirement and Profit Sharing Plan (restated as of December 1,
2012).
10.2*
1998 Stock Option Plan, effective as of January 30,1998.
Form of Indemnification Agreement between the Company and
its directors.
Amended and Restated Supplemental
Retirement Plan for Executives of the Getty Realty Corp. and
Participating Subsidiaries (adopted by the Company on
December 16, 1997 and amended and restated effective
January 1, 2009).
2004 Getty Realty Corp. Omnibus Incentive Compensation
Plan.
10.3*
10.4*
10.6*
10.7*
10.8*
Filed as Exhibit 3.1 to Company’s Registration
Statement on Form S-4, filed on January 12, 1998 (File
No. 333- 44065), included as Appendix D. to the Joint
Proxy/Prospectus that is a part thereof, and incorporated
herein by reference.
Filed as Exhibit 3.2 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 3.3 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 3.4 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 3.5 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Filed under the heading “Description of Plan” on pages 4
through 17 to Company’s Registration Statement on
Form S-3D, filed on April 22, 2004 (File No. 333-
114730) and incorporated herein by reference.
Filed as Exhibit 10.1 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2012 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 10.1 to Company’s Registration
Statement on Form S-4, filed on January 12, 1998 (File
No. 333-44065), included as Appendix H to the Joint
Proxy Statement/Prospectus that is a part thereof, and
incorporated herein by reference.
Filed as Exhibit 10.5 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 10.6 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 10.3 to Company’s Annual Report on
Form 10-K for the fiscal year ended January 31, 2009
(File No. 001-13777) and incorporated herein by
reference.
Form of restricted stock unit grant award under the 2004 Getty
Realty Corp. Omnibus Incentive Compensation Plan, as
amended.
Filed as Exhibit 10.15 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
Amendment to the 2004 Getty Realty Corp. Omnibus Incentive
Compensation Plan dated December 31, 2008.
Filed as Exhibit 10.19 to Company’s Annual Report on
Form 10-K for the year ended December 31, 2008 (File
No. 001-13777) and incorporated herein by reference.
94
EXHIBIT NO.
10.10**
DESCRIPTION
Unitary Net Lease Agreement between GTY NY
Leasing, Inc. and CPD NY Energy Corp., dated as of
January 13, 2011.
10.11
10.13**
10.14**
10.15*
10.16
10.17
10.18*
14
21
23
31(i).1
31(i).2
32.1
32.2
101.INS
101.SCH
Stipulation and order Deferring Rents Owing to Getty
Properties, Establishing Procedures for the
Administration of the Chapter 11 Cases, Extending the
Time for the Debtors to Assume or Reject the Master
Lease and Other Matters.
Credit Agreement, dated as of February 25, 2013, among
Getty Realty Corp., Lenders named therein and JP
Morgan Chase Bank, N.A. as Administrative Agent and
Collateral Agent.
Filed as Exhibit 10.1 to Company’s Quarterly
Report on Form 10-Q filed April, 12, 2011 (File
No. 001-13777) and incorporated herein by
reference.
Filed as Exhibit 99.2 to Company’s Current Report
on Form 8-K filed March 9, 2012 (File No. 001-
13777) and incorporated herein by reference.
Filed as Exhibit 10.1 to Company’s Quarterly
Report on Form 10-Q filed May 10, 2013 (File No.
001-13777) and incorporated herein by reference.
Note Purchase and Guarantee Agreement, dated as of
February 25, 2013, among Getty Realty Corp. and the
Prudential Insurance Company of America.
Filed as Exhibit 10.2 to Company’s Quarterly
Report on Form 10-Q filed May 10, 2013 (File No.
001-13777) and incorporated herein by reference.
Form of incentive restricted stock unit grant award under
the 2004 Getty Realty Corp. Omnibus Incentive
Compensation Plan, as amended.
Filed as Exhibit 10.3 to Company’s Quarterly
Report on Form 10-Q filed May 10, 2013 (File No.
001-13777) and incorporated herein by reference.
Amendment to Credit Agreement, dated as of December
23, 2013, by among Getty Realty Corp., the lenders
party thereto and JPMorgan Chase Bank, N.A., as
administrative agent.
Amendment No. 1 to Note Purchase and Guarantee
Agreement, dated as of December 23, 2013, among
Getty Realty Corp. (the “Company”), each of the
Company’s subsidiaries party thereto as guarantors, the
Prudential Insurance Company of America and
Prudential Retirement Insurance and Annuity Company.
Getty Realty Corp. Amended and Restated 2004
Omnibus Incentive Compensation Plan.
The Getty Realty Corp. Business Conduct Guidelines
(Code of Ethics).
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting
Firm.
Filed as Exhibit 10.1 to Company’s Current Report
on Form 8-K filed December 30, 2013 (File No.
001-13777) and incorporated herein by reference.
Filed as Exhibit 10.2 to Company’s Current Report
on Form 8-K filed December 30, 2013 (File No.
001-13777) and incorporated herein by reference.
(a)
(a)
(a)
(a)
Rule 13a-14(a) Certification of Chief Financial Officer.
(b)
Rule 13a-14(a) Certification of Chief Executive Officer.
(b)
Section 1350 Certification of Chief Executive Officer.
Section 1350 Certification of Chief Financial Officer.
XBRL Instance Document
XBRL Taxonomy Extension Schema
(b)
(b)
(a)
(a)
95
EXHIBIT NO.
DESCRIPTION
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Calculation Linkbase
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
XBRL Taxonomy Extension Presentation Linkbase
(a)
(a)
(a)
(a)
(a) Filed herewith.
(b) Furnished herewith. These certifications are being furnished solely to accompany the Report pursuant to 18 U.S.C. Section.
1350, and are not being filed for purposes of Section 18 of the Exchange Act, and are not to be incorporated by reference into
any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in
such filing.
* Management contract or compensatory plan or arrangement.
** Confidential treatment has been granted for certain portions of this Exhibit pursuant to Rule 24b-2 under the Exchange Act,
which portions are omitted and filed separately with the SEC.
The exhibits listed in this Exhibit Index which were filed or furnished with our 2014 Annual Report on Form 10-K filed with the
Securities and Exchange Commission are available upon payment of a $25 fee per exhibit, upon request from us, by writing to
Investor Relations addressed to Getty Realty Corp., Two Jericho Plaza, Suite 110, Jericho, NY 11753. Our website address is
www.gettyrealty.com. Our website contains a hyperlink to the EDGAR database of the Securities and Exchange Commission at
www.sec.gov where you can access, free-of-charge, each exhibit that was filed or furnished with our 2014 Annual Report on
Form 10-K.
96
EXHIBIT 21. SUBSIDIARIES OF THE COMPANY
SUBSIDIARY
AOC Transport, Inc.
GettyMart, Inc.
Getty HI Indemnity, Inc.
Getty Leasing, Inc.
Getty Properties Corp.
Getty TM Corp.
GTY MA/NH Leasing, Inc.
GTY MD Leasing, Inc.
GTY NY Leasing, Inc.
GTY-CPG (VA/DC) Leasing, Inc.
GTY-CPG (QNS/BX) Leasing, Inc.
GTY-RPI (TX) Leasing, LLC
GTY-VPS (IN/MA/OH) Leasing, Inc.
Getty LFA, LLC
Leemilt’s Petroleum, Inc.
Power Test Realty Company Limited Partnership*
Slattery Group, Inc.
STATE OF
INCORPORATION
Delaware
Delaware
New York
Delaware
Delaware
Maryland
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New York
New York
New Jersey
* Ninety-nine percent owned by the Company, representing the limited partner units, and one percent owned by Getty Properties
Corp., representing the general partner interest.
EXHIBIT 23. CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-115672, 333-45249
and 333-45251), Form S-3 (No. 333-200913) and Form S-3D (No. 333-114730) of Getty Realty Corp. of our reports dated March 13,
2015 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial
reporting, which appear in this Form 10 K.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 13, 2015
EXHIBIT 31(i).1 RULE 13a-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Christopher J. Constant, certify that:
1. I have reviewed this Annual Report on Form 10-K of Getty Realty Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 13, 2015
By: /s/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
Vice President,
Chief Financial Officer and Treasurer
EXHIBIT 31(i).2 RULE 13a-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, David B. Driscoll, certify that:
1. I have reviewed this Annual Report on Form 10-K of Getty Realty Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated
financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date: March 13, 2015
By: /s/ DAVID B. DRISCOLL
David B. Driscoll
President and Chief Executive Officer
EXHIBIT 32.1 SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of
Getty Realty Corp. (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i) the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2014 (the “Report”) fully
complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended;
and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 13, 2015
By: /s/ DAVID B. DRISCOLL
David B. Driscoll
President and Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to Getty Realty Corp. and will be retained by
Getty Realty Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into
any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such
filing.
EXHIBIT 32.2 SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of
Getty Realty Corp. (the “Company”) hereby certifies, to such officer’s knowledge, that:
(i) the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2014 (the “Report”) fully
complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended;
and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 13, 2015
By: /s/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
Vice President, Chief Financial Officer and
Treasurer
A signed original of this written statement required by Section 906 has been provided to Getty Realty Corp. and will be retained by
Getty Realty Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being
filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into
any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such
filing.
CO RPO R ATE DATA
Board of Directors
Milton Cooper
Chairman of the Board of Kimco Realty Corporation
Philip E. Coviello
Retired Partner of Latham & Watkins LLP
David B. Driscoll
Chief Executive Officer and President of Getty Realty Corp.
Leo Liebowitz
Chairman of the Board of Directors of Getty Realty Corp.
Richard E. Montag
Former Senior Executive of the Richard E. Jacobs Group
Howard Safenowitz
President, Safenowitz Family Corp.
Executive Officers
David B. Driscoll
Chief Executive Officer and President
Kevin C. Shea
Executive Vice President
Mark J. Olear
Executive Vice President, Chief Investment Officer
Joshua Dicker
Senior Vice President, General Counsel and Secretary
Christopher J. Constant
Vice President, Chief Financial Officer and Treasurer
Corporate Headquarters
Getty Realty Corp.
Two Jericho Plaza, Suite 110
Jericho, New York 11753
(516) 478-5400
www.gettyrealty.com
About Our Stock
Our Common Stock is listed on the New York Stock
Exchange under the symbol GTY.
About Our Shareholders
As of March 13, 2015, we had 33,417,203 outstanding
shares of Common Stock owned by approximately
10,330 shareholders.
Annual Meeting
All shareholders are cordially invited to attend our annual
meeting on May 12, 2015 at 3:30 p.m. at the offices
of JPMorgan Chase & Co., located at 277 Park Avenue,
17th Floor Conference Center, New York, New York. Holders
of common stock of record at the close of business on
March 16, 2015, are entitled to vote at the meeting. A notice
of meeting, proxy statement and proxy were mailed to our
shareholders with this report.
Investor Relations Information
Shareholders are informed about Company news through
the issuance of press releases. Shareholders inquiries,
comments or suggestions concerning Getty Realty Corp.
are welcome. Investors, brokers, securities analysts and
others desiring financial information should contact Investor
Relations at (516) 478-5400 or by writing to:
Investor Relations
Getty Realty Corp.
Two Jericho Plaza, Suite 110
Jericho, New York 11753
Our website address is www.gettyrealty.com. Our website
contains a hyperlink to the EDGAR database of the Securities
and Exchange Commission where you can access, without
charge, the reports we file with the Securities and Exchange
Commission as soon as reasonably practicable after such
reports are filed.
Transfer Agent and Dividend
Reinvestment Plan Information
Computershare Inc.
P.O. Box 30170
College Station, TX 77842
(800) 368-5948
www.computershare.com
Two Jericho Plaza, Suite 110
Jericho, NY 11753
( 516 ) 478 - 5400