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2016ANNUAL REPORT
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
2015 Quarterly Performance (a)
2015 Quarterly Performance (a)
AFFO (Per Share in parentheses)
AFFO (Per Share in parentheses)
Net Income
(Per Share)
25,000
25,000
2016
829
Dividends Declared Growth (a)
Dividends Declared Growth (a)
115,266
2015
2014
851
863
110,733
99,867
Regular Special
Regular Special
38,411
1.12
0.96
0.96
64,182
1.87
37,410
1.15
1.11
1.15
23,418
0.69
69,134
45,283
2.04
1.34
57,951
65,205
42,636
1.69
1.93
1.26
20,000
20,000
Funds from Operations
15,000
(Per Share)
15,000
18,546
(0.54)
18,546
(0.54)
22,825
(0.68)
22,825
(0.68)
0.85
0.85
10,000
10,000
Adjusted Funds from Operations
12,796
(0.38)
12,796
(0.38)
11,038
(0.33)
11,038
(0.33)
5,000
(Per Share)
5,000
Dividends per Share
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
2013
2013
2014
1.03
2014
1.15
2015
2015
0.96
2016 Quarterly Performance (a)
Dividends Declared Growth (a)
AFFO (Per Share in parentheses)
AFFO (Per Share in parentheses)
20,000
20,000
15,000
15,000
10,000
10,000
13,161
(0.39)
13,161
(0.39)
14,461
(0.42)
14,461
(0.42)
15,426
(0.45)
15,426
(0.45)
14,903
(0.43)
14,903
(0.43)
Regular Special
Regular Special
1.15
1.15
0.96
0.96
1.03
1.03
5,000
5,000
0
0
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
2014
2014
2015
2015
2016
2016
Geographic Diversity
(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
D E AR S HAREH O LD ERS
By all measures, 2016 was a tremendous
year for Getty, and I am incredibly proud of
our accomplishments. Through a lot of
hard work, we have created a stable port-
folio of convenience store and gasoline sta-
tion properties which should deliver
consistent organic growth and provides a
platform that is extremely well-positioned
to drive long-term growth. We enter 2017
in a great place financially and operation-
ally, and we anticipate that 2017 will be a
year of investment to further our long-term
objectives of growing our portfolio, unlock-
ing the value of our owned real estate and
continuing to produce strong results for
our shareholders for many years to come.
A Year of Strong Financial and Operational
Achievements
In addition, with the disposition and leasing activity com-
pleted during the year, we have essentially completed
the repositioning of former transitional properties, which
has been one of our primary strategic initiatives over the
past several years. We began the year with 46 transi-
tional properties and over the course of the year
reduced this figure by approximately 40%. As a result,
we will no longer characterize properties as “transi-
tional,” which is how we used to discuss properties that
were previously leased to Getty Petroleum Marketing
Inc., and which we were either looking to lease or sell.
We now have a stable portfolio of quality assets, allow-
ing our resources to be fully dedicated to ongoing
growth. Going forward, we will continue to disclose the
number of properties in our net lease portfolio (808 as of
December 31, 2016); in addition, we will now provide our
shareholders with the number of sites we are actively
redeveloping (six as of December 31, 2016) and our
vacant properties (15 as of December 31, 2016).
Our strong financial results represent the culmination of
efforts by the entire Getty team over the last few years
Steps Taken to Accelerate Growth
to stabilize our core net lease portfolio of convenience
Getty remains committed to executing on our strategy of
store and gasoline station properties. For 2016, our
growing our portfolio by acquiring new assets in the con-
Adjusted Funds from Operations (AFFO) was $1.64 per
venience store, gasoline station and auto services related
share, which represented an 18% increase over our
sectors and also by creating additional value from our
AFFO per share for the prior year, excluding certain
existing portfolio as we redevelop locations for a wide
“notable items” in both years which we do not expect to
variety of single-tenant net lease uses. During the year,
recur on a regular basis.
we took several important steps to help us accelerate
these growth initiatives.
I am also pleased with our ongoing progress in steadily
reducing our environmental liability. In January of 2016,
First, we bolstered the team at Getty responsible for
we brought in house the management of our environmen-
executing on our growth initiatives by selectively adding
tal program and began to recognize instant cost savings
personnel with real estate leasing and development
stemming from operating efficiencies. For the year, we
expertise and realigning our existing resources to place
closed 73 open incidents and reduced our overall remedi-
additional emphasis on sourcing and closing on acquisi-
ation liability by $9.8 million, or 12%. We will continue to
tion opportunities. We maintain an efficient team, with
place an emphasis on reducing our overall environmental
an excellent mix of long time Getty employees and new
liability by remediating known contamination thereby
hires who are integrating well into the organization and
increasing the value of our properties and in turn creating
creating exciting opportunities for Getty as we look to
value for our shareholders.
the future.
We also implemented an At-the-Market (“ATM”) equity
increase, our total return to shareholders in 2016 was
issuance program during the year to provide the
more than 55%, making Getty one of the top perform-
Company with an additional avenue for generating capi-
ing REITs in both the net lease and overall industry sec-
tal needed for our growth plans. During 2016, we used
tors. We are confident that we have taken the right
the ATM program opportunistically and raised approxi-
steps and are following the optimal strategy such that
mately $15 million. I feel strongly that the ATM program
our positive and consistent operating performance
is ideal for our Company as it is cost effective and
should result in appreciable growth in long-term share-
allows us to match fund our acquisitions and redevelop-
holder value.
ment projects.
We also strengthened our balance sheet in February
A Bright Future
2017 by issuing $50.0 million of 4.75% fixed rate unse-
As we look ahead, we have the strongest and largest
cured debt maturing in February 2025 and used the
pipeline of acquisition and redevelopment opportunities
proceeds to reduce our exposure to rising interest rates
that we have had at any time during the past year.
by repaying floating rate debt outstanding under our cur-
With our enhanced team, strong pipeline, ATM pro-
rent credit facility. On a pro forma basis, we length-
gram and debt refinancing transaction, we believe we
ened our weighted average debt maturities and reduced
have significantly enhanced our ability to accretively
the Company’s exposure to floating rate debt to 25% of
grow our Company.
total debt outstanding.
Delivering Returns to Shareholders
Thank You!
I am very pleased with the progress throughout this past
Importantly, all of our activities are resulting in an attrac-
year and believe we have the team in place to success-
tive total return for our shareholders. Due to our prog-
fully implement our long-term growth strategies. I
ress, in October 2016, our Board raised our recurring
would like to conclude by personally thanking our man-
annual cash dividend by 12% to $1.12 per share. This
agement and employees for all of their hard work dur-
increase reflects the Company’s consistent growth and
ing the past year. I would also like to thank our Board
the stability of our overall portfolio. It also marked the
and shareholders for their continued support.
second straight year that we rewarded our shareholders
with a dividend increase of more than 10%.
Best Regards,
The entire Getty team and I are deeply gratified that the
market has recognized our Company’s progress as evi-
denced by the meaningful increase in our share price
during 2016. When combined with our dividend
Christopher J. Constant
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016
OR
(cid:1) 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)
11-3412575
(I.R.S. employer
identification no.)
Two Jericho Plaza, Suite 110, Jericho, New York
(Address of principal executive offices)
11753-1681
(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 (cid:2) No (cid:1)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:2)
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 (cid:1) No (cid:2)
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 (cid:2) No (cid:1)
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. (cid:1)
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):
(cid:2)
Large accelerated filer (cid:1)
Non-accelerated filer (cid:1) (Do not check if a smaller reporting company)
(cid:1)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1) No (cid:2)
The aggregate market value of common stock held by non-affiliates (26,578,306 shares of common stock) of the Company was $570,105,000 as of
June 30, 2016.
The registrant had outstanding 34,573,340 shares of common stock as of March 2, 2017.
Accelerated filer
Smaller reporting company
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT
PART OF
FORM 10-K
Selected Portions of Definitive Proxy Statement for the 2017 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, 2016, 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
Properties
2
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
9A Controls and Procedures
9B Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
10 Directors, Executive Officers and Corporate Governance
11 Executive Compensation
12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
13 Certain Relationships and Related Transactions, and Director Independence
14 Principal Accountant Fees and Services
15 Exhibits and Financial Statement Schedules
PART IV
Signatures
Exhibit Index
Page
3
4
7
17
17
19
22
23
25
26
39
41
68
68
68
70
70
70
70
70
71
91
92
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 convenience store and gasoline station 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 liabilities, including those 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; the impact of our redevelopment
efforts related to certain of our properties; 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 as a measure that best represents our recurring
financial performance and its utility in comparing the sustainability of our operating performance with the sustainability of the
operating performance of other REITs; corporate-level federal income taxes; the reasonableness of our estimates, judgments,
projections and assumptions used regarding our accounting policies and methods; our critical accounting policies; our exposure and
liability due to and our accruals, estimates and assumptions regarding our environmental liabilities and remediation costs; 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; our claims for reimbursement of monies expended in in the
defense and settlement of certain MTBE cases under pollution insurance policies; 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 UST funds; our indemnification
obligations and the indemnification obligations of others; 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 continued compliance with the covenants in our Credit Agreement and Restated Prudential Note Purchase
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; our beliefs regarding our
properties, including their alternative uses and our ability to sell or lease our vacant properties over time; 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 in “Item 1A. Risk Factors” and in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” 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 environmental laws and regulations and the
costs associated with complying with such laws and regulations; counterparty risks; the creditworthiness of our tenants; our tenants’
compliance with their lease obligations; renewal of existing leases and our ability to either re-lease or sell properties; our dependence
on external sources of capital; 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 redevelopment opportunities; our ability to successfully manage our investment strategy; owning and leasing real estate; 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; competition in our industry; the adequacy of our insurance coverage and
that of our tenants; failure to qualify as a REIT; changes in interest rates and our ability to manage or mitigate this risk effectively;
adverse effect of inflation; dilution as a result of future issuances of equity securities; our dividend policy, ability to pay dividends and
changes to our dividend policy; changes in market conditions; provisions in our corporate charter and by-laws; Maryland law
discouraging a third-party takeover; the loss of a member or members of our management team; changes in accounting standards;
future impairment charges; 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.
3
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 convenience store and gasoline station properties. Our 829 properties are
located in 23 states across the United States and Washington, D.C. Our properties are operated under a variety of brands including 76,
Aloha, BP, Citgo, Conoco, Exxon, Getty, Mobil, RaceTrac, Shell and Valero. 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 convenience store and gasoline station properties. We have invested, and will continue to invest, in real estate and real
estate related investments when appropriate opportunities arise. Our company is headquartered in Jericho, New York and as of
March 2, 2017, we had 31 employees.
Company Operations
As of December 31, 2016, we owned 740 properties and leased 89 properties from third-party landlords. Our typical property is
used as a convenience store and gasoline station, and is located on between one-half and three quarters of an acre of land in a
metropolitan area. In addition, many of our properties are located at highly trafficked urban intersections or conveniently close to
highway entrances or exit ramps. Our properties are concentrated in the Northeast and Mid-Atlantic regions. We believe our network
of convenience store and gasoline station 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, convenience store retailers
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 convenience stores, gasoline stations, automotive repair service facilities or other
businesses at our properties. Convenience store and gasoline station properties are an integral component of the transportation
infrastructure supported by highly inelastic demand for refined petroleum products, day-to-day consumer goods and convenience
foods.
Substantially all of our tenants’ financial results depend on the sale of refined petroleum products, convenience store sales or
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 reviewing 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.
Our Properties
Net Lease. As of December 31, 2016, we leased 808 of our properties to tenants under triple-net leases.
Our net lease properties include 724 properties leased to regional and national fuel distributors under 25 separate unitary or
master triple-net leases and 84 properties leased under single unit triple-net leases. These leases generally provide for an initial term of
15 to 20 years with options for successive renewal terms of up to 20 years and periodic rent escalations. As of December 31, 2016, our
contractual rent weighted average lease term, excluding renewal options was approximately 11 years. Our triple-net tenants are
generally 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 in “Item 8. Financial Statements and
Supplementary Data” in this Form 10-K.
Several of our leases provide for additional rent based on the aggregate volume of fuel sold. For the year ended December 31,
2016, additional rent based on the aggregate volume of fuel sold was not material to our financial results. 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 (“UST” or “USTs”) that are owned by our tenants. As of December 31, 2016, we have a remaining
commitment to fund up to $10.2 million in the aggregate with our tenants for our portion of such capital expenditures. See Note 2 in
“Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
4
Redevelopment. As of December 31, 2016, we were actively redeveloping six of our former convenience store and gasoline
station properties for alternative single-tenant net lease retail uses. See “Redevelopment Strategy and Activity” below for additional
detail.
Vacancies. As of December 31, 2016, 15 of our properties were vacant. We expect that we will either sell or enter into new
leases on these properties over time.
Investment Strategy and Activity
As part of our overall growth strategy, we regularly review acquisition and financing opportunities to invest in additional
convenience store and gasoline station properties, and we expect to continue to pursue investments that we believe will benefit our
financial performance. In addition to sale/leaseback and other real estate acquisitions, our investment activities include purchase
money financing with respect to properties we sell, and real property loans relating to our leasehold portfolios. 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 are in strong primary markets
that serve high density population centers. A key element of our investment strategy is to invest in properties that will promote our
geographic and tenant diversity. We cannot provide any assurance that we will be successful making additional investments, that
investments which meet our investment criteria will be available or that our current sources of liquidity will be sufficient to fund such
investments.
During the year ended December 31, 2016, we acquired fee simple or leasehold interests in three convenience store and gasoline
station properties and an adjacent parcel of land to an existing property for a redevelopment project, in separate transactions, for an
aggregate purchase price of $7.7 million. During the year ended December 31, 2015, we acquired fee simple interests in 80
convenience store and gasoline station properties for an aggregate purchase price of $219.2 million.
Over the last five years, we have acquired 138 properties, located in various states, for an aggregate purchase price of $322.9
million. These acquisitions included single property transactions and portfolio transactions ranging in size, the largest of which was
the United Oil Transaction in June 2015. For information regarding the United Oil Transaction, see Note 12 in “Item 8. Financial
Statements and Supplementary Data” and for selected combined audited financial data of United Oil, see “Item 9B. Other
Information” in this Form 10-K.
Redevelopment Strategy and Activity
We believe that a portion of our properties are located in geographic areas, which together with other factors, may make them
well-suited for alternative single-tenant net lease retail uses, such as quick service restaurants, automotive parts and service stores,
specialty retail stores and bank branch locations. We believe that such alternative types of properties can be leased or sold at higher
values than their current use. Accordingly, we are actively engaged in a redevelopment strategy with respect to certain of our
properties.
For the year ended December 31, 2016, we spent $0.7 million (of which $0.3 million was previously accrued for at
December 31, 2015) of construction-in-progress costs related to our redevelopment activities. For the year ended December 31, 2016,
we completed one redevelopment project and $1.0 million of construction-in-progress was transferred to buildings and improvements
on our consolidated balance sheet.
As of December 31, 2016, we were actively redeveloping six of our former convenience store and gasoline station properties for
alternative single-tenant net lease retail uses. In addition, to the six properties currently classified as redevelopment, we are in various
stages of feasibility and planning for the recapture of select properties, from our net lease portfolio, that are suitable for redevelopment
to alternative single-tenant net lease retail uses. As of December 31, 2016, we have signed leases on seven properties, that are
currently part of our net lease portfolio, which will be recaptured and transferred to redevelopment when the appropriate entitlements,
permits and approvals have been secured.
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.
Getty Petroleum Marketing, Inc. (“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 entered in to a long-term unitary triple-net lease (the “Master Lease”)
5
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 pursuant to a final decree issued by the
Bankruptcy Court in October 2015, the Chapter 11 cases pertaining to Marketing were closed, subject to final distributions to creditors
which were made in November 2015. As of December 31, 2016, 391 of the properties we own or lease 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 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, 2016, we had three significant tenants by revenue:
• We leased 166 convenience store and gasoline station properties in three separate unitary leases and three stand-
alone leases to subsidiaries of Global Partners LP (NYSE: GLP) (“Global Partners”). Two of these leases were
assigned to subsidiaries of Global Partners in June 2015 by our former tenants, White Oak Petroleum, LLC and Big
Apple Petroleum Realty, LLC (both affiliates of Capitol Petroleum Group, LLC). In the aggregate, our leases with
subsidiaries of Global Partners represented 21% of our total revenues for the years ended December 31, 2016 and
2015. All of our unitary leases with subsidiaries of Global Partners are guaranteed by the parent company.
• We leased 77 convenience store and gasoline station properties pursuant to three separate unitary leases to Apro,
LLC (d/b/a “United Oil”). In the aggregate, our leases with United Oil represented 15% and 9% of our total revenues
for the years ended December 31, 2016 and 2015, respectively. For information regarding the United Oil Transaction
see Note 12 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K. See Item 9B in this Form
10-K for selected combined audited financial data of United Oil.
• We leased 79 convenience store and gasoline station properties pursuant to three separate unitary leases to
subsidiaries of Chestnut Petroleum Dist., Inc. (“Chestnut Petroleum”). In the aggregate, our leases with subsidiaries
of Chestnut Petroleum represented 15% and 16% of our total revenues for the years ended December 31, 2016 and
2015, respectively. The largest of these unitary leases, covering 57 of our properties, is guaranteed by the parent
company, its principals and numerous Chestnut Petroleum affiliates.
Our major tenants are part of larger corporate organizations and the financial distress of one subsidiary or 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. For information regarding factors that could adversely affect us relating to our leases with these
tenants, see “Item 1A. Risk Factors”.
Competition
The single-tenant net lease retail 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 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, USTs and other equipment. These laws include: (i) requirements to report
to governmental authorities discharges of petroleum products into the environment and, under certain circumstances, to remediate the
6
soil and groundwater contamination, including 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 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 are incurred for, among other things, removing
USTs, excavation of contaminated soil and water, installing, operating, maintaining and decommissioning remediation systems,
monitoring contamination and governmental agency compliance reporting required 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 our 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 (substantially all of which
commenced in 2012), we have agreed to be responsible for environmental contamination at the premises that was known at the time
the lease commenced, and which 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 (or a shorter period for a minority of such leases). After expiration of
such ten-year (or, in certain cases, shorter) 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 “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and to Note 5 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
Additional Information
Our website address is www.gettyrealty.com. Information available on our website shall not be deemed to be a part of this
Annual Report on Form 10-K. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”) are available on our website, free of charge, as soon as reasonably practicable after we electronically file such
materials with, or furnish them to, the U.S. Securities and Exchange Commission (“SEC”). The public may read and copy any
materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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.
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.
7
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 convenience store and gasoline station 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 are 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” in this 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 our 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 our 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. We assess whether to
accrue for environmental liabilities based upon relevant factors including our tenants’ histories of paying for such obligations, our
assessment of their financial ability, and their intent to pay for such obligations. 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 (the cost of which in certain cases is partially borne by us) 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 (substantially all of which commenced in 2012), we have agreed to be responsible for environmental
contamination at the premises that was known at the time the lease commenced, and which 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 (or a shorter
period for a minority of such leases). After expiration of such ten-year (or, in certain cases, shorter) 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 several
years 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
8
such contamination. 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.
In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained
continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and
continues to be discovered. As a result, we have developed a reasonable estimate of fair value for the prospective future environmental
liability resulting from preexisting unknown environmental contamination and accrued for these estimated costs. 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. 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 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, 2016 and 2015, we have accrued $45.0 million and $45.4 million, respectively, for these future
environmental liabilities related to preexisting unknown contamination. 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,
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, 2016, we had accrued a total of $74.5 million for our prospective
environmental remediation liability. This accrual includes (a) $29.5 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) $45.0 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
9
limited to, the members of the Bank Syndicate related to our Credit Agreement, the lender that is the counterparty to the Restated
Prudential Note Purchase 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, 2016, we leased 166 convenience store and gasoline station
properties pursuant to three separate unitary leases and three stand-alone leases to subsidiaries of Global Partners, LP (NYSE: GLP)
(“Global Partners”). Two of these leases were assigned to subsidiaries of Global Partners in June 2015 by our former tenants, White
Oak Petroleum, LLC and Big Apple Petroleum Realty, LLC (both affiliates of Capitol Petroleum Group, LLC). In the aggregate, our
leases with subsidiaries of Global Partners represented 21% of our total revenues for the years ended December 31, 2016 and 2015.
All of our unitary leases with subsidiaries of Global Partners are guaranteed by the parent company. As of December 31, 2016, we
leased 77 convenience store and gasoline station properties pursuant to three separate unitary leases to Apro, LLC (d/b/a “United
Oil”). In the aggregate, our leases with United Oil represented 15% and 9% of our total revenues for the years ended December 31,
2016 and 2015, respectively. See Item 9B in this Form 10-K for selected combined audited financial data of United Oil. As of
December 31, 2016, we leased 79 convenience store and gasoline station properties pursuant to three separate unitary leases to
subsidiaries of Chestnut Petroleum Dist. Inc. (“Chestnut Petroleum”). In the aggregate, our leases with subsidiaries of Chestnut
Petroleum represented 15% and 16% of our total revenues for the years ended December 31, 2016 and 2015, respectively. The largest
of these unitary leases, covering 57 of our properties, is guaranteed by the parent company, its principals and numerous Chestnut
Petroleum affiliates. We may also undertake additional transactions with these or other existing tenants which would further
concentrate our sources of rental revenues. Many of our tenants, including those noted above, are part of larger corporate
organizations and the financial distress of one subsidiary or 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. 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 certain of 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, many of our
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-leasing or selling our 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-leasing 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.
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-lease or sell our 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.
10
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-lease or sell our properties; or if lease terms upon renewal or re-leasing 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. We may need to
access the capital markets in order to execute future significant acquisitions. There can be no assurance that sources of capital will be
available to us on favorable terms, or at all.
Our principal sources of liquidity are our cash flows from operations, funds available under our $225.0 million Credit
Agreement with a group of banks led by Bank of America, N.A. The Credit Agreement consists of a $175.0 million Revolving
Facility, which is scheduled to mature in June 2018 and a $50.0 million Term Loan, which is scheduled to mature in June 2020.
Subject to the terms of the Credit Agreement and our continued compliance with its provisions, we have the option to (a) extend the
term of the Revolving Facility for one additional year to June 2019 and (b) increase by $75.0 million the amount of the Revolving
Facility to $250.0 million. On June 2, 2015, we entered into the Restated Prudential Note Purchase Agreement, amending and
restating our existing senior secured note purchase agreement with Prudential and an affiliate of Prudential. Pursuant to the Restated
Prudential Note Purchase Agreement, among other matters, Prudential and its affiliate, redenominated the existing notes in the
aggregate amount of $100.0 million issued under the existing note purchase agreement as senior unsecured Series A Notes, and issued
$75.0 million of senior unsecured Series B Notes bearing interest at 5.35% and maturing in June 2023 to Prudential and certain
affiliates of Prudential. The Series A Notes continue to bear interest at 6.0% and mature in February 2021. For additional information,
please refer to “Credit Agreement” and “Senior Unsecured Notes” in Note 4 in “Item 8. Financial Statements and Supplementary
Data” in this Form 10-K.
Each of the Credit Agreement and the Restated Prudential Note Purchase Agreement contains customary financial and other
covenants such as 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 Restated Prudential Note Purchase Agreement, change of control and failure to maintain REIT status. The Restated
Prudential Note Purchase 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” 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 Restated Prudential Note Purchase 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 Restated Prudential Note Purchase Agreement and the market price of our
common stock.
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,
11
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.
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 are pursuing redevelopment opportunities and this creates risks to our Company.
We have commenced a program to redevelop certain of our properties and to recapture select properties from our net lease
portfolio in order to redevelop such properties for alternative uses. The success at each stage of our redevelopment program is
dependent on numerous factors and risks including our ability to identify and extract preferred sites from our portfolio and
successfully prepare and market them for alternative uses, and project development issues, including those relating to planning,
zoning, licensing, permitting, third party and governmental authorizations, changes in local market conditions, increases in
construction costs, the availability and cost of financing, and issues arising from possible discovery of new environmental
contamination and the need to conduct environmental remediation. Occupancy rates and rents at any particular redeveloped property
may fail to meet our original expectations for a number of reasons beyond our control, including changes in market and economic
conditions and the development by competitors of competing properties. We could experience increased and unexpected costs or
significant delays or abandonment of some or all of these redevelopment opportunities. For any of the above-described reasons, and
others, we may determine to abandon opportunities that we have already begun to explore or with respect to which we have
commenced redevelopment efforts and, as a result, we may fail to recover expenses already incurred. We cannot assure you that we
will be able to successfully redevelop and lease any of our identified opportunities or that our overall redevelopment program will be
successful. 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, financing and development opportunities, 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. Pursuing our investment opportunities may result in the issuance of new equity securities of the Company that may initially be
dilutive to our net income, and such investments 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 investments 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 investments, 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
12
operational systems, or hire and retain sufficient operational staff to integrate investments into our portfolio or manage any future
investments 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 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-leasing 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 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, (iii) environmental remediation costs and (iv) 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 convenience store and
gasoline station 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
13
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”,
“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” in this Form 10-K.
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 56.5% 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 regions of the 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, convenience store retailers, 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
14
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
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 Restated Prudential Note Purchase 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” in this Form 10-K.
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.
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 Restated Prudential Note Purchase 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.
15
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.
The loss of certain members of our management team could adversely affect our business.
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 31 employees and have a cost-effective management structure. We do not
have any 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.
16
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 due to changes in estimates associated with our 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, 2016 and 2015, we incurred $12.8 million and $17.4 million, respectively, of
impairment charges. We may be required to take similar 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 cyberattacks. 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.
Item 2. Properties
Substantially all our properties are leased or subleased to petroleum distributors and convenience store retailers, engaged in the
sale of refined petroleum products and convenience store products, who are responsible for the operations conducted at our 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 its existing use, we will seek an alternative tenant or buyer
for the property.
We believe that most of our owned and leased properties are adequately covered by casualty and liability insurance. In addition,
in almost all cases we require our tenants to provide insurance for properties they lease from us, including casualty, liability, pollution
legal liability, fire and extended coverage in amounts and on other terms satisfactory to us.
17
The following table summarizes the geographic distribution of our properties at December 31, 2016. 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
Virginia
New Hampshire
Maryland
Washington State
California
Pennsylvania
Texas
Colorado
Hawaii
Oregon
Maine
Rhode Island
Ohio
Arkansas
Florida
North Carolina
Nevada
Washington, D.C.
Delaware
North Dakota
Total
OWNED
BY
GETTY
REALTY
222
99
74
46
45
44
41
31
29
23
21
15
10
10
7
5
4
3
3
3
2
2
—
1
740
LEASED
BY
GETTY
REALTY
47
13
13
8
1
2
2
—
—
2
—
—
—
—
—
—
—
—
—
—
—
—
1
—
89
TOTAL
PROPERTIES
BY STATE
PERCENT
OF TOTAL
PROPERTIES
269
112
87
54
46
46
43
31
29
25
21
15
10
10
7
5
4
3
3
3
2
2
1
1
829
32.5%
13.5
10.5
6.5
5.6
5.6
5.2
3.7
3.5
3.0
2.5
1.8
1.2
1.2
0.8
0.6
0.5
0.4
0.4
0.4
0.2
0.2
0.1
0.1
100.0%
The properties that we lease from third-parties have a remaining lease term, including renewal and extension option terms,
averaging approximately 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
2017
2018
2019
2020
2021
Subtotal
Thereafter
Total
NUMBER OF
LEASES
EXPIRING
PERCENT
OF TOTAL
LEASED
PROPERTIES
PERCENT
OF TOTAL
PROPERTIES
6
4
6
6
8
30
59
89
6.8%
4.6
6.8
6.8
9.0
34.0
66.0
100.0%
0.7%
0.5
0.7
0.7
1.0
3.6
7.1
10.7%
Revenues from rental properties and tenant reimbursements included in continuing and discontinued operations for the year
ended December 31, 2016, were $111.7 million with respect to 836 average rental properties held during the year for an average
revenue per rental property of approximately $133,600. Revenues from rental properties and tenant reimbursements included in
continuing and discontinued operations for the year ended December 31, 2015, were $107.2 million with respect to 875 average rental
properties held during the year for an average revenue per rental property of approximately $122,500.
18
Rental property lease expirations and annualized contractual rent as of December 31, 2016, are as follows (in thousands, except
for the number of rental units data):
CALENDAR YEAR
Redevelopment
Vacant
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Total
NUMBER OF
RENTAL
PROPERTIES(a)
6
15
24
23
54
37
47
31
11
12
13
54
502
829
ANNUALIZED
CONTRACTUAL
RENT(b)
PERCENTAGE
OF TOTAL
ANNUALIZED
RENT
$
$
—
—
2,045
2,595
6,025
4,548
4,140
2,224
1,335
1,084
2,614
10,261
53,875
90,746
0.0%
0.0
2.2
2.9
6.6
5.0
4.6
2.5
1.5
1.2
2.9
11.3
59.3
100.0%
(a) With respect to a unitary master lease that includes properties that we lease from third-parties, the expiration dates refer 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, 2016, multiplied by 12.
Item 3. Legal Proceedings
We are subject to various 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 gasoline
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 against us, including each of the legal proceedings listed below. As of December 31, 2016 and 2015, we
had accrued $11.8 million and $11.3 million, respectively, for certain of these matters which we believe were appropriate based on
information then currently available. It is possible that losses related to these legal proceedings could exceed the amounts accrued as
of December 31, 2016, and that 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.
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.’s
law firm was substituted in place of our law firm as the attorneys of record for Kingston Oil Supply Corp. and Amos Post Inc.,
Kingston Oil Supply Corp. nevertheless continued to dispute our position as to its defense responsibilities. In November 2015, we
settled our dispute with Kingston Oil Supply Corp. regarding who, as between the two of us, was responsible for defense and liability
(if any) for the underlying action, by agreeing that we would each pay one-half of the costs of defense incurred going forward, and
one-half of any award upon settlement or final judgment. Discussions with the State of New York regarding this case are ongoing.
In September 2004, the State of New York commenced an action against us, United Gas Corp., Costa Gas Station, Inc., Vincent
Costa, The Ingraham Bedell Corporation, Richard Berger and Exxon Mobil Corporation 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 gasoline station
properties located in the same vicinity in Uniondale, N.Y., including a site formerly owned by us and at which a petroleum release
19
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. In 2007, the State of New York commenced action against Shell Oil Company, Shell
Oil Products Company, Motiva Enterprises, LLC, and related parties, in New York Supreme court, Albany County seeking basically
the same relief sought in the action involving us. We have also filed a third party complaint against Hess Corporation and certain
individual defendants based on alleged contribution to the contamination that is the subject of the State’s claims arising from a
petroleum discharge at a gasoline station up-gradient from the site formerly owned by us. In 2016, the various actions filed by the
State of New York and our third party actions were consolidated for discovery proceedings and trial. 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 gasoline station 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 for, and were granted, a hearing to contest the allegations of the Order and Assessment.
A case management conference was held by the Administrative Law Judge assigned to hear the case, which is still in early stages of
discovery and without a scheduled hearing date. 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 gasoline 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”) is 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 gasoline station properties from which the releases occurred.
The New Jersey MDL Proceedings name us as a defendant along with approximately 50 petroleum refiners, manufacturers,
distributors and retailers of MTBE, or gasoline containing MTBE, 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. The majority of the named defendants have already settled the case against
them. The remaining cases have been transferred to the United States District Court for the District of New Jersey for pre-trial
proceedings and trial, although a trial date has not yet been set. We continue to engage in settlement negotiations and a dialogue with
the plaintiff’s counsel to educate them on the unique role of the Company and our business as compared to other defendants in the
litigation. 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. 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, 2016, 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, our subsidiary, 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 (then) Pennsylvania Attorney General Kathleen G.
Kane (as Trustee of the waters of the State), the Pennsylvania Insurance Department (which governs and administers the
20
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 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 removed by defendants to the United States
District Court for the Eastern District of Pennsylvania and then 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 MDL. Plaintiffs have recently filed a Second Amended
Complaint naming additional defendants and adding factual allegations intended to bolster their claims against the defendants. We
have joined with other defendants in the filing of a motion to dismiss the claims against us. This motion is pending with the Court. We
intend to defend vigorously the claims made against us. 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 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.
The Directive provides, among other things, that the named recipients must conduct an assessment of the natural resources that
have been injured by 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 are 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 to perform a Remedial Investigation and Feasibility Study (“RI/FS”)
for a 17-mile stretch of the Lower Passaic River in New Jersey. 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. Most of the parties to the AOC, including us,
are also members of a Cooperating Parties Group (“CPG”). The CPG agreed to an interim allocation formula for purposes of
allocating the costs to complete the RI/FS among its members, with the understanding that this agreed-upon allocation formula is not
binding on the parties in terms of any potential liability for the costs to remediate the Lower Passaic River. The CPG submitted to the
EPA its draft RI/FS in 2015. The draft RI/FS set forth various alternatives for remediating the entire 17-mile stretch of the Lower
Passaic River, and provides that cost estimate for the preferred remedial action presented therein is in the range of approximately $483
million to $725 million. The EPA has provided comments to the draft RI/FS to the CPG, some of which require proposed additional
work to finalize the RI/FS. The CPG is evaluating the EPA’s comments and engaging the EPA in discussions to address the EPA’s
comments and to determine a schedule for the completion of the RI/FS.
21
In addition to the RI/FS activities, other actions relating to the investigation and/or remediation of the Lower Passaic River have
proceeded as follows. First, in June 2012, 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. Concurrent with the CPG’s
work on the RI/FS, on April 11, 2014, the EPA issued a draft Focused Feasibility Study (“FFS”) with proposed remedial alternatives
to remediate the lower 8-miles of the 17-mile stretch of the Lower Passaic River. The FFS was subject to public comments and
objections and, on March 4, 2016, the EPA issued its Record of Decision (“ROD”) for the lower 8-miles selecting a remedy that
involves bank-to-bank dredging and installing an engineered cap with an estimated cost of $1.38 billion. On March 31, 2016, we and
more than 100 other potentially responsible parties received from the EPA a “Notice of Potential Liability and Commencement of
Negotiations for Remedial Design” (“Notice”), which informed the recipients that the EPA intends to seek an Administrative Order on
Consent and Settlement Agreement with Occidental for remedial design of the remedy selected in the ROD, after which the EPA plans
to begin negotiations with “major” potentially responsible parties for implementation and/or payment of the selected remedy. The
Notice also stated that the EPA believes that some of the potentially responsible parties and other parties not yet identified as
potentially responsible parties will be eligible for a cash out settlement with the EPA. On October 5, 2016, the EPA announced that it
had entered into a settlement agreement with Occidental which requires that Occidental perform the remedial design (which is
expected to take four years to complete) for the remedy selected for the lower 8-miles of the Lower Passaic River.
On June 16, 2016, Maxus Energy Corporation and Tierra Solutions, Inc., who have contractual liability to Occidental for
Occidental’s potential liability related to the Lower Passaic River, filed for reorganization under Chapter 11 of the U.S. Bankruptcy
Code. In the Chapter 11 proceedings, YPF SA, Maxus and Tierra’s corporate parent, sought bankruptcy approval of a settlement under
which YPF would pay $130 million to the bankruptcy estate in exchange for a release in favor of Maxus, Tierra, YPF and YPF’s
affiliates of Maxus and Tierra’s contractual environmental liability to Occidental. We and the CPG filed proofs of claims for costs
incurred by the CPG relating to the lower Passaic River, although we believe that Occidental is ultimately liable for any costs asserted
in the proof of claims that are not satisfied in the bankruptcy. The CPG is a member of the creditors committee and continues to
evaluate any action taken in the proceedings that could have a potential impact on the CPG as it relates to the ultimate allocation of
liability for remediation of the lower Passaic River. We currently do not anticipate that the bankruptcy filing by Maxus and Tierra will
affect our ultimate liability, if any, for clean-up costs related to the Lower Passaic River, however we (through the CPG and
independently) will monitor the bankruptcy proceedings for any potential impact.
Many uncertainties remain regarding how the EPA intends to implement the ROD. We anticipate that performance of the EPA’s
selected remedy will be subject to future negotiation, potential enforcement proceedings and/or possible litigation. The RI/FS, AOC
and 10.9 AOC and Notice do not obligate us to fund or perform remedial action contemplated by either the ROD or RI/FS and 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.
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 these 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, until either party terminates such Tolling/Standstill Agreement.
Lukoil Americas Case
In March 2016, we filed a civil lawsuit in the New York State Supreme Court, New York County, against Lukoil Americas
Corporation and certain of its current or former executives, seeking recovery of environmental remediation costs that we have either
incurred, or expect to incur, at properties previously leased to Marketing pursuant to the Master Lease. The lawsuit alleges various
theories of liability, including claims based on environmental liability statutes in effect in the states in which the properties are located,
claims seeking to pierce Marketing’s corporate veil, negligence claims and tortious interference claims. Lukoil Americas Corporation
and the other defendants moved to dismiss our complaint. A decision from the Court on that motion has not yet been issued. This case
is at an early stage of its proceedings. It is not possible to predict or estimate the potential outcome of this case.
Item 4. Mine Safety Disclosures
None.
22
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 11,130 beneficial
holders of our common stock as of March 2, 2017, of which approximately 978 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, 2016
and 2015 was as follows:
QUARTER ENDED
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
PRICE RANGE
HIGH
19.30
18.59
17.10
17.87
19.97
21.54
24.33
25.63
LOW
17.03
16.29
15.16
15.67
16.21
19.44
21.27
21.71
CASH
DIVIDENDS
PER SHARE
.2200
.2200
.2400
.4700(a)
.2500
.2500
.2500
.2800
(a)
Includes a $0.22 per share special dividend declared in the quarter ended December 31, 2015.
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.
23
Stock Performance Graph
Comparison of Five-Year Cumulative Total Return*
Source: SNL Financial
Getty Realty Corp.
Standard & Poors 500
Old Peer Group
New Peer Group
12/31/2011
12/31/2012
12/31/2013
12/31/2014
12/31/2015
100.00
100.00
100.00
100.00
132.20
116.00
116.91
119.25
140.42
153.57
126.95
128.65
146.66
174.60
164.12
155.90
147.67
177.01
171.49
167.00
12/31/2016
229.90
198.18
209.80
203.35
Assumes $100 invested at the close of the last day of trading on the New York Stock Exchange on December 31, 2011 in Getty
Realty Corp. common stock, Standard & Poors 500 and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
The above performance graph compares the performance of our common stock during the period beginning December 31, 2011,
and ending December 31, 2016, to: (i) the Standard & Poor’s 500, (ii) a peer group for the year ending December 31, 2015 (“Old Peer
Group”) and (iii) a peer group for the year ending December 31, 2016 (“New Peer Group”). The Old Peer Group consists of the
following companies: EPR Properties (formerly known as Entertainment Properties Trust), Hospitality Properties Trust, National
Retail Properties and Realty Income Corporation. From time to time we review the companies included our peer group and add or
remove companies as necessary to ensure that our peer group consists of companies that are reasonably comparable to the Company.
The changes in our New Peer Group compared to our Old Peer Group were to add Agree Realty Corporation, Spirit Realty Capital,
Inc. and STORE Capital Corporation and remove Hospitality Properties Trust. Our New Peer Group, therefore, consists of the
following companies: Agree Realty Corporation, EPR Properties (formerly known as Entertainment Properties Trust), National Retail
Properties, Realty Income Corporation, Spirit Realty Capital, Inc. and STORE Capital Corporation. As reconstituted, our New Peer
Group more accurately reflects our internally-managed structure and market capitalization and continues to include companies where
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 performance graph above. We do not make or
endorse any predictions as to future stock performance.
The above 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.
24
Item 6. Selected Financial Data
GETTY REALTY CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(in thousands, except per share amounts and number of properties)
OPERATING DATA:
Total revenues
Earnings from continuing operations
(Loss) earnings from discontinued operations
Net earnings
Basic and diluted per share amounts:
Earnings from continuing operations
Net earnings
Basic and diluted weighted average common shares
outstanding
Dividends declared per share (f)
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS
FROM OPERATIONS (g):
Net earnings
Depreciation and amortization
Gains on dispositions of real estate
Impairments
Funds from operations
Revenue recognition adjustments
Allowance for deferred rent/mortgage receivables
Non-cash changes in environmental estimates
Accretion expense
Acquisition costs
Adjusted funds from operations
BALANCE SHEET DATA (AT END OF YEAR):
Real estate before accumulated depreciation and amortization
Total assets
Total debt
Shareholders’ equity
NUMBER OF PROPERTIES:
Owned
Leased
Total properties
FOR THE YEARS ENDED DECEMBER 31,
2016(a)
2015(b)
2014(c)
2013(d)
2012(e)
$ 115,266
42,081
(3,670)
38,411
$ 110,733
40,370
(2,960)
37,410
$ 99,893
20,405
3,013
23,418
$ 102,818
27,376
42,635
70,011
$ 96,122
13,728
(1,281)
12,447
1.23
1.12
1.20
1.11
0.60
0.69
0.81
2.08
0.41
0.37
33,806
1.03
33,420
1.15
33,409
0.96
33,397
0.85
33,395
0.375
38,411
19,170
(6,213)
12,814
64,182
(3,417)
—
(7,007)
4,107
86
57,951
$ 782,166
877,306
298,544
430,918
37,410
16,974
(2,611)
17,361
69,134
(4,471)
(93)
(4,639)
4,829
445
65,205
$ 783,233
896,918
317,093
406,561
23,418
10,549
(10,218)
21,534
45,283
(5,372)
2,331
(2,756)
3,046
104
42,636
$ 595,959
687,501
124,425
407,024
70,011
9,927
(45,505)
13,425
47,858
(8,379)
4,775
(2,956)
3,214
480
44,992
$ 570,275
682,402
156,017
415,091
12,447
13,700
(6,866)
13,942
33,223
(4,433)
—
(4,215)
3,174
—
27,749
$ 562,316
640,581
171,529
372,749
740
89
829
753
98
851
757
106
863
840
125
965
946
135
1,081
(a)
(b)
(c)
(d)
(e)
(f)
Includes the effect of a $12.8 million impairment charge.
Includes (from the date of the acquisition) the effect of the $214.5 million acquisition of 77 convenience store and gasoline
station properties in the United Oil Transaction on June 3, 2015, a $17.4 million impairment charge and $18.2 million of other
income received from the Marketing Estate.
Includes the effect of a $2.2 million allowance for deferred rent receivable and 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 and 20 Exxon- and
Shell-branded convenience store and gasoline station properties in two sale/leaseback transactions with subsidiaries of Capitol
Petroleum Group, LLC on May 9, 2013, $3.1 million of other revenue for the partial recovery of damages received by us from
the settlement of the lawsuit filed by the Marketing Estate against Marketing’s former parent and certain of its affiliates, a $15.2
million net credit for bad debt expense primarily related to receiving funds from the Marketing Estate, a $9.6 million increase in
provisions for environmental litigation losses, a $4.3 million allowance for deferred rent receivable and a $3.6 million
impairment charge.
Includes the effect of a $12.0 million accounts receivable reserve and a $5.1 million impairment charge.
Includes special dividends of $0.22 per share, $0.14 per share and $0.05 per share for the years ended December 31, 2015, 2014
and 2013, respectively.
(g) See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – General –
Supplemental Non-GAAP Measures”.
25
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 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 convenience store and
gasoline station properties. As of December 31, 2016, we owned 740 properties and leased 89 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 Triple-Net Leases
Substantially all of our properties are leased on a triple-net basis primarily to petroleum distributors, convenience store retailers
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 convenience stores, gasoline stations, automotive repair service facilities or other
businesses at our properties. Our triple-net tenants are generally 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, convenience store sales or
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 reviewing 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”, “Item 2. Properties” and “Environmental
Matters” below.
Our Properties
Net Lease. As of December 31, 2016, we leased 808 of our properties to tenants under triple-net leases.
Our net lease properties include 724 properties leased to regional and national fuel distributors under 25 separate unitary or
master triple-net leases and 84 properties leased under single unit triple-net leases. These leases generally provide for an initial term of
15 to 20 years with options for successive renewal terms of up to 20 years and periodic rent escalations. Several of our leases provide
for additional rent based on the aggregate volume of fuel sold. Certain leases require our tenants to invest capital in our properties.
Redevelopment. As of December 31, 2016, we were actively redeveloping six of our former convenience store and gasoline
station properties for alternative single-tenant net lease retail uses.
Vacancies. As of December 31, 2016, 15 of our properties were vacant. We expect that we will either sell or enter into new
leases on these properties over time.
Investment Strategy and Activity
As part of our overall growth strategy, we regularly review acquisition and financing opportunities to invest in additional
convenience store and gasoline station properties, and we expect to continue to pursue investments that we believe will benefit our
financial performance. In addition to sale/leaseback and other real estate acquisitions, our investment activities include purchase
money financing with respect to properties we sell, and real property loans relating to our leasehold portfolios. 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 are in strong primary markets
that serve high density population centers. A key element of our investment strategy is to invest in properties that will promote our
geographic and tenant diversity. We cannot provide any assurance that we will be successful making additional investments, that
26
investments which meet our investment criteria will be available or that our current sources of liquidity will be sufficient to fund such
investments.
During the year ended December 31, 2016, we acquired fee simple or leasehold interests in three convenience store and gasoline
station properties and an adjacent parcel of land to an existing property for a redevelopment project, in separate transactions, for an
aggregate purchase price of $7.7 million.
During the year ended December 31, 2015, we acquired fee simple interests in 80 convenience store and gasoline station
properties for an aggregate purchase price of $219.2 million. Included in these acquisitions was our June 3, 2015, acquisition of fee
simple interests in 77 convenience store and gasoline station properties from affiliates of Pacific Convenience and Fuels LLC and
simultaneously leased the properties to Apro, LLC (d/b/a “United Oil”), a leading regional convenience store and gasoline station
operator, under three separate cross-defaulted long-term triple-net unitary leases (the “United Oil Transaction”). The United Oil
properties are located across California, Colorado, Nevada, Oregon and Washington State and operate under several well recognized
brands including 7-Eleven, 76, Circle K, Conoco and My Goods Market. The total purchase price for the acquisition was $214.5
million, which was funded with proceeds from the Credit Agreement and Restated Prudential Note Purchase Agreement. In addition,
in 2015, we acquired fee simple interests in three convenience store and gasoline station properties in separate transactions for an
aggregate purchase price of $4.7 million.
Redevelopment Strategy and Activity
We believe that a portion of our properties are located in geographic areas, which together with other factors, may make them
well-suited for alternative single-tenant net lease retail uses, such as quick service restaurants, automotive parts and service stores,
specialty retail stores and bank branch locations. We believe that such alternative types of properties can be leased or sold at higher
values than their current use.
For the year ended December 31, 2016, we spent $0.7 million (of which $0.3 million was previously accrued for at
December 31, 2015) of construction-in-progress costs related to our redevelopment activities. For the year ended December 31, 2016,
we completed one redevelopment project and $1.0 million of construction-in-progress was transferred to buildings and improvements
on our consolidated balance sheet.
As of December 31, 2016, we were actively redeveloping six of our former convenience store and gasoline station properties for
alternative single-tenant net lease retail uses. In addition, to the six properties currently classified as redevelopment, we are in various
stages of feasibility and planning for the recapture of select properties, from our net lease portfolio, that are suitable for redevelopment
to alternative single-tenant net lease retail uses. As of December 31, 2016, we have signed leases on seven properties, that are
currently part of our net lease portfolio, which will be recaptured and transferred to redevelopment when the appropriate entitlements,
permits and approvals have been secured.
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, impairment
charges aggregating $12.8 million and $17.4 million for the years ended December 31, 2016 and 2015, 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 impairment charges were attributable to the
effect of adding asset retirement costs due to changes in estimates associated with our environmental liabilities, which increased the
carrying value of certain properties in excess of their fair value, reductions in estimated undiscounted cash flows expected to be
received during the assumed holding period for certain of our properties, and reductions in estimated sales prices from third-party
offers based on signed contracts, letters of intent or indicative bids for certain of our properties. 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
We manage our business to enhance the value of our real estate portfolio and, as a REIT, place particular emphasis on
minimizing risk, to the extent feasible, and generating cash sufficient to make required distributions to shareholders of at least 90% of
our ordinary taxable income each year. In addition to measurements defined by GAAP, we also focus on funds from operations
(“FFO”) and adjusted funds from operations (“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,
impairment charges and cumulative effect of accounting changes. Our 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
27
environmental estimates and other unusual items. 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.
FFO excludes various items such as depreciation and amortization of real estate assets, gains or losses on dispositions of real estate,
and 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, adjustments recorded for recognition of rental 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 is recognized on a straight-line 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 revenues 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 produces a constant periodic
rate of return on the net investments in the leased properties. The amortization of deferred lease incentives represents our funding
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. 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) environmental accretion expense and 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.
RESULTS OF OPERATIONS
Year ended December 31, 2016, compared to year ended December 31, 2015
Revenues from rental properties included in continuing operations increased by $5.0 million to $97.9 million for the year ended
December 31, 2016, as compared to $92.9 million for the year ended December 31, 2015. The increase in revenues from rental
properties was primarily due to $7.4 million of revenue from the properties acquired in the United Oil Transaction, which closed on
June 3, 2015, partially offset by a decrease of $1.1 million of Revenue Recognition Adjustments. Rental income contractually due or
received from our tenants included in revenues from rental properties in continuing operations was $94.5 million for the year ended
December 31, 2016, as compared to $88.4 million for the year ended December 31, 2015. Tenant reimbursements, which consist of
real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease
agreements, included in continuing operations totaled $13.8 million and $14.1 million for the years ended December 31, 2016 and
2015, respectively. Interest income on notes and mortgages receivable was $3.5 million for the year ended December 31, 2016, as
compared to $3.7 million for the year ended December 31, 2015.
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
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continuing operations includes Revenue Recognition Adjustments which increased rental revenue by $3.4 million for the year ended
December 31, 2016, and $4.5 million for the year ended December 31, 2015.
Property costs included in continuing operations, which are primarily comprised of rent expense, real estate and other state and
local taxes, municipal charges, maintenance expense and reimbursable tenant expenses, were $22.7 million for the year ended
December 31, 2016, as compared to $23.6 million for the year ended December 31, 2015. The decrease in property costs for the year
ended December 31, 2016, was principally due to a decrease in reimbursable tenant expenses and real estate taxes paid by us.
Impairment charges included in continuing operations were $6.9 million for the year ended December 31, 2016, as compared to
$11.6 million for the year ended December 31, 2015. Impairment charges are recorded when the carrying value of a property is
reduced to fair value. Impairment charges in continuing operations for the years ended December 31, 2016 and 2015, were primarily
attributable to the effect of adding asset retirement costs due to changes in estimates associated with 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, 2016, decreased by $3.6 million to
$2.6 million, as compared to $6.2 million for the year ended December 31, 2015. The decrease in environmental expenses for the year
ended December 31, 2016, was principally due to a $3.4 million decrease in environmental remediation costs and a $0.7 million
decrease in professional fees offset by a $0.5 million increase in litigation losses and legal fees. 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 $2.7 million to $14.2 million for the year
ended December 31, 2016, as compared to $16.9 million for the year ended December 31, 2015. The decrease in general and
administrative expenses for the year ended December 31, 2016, was principally due to a $2.6 million decline in legal and professional
fees and a $0.3 million decrease of non-recurring employee related expenses predominantly due to reductions in severance and
retirement costs.
Recoveries and allowances for uncollectible accounts included in continuing operations decreased by $1.5 million to a recovery
of $0.4 million for the year ended December 31, 2016, as compared to an allowance of $1.1 million for the year ended December 31,
2015. The recoveries from uncollectible accounts were principally due to reversals of previously provided bad debt reserves associated
with receiving past due rent from our tenants.
Depreciation and amortization expense included in continuing operations was $19.2 million for the year ended December 31,
2016, as compared to $17.0 million for the year ended December 31, 2015. The increase was primarily due to depreciation charges
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 $6.4 million for the year ended December 31, 2016,
as compared to $2.3 million for the year ended December 31, 2015. The gains were the result of the sale of 12 and 70 properties
during the years ended December 31, 2016 and 2015, respectively, which did not previously meet the criteria to be held for sale. For
the year ended December 31, 2016, the gains were primarily the result of the full recognition of the remaining deferred gain of $3.9
million resulting from the repayment of the entire seller financing mortgage by Ramoco affiliates and the sale of 12 properties.
Other income, net included in continuing operations was $2.0 million for the year ended December 31, 2016, as compared to
$18.3 million for the year ended December 31, 2015. For the year ended December 31, 2015, other income was the result of
distributions we received from the Marketing Estate of $18.2 million.
Interest expense was $16.6 million for the year ended December 31, 2016, as compared to $14.5 million for the year ended
December 31, 2015. The increase for the year ended December 31, 2016, was due to higher average borrowings outstanding and the
incurrence of new indebtedness required to fund the United Oil Transaction.
We reported as discontinued operations the results of two properties accounted for as held for sale in accordance with GAAP as
of December 31, 2016, and certain properties disposed of during the periods presented that were previously classified as held for sale.
Loss from discontinued operations increased by $0.7 million to a loss of $3.7 million for the year ended December 31, 2016, as
compared to a loss of $3.0 million for the year ended December 31, 2015. The change was primarily due to lower gains on
dispositions of real estate and an increase in loss from operating activities in discontinued operations. Loss on dispositions of real
estate included in discontinued operations was $0.2 million for the year ended December 31, 2016, as compared to a gain of $0.3
million for the year ended December 31, 2015. For the years ended December 31, 2016 and 2015, there were two and 14 property
dispositions, respectively, recorded in discontinued operations. Impairment charges recorded in discontinued operations during the
years ended December 31, 2016 and 2015, of $5.9 million and $5.8 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
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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, 2016, FFO decreased by $4.9 million to $64.2 million, as compared to $69.1 million for the
year ended December 31, 2015, and AFFO decreased by $7.2 million to $58.0 million, as compared to $65.2 million for the prior year.
FFO and AFFO include the effect of $18.2 million received from the Marketing Estate in 2015, which is included in other income on
our consolidated statements of operations. In addition, the decrease in FFO for the year ended December 31, 2016, was due to the
changes in net earnings but excludes a $4.6 million decrease in impairment charges, a $2.2 million increase in depreciation and
amortization expense and a $3.6 million increase in gains on dispositions of real estate. The decrease in AFFO for the year ended
December 31, 2016, also excludes a $0.1 million decrease in the allowance for deferred rent receivable, a $3.1 million increase in non-
cash environmental expenses and credits, a $0.3 million decrease in acquisition costs and a $1.1 million decrease in Revenue
Recognition 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).
Basic and diluted earnings per share was $1.12 per share for the year ended December 31, 2016, as compared to $1.11 per share
for the year ended December 31, 2015. Basic and diluted FFO per share for the year ended December 31, 2016, was $1.87 per share,
as compared to $2.04 per share for the year ended December 31, 2015. Basic and diluted AFFO per share for the year ended
December 31, 2016, was $1.69 per share, as compared to $1.93 per share for the year ended December 31, 2015.
Year ended December 31, 2015, compared to year ended December 31, 2014
Revenues from rental properties included in continuing operations increased by $9.9 million to $92.9 million for the year ended
December 31, 2015, as compared to $83.0 million for the year ended December 31, 2014. The increase in total revenues for the year
ended December 31, 2015, was primarily due to $10.2 million of revenue from the properties acquired in the United Oil Transaction,
which closed in June 3, 2015. Rental income contractually due or received from our tenants included in revenues from rental
properties in continuing operations was $88.4 million for the year ended December 31, 2015, as compared to $77.7 million for the
year ended December 31, 2014. Tenant reimbursements, which consist of real estate taxes and other municipal charges paid by us and
reimbursable by our tenants pursuant to their triple-net lease agreements, included in continuing operations totaled $14.1 million and
$13.8 million for the years ended December 31, 2015 and 2014, respectively. Interest income on notes and mortgages receivable was
$3.7 million for the year ended December 31, 2015, as compared to $3.1 million for the year ended December 31, 2014.
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 $4.5 million for the year ended
December 31, 2015, and $5.3 million for the year ended December 31, 2014.
Property costs included in continuing operations, which are primarily comprised of rent expense, real estate and other state and
local taxes, municipal charges, maintenance expense and reimbursable tenant expenses, were $23.6 million for the year ended
December 31, 2015, as compared to $23.8 million for the year ended December 31, 2014. The decrease in property costs is principally
due to declines in rent expense and maintenance expenses, offset by an increase in reimbursable tenant expenses paid by us.
Impairment charges included in continuing operations were $11.6 million for the year ended December 31, 2015, as compared
to $12.9 million for the year ended December 31, 2014. Impairment charges are recorded when the carrying value of a property is
reduced to fair value. Impairment charges in continuing operations for the years ended December 31, 2015 and 2014, were primarily
attributable to the effect of adding asset retirement costs due to changes in estimates associated with 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, 2015, increased by $1.6 million to
$6.2 million, as compared to $4.6 million for the year ended December 31, 2014. The increase in environmental expenses for the year
ended December 31, 2015, was principally due to a $0.5 million increase in litigation losses and legal fees and a $1.1 million increase
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 increased by $1.1 million to $16.9 million for the year
ended December 31, 2015, as compared to $15.8 million for the year ended December 31, 2014. The increase in general and
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administrative expenses for the year ended December 31, 2015, was principally due to $1.1 million of non-recurring employee related
expenses attributable to severance and retirement costs.
Recoveries and allowances for uncollectible accounts included in continuing operations was an allowance $1.1 million for the
year ended December 31, 2015, as compared to an allowance of $3.4 million for the year ended December 31, 2014. The decrease in
allowance for uncollectible accounts was principally due to $2.1 million in allowances for deferred rent receivable related to the
NECG Lease and Ramoco Lease recorded for the year ended December 31, 2014.
Depreciation and amortization expense included in continuing operations was $17.0 million for the year ended December 31,
2015, as compared to $10.5 million for the year ended December 31, 2014. The increase was primarily due to depreciation charges
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 $2.3 million for the year ended December 31, 2015,
as compared to $1.2 million for the year ended December 31, 2014. The gains were the result of the sale of 70 properties and four
properties during the years ended December 31, 2015 and 2014, respectively, which did not previously meet the criteria to be held for
sale. In addition, we recorded a deferred gain of $3.9 million related to the Ramoco sale during the year ended December 31, 2015.
The deferred gain is recorded in accounts payable and accrued liabilities on our balance sheet at December 31, 2015.
Other income, net included in earnings from continuing operations was $18.3 million for the year ended December 31, 2015, as
compared to $0.1 million for the year ended December 31, 2014. For the year ended December 31, 2015, other income was the result
of distributions we received from the Marketing Estate of $18.2 million.
Interest expense was $14.5 million for the year ended December 31, 2015, as compared to $9.8 million for the year ended
December 31, 2014. The increase for the year ended December 31, 2015, was due to higher average borrowings outstanding and the
incurrence of new indebtedness required to fund the United Oil Transaction.
We reported as discontinued operations the results of five properties accounted for as held for sale in accordance with GAAP as
of December 31, 2015, and certain properties disposed of during the periods presented that were previously classified as held for sale.
Earnings from discontinued operations decreased by $6.0 million to a loss of $3.0 million for the year ended December 31, 2015, as
compared to earnings of $3.0 million for the year ended December 31, 2014. The decrease in earnings was primarily due to lower
gains on dispositions of real estate offset by a decrease in loss from operating activities in discontinued operations. Gains on
dispositions of real estate included in discontinued operations were $0.3 million for the year ended December 31, 2015, and $9.0
million for the year ended December 31, 2014. For the year ended December 31, 2015, there were 14 property dispositions recorded in
discontinued operations. For the year ended December 31, 2014, there were 89 property dispositions recorded in discontinued
operations. Impairment charges recorded in discontinued operations during the years ended December 31, 2015 and 2014, of $5.8
million and $8.6 million, respectively, were attributable to reductions in our estimates of value for properties held for sale and the
accumulation of asset retirement costs due to changes in estimates associated with our 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, 2015, FFO increased by $23.8 million to $69.1 million, as compared to $45.3 million for the
year ended December 31, 2014, and AFFO increased by $22.6 million to $65.2 million, as compared to $42.6 million for the prior
year. FFO and AFFO include the effect of $18.2 million received from the Marketing Estate in 2015, which is included in other
income on our consolidated statements of operations. In addition, the increase in FFO for the year ended December 31, 2015, was due
to the changes in net earnings but excludes a $4.1 million decrease in impairment charges, a $6.5 million increase in depreciation and
amortization expense and a $7.6 million decrease in gains on dispositions of real estate. The increase in AFFO for the year ended
December 31, 2015, also excludes a $2.4 million decrease in the allowance for deferred rent and mortgages receivables, a $0.1 million
decrease in non-cash environmental expenses and credits, a $0.3 million increase in acquisition costs and a $0.9 million decrease in
Revenue Recognition 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).
Basic and diluted earnings per share was $1.11 per share for the year ended December 31, 2015, as compared to $0.69 per share
for the year ended December 31, 2014. Basic and diluted FFO per share for the year ended December 31, 2015, was $2.04 per share,
as compared to $1.34 per share for the year ended December 31, 2014. Basic and diluted AFFO per share for the year ended
December 31, 2015, was $1.93 per share, as compared to $1.26 per share for the year ended December 31, 2014.
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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 June 2018 (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, 2016, 2015 and 2014 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)/provided by financing activities
Operating Activities
YEAR ENDED DECEMBER 31,
2016
$ 36,874
12,718
$ (41,011)
2015
$ 49,688
(204,724)
$ 155,867
2014
$ 29,237
23,505
$ (61,666)
Net cash flow from operating activities decreased by $12.8 million for the year ended December 31, 2016, to $36.9 million, as
compared to $49.7 million for the year ended December 31, 2015. The decrease in net cash flow from operating activities for the year
ended December 31, 2016, was primarily the result of the receipt of $18.2 million from the Marketing Estate in 2015, offset by the full
year operating results of the United Oil Transaction. Net cash provided by operating activities represents cash received primarily from
rental income and interest income less cash used for property costs, environmental expenses, interest expense and general and
administrative expenses. The change in net cash flow provided by operating activities for the years ended December 31, 2016, 2015
and 2014, is primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above.
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. Net cash
flow from investing activities increased by $217.4 million for the year ended December 31, 2016, to $12.7 million, as compared to net
cash flow used by investing activities of $204.7 million for the year ended December 31, 2015. The increase in net cash flow from
investing activities for the year ended December 31, 2016, was primarily due to a decrease of $211.5 million in expenditures primarily
related to the United Oil Transaction during the year ended December 31, 2015, and an increase in the collection of notes and
mortgages receivable of $13.9 million, offset by a decrease in deposits for property acquisitions of $5.0 million and a decrease in
proceeds from the sale of real estate of $3.0 million.
Financing Activities
Net cash flow from financing activities decreased by $196.9 million for the year ended December 31, 2016, to a use of $41.0
million, as compared to net cash flow provided by financing activities of $155.9 million for the year ended December 31, 2015. The
increase in use of net cash flow for financing activities for the year ended December 31, 2016, was primarily due to net repayments
under the Credit Agreement of $19.0 million, as compared to net borrowings of $194.0 million for the year ended December 31, 2015,
offset by an increase in net proceeds from issuance of common stock of $14.9 million and a decrease in loan origination costs of $2.4
million.
Credit Agreement
On June 2, 2015, we entered into a $225.0 million senior unsecured credit agreement (the “Credit Agreement”) with a group of
banks led by Bank of America, N.A. (the “Bank Syndicate”). The Credit Agreement consists of a $175.0 million revolving facility
(the “Revolving Facility”), which is scheduled to mature in June 2018 and a $50.0 million term loan (the “Term Loan”), which is
scheduled to mature in June 2020. Subject to the terms of the Credit Agreement and our continued compliance with its provisions, we
have the option to (a) extend the term of the Revolving Facility for one additional year to June 2019 and (b) increase by $75.0 million
the amount of the Revolving Facility to $250.0 million.
The Credit Agreement incurs interest and fees at various rates based on our net debt to EBITDA ratio (as defined in the Credit
Agreement) at the end of each quarterly reporting period. The Revolving Facility permits borrowings at an interest rate equal to the
sum of a base rate plus a margin of 0.95% to 2.25% or a LIBOR rate plus a margin of 1.95% to 3.25%. The annual commitment fee on
the undrawn funds under the Revolving Facility is 0.25% to 0.30%. The Term Loan bears interest at a rate equal to the sum of a base
rate plus a margin of 0.90% to 2.20% or a LIBOR rate plus a margin of 1.90% to 3.20%. The Credit Agreement does not provide for
scheduled reductions in the principal balance prior to its maturity. As of December 31, 2016, borrowings under the Revolving Facility
were $75.0 million and borrowings under the Term Loan were $50.0 million and, as of December 31, 2015, borrowings
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under the Revolving Facility were $94.0 million and borrowings under the Term Loan were $50.0 million. The interest rate on Credit
Agreement borrowings at December 31, 2016, was 3.10% per annum.
The Credit Agreement contains customary financial covenants such as availability, 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 cross default provisions under the Restated Prudential Note
Purchase Agreement (as defined below), change of control and failure to maintain REIT status. Any event of default, if not cured or
waived in a timely manner, 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 Restated
Prudential Note Purchase Agreement. We may be prohibited from drawing funds against the Revolving Facility if there is a material
adverse effect on our business, assets, prospects or condition.
Senior Unsecured Notes
On June 2, 2015, we entered into an amended and restated note purchase agreement (the “Restated Prudential Note Purchase
Agreement”) amending and restating our existing senior secured note purchase agreement with The Prudential Insurance Company of
America (“Prudential”) and an affiliate of Prudential. Pursuant to the Restated Prudential Note Purchase Agreement, Prudential and its
affiliate released the mortgage liens and other security interests held by Prudential and its affiliate on certain of our properties and
assets, redenominated the existing notes in the aggregate amount of $100.0 million issued under the existing note purchase agreement
as senior unsecured Series A Notes, and issued $75.0 million of senior unsecured Series B Notes bearing interest at 5.35% and
maturing in June 2023 to Prudential and certain affiliates of Prudential. The Series A Notes continue to bear interest at 6.0% and
mature in February 2021. The Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the
principal balance of either the Series A Notes or the Series B Notes prior to their respective maturities. As of December 31, 2016 and
2015, borrowings under the Restated Prudential Note Purchase Agreement were $175.0 million.
The Restated Prudential Note Purchase Agreement contains customary financial covenants such as 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 Restated Prudential Note Purchase 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 Restated Prudential Note Purchase Agreement and could result in the acceleration of
our indebtedness under the Restated Prudential Note Purchase 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, 2016, we are in compliance with all of the material terms of the Credit Agreement and Restated Prudential
Note Purchase Agreement, including the various financial covenants described above.
As of December 31, 2016, the maturity date and amounts outstanding under the Credit Agreement and the Restated Prudential
Note Purchase Agreement are as follows:
Credit Agreement—Revolving Facility
Credit Agreement—Term Loan
Restated Prudential Note Purchase Agreement—Series A Notes
Restated Prudential Note Purchase Agreement—Series B Notes
Maturity Date
June 2018
June 2020
February 2021
June 2023
Amount
$ 75.0 million
$ 50.0 million
$ 100.0 million
$ 75.0 million
Property Acquisitions and Capital Expenditures
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.
During the year ended December 31, 2016, we acquired fee simple or leasehold interests in three convenience store and gasoline
station properties and an adjacent parcel of land to an existing property for a redevelopment project, in separate transactions, for an
aggregate purchase price of $7.7 million. During the year ended December 31, 2015, we acquired fee simple interests in 80
convenience store and gasoline station properties for an aggregate purchase price of $219.2 million, substantially all of which was for
the United Oil Transaction.
We are reviewing select opportunities for capital expenditures, redevelopment and alternative uses for certain of our properties.
We are also seeking to recapture select properties from our net lease portfolio to redevelop such properties for alternative single-tenant
net lease retail uses. For the year ended December 31, 2016, we spent $0.7 million (of which $0.3 million was previously accrued for
at December 31, 2015) of construction-in-progress costs related to our redevelopment activities. For the year ended December 31,
2016, we completed one redevelopment project and $1.0 million of construction-in-progress was transferred to buildings and
improvements on our consolidated balance sheet.
33
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. However, our tenants frequently make improvements to the properties leased from us at their
expense. As of December 31, 2016, we have a remaining commitment to fund up to $10.2 million in the aggregate in capital
improvements in certain properties previously subject to the Master Lease with Marketing.
To the extent that our sources of liquidity are not sufficient to fund acquisitions, redevelopment projects and capital
expenditures, we will require other sources of capital, which may or may not be available on favorable terms or at all.
ATM Program
In June 2016, we established an at-the-market equity offering program (the “ATM Program”), pursuant to which we may issue
and sell shares of our common stock with an aggregate sales price of up to $125.0 million through a consortium of banks acting as
agents. Sales of the shares of common stock may be made, as needed, from time to time in at-the-market offerings as defined in Rule
415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange or
otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or as otherwise agreed to with the
applicable agent. We incurred $0.4 million of stock issuance costs in the establishment of the ATM Program. Stock issuance costs
consisted primarily of underwriters’ fees and legal and accounting fees.
During the year ended December 31, 2016, we issued 653,000 shares and received net proceeds of $14.9 million. Future sales, if
any, will depend on a variety of factors to be determined by us from time to time, including among others, market conditions, the
trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding
available to us.
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 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 use such a procedure.
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 Restated Prudential Note Purchase Agreement and other factors, and therefore is not assured. In particular, our
Credit Agreement and Restated Prudential Note Purchase Agreement prohibit the payment of dividends during certain events of
default.
Cash dividends paid to our shareholders aggregated $36.2 million, $35.2 million and $28.7 million, for the years ended
December 31, 2016, 2015 and 2014, respectively. In addition, during the year ended December 31, 2016, we paid $4.4 million in stock
dividends as part of a special dividend. There can be no assurance that we will continue to pay dividends at historical rates.
CONTRACTUAL OBLIGATIONS
Our significant contractual obligations and commitments as of December 31, 2016, were comprised of borrowings under the
Credit Agreement and the Restated Prudential Note Purchase Agreement, operating and capital lease payments due to landlords,
estimated environmental remediation expenditures and our funding commitments for capital improvements at certain properties which
were previously leased to Marketing. The aggregate maturity of the Credit Agreement and the Restated Prudential Note Purchase
Agreement is as follows: 2018 — $75.0 million, 2020 — $50.0 million, 2021 — $100.0 million and 2023 — $75.0 million.
34
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, 2016, are summarized below (in thousands):
Operating and capital leases
Credit Agreement (a)
Restated Prudential Note Purchase Agreement (a)
Estimated environmental remediation expenditures (b)
Capital improvements (c)
$
TOTAL
25,758
125,000
175,000
74,516
10,231
LESS THAN
ONE YEAR
6,246
$
—
—
19,882
—
ONE TO
THREE
YEARS
THREE TO
FIVE
YEARS
MORE
THAN FIVE
YEARS
$
10,168
75,000
—
23,190
—
$
6,067
50,000
100,000
14,425
10,231
$
3,277
—
75,000
17,019
—
Total
$ 410,505
$ 26,128
$ 108,358
$ 180,723
$ 95,296
(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 funding of capital improvements is dependent on the timing of such capital improvement projects and the
terms of our leases. Our commitments provide 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 our properties
and for the payment of taxes, maintenance, repair, insurance, environmental remediation and other operating expenses.
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, real estate, receivables, deferred rent receivable, direct financing leases, depreciation and amortization, impairment of long-
lived assets, environmental remediation obligations, litigation, accrued liabilities, income taxes and the 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 in “Item 8. Financial Statements and Supplementary Data”. 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, environmental remediation obligations, litigation, income taxes, and the allocation of the
purchase price of properties acquired to the assets acquired and liabilities assumed 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 balance will be collected when the payment is due, in accordance with the annual rent escalations
provided for in the leases. 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.
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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 represents the investments in leased assets accounted for as direct financing leases. 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.
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.
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 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 our 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.
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 (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.
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
property costs.
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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.
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 are incurred for, among other things, removing USTs, excavation of contaminated soil and water, installing,
operating, maintaining and decommissioning remediation systems, monitoring contamination and governmental agency compliance
reporting required 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 at that time 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 our 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 our counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if our counterparty fails to pay them. We assess whether to
accrue for environmental liabilities based upon relevant factors including our tenants’ histories of paying for such obligations, our
assessment of their financial ability, and their intent to pay for such obligations. 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 (the cost of which in certain cases is partially borne by us) 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 (substantially all of which commenced in 2012), we have agreed to be responsible for environmental
contamination at the premises that was known at the time the lease commenced, and which 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 (or a shorter
period for a minority of such leases). After expiration of such ten-year (or, in certain cases, shorter) 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 several
years 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
37
such contamination. For properties that 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.
In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained
continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and
continues to be discovered. As a result, we have developed a reasonable estimate of fair value for the prospective future environmental
liability resulting from preexisting unknown environmental contamination and accrued for these estimated costs. 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. 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 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, 2016 and 2015, we have accrued $45.0 million and $45.4 million, respectively, for these future
environmental liabilities related to preexisting unknown contamination. 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,
2016, we had accrued a total of $74.5 million for our prospective environmental remediation liability. This accrual includes (a) $29.5
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) $45.0 million for future environmental liabilities related to
preexisting unknown contamination. As of December 31, 2015, we had accrued a total of $84.3 million for our prospective
environmental remediation liability. This accrual includes (a) $38.9 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) $45.4 million for future environmental liabilities related to preexisting unknown contamination.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $4.1 million,
$4.8 million and $3.0 million of net accretion expense was recorded for the years ended December 31, 2016, 2015 and 2014,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2016, 2015 and 2014, we
recorded credits to environmental expenses, included in continuing and discontinued operations, aggregating $7.0 million, $4.6
million and $2.8 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, 2016 and 2015, we increased the carrying value of certain of our properties by $11.3
million and $12.3 million, respectively, due to increases in estimated environmental remediation costs. The recognition and
38
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 impairment charges
aggregating $11.7 million (consisting of $11.5 million for known environmental liabilities and $0.2 million for future environmental
liabilities) and $12.5 million (consisting of $10.3 million for known environmental liabilities and $2.2 million for future
environmental liabilities) for the years ended December 31, 2016 and 2015, respectively, in continuing and 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
related to capitalized asset retirement costs included in continuing and discontinued operations for the years ended December 31,
2016, 2015 and 2014 were $5.1 million, $6.0 million and $1.6 million, respectively. Capitalized asset retirement costs were $49.1
million (consisting of $20.6 million of known environmental liabilities and $28.5 million of reserves for future environmental
liabilities) and $51.4 million (consisting of $20.9 million of known environmental liabilities and $30.5 million of reserves for future
environmental liabilities) as of December 31, 2016 and 2015, respectively.
As part of the triple-net leases for our 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, 2016, we removed $13.8 million of
asset retirement obligations and $10.8 million of net asset retirement costs related to USTs from our balance sheet. The cumulative net
amount of $3.0 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 in “Item 8. Financial Statements and Supplementary Data” in
this Form 10-K.
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.
Environmental Litigation
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of December 31,
2016 and 2015, we had accrued an aggregate $11.8 million and $11.3 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 in “Item 8. Financial Statements and Supplementary Data” in
this Form 10-K 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 $225.0 million senior unsecured credit agreement (the “Credit
Agreement”) entered into on June 2, 2015 with a group of commercial banks led by Bank of America, N.A. (the “Bank Syndicate”).
The Credit Agreement consists of a $175.0 million revolving facility (the “Revolving Facility”), which is scheduled to mature in June
2018 and a $50.0 million term loan (the “Term Loan”), which is scheduled to mature in June 2020. Subject to the terms of the Credit
Agreement and our continued compliance with its provisions, we have the option to (a) extend the term of the Revolving Facility for
one additional year to June 2019 and (b) increase by $75.0 million the amount of the Revolving Facility to $250.0 million. The Credit
Agreement incurs interest and fees at various rates based on our net debt to EBITDA ratio (as defined in the Credit Agreement) at the
end of each quarterly reporting period. The Revolving Facility permits borrowings at an interest rate equal to the sum of a base rate
39
plus a margin of 0.95% to 2.25% or a LIBOR rate plus a margin of 1.95% to 3.25%. The Term Loan bears interest at a rate equal to
the sum of a base rate plus a margin of 0.90% to 2.20% or a LIBOR rate plus a margin of 1.90% to 3.20%. The Credit Agreement does
not provide for scheduled reductions in the principal balance prior to its maturity. 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, 2016, were $125.0 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 June 2, 2015 when we entered into an amended and restated note
purchase agreement (the “Restated Prudential Note Purchase Agreement”) with The Prudential Insurance Company of America
(“Prudential”) and an affiliate of Prudential. Pursuant to the Restated Prudential Note Purchase Agreement, Prudential and its affiliate
redenominated the existing notes in the aggregate amount of $100.0 million issued under the existing note purchase agreement as
senior unsecured Series A Notes, and issued $75.0 million of senior unsecured Series B Notes bearing interest at 5.35% and maturing
in June 2023 to Prudential and certain affiliates of Prudential. The Series A Notes continue to bear interest at 6.0% and mature in
February 2021. The Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the principal balance
of either the Series A Notes or the Series B Notes prior to their respective maturities. 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 of $125.0 million for the year ended December 31,
2016, an increase in market interest rates of 1.00% for 2017 would decrease our 2017 net income and cash flows by approximately
$1.3 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 $125.0 million outstanding borrowings under the Credit Agreement is indicative of our future
average floating interest rate borrowings for 2017 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.
40
Item 8. Financial Statements and Supplementary Data
GETTY REALTY CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
(PAGES)
42
43
44
46
67
41
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS:
Real Estate:
Land
Buildings and improvements
Construction in progress
Less accumulated depreciation and amortization
Real estate held for use, net
Real estate held for sale, net
Real estate, net
Investment in direct financing leases, net
Notes and mortgages receivable
Cash and cash equivalents
Restricted cash
Deferred rent receivable
Accounts receivable, net of allowance of $2,006 and $2,634, respectively
Prepaid expenses and other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Borrowings under credit agreement, net
Senior unsecured notes, net
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:
Preferred stock, $0.01 par value; 20,000,000 shares authorized; unissued
Common stock, $0.01 par value; 50,000,000 shares authorized; 34,393,114 and 33,422,170 shares
issued and outstanding, respectively
Additional paid-in capital
Dividends paid in excess of earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
DECEMBER 31,
2016
2015
$ 474,115
306,980
426
781,521
(120,576)
660,945
645
661,590
92,097
32,737
12,523
671
29,966
4,118
43,604
$ 475,784
304,894
955
781,633
(107,109)
674,524
1,339
675,863
94,098
48,455
3,942
409
25,450
2,975
45,726
$ 877,306
$ 896,918
$ 123,801
174,743
—
74,516
9,742
63,586
$ 142,100
174,689
303
84,345
15,897
73,023
446,388
490,357
—
—
—
—
344
485,659
(55,085)
334
464,338
(58,111)
430,918
406,561
$ 877,306
$ 896,918
The accompanying notes are an integral part of these consolidated financial statements.
42
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenues:
Revenues from rental properties
Tenant reimbursements
Interest on notes and mortgages receivable
Total revenues
Operating expenses:
Property costs
Impairments
Environmental
General and administrative
(Recoveries) allowance for uncollectible accounts
Depreciation and amortization
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
(Loss) gains on dispositions of real estate
(Loss) earnings from discontinued operations
Net earnings
Basic and diluted earnings per common share:
Earnings from continuing operations
(Loss) earnings from discontinued operations
Net earnings
Weighted average common shares outstanding:
Basic and diluted
YEAR ENDED DECEMBER 31,
2016
2015
2014
$ 97,939
13,784
3,543
$ 92,889
14,146
3,698
$ 82,971
13,777
3,145
115,266
110,733
99,893
22,725
6,888
2,578
14,154
(448)
19,170
23,649
11,615
6,222
16,930
1,053
16,974
23,768
12,938
4,612
15,777
3,408
10,549
65,067
76,443
71,052
50,199
6,418
2,025
(16,561)
34,290
2,272
18,301
(14,493)
28,841
1,223
147
(9,806)
42,081
40,370
20,405
(3,465)
(205)
(3,670)
(3,299)
339
(5,982)
8,995
(2,960)
3,013
$ 38,411
$ 37,410
$ 23,418
$
1.23
(0.11)
$
1.20
(0.09)
$ 0.60
0.09
$
1.12
$
1.11
$ 0.69
33,806
33,420
33,409
The accompanying notes are an integral part of these consolidated financial statements.
43
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
Impairment charges
(Gains) loss on dispositions of real estate
Continuing operations
Discontinued operations
Deferred rent receivable, net of allowance
(Recoveries) allowance for uncollectible accounts
Amortization of above-market and below-market leases
Amortization of credit agreement and senior unsecured notes 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
Capital expenditures
Addition to construction in progress
Proceeds from dispositions of real estate
Continuing operations
Discontinued operations
Deposits for property acquisitions
Change in restricted cash
Amortization of investment in direct financing leases
Collection of notes and mortgages receivable
YEAR ENDED DECEMBER 31,
2016
2015
2014
$ 38,411
$ 37,410
$ 23,418
19,170
12,814
16,974
17,361
10,549
21,534
(6,418)
205
(4,516)
(448)
(569)
851
4,107
1,426
(2,382)
445
(24,640)
(1,582)
36,874
(2,272)
(339)
(4,401)
1,089
(1,496)
1,150
4,829
1,090
(1,223)
(8,995)
(4,156)
1,278
(28)
1,068
3,046
917
(1,546)
(189)
(23,485)
3,513
(730)
3,934
(16,368)
(5,007)
49,688
29,237
(7,688)
(298)
(406)
(219,192)
(334)
(687)
(17,098)
(140)
—
3,957
88
(2,206)
(262)
2,001
17,532
5,604
1,424
2,844
304
1,666
3,647
4,776
15,289
16,226
287
1,382
2,783
Net cash flow provided by (used in) investing activities
12,718
(204,724)
23,505
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements
Repayments under credit agreements
Borrowings under senior unsecured notes
Payments of capital lease obligations
Repayment of mortgage payable
Payments of cash dividends
Payments of loan origination costs
Security deposits received (refunded)
Cash paid in settlement of restricted stock units
Proceeds from issuance of common stock, net
8,000
(27,000)
—
(236)
(400)
(36,231)
—
260
(290)
14,886
186,000
(67,000)
75,000
(249)
(50)
(35,150)
(2,432)
(187)
(65)
—
3,000
(36,000)
—
(255)
(50)
(28,675)
—
314
—
—
Net cash flow (used in) provided by financing activities
(41,011)
155,867
(61,666)
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
8,581
3,942
831
3,111
(8,924)
12,035
$ 12,523
$
3,942
$ 3,111
44
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
Income taxes
Environmental remediation obligations
Non-cash transactions
Issuance of notes and mortgages receivable related to property dispositions
Mortgage payable, net related to property acquisition
Accrued construction in progress
YEAR ENDED DECEMBER 31,
2016
2015
2014
$ 15,707
368
17,633
$ 12,643
341
19,123
$ 8,735
316
13,448
1,814
—
$ —
17,876
—
268
$
8,278
390
$ —
The accompanying notes are an integral part of these consolidated financial statements.
45
GETTY REALTY CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 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. 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, real estate,
receivables, deferred rent receivable, direct financing leases, depreciation and amortization, impairment of long-lived assets,
environmental remediation costs, environmental remediation obligations, litigation, 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.
Reclassifications
Beginning in 2016 Tenant reimbursements, which were previously included in Revenue from rental properties, were excluded
from Revenue from rental properties. Certain other amounts in prior years’ financial statements have been reclassified to conform to
the presentation used in the year ended December 31, 2016.
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. See Note 12 for additional information regarding
property acquisitions.
We capitalize direct costs, including costs such as construction costs and professional services, and indirect costs associated
with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their
intended use. The capitalization period begins when development activities are underway and ends when it is determined that the asset
is substantially complete and ready for its intended use.
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.
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 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.
46
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, 2016 and 2015.
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.
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. There were
no impairments related to our notes and mortgages receivable during the years ended December 31, 2016 and 2015.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our
cash and cash equivalents are held in the custody of 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, 2016, restricted cash of $671,000 consisted of security deposits received from our tenants. At
December 31, 2015, restricted cash of $409,000 consisted of an escrow account established to guarantee our environmental
remediation obligations at several of our properties.
Revenue Recognition and Deferred Rent Receivable
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 reserve 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.
47
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 revenues from rental properties over the remaining terms of the in-place
leases. Lease termination fees are recognized as other 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.
Impairment of Long-Lived Assets
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. Assets held for
disposal are written down to fair value less estimated disposition costs.
We recorded impairment charges aggregating $12,814,000, $17,361,000 and $21,534,000 for the years ended December 31,
2016, 2015 and 2014, respectively, in continuing and discontinued operations. Our estimated fair values, as they relate 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 bids, for which we do not have access to the unobservable inputs used to determine these estimated fair values, 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 $3,041,000 of the $12,814,000 in impairments recognized during the year ended December 31, 2016) and (ii) discounted
cash flow models (this method was used to determine $1,660,000 of the $12,814,000 in impairments recognized during the year ended
December 31, 2016). During the year ended December 31, 2016, we recorded $8,113,000 of the $12,814,000 in impairments
recognized due to the accumulation of asset retirement costs as a result of changes in estimates associated with our estimated
environmental liabilities which increased the carrying value of certain properties in excess of their fair value.
The impairment charges recorded during the years ended December 31, 2016 and 2015, were attributable to the effect of adding
asset retirement costs due to changes in estimates associated with our environmental liabilities, which increased the carrying value of
certain properties in excess of their fair value, reductions in estimated undiscounted cash flows expected to be received during the
assumed holding period for certain of our properties and reductions in estimated sales prices from third-party offers based on signed
contracts, letters of intent or indicative bids for certain of our properties.
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 Gain
On August 3, 2015, we terminated our unitary triple-net lease (the “Ramoco Lease”) with Hanuman Business, Inc. (d/b/a
“Ramoco”), and sold to Ramoco affiliates 48 of the 61 properties that had been subject to the Ramoco Lease. The total consideration
for the 48 properties we sold to Ramoco affiliates, including a seller financing mortgage of $13,900,000, was $15,000,000. In
accordance with ASC 360-20, Property, Plant and Equipment—Real Estate Sales, we evaluated the accounting for the gain on sales of
these assets, noting that the buyer’s initial investment did not represent the amount required for recognition of the gain by the full
accrual method. Accordingly, we recorded a deferred gain of $3,900,000 related to the Ramoco sale. The deferred gain was recorded
in accounts payable and accrued liabilities on our balance sheet at December 31, 2015. On April 28, 2016, Ramoco affiliates repaid
the entire seller financing mortgage and, as a result, the deferred gain was recognized in our consolidated statements of operations for
the year ended December 31, 2016.
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
48
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 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 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. 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 executives
participating in the Supplemental Retirement Plan for the participant account balances equal to the aggregate of the amount invested at
the executives’ 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, 2016 and 2015, of $780,000 and $1,264,000, 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, 2016, 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
$ 565
$ —
$ —
$ 565
Deferred compensation
$ —
$ 565
$ —
$ 565
The following summarizes as of December 31, 2015, 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
$ 888
$ —
$ —
$888
Deferred compensation
$ —
$ 888
$ —
$888
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.
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 UST 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
49
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 2013, 2014 and 2015, and tax returns which will be filed for the year ended 2016,
remain open to examination by federal and state tax jurisdictions under the respective statute of limitations.
New Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“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 was effective for the first interim period within annual reporting periods beginning after
December 15, 2016, and early adoption was not permitted. On July 9, 2015, the FASB decided to delay the effective date of ASU
2014-09 by one year making it effective for the first interim period within annual reporting periods beginning after December 15,
2017. Early adoption is permitted as of the original effective date. We are currently evaluating this guidance and do not expect the
adoption of ASU 2014-09 will have a material impact on our consolidated financial statements.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern: Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 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. ASU
2014-15 is effective for annual periods ending after December 15, 2016, including interim reporting periods thereafter. We adopted
this guidance in 2016 and there was no impact to our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 amends the existing
accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. Lessor
accounting will remain similar to lessor accounting under previous GAAP, while aligning with the FASB’s new revenue recognition
guidance. ASU 2016-02 is effective for the Company beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. The
standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial
application, with an option to use certain transition relief. We are currently evaluating the impact the adoption of ASU 2016-02 will
have on our consolidated financial statements.
On March 30, 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting (“ASU 2016-09”), which amends the current stock compensation guidance. The
amendments simplify the accounting for taxes related to stock based compensation, including adjustments as to how excess tax
benefits and a company’s payments for tax withholdings should be classified. The standard is effective for fiscal periods beginning
after December 15, 2016, with early adoption permitted. The adoption of ASU 2016-09 will not have an impact on our consolidated
financial statements.
On May 9, 2016, the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”),
which clarifies and provides practical expedients for certain aspects of ASU 2014-09, which outlines a single comprehensive model
for entities to use in accounting for revenues arising from contracts with customers and notes that lease contracts with customers are a
scope exception. Public business entities may elect to adopt the amendments as of the original effective date; however, adoption is
required for annual reporting periods beginning after December 15, 2017. We are currently evaluating the impact the adoption of ASU
2016-12 will have on our consolidated financial statements.
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit
Losses on Financial Instruments (“ASU 2016-13”) to amend the accounting for credit losses for certain financial instruments. Under
the new guidance, an entity recognizes its estimate of expected credit losses as an allowance, which the FASB believes will result in
more timely recognition of such losses. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. We are currently evaluating the impact the adoption of ASU 2016-13 will have on our
consolidated financial statements.
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In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments (“ASU 2016-15”). ASU 2016-15 is intended to clarify the presentation of cash receipts and payments in specific
situations. The amendments in this update are effective for financial statements issued for annual periods beginning after
December 15, 2017, including interim periods within those annual periods, and early adoption is permitted. We are currently
evaluating the impact the adoption of ASU 2016-15 will have on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”).
ASU 2016-18 requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and
cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU
2016-18 will be effective beginning January 1, 2018 (with early adoption permitted) and will be applied using a retrospective
transition method to each period presented. We early adopted ASU 2016-18 on January 1, 2017. Upon adoption, we will include
amounts generally described as restricted cash within the beginning-of-period, change and end-of-period total amounts on the
statement of cash flows rather than within an activity on the statement of cash flows.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business
(“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with
evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is
effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We early adopted
ASU 2017-01 on January 1, 2017. The adoption of this standard will result in less real estate acquisitions qualifying as businesses and,
accordingly, acquisition costs for those acquisitions that are not businesses will be capitalized rather than expensed.
NOTE 2. — LEASES
As of December 31, 2016, we owned 740 properties and leased 89 properties from third-party landlords. Our 829 properties are
located in 23 states across the United States and Washington, D.C. Substantially all of our properties are leased on a triple-net basis
primarily to petroleum distributors, convenience store retailers 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 convenience stores,
gasoline stations, 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, to a lesser extent, convenience store sales or
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 reviewing 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, 2016, 2015 and 2014 were
$97,939,000, $92,889,000 and $82,971,000, respectively. Rental income contractually due or received from our tenants in revenues
from rental properties included in continuing operations was $94,522,000, $88,358,000 and $77,720,000 for the years ended
December 31, 2016, 2015 and 2014, respectively.
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 basis over the current lease term, the net amortization of
above-market and below-market leases, 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 $3,417,000, $4,531,000 and $5,251,000 for the years ended December 2016, 2015 and 2014,
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. There
were no deferred rent receivable reserves at December 31, 2016 and 2015, respectively.
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Tenant reimbursements, which consist of 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 continuing operations were $13,784,000, $14,146,000 and
$13,777,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
We incurred $148,000, $120,000 and $60,000 of lease origination costs for the years ended December 31, 2016, 2015 and 2014,
respectively. This 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.
The components of the $92,097,000 investment in direct financing leases as of December 31, 2016, are minimum lease
payments receivable of $167,064,000 plus unguaranteed estimated residual value of $13,979,000 less unearned income of
$88,946,000. The components of the $94,098,000 investment in direct financing leases as of December 31, 2015, are minimum lease
payments receivable of $179,372,000 plus unguaranteed estimated residual value of $13,979,000 less unearned income of
$99,253,000.
Future contractual minimum annual rentals receivable from our tenants, which have terms in excess of one year as of
December 31, 2016, are as follows (in thousands):
YEAR ENDING
DECEMBER 31,
2017
2018
2019
2020
2021
Thereafter
OPERATING
LEASES
$
$
81,784
81,508
81,346
76,936
71,523
569,111
DIRECT
FINANCING
LEASES
$
12,622
12,872
13,079
13,375
13,552
$ 101,564
TOTAL
$ 94,406
94,380
94,425
90,311
85,075
$ 670,675
We have obligations to lessors under non-cancelable operating leases which have terms in excess of one year, principally for
convenience stores and gasoline stations. The leased properties have a remaining lease term averaging approximately 11 years,
including renewal options. Future minimum annual rentals payable under such leases, excluding renewal options, are as follows: 2017
— $6,246,000, 2018 — $5,548,000, 2019 — $4,620,000, 2020 — $3,494,000, 2021 — $2,573,000 and $3,277,000 thereafter.
Rent expense, substantially all of which consists of minimum rentals on non-cancelable operating leases, amounted to
$5,376,000, $5,918,000 and $6,088,000 for the years ended December 31, 2016, 2015 and 2014, respectively, and is included in
property costs using the straight-line method. Rent received under subleases for the years ended December 31, 2016, 2015 and 2014
was $9,153,000, $9,653,000 and $10,358,000, respectively.
Major Tenants
As of December 31, 2016, we had three significant tenants by revenue:
• We leased 166 convenience store and gasoline station properties in three separate unitary leases and three stand-alone
leases to subsidiaries of Global Partners LP (NYSE: GLP) (“Global Partners”). Two of these leases were assigned to
subsidiaries of Global Partners in June 2015 by our former tenants, White Oak Petroleum, LLC and Big Apple Petroleum
Realty, LLC (both affiliates of Capitol Petroleum Group, LLC). In the aggregate, our leases with subsidiaries of Global
Partners represented 21% of our total revenues for the years ended December 31, 2016 and 2015. All of our unitary leases
with subsidiaries of Global Partners are guaranteed by the parent company.
• We leased 77 convenience store and gasoline station properties pursuant to three separate unitary leases to Apro, LLC
(d/b/a “United Oil”). In the aggregate, our leases with United Oil represented 15% and 9% of our total revenues for the
years ended December 31, 2016 and 2015, respectively. See Note 12 for additional information regarding the United Oil
Transaction. See Item 9B in this Form 10-K for selected combined audited financial data of United Oil.
• We leased 79 convenience store and gasoline station properties pursuant to three separate unitary leases to subsidiaries of
Chestnut Petroleum Dist., Inc. (“Chestnut Petroleum”). In the aggregate, our leases with subsidiaries of Chestnut
Petroleum represented 15% and 16% of our total revenues for the years ended December 31, 2016 and 2015, respectively.
The largest of these unitary leases, covering 57 of our properties, is guaranteed by the parent company, its principals and
numerous Chestnut Petroleum affiliates.
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Marketing and the Master Lease
As of December 31, 2016, 391 of the properties we own or lease, 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”).
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 with the Liquidating Trustee of the Marketing Estate to
resolve claims asserted by us in Marketing’s bankruptcy case (the “Settlement Agreement”). The Settlement Agreement was approved
by an order of the U.S. Bankruptcy Court, and, on April 22, 2015, we received a distribution from the Marketing Estate of $6,800,000
on account of our general unsecured claims. The Settlement Agreement also resolved a dispute relating to the balance of payment due
to us pursuant to our agreement to fund a lawsuit that was brought by the Liquidating Trustee against Lukoil Americas Corporation
and related entities and individuals for the benefit of Marketing’s creditors. As a result, on April 22, 2015, we also received an
additional distribution of $550,000 from the Marketing Estate in full resolution of the Litigation Funding Agreement dispute.
On October 19, 2015, the U.S. Bankruptcy Court entered a final decree closing the bankruptcy case of the Marketing Estate. As
a result, on November 3, 2015, we received a final distribution from the Marketing Estate of $10,800,000 on account of our general
unsecured claims. The $18,177,000 received from the Marketing Estate for the year ended December 31, 2015, is included in other
income on our consolidated statements of operations. We do not expect to receive any further distributions from the Marketing Estate.
As of December 31, 2016, we have entered into long-term triple-net leases with petroleum distributors for 15 separate property
portfolios comprising 350 properties in the aggregate and 24 properties leased as single unit triple-net leases, that were previously
leased to Marketing. The long-term triple-net leases with petroleum distributors are unitary triple-net lease agreements generally with
an initial term of 15 to 20 years and options for successive renewal terms of up to 20 years. Rent is scheduled to increase at varying
intervals during both the initial and renewal terms of our 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, 2016, we have a
remaining commitment to fund up to $10,231,000 in the aggregate with our tenants for our portion of such capital expenditures. 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 lives 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, 2016, we removed $13,769,000 of asset
retirement obligations and $10,808,000 of net asset retirement costs related to USTs from our balance sheet. The cumulative net
amount of $2,961,000 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.
NECG Lease Restructuring
On May 1, 2012, we entered into a lease with NECG Holdings Corp (“NECG”) covering 84 properties formerly leased to
Marketing in Connecticut, Massachusetts and Rhode Island (the “NECG Lease”). Eviction proceedings against a holdover group of
former subtenants who continued to occupy properties subject to the NECG Lease had a material adverse impact on NECG’s
operations and profitability. 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 or NECG regained possession of all of the locations that were still subject to appeal.
We had previously entered into a lease modification agreement with NECG which deferred a portion of NECG’s rent due to us
and allowed us to remove properties from the NECG Lease. As a result, as of December 31, 2016, there were three properties
remaining in the NECG Lease. On January 6, 2017, the three remaining properties subject to the NECG Lease were re-leased to an
existing tenant and the NECG Lease was terminated.
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NOTE 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,
2016 and 2015, we had accrued $11,768,000 and $11,265,000, 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 $801,000 and
$374,000 for certain of these matters during the years ended December 31, 2016 and 2015, 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 resulting from the discharges of hazardous substances along the
lower Passaic River (the “Lower Passaic River”). The Directive provides, among other things, that the named recipients must conduct
an assessment of the natural resources that have been injured by 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 are 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 to perform a Remedial Investigation and Feasibility Study (“RI/FS”)
for a 17-mile stretch of the Lower Passaic River in New Jersey. 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. Most of the parties to the AOC, including us,
are also members of a Cooperating Parties Group (“CPG”). The CPG agreed to an interim allocation formula for purposes of
allocating the costs to complete the RI/FS among its members, with the understanding that this agreed-upon allocation formula is not
binding on the parties in terms of any potential liability for the costs to remediate the Lower Passaic River. The CPG submitted to the
EPA its draft RI/FS in 2015. The draft RI/FS set forth various alternatives for remediating the entire 17-mile stretch of the Lower
Passaic River, and provides that cost estimate for the preferred remedial action presented therein is in the range of approximately
$483,000,000 to $725,000,000. The EPA is still evaluating the draft RI/FS report submitted by the CPG.
In addition to the RI/FS activities, other actions relating to the investigation and/or remediation of the Lower Passaic River have
proceeded as follows. First, in June 2012, 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. Concurrent with the CPG’s
work on the RI/FS, on April 11, 2014, the EPA issued a draft Focused Feasibility Study (“FFS”) with proposed remedial alternatives
to remediate the lower 8-miles of the 17-mile stretch of the Lower Passaic River. The FFS was subject to public comments and
objections, and on March 4, 2016, the EPA issued its Record of Decision (“ROD”) for the lower 8-miles selecting a remedy that
would involve bank-to-bank dredging and installing an engineered cap with an estimated cost of $1,380,000,000. On March 31, 2016,
we and more than 100 other potentially responsible parties received from the EPA a “Notice of Potential Liability and
Commencement of Negotiations for Remedial Design” (“Notice”), which informed the recipients that the EPA intends to seek an
Administrative Order on Consent and Settlement Agreement with Occidental for remedial design of the remedy selected in the ROD,
after which the EPA plans to begin negotiations with “major” potentially responsible parties for implementation and/or payment of the
selected remedy. The Notice also stated that the EPA believes that some of the potentially responsible parties and other parties not yet
identified as potentially responsible parties will be eligible for a cash out settlement with the EPA. On October 5, 2016, the EPA
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announced that it had entered into a settlement agreement with Occidental which requires that Occidental perform the remedial design
(which is expected to take four (4) years to complete) for the remedy selected for the lower 8-miles of the Lower Passaic River.
Many uncertainties remain regarding how the EPA intends to implement the ROD. We anticipate that performance of the EPA’s
selected remedy will be subject to future negotiations, potential enforcement proceedings and/or possible litigation. The RI/FS, AOC,
10.9 AOC and Notice do not obligate us to fund or perform remedial action contemplated by either the ROD or RI/FS and 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.
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 gasoline station properties from which the releases occurred.
Several of the named defendants have already settled the case against them. These cases have been transferred to the United States
District Court for the District of New Jersey for pre-trial proceedings and trial, although a trial date has not yet been set. We continue
to engage in settlement negotiations and a dialogue with the plaintiff’s counsel to educate them on the unique role of the Company and
our business as compared to other defendants in the litigation, and with respect to certain facts applicable to our activities and gasoline
stations, and affirmative defenses available to us, which we believe have not been sufficiently developed in the proceedings. 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 us and 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. 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. 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, 2016, 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, our subsidiary, 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 Complaint names us and more than 50 other defendants, including 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 for natural resource damages 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.” 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 removed by defendants to the United States
District Court for the Eastern District of Pennsylvania and then 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 MDL. Plaintiffs have recently filed a Second Amended
Complaint naming additional defendants and adding factual allegations intended to bolster their claims against the defendants. We
have joined with other defendants in the filing of a motion to dismiss the claims against us. This motion is pending with the Court. We
intend to defend vigorously the claims made against us. 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.
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NOTE 4. — CREDIT AGREEMENT AND SENIOR UNSECURED NOTES
Credit Agreement
On June 2, 2015, we entered into a $225,000,000 senior unsecured credit agreement (the “Credit Agreement”) with a group of
banks led by Bank of America, N.A. (the “Bank Syndicate”). The Credit Agreement consists of a $175,000,000 revolving facility (the
“Revolving Facility”), which is scheduled to mature in June 2018 and a $50,000,000 term loan (the “Term Loan”), which is scheduled
to mature in June 2020. Subject to the terms of the Credit Agreement and our continued compliance with its provisions, we have the
option to (a) extend the term of the Revolving Facility for one additional year to June 2019 and (b) increase by $75,000,000 the
amount of the Revolving Facility to $250,000,000.
The Credit Agreement incurs interest and fees at various rates based on our net debt to EBITDA ratio (as defined in the Credit
Agreement) at the end of each quarterly reporting period. The Revolving Facility permits borrowings at an interest rate equal to the
sum of a base rate plus a margin of 0.95% to 2.25% or a LIBOR rate plus a margin of 1.95% to 3.25%. The annual commitment fee on
the undrawn funds under the Revolving Facility is 0.25% to 0.30%. The Term Loan bears interest at a rate equal to the sum of a base
rate plus a margin of 0.90% to 2.20% or a LIBOR rate plus a margin of 1.90% to 3.20%. The Credit Agreement does not provide for
scheduled reductions in the principal balance prior to its maturity. As of December 31, 2016 and 2015, borrowings under the
Revolving Facility were $75,000,000 and $94,000,000, respectively, and borrowings under the Term Loan were $50,000,000. The
interest rate on Credit Agreement borrowings at December 31, 2016, was approximately 3.10% per annum.
In April 2015, the FASB issued guidance ASU 2015-03, which amends Topic 835, Other Presentation Matters. The
amendments in ASU 2015-03 require that debt issuance costs be reported on the balance sheet as a direct reduction of the face amount
of the debt instrument they relate to, and should not be classified as a deferred charge, as was previously required under the
Accounting Standards Codification. We adopted ASU 2015-03 retrospectively as of January 1, 2016. As of December 31, 2016 and
2015, we had $1,199,000 and $1,900,000, respectively, of debt issuance costs included within borrowings under credit agreement.
The Credit Agreement contains customary financial covenants such as availability, 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 cross default provisions under the Restated Prudential Note
Purchase Agreement (as defined below), change of control and failure to maintain REIT status. Any event of default, if not cured or
waived in a timely manner, 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 Restated
Prudential Note Purchase Agreement. We may be prohibited from drawing funds against the Revolving Facility if there is a material
adverse effect on our business, assets, prospects or condition.
Senior Unsecured Notes
On June 2, 2015, we entered into an amended and restated note purchase agreement (the “Restated Prudential Note Purchase
Agreement”) amending and restating our existing senior secured note purchase agreement with The Prudential Insurance Company of
America (“Prudential”) and an affiliate of Prudential. Pursuant to the Restated Prudential Note Purchase Agreement, Prudential and its
affiliate released the mortgage liens and other security interests held by Prudential and its affiliate on certain of our properties and
assets, redenominated the existing notes in the aggregate amount of $100,000,000 issued under the existing note purchase agreement
as senior unsecured Series A Notes, and issued $75,000,000 of senior unsecured Series B Notes bearing interest at 5.35% and
maturing in June 2023 to Prudential and certain affiliates of Prudential. The Series A Notes continue to bear interest at 6.0% and
mature in February 2021. The Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the
principal balance of either the Series A Notes or the Series B Notes prior to their respective maturities. As of December 31, 2016 and
2015, borrowings under the Restated Prudential Note Purchase Agreement were $175,000,000.
In April 2015, the FASB issued guidance ASU 2015-03, which amends Topic 835, Other Presentation Matters. The
amendments in ASU 2015-03 require that debt issuance costs be reported on the balance sheet as a direct reduction of the face amount
of the debt instrument they relate to, and should not be classified as a deferred charge, as was previously required under the
Accounting Standards Codification. We adopted ASU 2015-03 retrospectively as of January 1, 2016. As of December 31, 2016 and
2015, we had $257,000 and $311,000, respectively, of debt issuance costs included within senior unsecured notes.
The Restated Prudential Note Purchase Agreement contains customary financial covenants such as 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 Restated Prudential Note Purchase 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 Restated Prudential Note Purchase Agreement and could result in the acceleration of
56
our indebtedness under the Restated Prudential Note Purchase 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, 2016, we are in compliance with all of the material terms of the Credit Agreement and Restated Prudential
Note Purchase Agreement, including the various financial covenants described above.
As of December 31, 2016, the maturity dates and amounts outstanding under the Credit Agreement and the Restated Prudential
Note Purchase Agreement are as follows:
Credit Agreement—Revolving Facility
Credit Agreement—Term Loan
Restated Prudential Note Purchase Agreement—Series A Notes
Restated Prudential Note Purchase Agreement—Series B Notes
Maturity Date
June 2018
June 2020
February 2021
June 2023
Amount
$ 75,000,000
$ 50,000,000
$100,000,000
$ 75,000,000
As of December 31, 2016 and 2015, the carrying value of the borrowings outstanding under the Credit Agreement approximated
fair value. As of December 31, 2016, the fair value of the borrowings under the Prudential Series A Notes and Series B Notes were
$104,900,000 and $76,100,000, respectively. As of December 31, 2015, the fair value of the borrowings under the Prudential Series A
Notes and Series B Notes were $105,800,000 and $76,400,000, respectively.
The fair value of the borrowings outstanding as of December 31, 2016 and 2015, 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.
NOTE 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 are incurred for, among other things, removing USTs, excavation of contaminated soil and water, installing,
operating, maintaining and decommissioning remediation systems, monitoring contamination and governmental agency compliance
reporting required 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
substantially 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 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 our 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 our counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if our counterparty fails to pay them. We assess whether to
accrue for environmental liabilities based upon relevant factors including our tenants’ histories of paying for such obligations, our
assessment of their financial ability, and their intent to pay for such obligations. 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 (the cost of which in certain cases is partially borne by us) 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 (substantially all of which commenced in 2012), we have agreed to be responsible for
57
environmental contamination at the premises that was known at the time the lease commenced, and which 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 (or a shorter period for a minority of such leases). After expiration of such ten-year (or, in certain cases, shorter) 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 several
years 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 properties that 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.
In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained
continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and
continues to be discovered. As a result, we have developed a reasonable estimate of fair value for the prospective future environmental
liability resulting from preexisting unknown environmental contamination and accrued for these estimated costs. 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. 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 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, 2016 and 2015, we have accrued $45,009,000 and $45,443,000, respectively, for these future environmental
liabilities related to preexisting unknown contamination. 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,
2016, we had accrued a total of $74,516,000 for our prospective environmental remediation liability. This accrual includes
(a) $29,507,000, 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) $45,009,000 for future environmental liabilities
related to preexisting unknown contamination. As of December 31, 2015, we had accrued a total of $84,345,000 for our prospective
58
environmental remediation liability. This accrual includes (a) $38,902,000, 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) $45,443,000 for future environmental liabilities related to preexisting unknown contamination.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $4,107,000,
$4,829,000 and $3,046,000 of net accretion expense was recorded for the years ended December 31, 2016, 2015 and 2014,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2016, 2015 and 2014, we
recorded credits to environmental expenses included in continuing and discontinued operations aggregating $7,007,000, $4,639,000
and $2,756,000, 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, 2016 and 2015, we increased the carrying value of certain of our properties by
$11,346,000 and $12,285,000, 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 values of the properties are non-
cash transactions which do not appear on the face of the consolidated statements of cash flows. We recorded impairment charges
aggregating $11,658,000 (consisting of $11,467,000 for known environmental liabilities and $191,000 for reserves for future
environmental liabilities) and $12,548,000 (consisting of $10,398,000 for known environmental liabilities and $2,150,000 for reserves
for future environmental liabilities) for the years ended December 31, 2016 and 2015, respectively, in continuing and 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 related to capitalized asset retirement costs included in continuing and discontinued operations in our consolidated statements
of operations for the years ended December 31, 2016, 2015 and 2014, were $5,126,000, $5,997,000 and $1,560,000, respectively.
Capitalized asset retirement costs were $49,125,000 (consisting of $20,636,000 of known environmental liabilities and $28,489,000 of
reserves for future environmental liabilities) and $51,393,000 (consisting of $20,939,000 of known environmental liabilities and
$30,454,000 of reserves for future environmental liabilities) as of December 31, 2016 and 2015, respectively.
As part of the triple-net leases for our 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 lives 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, 2016, we removed $13,769,000 of asset
retirement obligations and $10,808,000 of net asset retirement costs related to USTs from our balance sheet. The cumulative net
amount of $2,961,000 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.
NOTE 6. — INCOME TAXES
Net cash paid for income taxes for the years ended December 31, 2016, 2015 and 2014 of $368,000, $341,000 and $316,000,
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 property costs 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 consolidated 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 consolidated financial statements
purposes. The federal tax attributes of the common dividends for the years ended December 31, 2016, 2015 and 2014 were: ordinary
59
income of 61.6%, 83.8% and 43.9%, capital gain distributions of 34.4%, 16.2% and 56.1% and non-taxable distributions of 4.0%,
0.0% and 0.0%, 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 2013, 2014 and 2015, and tax returns which will be filed for the year ended 2016, 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, 2016
or 2015. However, uncertain tax matters may have a significant impact on the results of operations for any single fiscal year or interim
period.
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 was treated as non-
qualifying income for purposes of the REIT qualification gross income tests. During 2015, we received distributions from Marketing
Estate in the amount of $18,177,000, which was treated as non-qualifying income for REIT qualification gross income tests.
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 use such a procedure.
On November 25, 2015, our Board of Directors declared a special dividend of $0.22 per share (the “Special Dividend”). The
Special Dividend was payable in either common stock or cash. The aggregate amount of cash to be distributed by the Company was a
minimum of 20% of the total distribution and a maximum of 40% of the total distribution, with the remainder to be paid in shares of
common stock. As a result, we issued 255,747 shares of common stock and made cash payments aggregating $2,941,000 to our
shareholders.
NOTE 7. — SHAREHOLDERS’ EQUITY
A summary of the changes in shareholders’ equity for the years ended December 31, 2016, 2015 and 2014 is as follows (in
thousands, except per share amounts):
BALANCE, DECEMBER 31, 2013
Net earnings
Dividends declared — $0.960 per share
Stock-based compensation
BALANCE, DECEMBER 31, 2014
Net earnings
Dividends declared — $1.15 per share
Stock-based compensation
BALANCE, DECEMBER 31, 2015
Net earnings
Dividends declared — $1.03 per share
Shares issued pursuant to ATM Program, net
Shares issued pursuant to stock dividends
Shares issued pursuant to dividend reinvestment
Stock-based compensation
BALANCE, DECEMBER 31, 2016
DIVIDENDS
PAID
IN EXCESS
OF EARNINGS
(47,640)
$
23,418
(32,402)
—
(56,624)
$
COMMON STOCK
SHARES
33,397
AMOUNT
334
$
ADDITIONAL
PAID-IN
CAPITAL
$
462,397
20
33,417
5
33,422
653
256
43
19
34,393
$
$
$
—
334
—
334
7
3
—
—
344
$
$
$
917
463,314
1,024
464,338
$
14,879
4,409
897
1,136
485,659
$
37,410
(38,897)
—
(58,111)
38,411
(35,385)
—
—
—
—
(55,085)
TOTAL
415,091
$
23,418
(32,402)
917
407,024
$
37,410
(38,897)
1,024
406,561
38,411
(35,385)
14,886
4,412
897
1,136
430,918
$
$
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, 2016 or December 31, 2015.
60
ATM Program
In June 2016, we established an at-the-market equity offering program (the “ATM Program”), pursuant to which we may issue
and sell shares of our common stock with an aggregate sales price of up to $125,000,000 through a consortium of banks acting as
agents. Sales of the shares of common stock may be made, as needed, from time to time in at-the-market offerings as defined in Rule
415 of the Securities Act of 1933, including by means of ordinary brokers’ transactions on the New York Stock Exchange or
otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or as otherwise agreed to with the
applicable agent. We incurred $360,000 of stock issuance costs in the establishment of the ATM Program. Stock issuance costs
consisted primarily of underwriters’ fees and legal and accounting fees.
During the year ended December 31, 2016, we issued 653,000 shares and received net proceeds of $14,886,000. Future sales, if
any, will depend on a variety of factors to be determined by us from time to time, including among others, market conditions, the
trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding
available to us.
Dividends
For the year ended December 31, 2016, we paid dividends of $40,643,000 or $1.22 per share (which consisted of $33,202,000
or $1.00 per share of regular quarterly cash dividends and a $7,441,000 or $0.22 per share special cash and stock dividend). For the
year ended December 31, 2015, we paid dividends of $35,150,000 or $1.04 per share (which consisted of $30,425,000 or $0.90 per
share of regular quarterly cash dividends and a $4,725,000 or $0.14 per share special cash dividend).
Dividend Reinvestment Plan
Our dividend reinvestment plan provides our common stockholders with a convenient and economical method of acquiring
additional shares of common stock by reinvesting all or a portion of their dividend distributions. During the year ended December 31,
2016, we issued 42,681 shares under the dividend reinvestment plan and raised $897,000.
Stock-Based Compensation
Compensation cost for our stock-based compensation plans using the fair value method was $1,426,000, $1,090,000 and
$917,000 for the years ended December 31, 2016, 2015 and 2014, respectively, and is included in general and administrative expenses
in our consolidated statements of operations.
NOTE 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 (“RSUs”), 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. RSUs awarded under the 2004 Plan 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 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. Under the
2012 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. 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 86,600, 79,250 and 72,125 RSUs and dividend equivalents in 2016, 2015 and 2014,
respectively. RSUs granted before 2009 provide for settlement upon termination of employment with the Company or termination of
service from the Board of Directors. RSUs granted in 2009 and thereafter provide for settlement upon the earlier of ten years after
grant or termination of employment with the Company. 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
61
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, 2016, 2015 and 2014, dividend equivalents aggregating
approximately $445,000, $464,000 and $333,000 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, 2013
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2014
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2015
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2016
NUMBER OF
RSUs
OUTSTANDING
295,850
72,125
(19,550)
(15,900)
332,525
79,250
(8,160)
(3,240)
400,375
86,600
(34,650)
(22,550)
429,775
FAIR VALUE
AMOUNT
AVERAGE
PER RSU
$ 1,386,000
360,000
$
293,000
$
$ 1,429,700
144,300
$
55,600
$
$ 1,593,400
635,800
$
415,400
$
$
$
$
$
$
$
$
$
$
19.21
18.43
18.44
18.04
17.68
17.16
18.40
18.35
18.42
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, 2016, 2015 and 2014, was $1,418,000, $1,083,000 and $910,000, respectively, and
is included in general and administrative expenses in our consolidated statements of operations. As of December 31, 2016, there was
$2,660,000 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 three
years. The aggregate intrinsic value of the 429,775 outstanding RSUs and the 221,819 vested RSUs as of December 31, 2016, was
$10,955,000 and $5,654,000, respectively.
The following is a schedule of the vesting activity relating to RSUs outstanding:
RSUs VESTED AT DECEMBER 31,
2013
Vested
Settled
RSUs VESTED AT DECEMBER 31,
2014
Vested
Settled
RSUs VESTED AT DECEMBER 31,
2015
Vested
Settled
RSUs VESTED AT DECEMBER 31,
2016
NUMBER
OF RSUs
VESTED
136,135
38,270
(19,550)
154,855
55,649
(8,160)
202,344
54,125
(34,650)
221,819
FAIR
VALUE
$ 697,000
$ 360,000
$ 954,400
$ 144,300
$1,379,600
$ 635,800
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
62
retirement plans approximated $268,000, $284,000 and $261,000 for the years ended December 31, 2016, 2015 and 2014,
respectively. These amounts are included in general and administrative expenses in our consolidated statements of operations. During
the year ended December 31, 2016, we distributed $469,000 from the Supplemental Plan to one former officer of the Company.
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 year ended December 31, 2015.
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, 2016 and 2015, there were 5,000 options outstanding which were
exercisable at $27.68 with an expiration date of May 15, 2017. As of December 31, 2016 and 2015, the 5,000 options outstanding had
no intrinsic value.
NOTE 9. — EARNINGS PER COMMON SHARE
Basic and diluted 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 and diluted 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 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, 2016, 2015 and 2014, respectively.
(in thousands):
Earnings from continuing operations
Less dividend equivalents attributable to RSUs outstanding
Year ended December 31,
2016
$ 42,081
(482)
2015
$ 40,370
(460)
2014
$ 20,405
(341)
Earnings from continuing operations attributable to common shareholders
41,599
39,910
20,064
(Loss) earnings from discontinued operations
Less dividend equivalents attributable to RSUs outstanding
(3,670)
—
(2,960)
—
3,013
(50)
(Loss) earnings from discontinued operations attributable to common
shareholders
Net earnings attributable to common shareholders used for basic and
diluted earnings per share calculation
Weighted average common shares outstanding:
Basic and diluted
RSUs outstanding at the end of the period
Basic and diluted earnings per common share
(3,670)
(2,960)
2,963
$ 37,929
$ 36,950
$ 23,027
33,806
33,420
33,409
430
400
333
$
1.12
$
1.11
$
0.69
NOTE 10. — DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
We report as discontinued operations two properties which met the criteria to be accounted for as held for sale in accordance
with GAAP as of June 30, 2014, and certain properties disposed of during the periods presented that were previously classified as held
for sale as of June 30, 2014. 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. We elected to early adopt ASU 2014-08, Presentation
of Financial Statements (Topic 205), 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.
During the year ended December 31, 2016, we sold two properties resulting in a loss of $205,000 that were previously classified
as held for sale as of June 30, 2014. In addition, during the year ended December 31, 2016, we sold 12 properties resulting in a
recognized gain of $2,373,000 that did not meet the criteria to be classified as discontinued operations. We determined that the 12
properties sold did not represent a strategic shift in our operations as defined in ASU 2014-08 and, as a result, the gains on
dispositions of real estate for the 12 properties were reflected in our earnings from continuing operations. We also received funds from
property condemnations resulting in a gain of $177,000 and recognized the remaining deferred gain of $3,868,000 related to the
Ramoco sale.
63
Real estate held for sale consisted of the following at December 31, 2016 and 2015:
(in thousands)
Land
Buildings and improvements
Accumulated depreciation and amortization
Real estate held for sale, net
Year ended December 31,
2016
2015
$
$
117
528
603
997
645
—
1,600
(261)
$
645
$ 1,339
The revenue from rental properties, impairment charges, other operating expenses and gains/losses from dispositions of real
estate related to these properties are as follows:
(in thousands)
Revenues from rental properties
Impairments
Other operating income
(Loss) from operating activities
(Loss) gains from dispositions of real estate
(Loss) earnings from discontinued operations
Year ended December 31,
2016
2015
$
5
(5,926)
2,456
(3,465)
(205)
$
164
(5,746)
2,283
(3,299)
339
2014
$ 2,372
(8,596)
242
(5,982)
8,995
$ (3,670)
$ (2,960)
$ 3,013
NOTE 11. — QUARTERLY FINANCIAL DATA
The following is a summary of the quarterly results of operations for the years ended December 31, 2016 and 2015 (unaudited
as to quarterly information) (in thousands, except per share amounts):
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 2016
Revenues from rental properties
Earnings from continuing operations
Net earnings
Diluted earnings per common share:
Earnings from continuing operations
Net earnings
YEAR ENDED DECEMBER 31, 2015
Revenues from rental properties
(Loss) earnings from continuing operations
Net (loss) earnings
Diluted (loss) earnings per common share:
(Loss) earnings from continuing operations
Net (loss) earnings
NOTE 12. — PROPERTY ACQUISITIONS
MARCH 31,
JUNE 30,
$
$
$
$
$
$
$
$
24,388
7,842
7,703
0.23
0.23
MARCH 31,
20,413
(81)
(1,137)
(0.01)
(0.04)
$
$
$
$
$
$
$
$
24,140
13,583
13,576
SEPTEMBER 30,
24,328
$
9,236
8,804
$
DECEMBER 31,
25,083
$
11,420
8,328
$
0.40
0.40
$
$
0.27
0.26
$
$
0.33
0.24
JUNE 30,
SEPTEMBER 30,
DECEMBER 31,
22,122
11,503
11,619
0.34
0.34
$
$
$
$
24,840
8,564
7,035
0.25
0.21
$
$
$
$
25,514
20,384
19,893
0.60
0.59
During the year ended December 31, 2016, we acquired fee simple or leasehold interests in three convenience store and gasoline
station properties and an adjacent parcel of land to an existing property for a redevelopment project, in separate transactions, for an
aggregate purchase price of $7,688,000. We accounted for the acquisitions of fee simple interests and leasehold title as business
combinations. We estimated the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant.”
Based on these estimates, we allocated $1,041,000 of the purchase price to land, $6,111,000 to buildings and improvements and
$374,000 to in-place leases. In addition, we purchased an adjacent parcel of land to an existing property for a redevelopment project
for $162,000. We incurred transaction costs of $86,000 directly related to these acquisitions which are included in general and
administrative expenses in our consolidated statements of operations.
During the year ended December 31, 2015, we acquired fee simple interests in 80 convenience store and gasoline station
properties for an aggregate purchase price of $219,200,000.
64
On June 3, 2015, we acquired fee simple interests in 77 convenience store and gasoline station properties from affiliates of
Pacific Convenience and Fuels LLC which we simultaneously leased to Apro, LLC (d/b/a “United Oil”), a leading regional
convenience store and gasoline station operator, under three separate cross-defaulted long-term triple-net unitary leases (the “United
Oil Transaction”). The United Oil properties are located across California, Colorado, Nevada, Oregon and Washington State and
operate under several well recognized brands including 7-Eleven, 76, Circle K, Conoco and My Goods Market. The total purchase
price for the United Oil Transaction was $214,500,000, which was funded with proceeds from our Credit Agreement and Restated
Prudential Note Purchase Agreement.
The leases governing the properties are unitary triple-net lease agreements with initial terms of 20 years and options for up to
three successive five-year renewal options. The unitary leases require United Oil to pay a fixed annual rent plus all amounts pertaining
to the properties including environmental expenses, real estate taxes, assessments, license and permit fees, charges for public utilities
and all other governmental charges. Rent is contractually scheduled to increase at various intervals over the course of the initial and
renewal terms of the leases.
We accounted for the United Oil Transaction as a business combination. We estimated the fair value of acquired tangible assets
(consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $140,966,000 of the purchase
price to land, $75,119,000 to buildings and improvements, $216,000 to above-market leases, $19,210,000 to below-market leases,
which is accounted for as a deferred liability and $17,402,000 to in-place leases and other intangible assets. We incurred transaction
costs of $413,000 directly related to the acquisition which are included in general and administrative expenses in our consolidated
statements of operations.
In addition, in 2015, we acquired fee simple interests in three convenience store and gasoline station properties in separate
transactions for an aggregate purchase price of $4,700,000.
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial information has been prepared utilizing our historical
financial statements and the combined effect of additional revenue and expenses from the properties acquired assuming that the
acquisitions had occurred on January 1, 2014, after giving effect to certain adjustments resulting from the straight-lining of scheduled
rent increases. The following information also gives effect to the additional interest expense resulting from the assumed increase in
borrowings outstanding under the Credit Agreement and the Restated Prudential Note Purchase Agreement to fund the acquisition.
The unaudited pro forma condensed financial information is not indicative of the results of operations that would have been achieved
had the acquisition reflected herein been consummated on the dates indicated or that will be achieved in the future.
(in thousands, except per share data)
Revenues from continuing operations
Earnings from continuing operations
Basic and diluted earnings from continuing operations per common
share
Year ended December 31,
2015
$ 118,003
2014
$ 117,340
$ 41,763
$ 22,399
$
1.24
$
0.66
Total revenues for the United Oil Transaction included in continuing operations were $17,631,000 and $10,177,000 for the
years ended December 31, 2016 and 2015, respectively. Net earnings for the United Oil Transaction were $11,762,000 and $6,952,000
for the years ended December 31, 2016 and 2015, respectively.
NOTE 13. — 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 $2,527,000 and $3,021,000 (net of accumulated amortization of $4,210,000 and $3,715,000,
respectively) at December 31, 2016 and 2015, 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 $22,539,000 and $24,534,000 (net of
accumulated amortization of $13,619,000 and $11,624,000, respectively) at December 31, 2016 and 2015, respectively. When we are
a lessor, 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. In-place leases are included in prepaid expenses and other assets and had a balance of $20,984,000 and $22,004,000 (net
of accumulated amortization of $5,187,000 and $3,793,000, respectively) at December 31, 2016 and 2015,
65
respectively. When we are a lessee, 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. Rental income included amortization from acquired leases of $1,833,000, $1,426,000
and $1,239,000 for the years ended December 31, 2016, 2015 and 2014, respectively. Rent expense included amortization from
acquired leases of $333,000 for the years ended December 31, 2016, 2015 and 2014. 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 $1,395,000, $1,019,000 and $518,000 for the years ended
December 31, 2016, 2015 and 2014, respectively.
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,
2017
2018
2019
2020
2021
Thereafter
As Lessee:
Year ending December 31,
2017
2018
2019
2020
2021
Thereafter
Above-Market
Leases
Below-Market
Leases
In-Place
Leases
$
148,000
47,000
30,000
24,000
16,000
179,000
$ 1,833,000
1,781,000
1,701,000
1,463,000
1,322,000
14,439,000
$ 1,389,000
1,363,000
1,342,000
1,322,000
1,301,000
14,267,000
$
444,000
$ 22,539,000
$ 20,984,000
Below-Market
Leases
$
320,000
317,000
312,000
222,000
157,000
755,000
$ 2,083,000
NOTE 14. — SUBSEQUENT EVENTS
We have evaluated events and transactions occurring after December 31, 2016, for recognition or disclosure purposes. On
February 21, 2017, we entered into an amended and restated note purchase agreement with Prudential and an affiliate of Prudential.
Pursuant to this agreement, Prudential and its affiliate issued $50,000,000 of senior unsecured Series C Notes bearing interest at
4.75% and maturing in February 2025. The proceeds were used to repay borrowings outstanding under our Revolving Facility. There
were no other reportable subsequent events or transactions.
66
To the Board of Directors and Shareholders of Getty Realty Corp.
Report of Independent Registered Public Accounting Firm
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, 2016 and
2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, 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, 2016, 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. 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.
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 2, 2017
67
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, 2016.
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,
2016.
The effectiveness of our internal control over financial reporting as of December 31, 2016, 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”.
Item 9B. Other Information
As of December 31, 2016, we leased 77 convenience store and gasoline station properties pursuant to three separate, cross-
defaulted, unitary leases to Apro, LLC (d/b/a “United Oil”). In the aggregate, these leases with United Oil accounted for 15% of our
rental revenues for the year ended December 31, 2016. United Oil is wholly owned subsidiary of CF United LLC.
The selected combined audited financial data of CF United LLC, which has been prepared by CF United LLC’s management
and audited by a third-party accounting firm, is provided below:
(in thousands)
Operating Data:
Total income
Total costs of operations and operating expenses
Net income
Year ended
December 31,
2016
$ 1,161,150
1,134,585
24,338
$
2015
$ 1,160,652
1,133,510
23,545
$
68
Balance Sheet Data:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
$
December 31,
2016
71,836
262,228
63,848
$ 140,794
$
December 31,
2015
87,195
265,315
63,892
$ 151,088
69
Item 10. Directors, Executive Officers and Corporate Governance
PART III
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 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
Christopher J. Constant
Mark J. Olear
Joshua Dicker
Danion Fielding
POSITION
AGE
38 President, Chief Executive Officer and Director
52 Executive Vice President and Chief Operating Officer
56 Senior Vice President, General Counsel and Secretary
45 Vice President, Chief Financial Officer and Treasurer
OFFICER SINCE
2012
2014
2008
2016
Mr. Constant has served as President, Chief Executive Officer and Director since January 2016. Mr. Constant joined the
Company in November 2010 as Director of Planning and Corporate Development and was later promoted to Treasurer in May 2012,
Vice President in May 2013 and Chief Financial Officer in December 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.
Mr. Olear has served as Executive Vice President since May 2014 and Chief Operating Officer since May 2015 (Chief
Investment Officer since May 2014). 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. Fielding joined the Company in February 2016 as Vice President, Chief Financial Officer and Treasurer. Prior to joining the
Company, Mr. Fielding held various positions in real estate and investment banking with Wilbraham Capital, Moinian Group,
Nationwide Health Properties, J.P. Morgan, PricewaterhouseCoopers and Daiwa Securities.
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.
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, 2016.
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.
70
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
71
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, 2016, 2015 and 2014
Schedule III — Real Estate and Accumulated Depreciation and Amortization as of December 31, 2016
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2016
PAGES
73
73
74
88
(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.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors 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 2, 2017 appearing in the 2016 Annual Report to Shareholders of Getty Realty Corp. (which report and
consolidated financial statements are incorporated by reference in this 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 2, 2017
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE II — VALUATION and QUALIFYING ACCOUNTS and RESERVES
for the years ended December 31, 2016, 2015 and 2014
(in thousands)
December 31, 2016:
Allowance for deferred rent receivable
Allowance for accounts receivable
December 31, 2015:
Allowance for deferred rent receivable
Allowance for accounts receivable
December 31, 2014:
Allowance for deferred rent receivable
Allowance for accounts receivable
BALANCE AT
BEGINNING
OF YEAR
ADDITIONS
DEDUCTIONS
BALANCE
AT END
OF YEAR
$
$
$
$
$
$
—
2,634
7,009
4,160
4,775
3,248
$
$
$
$
$
$
—
855
—
1,778
2,234
1,182
$
$
$
$
$
$
—
1,483
$ —
$ 2,006
7,009
3,304
$ —
$ 2,634
—
270
$ 7,009
$ 4,160
73
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
As of December 31, 2016
(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
Impairments
Sales and condemnations
Lease expirations/settlements
Balance at end of year
Accumulated depreciation and amortization:
Balance at beginning of year
Depreciation and amortization
Impairments
Sales and condemnations
Lease expirations/settlements
Balance at end of year
2016
2015
2014
$ 783,233
19,097
(13,590)
(6,379)
(195)
$ 595,959
233,785
(20,606)
(25,019)
(886)
$ 570,275
79,259
(24,620)
(25,786)
(3,169)
$ 782,166
$ 783,233
$ 595,959
$ 107,370
16,629
(776)
(2,559)
(88)
$ 100,690
15,663
(3,246)
(5,313)
(424)
$ 103,452
9,777
(3,086)
(6,544)
(2,909)
$ 120,576
$ 107,370
$ 100,690
74
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
$
1,468
868
2,985
1,369
2,224
2,385
2,235
6,072
1,354
1,485
1,643
2,055
1,250
2,727
1,971
7,615
3,715
6,612
5,434
6,613
4,611
2,130
2,737
3,193
4,247
5,942
1,941
5,412
5,978
4,751
1,187
3,001
3,900
5,269
4,641
4,077
4,356
2,349
4,233
6,612
3,619
6,605
5,081
3,748
5,003
1,457
6,151
731
Brookland, AR
Jonesboro, AR
Jonesboro, AR
Bellflower, CA
Benicia, CA
Chula Vista, CA
Coachella, CA
Cotati, CA
Fillmore, CA
Grass Valley, CA
Hesperia, CA
Hesperia, CA
Indio, CA
Indio, CA
La Palma, CA
La Puente, CA
Lakeside, CA
Los Angeles, CA
Oakland, CA
Ontario, CA
Phelan, CA
Riverside, CA
Riverside, CA
Sacramento, CA
Sacramento, CA
Sacramento, CA
San Dimas, CA
San Jose, CA
San Leandro, CA
Shingle Springs, CA
Stockton, CA
Stockton, CA
Boulder, CO
Castle Rock, CO
Golden, CO
Greenwood Village, CO
Highlands Ranch, CO
Lakewood, CO
Littleton, CO
Lone Tree, CO
Longmont, CO
Louisville, CO
Morrison, CO
Superior, CO
Thornton, CO
Westminster, CO
Wheat Ridge, CO
Avon, CT
Gross Amount at Which Carried
at Close of Period
Cost
Capitalized
Subsequent
to Initial
Investment
$ — $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
333
Building and
Improvements
1,319
$
695
2,655
459
1,166
1,496
1,018
2,064
404
632
794
1,563
948
1,241
582
1,210
1,020
1,606
1,311
2,090
1,335
511
1,521
986
1,643
1,709
1,192
1,193
900
1,262
560
1,541
1,025
2,000
1,394
1,188
1,435
808
1,867
1,487
1,304
1,377
2,063
1,271
2,281
705
1,950
661
Land
149
173
330
910
1,058
889
1,217
4,008
950
853
849
492
302
1,486
1,389
6,405
2,695
5,006
4,123
4,523
3,276
1,619
1,216
2,207
2,604
4,233
749
4,219
5,078
3,489
627
1,460
2,875
3,269
3,247
2,889
2,921
1,541
2,366
5,125
2,315
5,228
3,018
2,477
2,722
752
4,201
403
75
Accumulated
Depreciation
508
$
282
1,076
241
639
152
521
180
211
57
384
166
89
122
300
125
100
164
132
213
139
67
179
103
151
168
528
131
97
128
58
145
95
197
134
109
140
75
182
152
133
138
209
124
223
67
197
309
Date of Initial
Leasehold or
Acquisition
Investment (1)
2007
2007
2007
2007
2007
2014
2007
2015
2007
2015
2007
2015
2015
2015
2007
2015
2015
2015
2015
2015
2015
2015
2014
2015
2015
2015
2007
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2002
Total
Cost
$ 1,468
868
2,985
1,369
2,224
2,385
2,235
6,072
1,354
1,485
1,643
2,055
1,250
2,727
1,971
7,615
3,715
6,612
5,434
6,613
4,611
2,130
2,737
3,193
4,247
5,942
1,941
5,412
5,978
4,751
1,187
3,001
3,900
5,269
4,641
4,077
4,356
2,349
4,233
6,612
3,619
6,605
5,081
3,748
5,003
1,457
6,151
1,064
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
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
Newington, CT
North Haven, CT
Norwalk, CT
Norwalk, CT
Norwich, CT
Old Greenwich, CT
Plainville, CT
Plymouth, CT
Ridgefield, CT
Ridgefield, CT
South Windham, CT
South Windsor, CT
Stamford, CT
Stamford, CT
Stamford, CT
Suffield, CT
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
346
339
59
313
350
377
360
365
1,594
57
491
396
667
994
208
1,295
430
466
51
571
665
110
208
1,532
132
1,039
293
57
57
391
217
539
1,414
954
405
511
—
107
—
545
931
402
536
644
545
507
603
508
237
12
22
380
298
330
394
—
—
—
733
(113)
—
323
—
224
—
51
—
447
—
—
323
339
—
564
—
45
295
332
—
297
454
(275)
—
—
45
942
323
1,223
—
—
304
466
1,398
—
16
343
476
603
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
128
141
415
407
452
525
360
128
558
770
111
396
556
994
378
453
201
163
478
200
233
383
463
543
565
364
147
322
365
137
373
642
570
334
153
224
540
386
603
191
326
539
654
1,444
208
193
553
654
639
Total
Cost
358
361
439
611
680
771
360
365
1,594
790
378
396
990
994
432
1,295
481
466
498
571
665
433
547
1,532
696
1,039
338
352
389
391
514
993
1,139
954
405
556
942
430
1,223
545
931
706
1,002
2,042
545
523
946
984
840
Land
230
220
24
204
228
246
—
237
1,036
20
267
—
434
—
54
842
280
303
20
371
432
50
84
989
131
675
191
30
24
254
141
351
569
620
252
332
402
44
620
354
605
167
348
598
337
330
393
330
201
76
Accumulated
Depreciation
128
112
196
162
203
254
360
62
272
288
46
396
352
994
223
221
125
79
257
97
113
147
229
269
242
177
120
103
146
67
135
373
99
162
84
181
188
172
194
93
159
324
318
548
115
150
265
260
481
Date of Initial
Leasehold or
Acquisition
Investment (1)
1985
1985
1982
1985
1985
1985
2004
2004
2004
1985
1985
2004
1985
2004
1982
2004
1985
2004
1982
2004
2004
1987
1982
2004
1987
2004
1985
1985
1982
2004
1985
1985
1985
2004
2004
1985
1988
1982
1969
2004
2004
1985
1985
2004
2004
1985
1985
1985
2004
Tolland, 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
Orlando, FL
Haleiwa, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Kaneohe, HI
Kaneohe, HI
Waianae, HI
Waianae, HI
Waipahu, HI
Arlington, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Barre, MA
Bedford, MA
Bellingham, MA
Belmont, MA
Bradford, MA
Burlington, MA
Burlington, MA
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
108
1,434
551
469
515
804
352
925
185
1,215
345
604
447
717
519
1,031
1,434
848
941
868
1,522
1,069
1,539
1,769
9,211
1,364
1,978
1,520
1,997
2,458
518
174
—
600
625
369
725
800
536
1,350
734
390
650
600
1,250
379
—
—
—
—
—
343
—
322
—
—
12
—
—
364
—
1,400
—
—
33
—
16
—
—
—
—
182
—
—
—
28
213
535
—
—
264
—
—
12
—
73
29
—
—
—
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
443
1,434
216
164
180
288
491
358
433
425
345
223
447
251
545
361
1,779
430
277
500
464
104
320
577
1,017
542
687
872
1,126
1,513
208
262
147
—
—
393
—
800
200
—
331
165
—
—
—
Total
Cost
487
1,434
551
469
515
804
695
925
507
1,215
345
616
447
717
883
1,031
2,834
848
941
901
1,522
1,085
1,539
1,769
9,211
1,364
2,160
1,520
1,997
2,458
546
387
535
600
625
633
725
800
548
1,350
807
419
650
600
1,250
Land
44
—
335
305
335
516
204
567
74
790
—
393
—
466
338
670
1,055
418
664
401
1,058
981
1,219
1,192
8,194
822
1,473
648
871
945
338
125
388
600
625
240
725
—
348
1,350
476
254
650
600
1,250
77
Accumulated
Depreciation
220
1,434
123
80
88
145
215
201
214
207
345
172
447
122
242
176
1,453
79
58
333
300
75
162
269
490
295
297
406
527
676
164
122
29
—
—
182
—
442
111
—
269
132
—
—
—
Date of Initial
Leasehold or
Acquisition
Investment (1)
1982
2004
2004
2004
2004
2004
1992
2004
1982
2004
2004
1985
2004
2004
1985
2004
2004
2013
2013
2000
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
1985
1986
1996
2011
2011
1991
2011
2011
1991
2011
1985
1985
2011
2011
2011
Chelmsford, MA
Danvers, 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
Newton, MA
North Andover, MA
Peabody, MA
Peabody, MA
Peabody, MA
Randolph, MA
Revere, MA
Rockland, 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
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
715
400
450
519
390
427
400
550
1,008
787
353
499
571
375
361
—
400
850
550
736
600
300
380
491
650
691
394
400
550
650
573
1,300
579
600
1,073
400
450
476
714
125
1,200
428
900
450
358
1,012
312
—
—
—
127
33
98
23
—
282
—
111
157
—
9
90
619
—
—
—
98
—
134
64
97
—
124
32
18
—
—
238
—
45
—
(261)
—
—
2
62
506
—
115
—
92
211
618
29
Accumulated
Depreciation
231
—
—
121
107
135
100
—
416
23
152
194
89
134
246
37
—
—
—
219
—
217
166
162
—
268
137
166
—
—
228
—
198
—
88
—
—
94
199
170
—
125
—
146
142
474
89
Date of Initial
Leasehold or
Acquisition
Investment (1)
2012
2011
2011
1988
1992
1990
1991
2011
1985
2014
1989
1985
2012
1986
1985
1996
2011
2011
2011
1985
2011
1986
1985
1985
2011
1985
1985
1986
2011
2011
1985
2011
1985
2011
1985
2011
2011
1991
1993
1986
2011
1991
2011
1985
1985
1985
1991
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
715
—
—
188
169
200
163
—
633
149
221
334
372
134
250
190
—
—
—
355
—
284
198
269
—
365
170
166
—
—
381
—
247
—
236
—
—
169
312
556
—
264
—
249
248
971
138
Total
Cost
715
400
450
646
423
525
423
550
1,290
787
464
656
571
384
451
619
400
850
550
834
600
434
444
588
650
815
426
418
550
650
811
1,300
624
600
812
400
450
478
776
631
1,200
543
900
542
569
1,630
341
Land
—
400
450
458
254
325
260
550
657
638
243
322
199
250
201
429
400
850
550
479
600
150
246
319
650
450
256
252
550
650
430
1,300
377
600
576
400
450
309
464
75
1,200
279
900
293
321
659
203
78
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
Accokeek, MD
Baltimore, MD
Baltimore, MD
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
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
491
312
450
275
600
1,300
350
508
400
500
550
547
498
979
692
802
2,259
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
86
21
—
81
—
—
63
394
—
—
—
11
330
7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
191
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
258
130
—
181
—
—
213
394
—
—
—
202
506
350
—
802
1,537
—
—
—
—
—
—
—
—
—
—
—
—
895
236
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
Cost
577
333
450
356
600
1,300
413
902
400
500
550
558
828
986
692
802
2,259
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
895
338
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
Land
319
203
450
175
600
1,300
200
508
400
500
550
356
322
636
692
—
722
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
—
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
79
Accumulated
Depreciation
181
81
—
142
—
—
201
250
—
—
—
115
261
195
—
392
701
—
—
—
—
—
—
—
—
—
—
—
—
460
154
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Date of Initial
Leasehold or
Acquisition
Investment (1)
1985
1991
2011
1986
2011
2011
1986
1985
2011
2011
2011
1991
1985
1991
2010
2007
2007
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
Riverdale, MD
Riverdale, MD
Seat Pleasant, MD
Suitland, MD
Suitland, MD
Temple Hills, MD
Upper Marlboro, MD
Biddeford, ME
Lewiston, ME
Kernersville, NC
Madison, NC
New Bern, NC
Belfield, ND
Allenstown, NH
Concord, NH
Concord, NH
Derry, NH
Derry, NH
Dover, NH
Dover, NH
Goffstown, 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
Plaistow, NH
Portsmouth, NH
Raymond, NH
Rochester, NH
Rochester, NH
Rochester, NH
Rochester, NH
Salem, NH
Salem, NH
Basking Ridge, NJ
Bergenfield, NJ
Brick, NJ
Colonia, NJ
Elizabeth, NJ
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
582
788
468
377
673
331
845
618
342
449
396
350
1,232
1,787
675
900
418
950
650
1,200
1,737
1,562
1,500
703
1,100
550
190
500
550
750
825
1,750
500
—
300
525
550
700
939
1,400
1,600
744
450
362
382
1,508
720
406
—
—
—
—
—
—
—
8
188
—
—
83
—
—
—
—
17
—
—
—
—
—
—
30
—
—
147
—
—
—
—
—
—
730
101
—
—
—
12
—
—
18
880
287
331
229
(297)
62
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
—
—
—
—
—
—
—
391
308
111
350
243
850
1,320
—
—
277
—
—
—
1,040
738
—
275
—
—
222
—
—
—
—
—
—
413
156
—
—
—
351
—
—
278
980
449
413
737
351
241
Total
Cost
582
788
468
377
673
331
845
626
530
449
396
433
1,232
1,787
675
900
435
950
650
1,200
1,737
1,562
1,500
733
1,100
550
337
500
550
750
825
1,750
500
730
401
525
550
700
951
1,400
1,600
762
1,330
649
713
1,737
423
468
Land
582
788
468
377
673
331
845
235
222
338
46
190
382
467
675
900
158
950
650
1,200
697
824
1,500
458
1,100
550
115
500
550
750
825
1,750
500
317
245
525
550
700
600
1,400
1,600
484
350
200
300
1,000
72
227
80
Accumulated
Depreciation
—
—
—
—
—
—
—
391
200
102
185
143
727
670
—
—
275
—
—
—
327
651
—
216
—
—
138
—
—
—
—
—
—
69
155
—
—
—
269
—
—
215
43
221
166
432
264
149
Date of Initial
Leasehold or
Acquisition
Investment (1)
2009
2009
2009
2009
2009
2009
2009
1985
1985
2007
2007
2007
2007
2007
2011
2011
1987
2011
2011
2011
2012
2007
2011
1985
2011
2011
1986
2011
2011
2011
2011
2011
2011
1996
1987
2011
2011
2011
1985
2011
2011
1985
1986
1986
1990
2000
1985
1985
Flemington, NJ
Flemington, NJ
Fort Lee, NJ
Franklin Twp., NJ
Freehold, NJ
Green Village, NJ
Hasbrouck Heights, NJ
Hillsborough, NJ
Irvington, NJ
Lake Hopatcong, NJ
Livingston, NJ
Long Branch, NJ
Mcafee, NJ
Midland Park, NJ
Mountainside, NJ
North Bergen, NJ
North Plainfield, NJ
Nutley, NJ
Paramus, NJ
Parlin, NJ
Paterson, NJ
Ridgefield, NJ
Ridgewood, NJ
Somerville, NJ
Trenton, NJ
Union, NJ
Washington Township,
NJ
Watchung, NJ
West Orange, NJ
Fernley, NV
Naples, NY
Perry, NY
Prattsburg, NY
Rochester, NY
Alfred Station, NY
Amherst, NY
Astoria, NY
Avoca, NY
Batavia, NY
Bay Shore, NY
Bayside, NY
Bellaire, NY
Brewster, NY
Briarcliff Manor, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
708
547
1,246
683
494
277
641
237
411
1,305
871
514
672
200
665
630
227
434
382
418
620
55
703
253
1,303
437
912
449
800
1,665
1,257
1,444
553
853
714
222
1,684
936
684
156
470
330
789
652
104
423
391
877
(251)
17
362
195
370
76
440
487
(34)
—
294
437
268
333
(172)
151
576
199
68
157
16
280
386
124
—
316
287
130
412
—
—
—
—
—
—
247
—
(1)
—
356
261
37
—
606
226
—
53
—
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
289
218
797
433
769
225
665
624
279
505
597
616
503
383
359
371
628
350
201
372
233
302
631
176
157
514
605
353
691
1,444
430
400
250
550
300
296
579
300
320
426
425
152
—
756
240
—
193
—
Total
Cost
457
564
1,608
878
864
353
1,081
724
377
1,305
1,165
951
940
533
493
781
803
633
450
575
636
335
1,089
377
1,303
753
1,199
579
1,212
1,665
1,257
1,444
553
853
714
469
1,684
935
684
512
731
367
789
1,258
330
423
444
877
Land
168
346
811
445
95
128
416
100
98
800
568
335
437
150
134
410
175
283
249
203
403
33
458
201
1,146
239
594
226
521
221
827
1,044
303
303
414
173
1,105
635
364
86
306
215
789
502
90
423
251
877
81
Accumulated
Depreciation
62
169
439
305
121
191
350
251
31
412
314
228
240
181
84
265
386
194
131
84
181
112
304
84
39
103
Date of Initial
Leasehold or
Acquisition
Investment (1)
1985
1985
1985
1985
1978
1985
1985
1985
1985
2000
1985
1985
1985
1989
1985
1985
1978
1985
1985
1985
1985
1980
1985
1987
2012
1985
318
71
380
162
186
173
108
238
130
90
122
130
139
240
171
125
—
418
233
—
160
—
1985
1985
1985
2015
2006
2006
2006
2006
2006
2000
2013
2006
2006
1981
1985
1985
2011
1976
1985
2013
1985
2013
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
Buffalo, NY
Byron, NY
Chester, NY
Churchville, NY
Commack, NY
Corona, NY
Corona, NY
Cortland Manor, NY
Dobbs Ferry, NY
Dobbs Ferry, NY
East Hampton, NY
East Islip, NY
East Pembroke, NY
Eastchester, NY
Elmont, NY
Elmsford, NY
Elmsford, NY
Fishkill, NY
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
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
884
953
1,049
1,910
2,408
1,232
—
100
75
148
237
282
422
478
627
312
969
1,158
1,011
321
114
2,543
1,872
670
1,345
660
89
787
1,724
389
—
1,453
1,793
617
516
1,936
1,947
2,478
1,273
153
393
361
1,508
234
461
369
—
—
—
—
—
—
396
345
384
394
382
457
334
318
313
242
—
—
—
26
301
—
—
34
—
39
549
—
—
319
1,012
—
—
175
241
—
—
—
—
331
—
243
—
219
284
280
Accumulated
Depreciation
—
—
119
124
138
—
195
177
210
238
156
362
249
254
273
168
130
—
178
110
302
129
—
213
—
214
259
108
—
286
196
—
—
219
193
110
105
131
—
146
152
155
—
347
215
186
Date of Initial
Leasehold or
Acquisition
Investment (1)
2013
2013
2013
2013
2013
2011
1970
1972
1967
1972
1985
1967
1985
1985
1985
2000
2006
2011
2006
1985
1965
2013
2011
1985
2011
1985
1972
2006
2011
1978
1971
2011
2011
1998
1998
2013
2013
2013
2013
1978
2006
1985
2011
1982
1985
1985
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
—
—
564
561
696
—
396
378
428
438
465
563
481
490
532
403
300
—
410
138
302
640
—
270
—
271
551
250
—
477
431
—
—
436
437
523
542
677
—
347
350
368
—
350
444
413
Total
Cost
884
953
1,049
1,910
2,408
1,232
396
445
459
542
619
739
756
796
940
554
969
1,158
1,011
347
415
2,543
1,872
704
1,345
699
638
787
1,724
708
1,012
1,453
1,793
792
757
1,936
1,947
2,478
1,273
484
393
604
1,508
453
745
649
Land
884
953
485
1,349
1,712
1,232
—
67
31
104
154
176
275
306
408
151
669
1,158
601
209
113
1,903
1,872
434
1,345
428
87
537
1,724
231
581
1,453
1,793
356
320
1,413
1,405
1,801
1,273
137
43
236
1,508
103
301
236
82
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
500
1,018
1,626
2,084
1,163
141
990
1,084
130
1,028
503
546
2,717
1,429
333
313
719
751
1,281
1,448
1,907
985
2,316
971
188
1,887
1,084
126
527
1,192
425
295
71
231
57
2,207
1,035
137
398
941
1,015
387
591
1,020
1,231
1,306
1,340
252
—
—
—
—
284
—
—
1,043
—
42
87
—
—
285
110
—
274
—
—
—
—
—
—
344
—
—
399
—
—
35
243
300
219
367
—
—
307
62
—
—
294
—
—
(31)
—
—
Great Neck, NY
Greigsville, 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
Mamaroneck, NY
Massapequa, NY
Mastic, NY
Middletown, NY
Middletown, NY
Middletown, 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
Ossining, NY
Ossining, NY
Ozone Park, NY
Peekskill, NY
Pelham, 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
Accumulated
Depreciation
120
449
—
—
—
155
—
—
382
458
175
210
269
—
168
193
—
279
—
—
—
—
—
—
176
—
—
263
—
—
185
145
138
108
178
—
—
183
204
332
—
215
—
—
—
—
—
Date of Initial
Leasehold or
Acquisition
Investment (1)
1985
2008
2011
2011
2011
1978
2011
2011
1972
2008
1985
1985
2013
2011
1985
1985
2011
1985
2011
2011
2011
2011
2011
2011
1982
2011
2011
1972
2011
2011
1986
1998
1977
1985
1976
2011
2011
1985
1986
2011
2011
1985
2011
2011
2011
2011
2011
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
302
815
—
—
—
341
—
—
1,109
825
218
277
1,534
—
401
219
—
536
—
—
—
—
—
—
428
—
—
447
—
—
185
346
328
333
379
—
—
369
220
941
—
435
—
—
—
—
—
Total
Cost
752
1,018
1,626
2,084
1,163
425
990
1,084
1,173
1,028
545
633
2,717
1,429
618
423
719
1,025
1,281
1,448
1,907
985
2,316
971
532
1,887
1,084
525
527
1,192
460
538
371
450
424
2,207
1,035
444
460
941
1,015
681
591
1,020
1,200
1,306
1,340
Land
450
203
1,626
2,084
1,163
84
990
1,084
64
203
327
356
1,183
1,429
217
204
719
489
1,281
1,448
1,907
985
2,316
971
104
1,887
1,084
78
527
1,192
275
192
43
117
45
2,207
1,035
75
240
—
1,015
246
591
1,020
1,200
1,306
1,340
83
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
1,355
2,783
724
559
595
111
350
1,605
872
704
1,314
345
1,301
1,061
281
88
749
330
357
389
301
350
176
956
1,650
640
452
1,488
990
1,049
936
203
—
1,458
—
—
—
1,020
291
1,907
1,700
2,365
1,202
922
1,950
2,580
—
—
—
—
—
277
66
—
—
35
—
245
—
508
332
287
—
106
35
90
328
290
281
—
—
—
—
—
—
—
—
442
569
—
798
610
1,040
64
1,052
—
—
—
—
—
—
—
Poughkeepsie, NY
Rego Park, NY
Riverhead, NY
Rochester, NY
Rochester, NY
Rockaway Beach, NY
Rockville Centre, NY
Rokaway Park, 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
Tuchahoe, NY
Wantagh, NY
Wappingers Falls, NY
Wappingers Falls, NY
Warsaw, NY
Warwick, NY
West Nyack, NY
West Taghkanic, NY
White Plains, NY
White Plains, NY
Yaphank, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yonkers, NY
Yorktown Heights, NY
Yorktown Heights, NY
Crestline, OH
Mansfield, OH
Mansfield, OH
Monroeville, OH
Accumulated
Depreciation
—
138
216
173
119
125
189
—
—
221
152
82
—
491
348
135
—
166
132
192
207
185
163
—
—
198
242
—
130
—
—
305
181
—
103
251
81
332
364
—
47
—
376
227
468
763
Date of Initial
Leasehold or
Acquisition
Investment (1)
2011
2013
1998
2006
2008
1972
1985
2013
2011
1985
2006
1998
2011
1985
1969
1977
2011
1985
1985
1985
1985
1985
1978
2011
2011
1998
2011
2011
2006
2011
2011
1986
1972
2011
1993
1970
1990
1985
1972
2011
2013
2011
2008
2008
2009
2009
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
—
679
292
400
290
309
215
—
—
281
350
290
—
878
483
324
—
221
162
225
433
412
352
—
—
270
452
—
300
—
—
523
266
—
423
610
260
419
1,127
—
1,700
—
917
590
1,250
2,095
Total
Cost
1,355
2,783
724
559
595
388
416
1,605
872
739
1,314
590
1,301
1,569
613
375
749
436
392
479
629
640
457
956
1,650
640
452
1,488
990
1,049
936
645
569
1,458
798
610
1,040
1,084
1,343
1,907
1,700
2,365
1,202
922
1,950
2,580
Land
1,355
2,104
432
159
305
79
201
1,605
872
458
964
300
1,301
691
130
51
749
215
230
254
196
228
105
956
1,650
370
—
1,488
690
1,049
936
122
303
1,458
375
—
780
665
216
1,907
—
2,365
285
332
700
485
84
Banks, OR
Estacada, OR
Pendleton, OR
Portland, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Springfield, OR
Allentown, PA
Allison Park, PA
Harrisburg, PA
Havertown, PA
Lancaster, PA
New Holland, PA
New Kensington, PA
New Oxford, PA
Philadelphia, PA
Philadelphia, PA
Pottsville, PA
Reading, PA
Ashaway, RI
Barrington, RI
East Providence, RI
N. Providence, RI
Austin, TX
Austin, TX
Austin, TX
Bedford, TX
Ft Worth, TX
Garland, TX
Garland, TX
Harker Heights, TX
Houston, TX
Houston, TX
Keller, TX
Lewisville, TX
Midlothian, TX
Port Arthur, TX
San Marcos, TX
Temple, TX
The Colony, TX
Waco, TX
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Alexandria, VA
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
498
646
766
4,416
1,071
1,350
1,408
4,215
4,614
1,398
358
1,500
399
402
643
313
1,375
1,045
406
1,252
451
750
619
490
2,298
542
462
2,368
3,511
353
2,115
3,296
4,439
2,051
1,689
2,803
2,507
494
429
2,648
1,954
2,406
4,396
3,884
649
656
712
735
1,327
1,388
—
—
—
—
—
—
—
—
—
—
31
—
213
63
17
24
—
(75)
175
—
2
49
—
180
(1,687)
159
—
—
—
—
—
—
—
(9)
—
—
—
—
—
—
—
(11)
—
—
—
—
—
—
—
—
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
—
562
644
1,048
672
829
884
1,033
1,097
602
156
650
413
211
360
194
700
789
317
438
305
799
217
351
522
348
188
1,630
1,916
240
1,249
3,051
4,000
1,463
1,465
2,268
1,511
384
357
2,143
1,703
1,190
4,059
2,990
—
247
—
—
—
368
Total
Cost
498
646
766
4,416
1,071
1,350
1,408
4,215
4,614
1,398
389
1,500
612
465
660
337
1,375
970
581
1,252
453
799
619
670
611
701
462
2,368
3,511
353
2,115
3,296
4,439
2,042
1,689
2,803
2,507
494
429
2,648
1,954
2,395
4,396
3,884
649
656
712
735
1,327
1,388
Land
498
84
122
3,368
399
521
524
3,182
3,517
796
233
850
199
254
300
143
675
181
264
814
148
—
402
319
89
353
274
738
1,595
113
866
245
439
579
224
535
996
110
72
505
251
1,205
337
894
649
409
712
735
1,327
1,020
85
Accumulated
Depreciation
—
48
61
94
77
76
84
100
99
67
125
343
313
146
360
185
207
777
244
139
304
799
105
233
—
219
119
730
868
164
633
286
392
1,081
623
17
719
204
208
17
745
580
1,675
1,465
—
56
—
—
—
85
Date of Initial
Leasehold or
Acquisition
Investment (1)
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
1985
2010
1989
1985
1989
1989
2010
1996
1985
2009
1990
1989
2004
1985
1985
1985
2007
2007
2007
2007
2007
2014
2014
2007
2007
2016
2007
2008
2007
2016
2007
2007
2007
2007
2013
2013
2013
2013
2013
2013
Alexandria, VA
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 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
Auburn, WA
Bellevue, WA
Chehalis, WA
Colfax, WA
Federal Way, WA
Fife, WA
Kent, WA
Monroe, WA
Port Orchard, WA
Puyallup, WA
Puyallup, WA
Puyallup, WA
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
1,582
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
1,688
903
957
1,043
1,125
1,476
1,677
2,481
535
1,441
562
1,132
466
722
1,290
4,257
3,022
1,725
1,176
4,800
4,218
1,181
2,900
2,792
2,019
831
2,035
4,050
—
—
—
—
—
—
—
—
(186)
110
—
—
—
—
—
—
24
—
—
—
—
—
—
—
—
—
—
—
(114)
6
—
34
(41)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Gross Amount at Which Carried
at Close of Period
Building and
Improvements
432
444
—
—
379
498
459
—
196
729
635
713
997
1,084
605
810
515
720
795
625
755
620
630
633
820
620
600
520
755
230
625
374
585
435
620
800
1,288
1,057
839
863
1,189
1,245
767
834
1,236
1,858
659
1,570
1,656
Total
Cost
1,582
1,757
1,718
1,083
1,464
2,014
2,062
840
594
1,114
1,825
2,078
3,348
4,454
1,227
1,279
1,313
1,716
3,623
1,037
1,077
1,688
903
957
1,043
1,125
1,476
1,677
2,367
541
1,441
596
1,091
466
722
1,290
4,257
3,022
1,725
1,176
4,800
4,218
1,181
2,900
2,792
2,019
831
2,035
4,050
Land
1,150
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
1,068
273
324
223
505
876
1,157
1,612
311
816
222
506
31
102
490
2,969
1,965
886
313
3,611
2,973
414
2,066
1,556
161
172
465
2,394
86
Accumulated
Depreciation
91
99
—
—
81
104
95
—
48
647
132
128
195
213
285
381
247
339
374
294
355
292
296
323
386
292
282
245
355
230
294
363
275
205
292
376
250
99
79
89
112
126
78
85
119
149
72
145
190
Date of Initial
Leasehold or
Acquisition
Investment (1)
2013
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
1990
2005
1990
2005
2005
2005
2005
2013
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
Renton, WA
Seattle, WA
Seattle, WA
Seattle, WA
Silverdale, WA
Snohomish, WA
South Bend, WA
Spokane, WA
Tacoma, WA
Tacoma, WA
Tenino, WA
Vancouver, WA
Wilbur, WA
Miscellaneous
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
1,485
346
717
1,884
2,178
955
760
346
518
671
937
1,214
629
32,937
—
—
—
—
—
—
—
—
—
—
—
—
—
11,470
Gross Amount at Which Carried
at Close of Period
Land
952
346
193
1,223
1,217
955
121
346
518
671
219
163
153
14,749
Building and
Improvements
533
—
524
661
961
—
639
—
—
—
718
1,051
476
29,658
Total Cost
1,485
346
717
1,884
2,178
955
760
346
518
671
937
1,214
629
44,407
Accumulated
Depreciation
68
—
47
60
97
—
56
—
—
—
64
84
47
19,388
Date of Initial
Leasehold or
Acquisition
Investment (1)
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
various
$ 720,099
$ 62,067 $ 474,232
$ 307,934 $ 782,166
$ 120,576
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.
The aggregate cost for federal income tax purposes was approximately $617,464,000 at December 31, 2016.
3)
87
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
As of December 31, 2016
(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
Horsham, PA
Green Island, NY
Concord, NH
Irvington, NJ
Kernersville/Lexington, NC
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing Wantagh, NY
Fullerton Hts, MD
Seller financing
Springfield, MA
Seller financing
E. Patchogue, NY
Seller financing
Union City, NJ
Seller financing
Bronx, NY
Seller financing
Seaford, NY
Seller financing
Spotswood, NJ
Seller financing
Freeport, NY
Seller financing
Pleasant Valley, NY
Seller financing
Fairhaven, MA
Seller financing
Baldwin, NY
Seller financing
Leicester, MA
Seller financing
Valley Cottage, NY
Seller financing
Ephrata, PA
Seller financing
Seller financing
Piscataway, NJ
Seller financing Westfield, MA
Seller financing Wilmington, DE
Gettysburg, PA
Seller financing
Kenmore, NY
Seller financing
Stafford Springs, CT
Seller financing
Seller financing
Latham, NY
Seller financing Magnolia, NJ
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing Waterbury, CT
Seller financing White Plains, NY
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Colonia, NJ
Jersey City, NJ
Elmont, NY
Leola, PA
Lititz/Rothsville, PA
Bayonne, NJ
Ballston, NY
Scarsdale, NY
York, PA
Bristol, CT
Belleville, NJ
Southbridge, MA
Ridgefield, NJ
Glenville, NY
7/2024
10.0%
8/2018
11.0%
8/2028
9.5%
7/2022
10.0%
7/2026
8.0%
5/2032
9.0%
5/2019
9.0%
7/2019
9.0%
8/2019
9.0%
9/2019
9.0%
9.0% 12/2019
1/2020
9.0%
1/2020
9.0%
5/2020
9.0%
9/2020
9.0%
9/2020
9.0%
9.0%
9/2020
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% 12/2020
1/2021
9.0%
1/2021
9.0%
6/2020
9.0%
7/2020
9.0%
7/2018
9.0%
9.0% 10/2021
3/2020
9.0%
3/2020
9.0%
3/2020
9.0%
5/2020
9.0%
2/2021
9.0%
9.0%
2/2021
9.0% 11/2025
2/2021
9.0%
3/2021
9.0%
3/2021
9.0%
3/2021
9.0%
4/2021
9.0%
4/2021
9.0%
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
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
237 $
298
210
300
568
455
225
131
200
800
240
488
306
206
230
458
300
268
431
265
121
165
84
69
74
232
169
53
320
500
450
220
180
308
225
171
444
337
102
230
315
300
172
325
146
75
165
202
291
409
35
108
181
740
121
446
280
191
214
427
282
251
403
247
103
155
79
64
70
218
159
49
297
464
384
202
166
283
208
161
418
317
96
217
297
283
163
308
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
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
88
Type of
Loan/Borrower
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
Borrower CB
Borrower CC
Note receivable
Total (c)
Description
Location(s)
Great Barrington, MA
Rockland, MA
Belford, NJ
Swedesboro, NJ
Hatboro, PA
New Bedford, MA
Fitchburg, MA
Queensbury, NY
Seller financing
Seller financing
Seller financing Williamstown, NJ
Seller financing
Seller financing
Seller financing
Seller financing Middlesex, NJ
Coxsackie, NY
Seller financing
Newburgh, NY
Seller financing
Seller financing
Providence, RI
Seller financing Warwick, RI
Seller financing
Seller financing
Seller financing
Seller financing Worcester, MA
Seller financing Westfield, MA
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing Worcester, MA
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing McConnellsburg, PA
Seller financing
Seller financing
Seller financing
Seller financing Malta, NY
Cairo, NY
Seller financing
Central Islip, NY
Seller financing
Pottsville, PA
Seller financing
S. Yarmouth, MA
Harwich Port, MA
Nyack, NY
Norwalk, CT
Hadley, MA
Clinton, MA
Pelham, NH
Brewster, NY
Brewster, NY
Cranston, RI
Pawtucket, RI
E. Providence, RI
Billerica, MA
Oxford, MA
Colonie, NY
Final
Maturity
Interest
Date
Rate
4/2021
9.0%
4/2021
9.0%
4/2021
9.0%
4/2021
9.0%
4/2021
9.0%
4/2021
9.0%
5/2021
9.0%
7/2021
9.0%
9/2021
9.0%
9.0%
9/2021
9.0% 10/2021
9.0% 10/2021
9.0% 10/2021
9.0% 11/2021
9.0% 11/2021
9.0% 11/2021
1/2022
9.0%
1/2022
9.0%
9/2022
9.0%
4/2022
9.0%
7/2022
9.0%
3/2022
9.0%
9.0%
2/2022
9.0% 01/2023
9.0% 10/2022
8/2022
9.0%
8/2022
9.0%
1/2023
9.0%
2/2022
9.0%
9.0%
1/2023
9.0% 03/2023
9.0% 03/2023
9.0% 08/2023
9.0% 03/2023
9.0% 08/2023
9.0% 06/2023
9.0% 03/2023
Periodic
Payment
Terms (a)
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
Prior
Liens
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Face Value
at
Inception
58
134
42
134
77
84
255
153
394
184
357
363
187
176
237
303
275
293
253
319
78
158
210
73
554
333
153
31
186
38
98
86
143
572
113
780
23
Amount of
Principal
Unpaid at
Close of Period
55
127
40
127
72
80
242
146
376
175
342
347
179
169
227
291
265
282
248
308
75
140
202
71
542
324
149
30
179
38
96
84
142
564
112
773
23
20,089
18,017
Purchase/leaseback Various-NY
9.5%
1/2021
I(b)
18,400
14,720
$ 38,489 $
32,737
(a)
(b)
(c)
P & I = Principal and interest paid monthly.
I = Interest only paid monthly with principal deferred.
The aggregate cost for federal income tax purposes approximates the amount of principal unpaid.
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
89
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,
2016
$ 48,455
2015
$ 34,226
2014
$ 28,793
1,814
17,876
8,278
(16,714)
(818)
—
(2,883)
(764)
—
(2,294)
(489)
(62)
$ 32,737
$ 48,455
$ 34,226
90
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:
By:
/S/ DANION FIELDING
Danion Fielding
Vice President, Chief Financial Officer and
Treasurer
(Principal Financial Officer)
March 2, 2017
/S/ EUGENE SHNAYDERMAN
Eugene Shnayderman
Chief Accounting Officer and Controller
(Principal Accounting Officer)
March 2, 2017
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/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
President, Chief Executive Officer and Director
(Principal Executive Officer)
March 2, 2017
/S/ LEO LIEBOWITZ
Leo Liebowitz
Director and Chairman of the Board
March 2, 2017
/S/ MILTON COOPER
Milton Cooper
Director
March 2, 2017
By:
By:
By:
/S/ HOWARD SAFENOWITZ
Howard Safenowitz
Director
March 2, 2017
/S/ PHILIP E. COVIELLO
Philip E. Coviello
Director
March 2, 2017
/S/ RICHARD E. MONTAG
Richard E. Montag
Director
March 2, 2017
91
EXHIBIT INDEX
Exhibit
Number
3.1
GETTY REALTY CORP.
Annual Report on Form 10-K
for the year ended December 31, 2016
Description of Document
Location of Document
Articles of Incorporation of Getty Realty Holding Corp.
(“Holdings”), now known as Getty Realty Corp., filed
December 23, 1997.
Filed as Exhibit 3.1 to Company’s Registration Statement
on Form S-4, filed on January 12, 1998 (File No. 333-
Joint
44065),
Proxy/Prospectus that is a part thereof, and incorporated
herein by reference.
included as Appendix D.
the
to
3.2
Articles Supplementary to Articles of Incorporation of
Holdings, filed January 21, 1998.
3.3
By-Laws of Getty Realty Corp.
3.4
3.5
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.
4.1
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.
Filed as Exhibit 3.2 to Company’s Annual Report on
the year ended December 31, 2008
Form 10-K for
(File No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 3.2 to Company’s Current Report on
Form 8-K filed November 14, 2011 (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
thereof, and
incorporated herein by reference.
is a part
that
Form of
Company and its directors.
Indemnification Agreement between
the
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.
10.3*
10.4*
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 Appendix B to the Definitive Proxy Statement of
the Company filed April 9, 2004 (File No. 001-13777) and
incorporated herein by reference.
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).
10.6*
2004 Getty Realty Corp. Omnibus
Compensation Plan.
Incentive
92
Exhibit
Number
10.7*
Description of Document
Location of Document
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.
10.8*
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.
10.10**
10.15*
Unitary Net Lease Agreement between GTY NY Leasing,
Inc. and CPD NY Energy Corp., dated as of January 13,
2011.
Filed as Exhibit 10.1 to Company’s Quarterly Report on
Form 10-Q filed May, 12, 2011 (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.
10.18*
Getty Realty Corp. Amended and Restated 2004 Omnibus
Incentive Compensation Plan.
Filed as Exhibit 10.18 to the Company’s Annual Report on
Form 10-K filed on March 16, 2015 (File No. 001-13777)
and incorporated herein by reference.
10.19
10.20**
10.21**
10.22**
10.23**
10.24**
10.27
Settlement Agreement
regarding claims of Getty
Properties Corp., GettyMart Inc., and Leemilt’s Petroleum,
Inc. dated March 3, 2015.
Filed as Exhibit 99.1 to the Company’s Current Report on
Form 8-K filed on March 10, 2015 (File No. 001-13777)
and incorporated herein by reference.
Credit Agreement, dated as of June 2, 2015, among Getty
Realty Corp., certain of its subsidiaries party thereto, Bank
of America, N.A. as Administrative Agent, Swing Line
Lender, an L/C Issuer and as a Lender, and the other
leaders party thereto.
Filed as Exhibit 10.1 to the Company’s Form 10-Q filed on
August 10, 2015 (File No. 001-13777) and incorporated
herein by reference.
Amended and Restated Note Purchase and Guarantee
Agreement, dated as of June 2, 2015, among Getty Realty
Corp., certain of
the
Prudential Insurance Company of America, and the
Prudential Retirement Insurance and Annuity Company.
its subsidiaries party
thereto,
Filed as Exhibit 10.2 to the Company’s Form 10-Q filed on
August 10, 2015 (File No. 001-13777) and incorporated
herein by reference.
Master Land and Building Lease (Pool 1) between GTY-
Pacific Leasing, LLC and Apro, LLC, dated as of June 3,
2015.
Filed as Exhibit 10.3 to the Company’s Form 10-Q filed on
August 10, 2015 (File No. 001-13777) and incorporated
herein by reference.
Master Land and Building Lease (Pool 2) between GTY-
Pacific Leasing, LLC and Apro, LLC, dated as of June 3,
2015.
Filed as Exhibit 10.4 to the Company’s Form 10-Q filed on
August 10, 2015 (File No. 001-13777) and incorporated
herein by reference.
Master Land and Building Lease (Pool 3) between GTY-
Pacific Leasing, LLC and Apro, LLC, dated as of June 3,
2015.
Filed as Exhibit 10.5 to the Company’s Form 10-Q filed on
August 10, 2015 (File No. 001-13777) and incorporated
herein by reference.
Distribution Agreement by and among Getty Realty Corp.,
J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, KeyBanc Capital Markets Inc.,
RBC Capital Markets, LLC, Canaccord Genuity Inc. and
JMP Securities LLC dated June 6, 2016
Filed as Exhibit 1.1 to the Company’s Form 8-K filed on
June 6, 2016 (File No. 001-13777) and incorporated herein
by reference.
21
23
Subsidiaries of the Company.
Filed herewith.
Consent of Independent Registered Public Accounting
Firm.
Filed herewith.
93
Location of Document
Exhibit
Number
31.1
31.2
32.1
32.2
Description of Document
Certification of Christopher J. Constant, President and
Chief Executive Officer, pursuant to Rule 13a-14(a) under
the Securities Exchange Act of 1934, as amended.
Certification of Danion Fielding, Vice President, Chief
Financial Officer and Treasurer, pursuant to Rule 13a-
14(a) under the Securities Exchange Act of 1934, as
amended.
Certification of Christopher J. Constant, President and
Chief Executive Officer, pursuant to Rule 13a-14(b) under
the Securities Exchange Act of 1934, as amended, and 18
U.S.C. § 1350.
Certification of Danion Fielding, Vice President, Chief
Financial Officer and Treasurer, pursuant to Rule 13a-
14(b) under the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. § 1350.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
101.CAL XBRL Taxonomy Extension Calculation Linkbase
Filed herewith.
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Filed herewith.
101.LAB XBRL Taxonomy Extension Label Linkbase
Filed herewith.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Filed herewith.
* 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 2016 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 11753-1681. 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 2016 Annual Report on
Form 10-K.
94
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-Pacific Leasing, 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
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 Statement on Form S-8 (Nos. 333-115672 and 333-45249)
and Form S-3 (No. 333-200913) of Getty Realty Corp. of our report dated March 2, 2017 relating to the financial statements and the
effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 2, 2017
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Exhibit 31.1
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)
b)
c)
d)
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;
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;
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
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) 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)
b)
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
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 2, 2017
By: /s/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
President and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Exhibit 31.2
I, Danion Fielding, 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)
b)
c)
d)
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;
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;
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
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) 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)
b)
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
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 2, 2017
By: /s/ DANION FIELDING
Danion Fielding
Vice President,
Chief Financial Officer and Treasurer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Exhibit 32.1
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, 2016 (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 2, 2017
By: /s/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
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.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Exhibit 32.2
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, 2016 (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 2, 2017
By: /s/ DANION FIELDING
Danion Fielding
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 Directors of Kimco Realty Corporation
Philip E. Coviello
Retired Partner of Latham & Watkins LLP
Christopher J. Constant
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
Christopher J. Constant
Chief Executive Officer and President
Mark J. Olear
Executive Vice President and Chief Operating Officer
Joshua Dicker
Senior Vice President, General Counsel and Secretary
Danion Fielding
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 2, 2017, we had 34,573,340 outstanding
shares of common stock owned by approximately
11,130 shareholders.
Annual Meeting
All shareholders are cordially invited to attend our annual meet-
ing on May 4, 2017 at 3:30 p.m. at the offices of DLA Piper,
located at 1251 Avenue of the Americas, 27th Floor, New
York, New York 11020. Holders of common stock of record at
the close of business on March 20, 2017, 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. Shareholder 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
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Two Jericho Plaza, Suite 110
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( 516 ) 478 - 5400