G
E
T
T
Y
R
E
A
L
T
Y
C
O
R
P
.
2
0
1
7
A
N
N
U
A
L
R
E
P
O
R
T
ANNUAL REPORT
2017
D E AR S HAREH O LD ERS
Getty completed a transformative year in 2017, and I
am proud of our many accomplishments achieved
throughout the year. During the year, we completed
several significant transactions which diversified the
Company’s revenue and broadened the geographic
presence of our portfolio. We added several new high-
quality tenants to our portfolio including Applegreen,
Circle K, Empire Petroleum and Sheetz. In addition,
we efficiently issued long-term debt and raised per-
manent equity capital to further improve our already
conservative balance sheet. The successful execution
of our strategy in 2017 produced exceptional financial
results for the Company, which led to an increase in
our recurring annual dividend and strong returns for
our shareholders. As we look ahead to 2018, we remain
focused on building upon our growth as we create addi-
tional shareholder value by executing on each of our
stated growth initiatives:
• Realizing organic growth from our core net lease portfolio,
• Enhancing our portfolio through accretive acquisitions, and
I am also pleased that we continued our ongoing initiative to
reduce our environmental liability. For the year, we closed 55
open incidents and reduced our remediation liability by $11
million, or 15%. We believe that reducing our environmental
liability by remediating known contamination increases the
value of our properties and, in turn, creates value for our
shareholders.
Completing Accretive Acquisitions
The convenience and gas sector remains one of the healthiest
segments of the entire retail landscape, and is also undergoing
a wave of consolidation by several of the largest convenience
store operators in the U.S. As a result of our team’s efforts
and our relationships in the sector, Getty was afforded numer-
ous opportunities to acquire convenience store and gasoline
stations, and other auto related properties throughout 2017.
We remained extremely disciplined in our investment
approach, which carefully considers real estate attributes, as
well as the operational and credit quality of the proposed ten-
• Unlocking embedded value in our existing portfolio
ant. We evaluated more than $1.3 billion of potential transac-
through selective redevelopments.
tions during the year, and ultimately acquired 103 properties
I am energized by the year we have just concluded, and believe
we have a first-rate team in place to execute on our growth
strategy for years to come.
A Year of Strong Financial and Operational
Achievements
For the year ended 2017, we grew our net income, funds from
operations (FFO) and adjusted funds from operations (AFFO).
We produced AFFO of $1.66 per share, which was ahead of
expectations, reflecting both our solid operating results and
capital raising activity to fund our growth. Our strong financial
results benefited from a 4.2% increase in annual revenues in
2017 and our ability to control our overhead costs as we scale
our portfolio.
On the asset management front, we continue to actively
manage our portfolio of more than 900 properties. As such,
we sold 12 properties, leased seven properties and allowed
four over-leased sites to expire during 2017. The net result of
our portfolio management activities was that we ended the
year with 890 net lease properties, nine active redevelopment
sites and only eight vacant properties. Our net lease portfolio
has a weighted average lease term of approximately 11 years
and an overall occupancy rate of 99.1%.
for $214 million. The majority of our acquisition activity was
attributable to two sale leaseback portfolio transactions, which
accounted for 87 properties and $191 million of investment,
with the balance attributable to 16 individual net lease acquisi-
tions, which we acquired for $23 million in aggregate.
In September 2017, we closed our transaction with Empire
Petroleum Partners, one of the nation’s leading independent
wholesale distributors of motor fuel. We acquired the fee inter-
est in 49 high-quality properties located in Arizona, Colorado,
Florida, Georgia, Louisiana, New Mexico and Texas for $123
million. This transaction significantly expanded the Company’s
presence in the Southwestern U.S. The properties have an
average lot size of 1.3 acres and store size of approximately
2,700 square feet, both of which compare favorably to the
industry as a whole.
In October 2017, we closed our transaction with a U.S. sub-
sidiary of Applegreen, plc, a publicly-traded convenience and
gas operator in Ireland and the United Kingdom. We acquired
the fee interest in 38 properties for $68 million in the greater
Columbia, South Carolina metropolitan market, which extended
our reach into the Southeastern U.S. The Applegreen portfolio
illustrates one of the noteworthy trends currently driving our
sector, in that operators are seeking multiple revenue streams
beyond the traditional convenience store and gasoline station
model. Of the 38 properties we acquired, five are standalone
We also partially financed our growth in 2017 through the issu-
Burger King restaurants, and many of the 33 convenience store
ance of common equity. For the year, we raised $118 million
and gasoline station properties comprising the balance of the
of capital - $104 million through a follow-on offering in July, and
portfolio contain Burger King, Subway or Blimpie outlets inside
$14 million through the use of our at-the-market (ATM) pro-
the convenience store. Once again, the properties reflect the
gram. The ATM program is a valuable tool for our Company as
growing size and scale of the typical store in today’s market
it is a very cost effective and efficient way to raise equity capital
as the sites acquired have an average lot size of 1.7 acres and
and allows us to match fund our acquisitions and redevelop-
average store size of 2,900 square feet.
ment projects.
Significant Strides Made in Redeveloping Assets
Delivering Returns to Shareholders
We made significant headway in 2017 in terms of completing
Our 2017 accomplishments resulted in our Board’s decision to
redevelopment projects within our existing portfolio and adding
increase our dividend by 14% to $1.28 per share – making 2017
to our redevelopment pipeline. During the year, we completed
the third consecutive year that the Company raised its recur-
two projects, the most recent being a new-to-industry conve-
ring annual cash dividend rate by more than 10%. Our dividend
nience and gas location leased to Sheetz Inc. in central
is well covered and its increase reflected our 2017 growth, the
Pennsylvania where we invested approximately $400K and will
stability of our overall portfolio and our belief that we will
generate an incremental return of more than 20%. In terms of
continue to grow our earnings. The entire team at Getty and
our redevelopment pipeline, we ended the year with 13 signed
our Board believe we have taken meaningful steps which will
leases and letters of intent (nine active projects, and four proj-
enable us to deliver consistent operating performance and
ects relating to sites which are currently subject to net leases),
enhance long-term shareholder value.
and we have a number of additional sites which we expect
will move into our redevelopment pipeline over the next several
years. We continue to believe that between five and ten percent
of our portfolio can be redeveloped either for either a new
convenience and gas use, or for alternative retail uses. Our
redevelopment efforts are an important part of our overall
business strategy. By strategically investing in our existing
portfolio, we believe we can generate attractive risk-adjusted
returns, improve the credit quality of our portfolio and diversify
our retail tenant base.
Steps Taken to Fortify our Balance Sheet
We further strengthened our balance sheet in 2017 by issuing
$50 million of 4.75% fixed rate unsecured debt as a hedge
against rising interest rates, and used the proceeds to repay
floating rate debt under our credit facility. On a pro forma basis,
We have a clear strategy to deliver ongoing growth. First, we
will draw upon the stable growth inherent in our core net
lease portfolio which is supported by proactive asset manage-
ment. Second, we intend to continue to expand our portfolio
through disciplined acquisitions in the convenience, gas and
auto related sectors. Third, we will pursue selective rede-
velopment projects to unlock embedded value in our existing
portfolio.
We will continue our focus on acquiring high quality real estate
and partnering with tenants who share our commitment to the
growth and evolution of the convenience and gas sector, as
we believe these are critical components to driving additional
shareholder value as we move through 2018 and beyond.
Thank You!
this transaction, which matures in 2025, lengthened our
I am very pleased with the Company’s performance in 2017
weighted average debt maturities and reduced the Company’s
and would like to conclude by personally thanking our manage-
exposure to floating interest rates. We place a premium on
ment and employees for all of their hard work during the past
having a conservative, well laddered balance sheet and are
year. I would also like to thank our Board and shareholders for
committed to maintaining a flexible capital structure as we
their continued support.
continue to grow the Company. As a result, we will work with
our existing bank group to extend our credit facility prior to its
Best Regards,
maturity and will explore additional sources of long-term fixed
rate debt capital to minimize the negative impact that rising
interest rates can have on a net lease REIT.
Christopher J. Constant
President and Chief Executive Officer
-
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)
Net Income
AFFO (Per Share in parentheses)
AFFO (Per Share in parentheses)
2015
851
2016
829
2017
907
Dividends Declared Growth (a)
Dividends Declared Growth (a)
110,776
115,271
120,153
37,410
Regular Special
Regular Special
38,411
47,186
(Per Share)
25,000
25,000
Funds from Operations
20,000
20,000
(Per Share)
15,000
15,000
18,546
18,546
(0.54)
(0.54)
1.11
1.12
1.1 1.26
1.15
1.15
22,825
22,825
(0.68)
(0.68)
0.96
0.96
0.85
0.85
69,134
2.04
64,182
74,555
1.87
2.0 2.00
Adjusted Funds from Operations
10,000
10,000
12,796
12,796
(0.38)
(0.38)
11,038
11,038
(0.33)
(0.33)
(Per Share)
5,000
5,000
Dividends per Share
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
2013
2013
47,403
57,092
62,032
1.40
1.15
2014
2014
1.67
1.03
1.66
1.16
2015
2015
2017 Quarterly Performance (a)
Dividends Declared Growth (a)
20,000
20,000
15,000
15,000
10,000
10,000
5,000
5,000
0
0
AFFO (Per Share in parentheses)
AFFO (Per Share in parentheses)
Regular Special
Regular Special
1.150
1.150
1.160
1.160
1.030
1.030
14,168
(0.41)
14,168
(0.41)
14,870
(0.42)
14,870
(0.42)
15,701
(0.40)
15,701
(0.40)
17,293
17,293
(0.43)
(0.43)
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
2015
2015
2016
2016
2017
2017
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
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13777
GETTY REALTY CORP.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
Two Jericho Plaza, Suite 110, Jericho, New York
(Address of principal executive offices)
11-3412575
(I.R.S. employer
identification no.)
11753-1681
(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x
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 x No ¨
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 x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
Emerging Growth Company
¨
¨ (Do not check if a smaller reporting company)
¨
Accelerated filer
Smaller reporting company
x
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of common stock held by non-affiliates (26,975,852 shares of common stock) of the Company was $677,094,000 as of June 30, 2017.
The registrant had outstanding 39,710,287 shares of common stock as of March 1, 2018.
DOCUMENT
Selected Portions of Definitive Proxy Statement for the 2018 Annual Meeting of Stockholders (the “Proxy Statement”), which will be filed by the
PART OF
FORM 10-K
registrant on or prior to 120 days following the end of the registrant’s year ended December 31, 2017, pursuant to Regulation 14A.
III
DOCUMENTS INCORPORATED BY REFERENCE
Item
Description
Cautionary Note Regarding Forward-Looking Statements
TABLE OF CONTENTS
1
1A
1B
2
3
4
5
6
7
7A
8
9
9A
9B
10
11
12
13
14
15
16
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Exhibit Index
Signatures
Page
3
5
8
18
18
20
24
25
27
29
42
43
71
71
71
72
72
72
72
72
73
73
94
98
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
federal securities laws, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements preceded by, followed by, or that otherwise include
the words “believes,” “expects,” “seeks,” “plans,” “projects,” “estimates,” “anticipates,” “predicts” and similar expressions or future
or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and are not
historical facts. (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, 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 effects of recently enacted U.S. federal tax reform and other
legislative, regulatory and administrative developments; 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 core operating performance and its
utility in comparing the sustainability of our operating performance with the sustainability of the operating performance of other
REITs; 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, our MTBE
multi-district litigation cases in the states of New Jersey, Pennsylvania and Maryland, and our lawsuit with the State of New York
pertaining to a property formerly owned by us in Uniondale NY, 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
Second 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 are subject to known and unknown risks, uncertainties and other factors and were derived utilizing numerous important
assumptions that may cause our actual results, performance or achievements to differ materially from any future results, performance
or achievements expressed or implied by such forward-looking statements. Factors and assumptions involved in the derivation of
forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual
results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our
control. These factors and assumptions may have an impact on the continued accuracy of any forward-looking statements that we
make.
Factors which may cause actual results to differ materially from our current expectations include, but are not limited to, the risks
described in “Item 1. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in this Annual Report on Form 10-K, as such risk factors may be updated from time to time in our public filings, and 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; substantially all of our tenants depending on the same
industry for their revenues; adverse developments in general business, economic or political conditions; changes in interest rates and
our ability to manage or mitigate this risk effectively; adverse effect of inflation; federal tax reform; 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; 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.
3
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. Except
for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release
publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events, unless
required by law. For any forward-looking statements contained in this Annual Report on Form 10-K or in any other document, we
claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of
1995.
4
Item 1. Business
Company Profile
PART I
Getty Realty Corp., a Maryland corporation, is the leading publicly-traded real estate investment trust (“REIT”) in the United
States specializing in the ownership, leasing and financing of convenience store and gasoline station properties. Our 907 properties are
located in 28 states across the United States and Washington, D.C. Our properties are operated under a variety of brands including,
among others, 76, BP, Citgo, Conoco, Exxon, Getty, Gulf, Mobil, Shell, Sunoco 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 1, 2018, we had 30 employees.
Company Operations
As of December 31, 2017, we owned 828 properties and leased 79 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 one 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. We have a national portfolio of properties with a concentration 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, 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. For
additional information regarding our environmental obligations, see Note 5 in “Item 8. Financial Statements and Supplementary Data”
in this Form 10-K.
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, 2017, we leased 890 of our properties to tenants under triple-net leases.
Our net lease properties include 790 properties leased under 24 separate unitary or master triple-net leases and 100 properties
leased under single unit triple-net leases. These leases generally provide for an initial term of 15 or 20 years with options for
successive renewal terms of up to 20 years and periodic rent escalations. As of December 31, 2017, our contractual rent weighted
average lease term, excluding renewal options, was approximately 11 years.
Several of our leases provide for additional rent based on the aggregate volume of fuel sold. For the year ended December 31,
2017, 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, 2017, we have a remaining
commitment to fund up to $8.7 million in the aggregate with our tenants for our portion of such capital expenditures. For additional
information with respect to our leases see Note 2 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
Redevelopment. As of December 31, 2017, we were actively redeveloping nine of our former convenience store and gasoline
station properties either as a new convenience and gasoline use or for an alternative single-tenant net lease retail use. See
“Redevelopment Strategy and Activity” below for additional detail.
5
Vacancies. As of December 31, 2017, eight 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, 2017, we acquired fee simple interests in 103 convenience store and gasoline station
properties for an aggregate purchase price of $214.0 million. For additional information regarding our property acquisitions see
Note 13 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
Over the last five years, we have acquired 236 properties, located in various states, for an aggregate purchase price of $531.7
million. These acquisitions included single property transactions and portfolio transactions ranging in size.
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 a new convenience and gasoline use or 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, 2017, we spent $1.6 million of construction-in-progress costs related to our redevelopment
activities. During the year ended December 31, 2017, we completed two redevelopment projects and $0.4 million of construction-in-
progress was transferred to buildings and improvements on our consolidated balance sheet. As of December 31, 2017, we have
completed three redevelopment projects for aggregate cost of $1.4 million.
As of December 31, 2017, we were actively redeveloping nine of our former convenience store and gasoline station properties
either as a new convenience and gasoline use or for an alternative single-tenant net lease retail use. In addition, to the nine 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, 2017,
we have signed leases on four 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, which at the time was our principal tenant under a long-term unitary triple-net
lease (the “Master Lease”) was acquired by a U.S. subsidiary of OAO Lukoil (“Lukoil”) in December 2000. In December 2011,
Marketing filed with the U.S. Bankruptcy Court for Chapter 11 bankruptcy protection. The bankruptcy proceedings resulted in the
termination of the Master Lease effective April 30, 2012, followed by the liquidation of Marketing, which culminated with final
distributions to creditors in November 2015. As of December 31, 2017, 383 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
6
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, 2017, we had three significant tenants by revenue:
• We leased 163 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”). In the aggregate, our leases with
subsidiaries of Global Partners represented 21% of our total revenues for the years ended December 31, 2017 and 2016.
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% of our total revenues for the years
ended December 31, 2017 and 2016. See Item 9B in this Form 10-K for selected combined audited financial data of
United Oil.
• We leased 76 convenience store and gasoline station properties pursuant to two separate unitary leases to subsidiaries
of Chestnut Petroleum Dist., Inc. (“Chestnut Petroleum”). In the aggregate, our leases with subsidiaries of Chestnut
Petroleum represented 13% and 15% of our total revenues for the years ended December 31, 2017 and 2016,
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® trademark 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 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 environmental laws and regulations with respect to their operations at 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”.
For substantially 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
7
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 10 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 see “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.
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 first
on the party responsible for the contamination, but can also impose liability and clean-up responsibility on the owner and the current
operator 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. Liability under such environmental laws has been interpreted to be joint and several unless the harm is divisible
and there is a reasonable basis for allocation of responsibility and the financial resources are available to perform the remediation. 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-lease or sell
our properties on favorable terms, or at all.
8
For additional information with respect to certain 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 tenant or other counterparty 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 tenant or other counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if our tenant or other 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 capability, 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 substantially 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 for environmental contamination
discovered (other than as a result of a voluntary site investigation) during the first 10 years of the lease term (or a shorter period for a
minority of such leases). After expiration of such 10-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 10 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. We have also agreed to be responsible for environmental contamination that existed prior to the
sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the
first five years after the sale of the properties. For 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.
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 have 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 10 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.
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, 2017, we had accrued a total of $63.6 million for our prospective
environmental remediation obligations. This accrual consisted of (a) $18.6 million, which was our best estimate of reasonably
estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated
recoveries and (b) $45.0 million for future environmental liabilities related to preexisting unknown contamination.
9
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.
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, and possible changes in the environmental rules and regulations, enforcement
policies, and reimbursement programs of various states. 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.
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. Accordingly, compliance
with environmental laws and regulations could have a material adverse effect on our business, financial condition, results of
operations, liquidity, ability to pay dividends or stock price.
We are exposed to counterparty risk and there can be no assurances that we will effectively manage or mitigate this risk.
We regularly interact with counterparties in various industries. The types of counterparties most common to our transactions and
agreements include, but are not limited to, landlords, tenants, vendors and lenders. We also enter into agreements to acquire and sell
properties which allocate responsibility for certain costs to the counterparty. Our most significant counterparties include, but are not
limited to, the members of the Bank Syndicate related to our Credit Agreement, the lender that is the counterparty to the Second
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,
including, without limitation, as a result of the rejection of an agreement in bankruptcy proceedings, is likely to have a material
adverse effect on us.
As of December 31, 2017, we leased 163 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”). In the aggregate, our leases with
subsidiaries of Global Partners represented 21% of our total revenues for the years ended December 31, 2017 and 2016. All of our
unitary leases with subsidiaries of Global Partners are guaranteed by the parent company. As of December 31, 2017, we leased 77
convenience store and gasoline station properties in three separate unitary leases to Apro, LLC (d/b/a “United Oil”). In the aggregate,
our leases with United Oil represented 15% of our total revenues for the years ended December 31, 2017 and 2016. As of
December 31, 2017, we leased 76 convenience store and gasoline station properties in two separate unitary leases to subsidiaries of
Chestnut Petroleum Dist. Inc. (“Chestnut Petroleum”). In the aggregate, our leases with subsidiaries of Chestnut Petroleum
represented 13% and 15% of our total revenues for the years ended December 31, 2017 and 2016, 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.
10
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 tenants’ 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 our
tenants to meet their 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.
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 the cash flows from our operations, funds available under our Credit Agreement, proceeds
from the sale of shares of our common stock through offerings, from time to time, under our at-the-market program (“ATM Program”)
and available cash and cash equivalents. 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
February 21, 2017, we entered into a First Amendment to the Credit Agreement to permit the Second Restated Prudential Note
Purchase Agreement. On February 21, 2017, we entered into the Second Restated Prudential Note Purchase Agreement which
amended and restated our existing senior note purchase agreement with Prudential and certain affiliates of Prudential. Pursuant to the
Second Restated Prudential Note Purchase Agreement, we agreed that our 6.0% Series A Guaranteed Senior Notes due February 25,
11
2021, in the original aggregate principal amount of $100.0 million (the “Series A Notes”) and our 5.35% Series B Guaranteed Senior
Notes due June 2, 2023, in the original aggregate principal amount of $75.0 million (the “Series B Notes”), both of which were
outstanding under the existing senior note purchase agreement, would continue to remain outstanding under the Second Restated
Prudential Note Purchase Agreement and we authorized and issued our 4.75% Series C Guaranteed Senior Notes due February 25,
2025, in the aggregate principal amount of $50.0 million (the “Series C Notes” and, together with the Series A Notes and Series B
Notes, the “Notes”). The Second Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the
principal balance of the Notes prior to their respective maturities. 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 Second Restated Prudential Note Purchase Agreement contain 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 and the Second Restated
Prudential Note Purchase Agreement also contain customary events of default, including cross defaults to each other, change of
control and failure to maintain REIT status (provided that the Second Restated Prudential Note Purchase Agreement requires a
mandatory offer to prepay the Notes upon a change in control in lieu of a change of control event of default). Our ability to meet the
terms of the agreements is dependent upon our continued ability to meet certain criteria, as further described in Note 4 in “Item 8.
Financial Statements and Supplementary Data” in this Form 10-K, 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 Second 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.
Under our ATM Program, 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 shares of our common stock under our ATM Program may be made
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. Sales of shares of our common stock under our ATM
Program, if any, will depend on a variety of factors to be determined by us from time to time, including among others, market
conditions and the trading price of our common stock. Our agents are not required to sell any specific number or dollar amount of our
common stock, but each agent will use its commercially reasonable efforts consistent with its normal trading and sales practices and
applicable law and regulation to sell shares designated by us in accordance with the terms of the distribution agreement with our
agents. The net proceeds we receive will be the gross proceeds received from such sales less the commissions and any other costs we
may incur in issuing the shares of our common stock.
We may use a portion of the net proceeds from any of such sales to reduce our outstanding indebtedness, including borrowings
under our Revolving Facility. The Revolving Credit Facility includes lenders who are affiliates of our agents. As a result, a portion of
the net proceeds from any sale of shares of our common stock under our ATM Program that is used to repay amounts outstanding
under our Revolving Credit Facility will be received by these affiliates. Because an affiliate may receive a portion of the net proceeds
from any of these sales, each of our agents may have an interest in these sales beyond the sales commission it will receive. This could
result in a conflict of interest and cause such agents to act in a manner that is not in the best interests of us or our investors in
connection with any sale of shares of our common stock under our ATM Program.
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 Second 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,
accrued liabilities, income taxes and allocation of the purchase price of properties acquired to the assets acquired and liabilities
12
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 properties when we believe that an acquisition 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, or that they may not perform as expected.
Further, if financed by the Company using debt or new equity issuances, our acquisition of properties 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 such acquisitions. We face competition in pursuing these acquisitions and we may not succeed in leasing acquired properties at
rents sufficient to cover the costs of their 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 either as a new convenience store or 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 qualified 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 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 redevelopment opportunities, and we expect to continue to pursue investments that we believe will
benefit our financial performance. We cannot assure you that investment opportunities which meet our investment criteria will be
available. 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 be able to 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 that we
increase the size of our portfolio, we may not be able to adapt our management, administrative, accounting and operational systems, or
hire and retain sufficient operational staff to integrate 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
13
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.
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 and battery-operated vehicles, or other “green
technologies,” 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 as to how these factors will affect petroleum product prices or supply in the future, or how in particular they will
affect our tenants.
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-lease or sell our properties and have an adverse effect on our tenants’ level of sales
and financial performance generally. As our revenues are substantially dependent on the economic success of our tenants, 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.
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 Second Restated Prudential Note Purchase Agreement, seek other sources of debt or equity capital or
refinance our outstanding indebtedness. 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.
14
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.
Recently enacted U.S. federal tax reform legislation could affect REITs generally, our tenants, the markets in which we operate,
the price of our common stock and our results of operations, in ways, both positively and negatively, that are difficult to predict.
On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Act”) was enacted. The 2017 Act includes significant changes to
corporate and individual tax rates and the calculation of taxes. As a REIT, we are generally not required to pay federal taxes otherwise
applicable to regular corporations if we distribute all of our income and comply with the various tax rules governing REITs.
Stockholders, however, are generally required to pay taxes on REIT dividends. The 2017 Act changes the way in which dividends
paid on our stock are taxed by the holder of that stock and could impact the price of our common stock or how stockholders and
potential investors view an investment in REITs. In addition, while certain elements of the 2017 Act do not appear to impact us
directly as a REIT, they could impact our tenants and the markets in which we operate in ways, both positive and negative, that are
difficult to predict. Prospective stockholders are urged to consult with their tax advisors with respect to the 2017 Act and any other
regulatory or administrative developments and proposals and the potential effects thereof on an investment in our common stock.
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 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. 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 certain pending
lawsuits and claims, see “Item 3. Legal Proceedings” and Note 3 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, as of December 31, 2017, 50.2% 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, natural disasters or severe weather 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,
15
public and private investment funds, and other individual and institutional investors. This competition has increased prices for
properties we seek to acquire and may impair our ability to make suitable property acquisitions on favorable terms in the future.
We are subject to losses that may not be covered by insurance.
We, and certain of our tenants, carry insurance against certain risks and in such amounts as we believe are customary for
businesses of our kind. However, as the costs and availability of insurance change, we may decide not to be covered against certain
losses (such as certain environmental liabilities, earthquakes, hurricanes, floods and civil disorder) where, in the judgment of
management, the insurance is not warranted due to cost or availability of coverage or the remoteness of perceived risk. Furthermore,
there are certain types of losses, such as losses resulting from wars, terrorism or certain acts of God, that generally are not insured
because they are either uninsurable or not economically insurable. There is no assurance that the existing insurance coverages are or
will be sufficient to cover actual losses incurred. The destruction of, or significant damage to, or significant liabilities arising out of
conditions at, our properties due to an uninsured loss would result in an economic loss and could result in us losing both our
investment in, and anticipated profits from, such properties. When a loss is insured, the coverage may be insufficient in amount or
duration, or a lessee’s customers may be lost, such that the lessee cannot resume its business after the loss at prior levels or at all,
resulting in reduced rent or a default under its lease. Any such loss relating to a large number of properties could have a material
adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
Failure to qualify as a REIT under the federal income tax laws would have adverse consequences to our shareholders. Uncertain
tax matters may have a significant impact on the results of operations for any single fiscal year or interim period or may cause us
to fail to qualify as a REIT.
We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. To qualify for taxation as a
REIT, we must, among other requirements such as those related to the composition of our assets and gross income, distribute annually
to our stockholders at least 90% of our taxable income, including taxable income that is accrued by us without a corresponding receipt
of cash. Accordingly, we generally will not be subject to federal income tax on qualifying REIT income, provided that distributions to
our shareholders equal at least the amount of our taxable income as defined under the Internal Revenue Code. Many of the REIT
requirements are highly technical and complex. If we were to fail to meet the requirements, we may be subject to federal income tax,
excise taxes, penalties and interest or we may have to pay a deficiency dividend. 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.
Future issuances of equity securities could dilute the interest of holders of our equity securities.
Our future growth depends upon our ability to raise additional capital. If we were to raise additional capital through the issuance
of equity securities, such issuance, the receipt of the net proceeds thereof and the use of such proceeds may have a dilutive effect on
our expected earnings per share, funds from operations per share and adjusted funds from operations per share. The actual amount of
such dilution cannot be determined at this time and will be based on numerous factors. Additionally, we are not restricted from issuing
additional shares of our common stock or preferred stock, including any securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock or preferred stock or any substantially similar securities in the future. The market price of
our common stock could decline as a result of sales of a large number of shares of our common stock in the market after an offering or
the perception that such sales could occur.
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 upon such factors as the Board of
Directors deems relevant and the dividend paid may vary from expected amounts. Any change in our dividend policy could adversely
affect our business and the market price of our common stock. In addition, each of the Credit Agreement and the Second 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,
16
will not fluctuate significantly. Under the Maryland General Corporation Law, our ability to pay dividends would be restricted if, after
payment of the dividend, (i) we would not be able to pay indebtedness as it becomes due in the usual course of business or (ii) 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.
No assurance can be given that our financial performance in the future will permit our payment of any dividends. Each of the
Credit Agreement and the Second Restated Prudential Note Purchase Agreement contain 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. As a result of the factors described above, we may experience material
fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, stock
price and ability to pay dividends.
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 (i)
own, or be deemed to own by virtue of certain constructive ownership provisions of the Internal Revenue Code, in excess of 5.0% (in
value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of our common stock or (ii)
own, or be deemed to own by virtue of certain other constructive ownership provisions of the Internal Revenue Code, in excess of
9.9% (by value or number of shares, whichever is more restrictive) of the outstanding shares of our common 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 may
be difficult to replace. As a REIT, we employ only 30 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,
17
disability or retirement, we may not be able to find replacements with comparable skill, ability and industry expertise which could
have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock
price.
Amendments to the Accounting Standards Codification made by the Financial Accounting Standards Board (the “FASB”) or
changes in accounting standards issued by other standard-setting bodies may adversely affect our reported revenues, profitability
or financial position.
Our consolidated financial statements are subject to the application of Generally Accepted Accounting Principles (“GAAP”) in
accordance with the Accounting Standards Codification, which is periodically amended by the FASB. The application of GAAP is
also subject to varying interpretations over time. Accordingly, we are required to adopt amendments to the Accounting Standards
Codification or comply with revised interpretations that are issued from time-to-time by recognized authoritative bodies, including the
FASB and the SEC. Those changes could adversely affect our reported revenues, profitability or financial position.
Our assets may be subject to impairment charges.
We periodically evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the
existence of impairment indicators is based on GAAP, and includes a variety of factors such as market conditions, the accumulation of
asset retirement costs 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, 2017 and 2016, we incurred $9.3 million and $12.8 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 of our properties are leased on a triple-net basis primarily to petroleum distributors, convenience store retailers
and, to a lesser extent, individual operators, 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 all 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 and is not subject to a lease, we will either redevelop the property for an alternative single-tenant net lease retail use or
seek an alternative tenant or buyer for the property. We manage and evaluate our operations as a single segment.
18
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.
The following table summarizes the geographic distribution of our properties as of December 31, 2017. 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.
Owned by
Getty Realty
Leased by
Getty Realty
Total
Properties
by State
Percent
of Total
Properties
New York
Massachusetts
Connecticut
New Jersey
Virginia
New Hampshire
Maryland
South Carolina
Texas
Washington State
California
Pennsylvania
Colorado
Arizona
Oregon
Hawaii
Maine
Ohio
New Mexico
Rhode Island
Florida
North Carolina
Arkansas
Georgia
Nevada
Washington, D.C.
Delaware
Louisiana
North Dakota
Total
214
100
73
47
45
45
41
38
32
31
29
23
23
22
13
10
7
6
5
5
4
4
3
2
2
2
—
1
1
828
46
11
11
6
1
1
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
79
260
111
84
53
46
46
43
38
32
31
29
23
23
22
13
10
7
6
5
5
4
4
3
2
2
2
1
1
1
907
28.7 %
12.2
9.3
5.8
5.1
5.1
4.7
4.2
3.5
3.4
3.2
2.5
2.5
2.4
1.4
1.1
0.8
0.7
0.6
0.6
0.5
0.5
0.3
0.2
0.2
0.2
0.1
0.1
0.1
100 %
The properties that we lease from third-parties have a remaining lease term, including renewal and extension option terms,
averaging approximately nine 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
2018
2019
2020
2021
2022
Subtotal
Thereafter
Total
Number of
Leases
Expiring
Percent of
Total Leased
Properties
Percent
of Total
Properties
4
6
6
8
4
28
51
79
5.1 %
7.6
7.6
10.1
5.1
35.5
64.5
100 %
0.4 %
0.7
0.7
0.9
0.4
3.1
5.6
8.7 %
19
Revenues from rental properties and tenant reimbursements included in continuing and discontinued operations for the year
ended December 31, 2017, were $117.2 million with respect to 857 average rental properties held during the year for an average
revenue per rental property of approximately $136,700. 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.
Rental property lease expirations and annualized contractual rent as of December 31, 2017, are as follows (in thousands, except
for number of properties):
CALENDAR YEAR
Redevelopment
Vacant
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Thereafter
Total
Number of
Rental
Properties(a)
Annualized
Contractual
Rent(b)
Percentage
of Total
Annualized Rent
9 $
8
28
52
36
24
35
14
15
13
77
256
340
907 $
—
—
2,267
5,966
4,712
2,273
2,774
1,969
1,570
2,687
12,839
17,520
54,538
109,115
0.0 %
0.0
2.1
5.5
4.3
2.1
2.5
1.8
1.4
2.4
11.8
16.1
50.0
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, 2017, 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, 2017 and 2016, we
had accrued $12.3 million and $11.8 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, 2017, 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 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 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 in later
stages and, as it nears completion, a schedule for trial will be established. We are unable to estimate the range of loss in excess of the
amount we have accrued for this lawsuit. It is possible that losses related to this case, in excess of the amounts accrued, as of
December 31, 2017, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability
to pay dividends or stock price.
20
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.
The case is being managed by the Administrative Law Judge, who has not yet scheduled a 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 their case with
the State of New Jersey. A portion of the case (“bellwether” trials) has 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 plaintiffs’ 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 we have accrued for the New Jersey MDL Proceedings as we do not
believe that plaintiffs’ settlement proposal is realistic and there remains uncertainty as to the allegations in this case as they relate to
us, our defenses to the claims, our rights to indemnification or contribution from other parties and the aggregate possible amount of
damages for which we may be held liable. It is possible that losses related to the New Jersey MDL Proceedings in excess of the
amounts accrued as of December 31, 2017, 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 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.
21
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.
MTBE Litigation – State of Maryland
On December 17, 2017, the State of Maryland, by and through the Attorney General on behalf of the Maryland Department of
Environment and the Maryland Department of Health (the “State of Maryland”), filed a Complaint in the Circuit Court for Baltimore
City related to alleged statewide MTBE contamination in Maryland (the “Complaint”). The Complaint was served upon us on January
19, 2018. The Complaint names us and more than 60 other defendants, including Exxon Mobil Corporation, APEX Oil Company,
Astra Oil Company, Atlantic Richfield Company, various BP, Chevron, Citgo, ConocoPhillips, Hess, Kinder Morgan, Lukoil,
Marathon, Shell Oil, Sunoco, Texaco and Valero entities, Cumberland Farms, Duke Energy Merchants, El Paso Merchant Energy-
Petroleum Company, Energy Transfer Partners, L.P., Equilon Enterprises, Inc. ETP Holdco Corporation, George E. Warren
Corporation, Getty Petroleum Marketing, Inc., Gulf Oil Limited Partnership, Guttman Energy, Inc., Hartree Partners L.P., Holtzman
Oil Corporation, Motiva Enterprises LLC, Nustar Terminals Operations Partnership LP, Phillips 66 Company, Premcor, 7-Eleven,
Inc., Sheetz, Inc. , Total Petrochemicals & Refining USA, Inc., Transmontaigne Product Services, Inc., Vitol S.A., WAWA, Inc. and
Western Refining, Inc. The Complaint seeks compensation for natural resource damages and for injuries sustained as a result of the
defendants’ unfair and deceptive trade practices in the marketing of MTBE and gasoline containing MTBE. The plaintiffs also seek to
recover costs paid or incurred by the State of Maryland to detect, investigate, treat and remediate MTBE from public and private water
wells and groundwater, punitive damages and the award of attorneys’ fees and litigation costs. The plaintiffs assert causes of action
against all defendants based on multiple theories, including strict liability – defective design; strict liability – failure to warn; strict
liability for abnormally dangerous activity; public nuisance; negligence; trespass; and violations of Titles 4, 7 and 9 of the Maryland
Environmental Code.
On February 14, 2018, defendants removed the case to the United States District Court for the District of Maryland. It is unclear
whether the matter will ultimately be removed to the MTBE MDL proceedings or remain in federal court in Maryland. 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.
22
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.
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.
On April 19, 2017, Maxus, Tierra and certain of its affiliates (collectively, the “Debtors”), together with the Official Committee
of Unsecured Creditors, of which the CPG is a member, filed an Amended Chapter 11 Plan of Liquidation (the “Chapter 11 Plan”) in
the Chapter 11 proceedings, which has been confirmed by order of the bankruptcy court, having an effective date of July 14, 2017 (the
“Effective Date”). The Chapter 11 Plan provides for, among other things, the creation of a Liquidating Trust to liquidate and distribute
from available assets certain allowed claims pursuant to the procedures set forth therein. Under the terms of the Chapter 11 Plan, the
CPG’s proof of claim, which includes past costs incurred in the performance of the RI/FS and River Mile 10.9 work, is classified as an
Allowed Class 4 Claim in the approximate amount of $14.3 million. To the extent that the CPG receives any distributions from the
Liquidating Trust with respect to its Allowed Class 4 Claim, we would be entitled to seek reimbursement of our pro-rata share of said
distribution for past costs we incurred with respect to performance of the RI/FS and River Mile 10.9 work. The Chapter 11 Plan also
provides for a Mutual Contribution Release Agreement under which claims for contribution relating to liabilities associated with the
Lower Passaic River and incurred prior to the Effective Date are mutually released by and among the parties identified therein. We are
one of 59 parties (the “Released Parties”) that entered into the Mutual Contribution Release Agreement, pursuant to which (i) the
Debtors release the Released Parties from any contribution claim they may have, (ii) Occidental releases the Released Parties for the
amounts itemized in Occidental’s Class 4 Claim, and (iii) the Released Parties release the Debtors and Occidental for the amounts
itemized in the CPG’s Class 4 Claim. The Mutual Contribution Release Agreement does not reduce or affect the CPG’s right to
receive distributions from the Liquidating Trust on account of the CPG’s Class 4 Claim or our pro-rata share of any such distributions,
nor does it affect our right to assert any future claims against Occidental for costs that we may incur related to the remediation of the
Lower Passaic River after the Effective Date.
By letter dated March 30, 2017, the EPA advised the recipients of the Notice that it would be entering into cash out settlements
with 20 potentially responsible parties to resolve their alleged liability for the lower 8-mile remedial action that is the subject of the
ROD. The letter also stated that the EPA would begin a process for identifying other potentially responsible parties for negotiation of
cash out settlements to resolve their alleged liability for the lower 8-mile remedial action that is the subject of the ROD. We were not
23
included in the initial group of 20 parties identified by the EPA for cash out settlements. In January 2018, the EPA published a notice
of its intent to enter into a final settlement agreement with 15 of the identified 20 parties to resolve their respective alleged liability for
the ROD work, each for a payment to the EPA in the amount of $280,600. The EPA has also been engaged in discussions with the
remaining recipients of the Notice regarding a proposed framework for an allocation process that will lead to offers of cash-out
settlements to certain additional parties and a consent decree in which parties that are not offered a cash-out settlement will agree to
perform the lower 8-mile remedial action. The EPA-commenced allocation process is scheduled to conclude by mid-2019.
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. In August 2017, the court
denied in part and granted in part a motion by Lukoil to dismiss our claims. We intend to move for reargument on certain of the claims
that were denied, however, further litigation is currently stayed by the court pending completion of a court ordered mediation, which is
anticipated to take place in the second quarter of 2018. This case is still in an early stage of its proceedings and it is not yet possible to
predict or estimate the potential outcome of this case.
Item 4. Mine Safety Disclosures
None.
24
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Capital Stock
Our common stock is traded on the New York Stock Exchange (symbol: GTY). There were approximately 10,922 beneficial
holders of our common stock as of March 1, 2018, of which approximately 944 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, 2017
and 2016 was as follows:
Quarter Ended
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
March 31, 2017
June 30, 2017
September 30, 2017
December 31, 2017
Price Range
High
Low
Cash
Dividends
Per Share
19.97
21.54
24.33
25.63
26.71
26.70
29.00
29.89
16.21
19.44
21.27
21.71
24.34
24.60
22.91
26.32
.2500
.2500
.2500
.2800
.2800
.2800
.2800
.3200
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.
25
Stock Performance Graph
Comparison of Five-Year Cumulative Total Return*
Source: SNL Financial
Getty Realty Corp.
Standard & Poors 500
Peer Group
12/31/2012 12/31/2013 12/31/2014 12/31/2015 12/31/2016 12/31/2017
100.00 106.22 110.94 111.71 173.90 193.65
100.00 132.39 150.51 152.59 170.84 208.14
100.00 108.03 133.90 143.70 174.89 180.28
Assumes $100 invested at the close of the last day of trading on the New York Stock Exchange on December 31, 2012, in Getty
Realty Corp. common stock, Standard & Poors 500 and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
We have chosen as our Peer Group the following companies: 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. We have chosen these companies as our Peer Group because a substantial segment of each of their businesses is owning
and leasing single-tenant net lease retail 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.
26
Item 6. Selected Financial Data
GETTY REALTY CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(in thousands, except per share amounts and number of properties)
2017 (a)
For the Years ended December 31,
2015 (b)
2014
2016
2013 (c)
OPERATING DATA:
Total revenues
Earnings from continuing operations
Earnings (loss) 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 (d)
FUNDS FROM OPERATIONS AND ADJUSTED
FUNDS FROM OPERATIONS (e):
Net earnings
Depreciation and amortization of real estate assets
Gains on dispositions of real estate
Impairments
Funds from operations
Revenue recognition adjustments
(Recovery) allowance for deferred rent/mortgage
receivables
Changes in environmental estimates
Accretion expense
Environmental litigation accruals
Insurance reimbursements
Legal settlements and judgments
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
$ 120,153 $ 115,271 $ 110,776 $
39,478
(2,068 )
37,410
39,825
(1,414 )
38,411
45,048
2,138
47,186
99,905 $ 102,829
26,044
19,890
43,967
3,528
70,011
23,418
1.20
1.26
1.16
1.12
1.17
1.11
0.59
0.69
0.77
2.08
36,897
1.16
33,806
1.03
33,420
1.15
33,409
0.96
33,397
0.85
47,186
19,089
(1,041 )
9,321
74,555
(1,976 )
—
(6,854 )
3,448
1,044
(1,804 )
(6,381 )
—
62,032
38,411
19,170
(6,213 )
12,814
64,182
(3,417 )
—
(7,007 )
4,107
801
(1,146 )
(514 )
86
57,092
37,410
16,974
(2,611 )
17,361
69,134
(4,471 )
23,418
10,549
(10,218 )
21,534
45,283
(5,372 )
(93 )
(4,639 )
4,829
374
—
(18,176 )
445
47,403
2,331
(2,756 )
3,046
—
—
—
104
42,636
70,011
9,927
(45,505 )
13,425
47,858
(8,379 )
4,775
(2,956 )
3,214
—
—
—
480
44,992
$ 970,964 $ 782,166 $ 783,233 $ 595,959 $ 570,275
680,419
1,072,754
156,017
379,158
415,091
553,695
877,306
298,544
430,918
686,582
124,425
407,024
896,918
317,093
406,561
828
79
907
740
89
829
753
98
851
757
106
863
840
125
965
(a) Includes (from the date of the acquisition) the effect of the $123.1 million acquisition of 49 properties in the Empire Transaction
on September 6, 2017, and the effect of the $68.7 million acquisition of 38 properties in the Applegreen Transaction on
October 3, 2017.
(b) Includes (from the date of the acquisition) the effect of the $214.5 million acquisition of 77 properties in the United Oil
Transaction on June 3, 2015.
27
(c) 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 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 a 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 and a $4.3 million allowance for deferred rent receivable.
(d) 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.
(e) During the fourth quarter of 2017, we revised our definition of AFFO. AFFO for the years ended December 31, 2017, 2016 and
2015, have been restated to conform to our revised definition. For additional information, see “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations – General – Supplemental Non-GAAP Measures”.
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the “Cautionary Note Regarding Forward-Looking
Statements”; the sections in Part I entitled “Item 1A. Risk Factors”; the selected financial data in 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, 2017, we owned 828 properties and leased 79 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, 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, 2017, we leased 890 of our properties to tenants under triple-net leases.
Our net lease properties include 790 properties leased under 24 separate unitary or master triple-net leases and 100 properties
leased under single unit triple-net leases. These leases generally provide for an initial term of 15 or 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, 2017, we were actively redeveloping nine of our former convenience store and gasoline
station properties either as a new convenience and gasoline use or for an alternative single-tenant net lease retail use.
Vacancies. As of December 31, 2017, eight 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.
29
During the year ended December 31, 2017, we acquired fee simple interests in 103 convenience store and gasoline station
properties for an aggregate purchase price of $214.0 million. Included in these acquisitions was our September 6, 2017, acquisition of
fee simple interests in 49 convenience store and gasoline station properties from Empire Petroleum Partners LLC (d/b/a “Empire”).
These properties were simultaneously leased to Empire, a leading regional convenience store and gasoline station operator, under a
long-term triple-net unitary lease (the “Empire Transaction”). The Empire properties are located across Arizona, Colorado, Florida,
Georgia, Louisiana, New Mexico and Texas. The total purchase price for the transaction was $123.1 million, which was funded with a
combination of funds from our $104.3 million Equity Offering (as defined below) and funds available under our Credit Agreement.
On October 3, 2017, the Company acquired 38 fee simple properties from a U.S. subsidiary of Applegreen PLC (“Applegreen”), the
largest convenience store and gasoline station operator in the Republic of Ireland. These properties were simultaneously leased to a
U.S. subsidiary of Applegreen under a long-term triple-net unitary lease (the “Applegreen Transaction”). The properties consist of 33
convenience store and gasoline stations, many of which contain nationally recognized food offerings such as Burger King, Subway
and Blimpie, and five stand-alone Burger King quick service restaurants, located within the metropolitan market of Columbia, SC.
The total purchase price for the transaction was $68.7 million, which was funded with a combination of funds from our $104.3 million
Equity Offering and funds available under our Credit Agreement. In addition to the Empire Transaction and the Applegreen
Transaction, in 2017, we acquired fee simple interests in 16 convenience store and gasoline station properties in various transactions
for an aggregate purchase price of $22.2 million.
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 various transactions, for an
aggregate purchase price of $7.7 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 a new convenience and gasoline use or 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, 2017, we spent $1.6 million of construction-in-progress costs related to our redevelopment
activities. During the year ended December 31, 2017, we completed two redevelopment projects and $0.4 million of construction-in-
progress costs were transferred to buildings and improvements on our consolidated balance sheet.
As of December 31, 2017, we were actively redeveloping nine of our former convenience store and gasoline station properties
either as a new convenience and gasoline use or for an alternative single-tenant net lease retail use. In addition, to the nine 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, 2017,
we have signed leases on four 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 $9.3 million and $12.8 million for the years ended December 31, 2017 and 2016, respectively, where the carrying
amounts of the properties exceed 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 and estimates of anticipated cash flows
used to conduct our impairment analysis involve highly subjective judgments and, accordingly, 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 and AFFO are generally considered by
analysts and investors to be an appropriate supplemental non-GAAP measure of the performance of REITs. 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.
30
FFO is defined by the National Association of Real Estate Investment Trusts as GAAP 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 (i) Revenue Recognition Adjustments (net of allowances), (ii)
changes in environmental estimates, (iii) accretion expense, (iv) environmental litigation accruals, (v) insurance reimbursements, (vi)
legal settlements and judgments, (vii) acquisition costs expensed and (viii) other unusual items that are not reflective of our core
operating performance. Other REITs may use definitions of FFO and/or AFFO that are different from ours and, accordingly, may not
be comparable.
Beginning in the fourth quarter of 2017, we revised our definition of AFFO to exclude three additional items – environmental
litigation accruals, insurance reimbursements, and legal settlements and judgments – because we believe that these items are not
indicative of our core operating performance. While we do not label excluded items as non-recurring, management believes that
excluding items from our definition of AFFO that are either non-cash or not reflective of our core operating performance provides
analysts and investors the ability to compare our core operating performance between periods. AFFO for the years ended December
31, 2017, 2016 and 2015, have been restated to conform to our revised definition.
We believe that FFO and AFFO are helpful to analysts and 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 core 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 include non-cash changes in environmental estimates and environmental accretion expense, which do not impact
our recurring cash flow. GAAP net earnings and FFO also include environmental litigation accruals, insurance reimbursements, and
legal settlements and judgments, which items are not indicative of our core operating performance. GAAP net earnings and FFO from
time to time may also include acquisition costs expensed and other unusual items that are not reflective of our core operating
performance. Acquisition costs are expensed, generally in the period in which properties are acquired and are not reflective of core
operating performance.
We pay particular attention to AFFO, as we believe it best represents our core operating performance. In our view, AFFO
provides a more accurate depiction than FFO of our core operating performance. By providing AFFO, we believe that we are
presenting useful information that assists analysts and investors to better assess our core operating performance. Further, we believe
that AFFO is useful in comparing the sustainability of our core operating performance with the sustainability of the core operating
performance of other real estate companies. For a reconciliation of FFO and AFFO to GAAP net earnings, see “Item 6. Selected
Financial Data”.
Results of Operations
Year ended December 31, 2017, compared to year ended December 31, 2016
Revenues from rental properties included in continuing operations increased by $4.6 million to $101.3 million for the year
ended December 31, 2017, as compared to $96.7 million for the year ended December 31, 2016. The increase in revenues from rental
properties was primarily due to $3.2 million and $1.4 million of revenue from the properties acquired in the Empire Transaction and
Applegreen Transaction, respectively, partially offset by a decrease of $1.4 million of Revenue Recognition Adjustments. Rental
income contractually due or received from our tenants included in revenues from rental properties in continuing operations was $99.4
million for the year ended December 31, 2017, as compared to $93.3 million for the year ended December 31, 2016. 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 $15.8 million and $15.0 million for the
years ended December 31, 2017 and 2016, respectively. Interest income on notes and mortgages receivable was $3.0 million for the
year ended December 31, 2017, as compared to $3.5 million for the year ended December 31, 2016.
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
31
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 increased rental revenue by $2.0 million for the year ended
December 31, 2017, and $3.4 million for the year ended December 31, 2016.
Property costs included in continuing operations, which are primarily comprised of rent expense, real estate taxes, state and
local taxes, municipal charges, maintenance expense and reimbursable tenant expenses, were $22.3 million for the year ended
December 31, 2017, as compared to $23.2 million for the year ended December 31, 2016. The decrease in property costs for the year
ended December 31, 2017, was principally due to a decrease in rent, maintenance and state and local taxes.
Impairment charges included in continuing operations were $8.3 million for the year ended December 31, 2017, as compared to
$8.6 million for the year ended December 31, 2016. 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, 2017 and 2016, 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, 2017, increased by $0.4 million to
$3.1 million, as compared to $2.7 million for the year ended December 31, 2016. The increase in environmental expenses for the year
ended December 31, 2017, was principally due to a $0.8 million increase in environmental litigation accrual and legal fees partially
offset by a $0.4 million decrease in environmental remediation costs. Environmental expenses vary from period to period and,
accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for
one period, as compared to prior periods.
General and administrative expenses included in continuing operations decreased by $0.3 million to $13.9 million for the year
ended December 31, 2017, as compared to $14.2 million for the year ended December 31, 2016. The decrease in general and
administrative expenses for the year ended December 31, 2017, was principally due to a $0.4 million decline in legal and professional
fees and a $0.4 million decrease of non-recurring employee related expenses predominantly due to reductions in severance and
retirement costs partially offset by a $0.5 million increase in employee related expenses.
Recoveries and allowances for uncollectible accounts included in continuing operations increased by $0.6 million to a $0.2
million allowance for the year ended December 31, 2017, as compared to a recovery of $0.4 million for the year ended December 31,
2016.
Depreciation and amortization expense included in continuing operations was $19.1 million for the year ended December 31,
2017, as compared to $19.2 million for the year ended December 31, 2016. The decrease was primarily due to a decrease in
depreciation charges related to asset retirement costs, the effect of certain assets becoming fully depreciated, lease terminations and
dispositions of real estate offset by depreciation and amortization of properties acquired.
Gains on dispositions of real estate included in continuing operations were $1.0 million for the year ended December 31, 2017,
as compared to $6.4 million for the year ended December 31, 2016. The gains were the result of the sale of 12 properties during each
of the years ended December 31, 2017 and 2016, 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.
Other income, net included in continuing operations was $8.5 million for the year ended December 31, 2017, as compared to
$2.0 million for the year ended December 31, 2016. For the year ended December 31, 2017, other income was primarily attributable to
$1.8 million received from insurance reimbursements and $6.4 million received from legal settlements and judgments. Other income
for the year ended December 31, 2016, was primarily attributable to $1.1 million received from insurance reimbursements and $0.5
million received from legal settlements and judgments.
Interest expense was $17.8 million for the year ended December 31, 2017, as compared to $16.6 million for the year ended
December 31, 2016. The increase for the year ended December 31, 2017, was due to higher average borrowings outstanding and the
incurrence of new indebtedness required to fund the Empire Transaction and Applegreen Transaction.
We report as discontinued operations 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. Earnings from discontinued operations increased by $3.5 million to $2.1 million for the year ended
December 31, 2017, as compared to a loss of $1.4 million for the year ended December 31, 2016. Other operating income recorded in
discontinued operations, which includes changes in environmental estimates, increased by $0.2 million to $3.2 million for the year
ended December 31, 2017, as compared to $3.0 million for the year ended December 31, 2016. There were no dispositions of real
estate included in discontinued operations for the year ended December 31, 2017. Loss on dispositions of real estate included in
discontinued operations was $0.2 million for the year ended December 31, 2016. For the year ended December 31, 2016, there were
two property dispositions recorded in discontinued operations. Impairment charges recorded in discontinued operations during the
32
years ended December 31, 2017 and 2016, of $1.0 million and $4.2 million, respectively, were attributable to 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. Environmental expenses 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, 2017, FFO increased by $10.4 million to $74.6 million, as compared to $64.2 million for the
year ended December 31, 2016, and AFFO increased by $4.9 million to $62.0 million, as compared to $57.1 million for the prior year.
The increase in FFO for the year ended December 31, 2017, was due to the changes in net earnings but excludes a $3.5 million
decrease in impairment charges, a $0.1 million decrease in depreciation and amortization expense and a $5.2 million decrease in gains
on dispositions of real estate. The increase in AFFO for the year ended December 31, 2017, also excludes a $5.9 million increase in
legal settlements and judgments, $0.7 million increase in insurance reimbursements, a $0.2 million increase in environmental litigation
accruals, a $0.5 million increase in environmental estimates and accretion expense, a $86 thousand decrease in acquisition costs and a
$1.4 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 during the periods presented (which are included in net earnings and FFO but
are excluded from AFFO).
Basic and diluted earnings per share was $1.26 per share for the year ended December 31, 2017, as compared to $1.12 per share
for the year ended December 31, 2016. Basic and diluted FFO per share for the year ended December 31, 2017, was $2.00 per share,
as compared to $1.87 per share for the year ended December 31, 2016. Basic and diluted AFFO per share for the year ended
December 31, 2017, was $1.66 per share, as compared to $1.67 per share for the year ended December 31, 2016.
Year ended December 31, 2016, compared to year ended December 31, 2015
Revenues from rental properties included in continuing operations increased by $4.9 million to $96.7 million for the year ended
December 31, 2016, as compared to $91.8 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 $93.3 million for the year ended
December 31, 2016, as compared to $87.3 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 $15.0 million and $15.3 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
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 taxes, state and
local taxes, municipal charges, maintenance expense and reimbursable tenant expenses, were $23.2 million for the year ended
December 31, 2016, as compared to $24.6 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 $8.6 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 $3.5 million to
$2.7 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 environmental litigation accrual 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.
33
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. Gains
on disposition of real estate vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the
directions of change in reported gains for one period, as compared to prior periods.
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. Other income for the year ended December 31, 2016, was primarily attributable
to $1.1 million received from insurance reimbursements and $0.5 million received from legal settlements and judgments. For the year
ended December 31, 2015, other income was primarily the result of distributions we received from legal settlements and judgments
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 decreased by $0.7 million to a loss of $1.4 million for the year ended December 31, 2016, as
compared to a loss of $2.1 million for the year ended December 31, 2015. The change was primarily due to a decrease in loss from
operating activities in discontinued operations and lower gains on dispositions of real estate. 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 $4.2 million and $5.7 million, respectively, were attributable to reductions in our estimates of value
for properties held for sale and the accumulation of asset retirement costs as a result of increases in estimated environmental liabilities
which increased the carrying value of certain properties above their fair value. Gains on disposition of real estate and impairment
charges vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the directions of change
in reported gains and impairment charges for one period, as compared to prior periods.
For the year ended December 31, 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 increased by $9.7 million to $57.1 million, as compared to $47.4 million for the prior year.
FFO includes 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 increase in AFFO for the year ended December 31,
2016, also excludes a $17.7 million decrease in legal settlements and judgments, of which $18.2 million was received from the
Marketing Estate in 2015, a $1.1 million increase in insurance reimbursements, a $0.4 million increase in environmental litigation
accruals, a $0.1 million decrease in the allowance for deferred rent receivable, a $3.1 million increase in environmental estimates and
accretion expenses, 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
during the periods presented (which are included in net earnings and FFO but are excluded from AFFO).
34
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 $1.67 per share, as compared to $1.40 per share for the year ended December 31, 2015.
Liquidity and Capital Resources
Our principal sources of liquidity are the cash flows from our operations, funds available under our Revolving Facility which is
scheduled to mature in June 2018, proceeds from the sale of shares of our common stock through offerings, from time to time, under
our ATM Program 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, proceeds from the sale of shares of our common stock under our ATM
Program and available cash and cash equivalents.
Our cash flow activities for the years ended December 31, 2017, 2016 and 2015, are summarized as follows (in thousands):
Net cash flow provided by operating activities
Net cash flow (used in)/provided by investing activities
Net cash flow provided by/(used in) financing activities
Operating Activities
2017
Year ended December 31,
2016
$
$
56,742 $
(206,217 )
157,094 $
36,874 $
12,980
(41,011 ) $
2015
49,688
(205,028 )
155,867
Net cash flow from operating activities increased by $19.8 million for the year ended December 31, 2017, to $56.7 million, as
compared to $36.9 million for the year ended December 31, 2016. The increase in net cash flow from operating activities for the year
ended December 31, 2017, is primarily the result of the Empire Transaction and Applegreen Transaction, and the receipt of
approximately $6.4 million for legal settlements and judgments. Net cash provided by operating activities represents cash received
primarily from rental income and interest income less cash used for property costs, environmental expenses, general and
administrative expenses and interest expense. The change in net cash flow provided by operating activities for the years ended
December 31, 2017, 2016 and 2015, 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 and
redevelopment activities. Net cash flow from investing activities decreased by $219.2 million for the year ended December 31, 2017,
to a use of $206.2 million, as compared to net cash flow provided by investing activities of $13.0 million for the year ended
December 31, 2016. The decrease in net cash flow from investing activities for the year ended December 31, 2017, was primarily due
to the property acquisitions we made during the year of $214.0 million and a decrease in the collection of notes and mortgage
receivable of $15.6 million.
Financing Activities
Net cash flow provided by financing activities increased by $198.1 million for the year ended December 31, 2017, to $157.1
million as compared to a use of $41.0 million for the year ended December 31, 2016. The increase in net cash flow from financing
activities for the year ended December 31, 2017, was primarily due to an increase in net borrowings under our Revolving Facility of
$30.0 million, as compared to net repayments of $19.0 million for the year ended December 31, 2016, an increase in borrowings under
the Second Restated Prudential Note Purchase Agreement of $50.0 million and an increase in net proceeds from issuance of common
stock of $104.3 million from our Equity Offering (as defined below).
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 unsecured revolving
credit facility (the “Revolving Facility”), which is scheduled to mature in June 2018 and a $50.0 million unsecured 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.
On February 21, 2017, we entered into a First Amendment to the Credit Agreement to permit the Second Restated Prudential
Note Purchase Agreement described under “Senior Unsecured Notes” below.
35
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 Term Loan does not provide for
scheduled reductions in the principal balance prior to its maturity.
Senior Unsecured Notes
On February 21, 2017, we entered into a second amended and restated note purchase and guarantee agreement (the “Second
Restated Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with The
Prudential Insurance Company of America (“Prudential”) and certain affiliates of Prudential. Pursuant to the Second Restated
Prudential Note Purchase Agreement, we agreed that our (a) 6.0% Series A Guaranteed Senior Notes due February 25, 2021, in the
original aggregate principal amount of $100.0 million (the “Series A Notes”) and (b) 5.35% Series B Guaranteed Senior Notes due
June 2, 2023, in the original aggregate principal amount of $75.0 million (the “Series B Notes”) that were outstanding under the
existing senior note purchase agreement would continue to remain outstanding under the Second Restated Prudential Note Purchase
Agreement and we authorized and issued our 4.75% Series C Guaranteed Senior Notes due February 25, 2025, in the aggregate
principal amount of $50.0 million (the “Series C Notes” and, together with the Series A Notes and Series B Notes, the “Notes”). The
Second Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Notes
prior to their respective maturities.
Debt Maturities
The amounts outstanding under our Credit Agreement and Second Restated Prudential Note Purchase Agreement, exclusive of
extension options, are as follows (in thousands):
Unsecured Revolving Credit Facility
Unsecured Term Loan
Series A Notes
Series B Notes
Series C Notes
Total debt
Unamortized debt issuance costs, net
Total debt, net
Maturity
Date
June 2018
June 2020
February 2021
June 2023
February 2025
Interest Rate
December 31,
2017
December 31,
2016
3.72 % $
3.85 %
6.00 %
5.35 %
4.75 %
$
105,000 $
50,000
100,000
75,000
50,000
380,000
(842 )
379,158 $
75,000
50,000
100,000
75,000
—
300,000
(1,456 )
298,544
As of December 31, 2017, we are in compliance with all of the material terms of the Credit Agreement and Second Restated
Prudential Note Purchase Agreement.
Equity Offering
On July 10, 2017, we entered into an underwriting agreement (the “Underwriting Agreement”) with Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities LLC and KeyBanc Capital Markets Inc., as representatives of the several
underwriters (the “Underwriters”), pursuant to which we sold to the Underwriters 4.1 million shares of common stock (the “Equity
Offering”). Pursuant to the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to an
additional 0.6 million shares of common stock. We received net proceeds from the Equity Offering, including the full exercise by the
Underwriters of their option to purchase additional shares, of $104.3 million after deducting the underwriting discount and offering
expenses. The net proceeds of the Equity Offering were used to repay amounts outstanding under our Revolving Facility and
subsequently were used to fund the Empire Transaction and the Applegreen Transaction.
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.
36
During the years ended December 31, 2017 and 2016, we issued 0.5 million and 0.7 million shares of our common stock,
respectively, and received net proceeds of $13.5 million and $14.9 million, respectively. 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.
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, 2017, we acquired fee simple interests in 103 convenience store and gasoline station
properties for an aggregate purchase price of $214.0 million. 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 various transactions, for an aggregate purchase price of $7.7 million. For additional information regarding
our property acquisitions see Note 13 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
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 either for a new
convenience and gasoline use or for an alternative single-tenant net lease retail use. For the year ended December 31, 2017, we spent
$1.6 million of construction-in-progress costs related to our redevelopment activities. During the year ended December 31, 2017, we
completed two redevelopment projects and $0.4 million of construction-in-progress costs were transferred to buildings and
improvements on our consolidated balance sheet. As of December 31, 2017, we have completed three redevelopment projects for
aggregate cost of $1.4 million.
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, 2017, we have a remaining commitment to fund up to $8.7 million in the aggregate in capital
improvements in certain properties previously leased to Marketing and now leased in unitary triple net leases with other tenants.
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.
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 Internal Revenue Service. 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 Second Restated Prudential Note Purchase Agreement and other factors, and therefore is not assured. In particular,
our Credit Agreement and Second Restated Prudential Note Purchase Agreement prohibit the payment of dividends during certain
events of default.
Cash dividends paid to our shareholders aggregated $39.3 million, $36.2 million and $35.2 million, for the years ended
December 31, 2017, 2016 and 2015, 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, 2017, were comprised of borrowings under the
Credit Agreement and the Second Restated Prudential Note Purchase Agreement (excluding extension options and unamortized debt
issuance costs), 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.
37
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, 2017, exclusive of extension options, are
summarized below (in thousands):
Less
Than
One Year
One to
Three
Years
Total
Three
to
Five
Years
More
Than
Five
Years
Operating and capital leases
Credit agreement
Senior unsecured notes
Interest on debt (a)
Estimated environmental remediation expenditures (b)
Capital improvements (c)
Total
$
24,150 $
155,000
225,000
63,952
63,565
8,735
3,328
—
125,000
6,796
12,713
7,722
$ 540,402 $ 141,070 $ 112,012 $ 131,761 $ 155,559
6,062 $
105,000
—
15,952
13,932
124
5,111 $
—
100,000
13,696
12,639
315
9,649 $
50,000
—
27,508
24,281
574
(a) For our Credit Agreement, which bears interest at floating rates, future interest expense was calculated using the cost of
borrowing as of December 31, 2017.
(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 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 our
most critical accounting policies relate to revenue recognition and deferred rent receivable, 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.
38
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.
39
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. 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.
In July 2012, we purchased a ten-year pollution legal liability insurance policy covering substantially 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. In addition to the environmental insurance policy purchased by the Company, we also took assignment of certain
environmental insurance policies, and rights to reimbursement for claims made thereunder, from Marketing, by order of the U.S.
Bankruptcy Court during Marketing’s bankruptcy proceedings. Under these assigned polices, we have received and expect to continue
to receive reimbursement of certain remediation expenses for covered claims.
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 tenant or other counterparty 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 tenant or other counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if our tenant or other 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 capability, 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 substantially 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 for environmental contamination
discovered (other than as a result of a voluntary site investigation) during the first 10 years of the lease term (or a shorter period for a
minority of such leases). After expiration of such 10-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 10 years of the
40
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. We have also agreed to be responsible for environmental contamination that existed prior to the
sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the
first five years after the sale of the properties. For 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.
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 have 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 10 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.
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,
2017, we had accrued a total of $63.6 million for our prospective environmental remediation obligations. This accrual includes
(a) $18.6 million, which was our best estimate of reasonably estimable environmental remediation liability, including obligations to
remove USTs for which we are responsible, net of estimated recoveries and (b) $45.0 million for future environmental liabilities
related to preexisting unknown contamination. As of December 31, 2016, we had accrued a total of $74.5 million for our prospective
environmental remediation obligations. This accrual includes (a) $29.5 million, which was our best estimate of reasonably estimable
environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries
and (b) $45.0 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, $3.4 million,
$4.1 million and $4.8 million of net accretion expense was recorded for the years ended December 31, 2017, 2016 and 2015,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2017, 2016 and 2015, we
recorded credits to environmental expenses, included in continuing and discontinued operations, aggregating $6.9 million, $7.0
million and $4.6 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
environmental litigation accruals.
During the years ended December 31, 2017 and 2016, we increased the carrying value of certain of our properties by $5.5
million and $11.3 million, respectively, due to increases in estimated environmental remediation costs. The recognition and
subsequent changes in estimates in environmental liabilities and the increase or decrease in carrying value of the properties are non-
cash transactions which do not appear on the face of the consolidated statements of cash flows.
Capitalized asset retirement costs are being depreciated over the estimated remaining life of the UST, a 10-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, 2017, 2016 and 2015, were $4.3 million, $5.1 million and $6.0 million, respectively. Capitalized asset retirement costs
were $45.4 million (consisting of $18.7 million of known environmental liabilities and $26.7 million of reserves for future
environmental liabilities) and $49.1 million (consisting of $20.6 million of known environmental liabilities and $28.5 million of
reserves for future environmental liabilities) as of December 31, 2017 and 2016, respectively. We recorded impairment charges
aggregating $6.9 million and $11.7 million for the years ended December 31, 2017 and 2016, respectively, in continuing and
discontinued operations for capitalized asset retirement costs.
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.
41
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, and possible changes in the environmental rules and regulations, enforcement
policies, and reimbursement programs of various states.
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. 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 Litigation
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of December 31,
2017 and 2016, we had accrued an aggregate $12.3 million and $11.8 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, our MTBE litigations in the states of New Jersey, Pennsylvania and
Maryland, and our lawsuit with the State of New York pertaining to a property formerly owned by us in Uniondale NY, 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, and amended on February 21, 2017, 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 unsecured revolving facility (the
“Revolving Facility”), which is scheduled to mature in June 2018 and a $50.0 million unsecured 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 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 Term Loan 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, 2017, were $155.0 million.
Based on our average outstanding borrowings under the Credit Agreement of $155.0 million for the year ended December 31,
2017, an increase in market interest rates of 1.00% for 2018 would decrease our 2018 net income and cash flows by approximately
$1.6 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 $155.0 million outstanding borrowings under the Credit Agreement is indicative of our future
average floating interest rate borrowings for 2018 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.
42
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, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Page
44
45
46
48
70
43
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 $1,840 and $2,006, respectively
Prepaid expenses and other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Borrowings under credit agreement, net
Senior unsecured notes, net
Environmental remediation obligations
Dividends payable
Accounts payable and accrued liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value; 10,000,000 and 20,000,000 shares authorized,
respectively; unissued
Common stock, $0.01 par value; 60,000,000 and 50,000,000 shares authorized,
respectively; 39,696,110 and 34,393,114 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,
2017
2016
589,497 $
379,785
1,682
970,964
(133,353 )
837,611
—
837,611
89,587
32,366
19,992
821
33,610
3,712
55,055
1,072,754 $
154,502 $
224,656
63,565
12,846
63,490
519,059
—
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
877,306
123,801
174,743
74,516
9,742
63,586
446,388
—
—
—
397
604,872
(51,574 )
553,695
1,072,754 $
344
485,659
(55,085 )
430,918
877,306
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
44
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
Allowance (recoveries) 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:
Earnings (loss) from operating activities
(Loss) gains on dispositions of real estate
Earnings (loss) from discontinued operations
Net earnings
Basic and diluted earnings per common share:
Earnings from continuing operations
Earnings (loss) earnings from discontinued operations
Net earnings
Weighted average common shares outstanding:
Basic and diluted
2017
Year ended December 31,
2016
2015
$
101,332 $
15,829
2,992
120,153
96,711 $
15,017
3,543
115,271
22,345
8,279
3,098
13,879
205
19,089
66,895
53,258
1,041
8,518
(17,769 )
45,048
2,138
—
2,138
47,186 $
1.20 $
0.06
1.26 $
23,205
8,566
2,654
14,155
(448 )
19,170
67,302
47,969
6,390
2,027
(16,561 )
39,825
(1,236 )
(178 )
(1,414 )
38,411 $
1.16 $
(0.04 )
1.12 $
$
$
$
91,822
15,256
3,698
110,776
24,583
11,615
6,223
16,930
1,053
16,974
77,378
33,398
2,272
18,301
(14,493 )
39,478
(2,407 )
339
(2,068 )
37,410
1.17
(0.06 )
1.11
36,897
33,806
33,420
Dividends declared per common share
$
1.16 $
1.03 $
1.15
The accompanying notes are an integral part of these consolidated financial statements.
45
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
Allowance (recoveries) 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
Amortization of investment in direct financing leases
Collection of notes and mortgages receivable
Net cash flow (used in) provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements
Repayments under credit agreements
Proceeds from 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)
Payments in settlement of restricted stock units
Proceeds from issuance of common stock, net - equity offering
Proceeds from issuance of common stock, net - ATM
Net cash flow provided by (used in) financing activities
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
$
46
2017
Year ended December 31,
2016
2015
$
47,186 $
38,411 $
37,410
19,089
9,321
19,170
12,814
16,974
17,361
(1,041 )
—
(3,644 )
205
(522 )
771
3,448
1,350
(1,295 )
489
(19,798 )
1,183
56,742
(214,000 )
(434 )
(1,255 )
2,739
—
2,346
2,511
1,876
(206,217 )
135,000
(105,000 )
50,000
(342 )
—
(39,299 )
(157 )
247
(1,195 )
104,312
13,528
157,094
7,619
13,194
20,813 $
(6,390 )
178
(4,516 )
(448 )
(569 )
851
4,107
1,426
(2,383 )
445
(24,640 )
(1,582 )
36,874
(7,688 )
(298 )
(406 )
3,957
88
(2,206 )
2,001
17,532
12,980
8,000
(27,000 )
—
(236 )
(400 )
(36,231 )
—
260
(290 )
—
14,886
(41,011 )
8,843
4,351
13,194 $
(2,272 )
(339 )
(4,401 )
1,089
(1,496 )
1,150
4,829
1,090
(1,546 )
(189 )
(23,485 )
3,513
49,688
(219,192 )
(334 )
(687 )
5,604
1,424
2,844
1,666
3,647
(205,028 )
186,000
(67,000 )
75,000
(249 )
(50 )
(35,150 )
(2,432 )
(187 )
(65 )
—
—
155,867
527
3,824
4,351
Supplemental disclosures of cash flow information
Cash paid (refunded) during the period for:
Interest
Income taxes
Environmental remediation obligations
Non-cash transactions
Dividends declared but not yet paid
Issuance of notes and mortgages receivable related to property
dispositions
Accrued construction in progress
2017
Year ended December 31,
2016
2015
$
16,435 $
(195 )
12,944
15,707 $
368
17,633
12,643
341
19,123
12,846
9,742
15,897
$
1,505
— $
1,814
— $
17,876
268
The accompanying notes are an integral part of these consolidated financial statements.
47
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
Certain prior years amounts in the consolidated financial statements have been reclassified to conform to the presentation used
in the year ended December 31, 2017.
Real Estate
Real estate assets are stated at cost less accumulated depreciation and amortization. For acquisitions of real estate which are
accounted for as business combinations, 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.
Acquisitions of real estate which do not meet the definition of a business are accounted for as asset acquisitions. The accounting
model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition costs are
capitalized and allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. See Note 13 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 10 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.
48
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, 2017 and 2016.
When we enter into a contract to sell properties that are recorded as direct financing leases, we evaluate whether we believe that
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, 2017 and 2016.
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, may 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, 2017 and 2016, restricted cash of $821,000 and $671,000, respectively, consisted of security deposits
received from our tenants.
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 a tenant will not make all of its contractual lease payments during the current lease term. 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.
49
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 $9,321,000, $12,814,000 and $17,361,000 for the years ended December 31,
2017, 2016 and 2015, 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 $3,288,000 of the $9,321,000 in impairments recognized during the year ended December 31, 2017) and (ii) discounted
cash flow models (this method was used to determine $451,000 of the $9,321,000 in impairments recognized during the year ended
December 31, 2017). During the year ended December 31, 2017, we recorded $5,582,000 of the $9,321,000 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 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 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.
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates of fair
value that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the consolidated
financial statements and revenues and expenses during the period reported using a hierarchy (the “Fair Value Hierarchy”) that
prioritizes the inputs to valuation techniques used to measure the fair value. The Fair Value Hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to
unobservable inputs (Level 3 measurements). The levels of the Fair Value Hierarchy are as follows: “Level 1” – inputs that reflect
unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;
“Level 2” – inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in
markets that are not considered to be active; and “Level 3” – inputs that are unobservable. Certain types of assets and liabilities are
50
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.
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 estimated
recoveries from state UST remediation funds considering estimated recovery rates developed from prior experience with the funds.
Net environmental liabilities are currently measured based on their expected future cash flows which have been adjusted for inflation
and discounted to present value. We accrue for environmental liabilities that we believe are allocable to other potentially responsible
parties if it becomes probable that the other parties will not pay their environmental remediation obligations.
Litigation
Legal fees related to litigation are expensed as legal services are performed. We provide for litigation accruals, including certain
litigation related to environmental matters, when it is probable that a liability has been incurred and a reasonable estimate of the
liability can be made. If the estimate of the liability can only be identified as a range, and no amount within the range is a better
estimate than any other amount, the minimum of the range is accrued for the liability. We accrue our share of environmental litigation
liabilities based on our assumptions of the ultimate allocation method and share that will be used when determining our share of
responsibility.
Income Taxes
We and our subsidiaries file a consolidated federal income tax return. Effective January 1, 2001, we elected to qualify, and
believe that 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 2014, 2015 and 2016, and tax returns which will be filed for the year
ended 2017, 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. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross versus Net). In April 2016, the FASB issued ASU 2016-
10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. In May 2016, the
FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedients and ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC
Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016
EITF Meeting. In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue
from Contracts with Customers. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from
Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842). These amendments provide additional
clarification and implementation guidance on the previously issued ASU 2014-09. These ASUs do not change the core principles of
the guidance stated in ASU 2014-09, instead these amendments are intended to clarify and improve operability of certain topics
included within the revenue standard. ASU 2014-09 establishes a single comprehensive model for entities to use in accounting for
revenue from contracts with customers and supersedes most of the existing revenue recognition guidance. We evaluated each of the
Company’s revenue streams to determine the sources of revenue that are impacted by ASU 2014-09 and concluded that only sales of
real estate fall under the scope of Topic 606. Specifically, we evaluated the impact of the guidance on timing of gain recognition for
dispositions and concluded there was no impact to our consolidated financial statements. The effective date and transition
requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09, which is effective
for fiscal years, and for interim periods within those years, beginning after December 15, 2017. Early adoption is permitted as of the
original effective date. Our revenue-producing contracts are primarily leases that are not within the scope of ASU 2014-09. Effective
51
January 1, 2018, we adopted ASU 2014-09 and the related practical expedients, technical corrections, and improvements for certain
aspects of ASU 2014-09, on a modified retrospective basis. Therefore, we have concluded that adoption of the new revenue
recognition guidance is not expected to have an impact on our consolidated financial statements or notes 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. Under ASU
2016-2 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 fiscal years, and for interim periods within those years, 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. In January 2018, the FASB
released an exposure draft to ASU 2016-02 that if issued in its current form would (1) simplify transition requirements for both lessees
and lessors by adding an option that would permit an organization to apply the transition provisions of the new standard at its adoption
date instead of at the earliest comparative period presented in its financial statements and (2) provide a practical expedient for lessors
that would permit lessors to not be required to separate nonlease components from the associated lease components if certain
conditions are met. We continue to evaluate the effect the adoption of ASU 2016-02 will have on our consolidated financial
statements. However, we currently believe that the adoption will not have a material impact for operating leases where we are a lessor
and we will continue to record revenues from rental properties for our operating leases on a straight-line basis. However, for leases
where we are a lessee we expect to record a lease liability and a right of use asset on our consolidated financial statements upon
adoption. The lease liability and right-of-use asset are to be carried at the present value of remaining expected future lease payments.
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. We adopted ASU 2016-09 on January 1, 2017. The adoption of ASU 2016-
09 did not have an impact 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.
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. Effective January 1, 2018,
we adopted ASU 2016-15. The adoption of this guidance did not have an impact on our consolidated financial statements or notes to
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 classified 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 for annual periods beginning after December 15, 2017, (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. As a result of
this adoption, we 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 activities within the statement. At December 31, 2017 and 2016, restricted
cash consisted of security deposits received from our tenants.
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. As a result of this adoption, we have evaluated real estate acquisitions completed during 2017 under
the new framework and determined that the assets acquired did not meet the definition of a business. Accordingly, we accounted for
these transactions as asset acquisitions.
52
On February 22, 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of
Nonfinancial Assets (Subtopic 610-20), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of
Nonfinancial Assets (“ASU 2017-05”) to provide guidance for recognizing gains and losses from the transfer of nonfinancial assets
and in substance nonfinancial assets in contracts with non-customers, unless other specific guidance applies. ASU 2017-05 requires a
company to derecognize nonfinancial assets once it transfers control of a distinct nonfinancial asset or distinct in substance
nonfinancial asset. As a result of the new guidance, the guidance specific to real estate sales in ASC 360-20 will be eliminated. As
such, sales and partial sales of real estate assets will now be subject to the same derecognition model as all other nonfinancial assets.
ASU 2017-05 is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting
period. The effective date of this guidance coincides with revenue recognition guidance. Effective January 1, 2018, we adopted ASU
2017-05 on a modified retrospective basis. Upon adoption, we will appropriately apply the guidance to prospective disposals of
nonfinancial assets within the scope of Subtopic 610-20. The adoption of this guidance is not expected to have an impact on our
consolidated financial statements or notes to our consolidated financial statements.
NOTE 2. — LEASES
As of December 31, 2017, we owned 828 properties and leased 79 properties from third-party landlords. These 907 properties
are located in 28 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, 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, 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, 2017, 2016 and 2015, were
$101,332,000, $96,711,000 and $91,822,000, respectively. Rental income contractually due or received from our tenants in revenues
from rental properties included in continuing operations was $99,355,000, $93,294,000 and $87,280,000 for the years ended
December 31, 2017, 2016 and 2015, respectively.
In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due 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 $1,976,000, $3,417,000 and $4,471,000 for the years ended December 2017, 2016 and 2015, respectively. We reserve
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, 2017 and 2016, respectively.
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 $15,829,000, $15,017,000 and
$15,256,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
We incurred $126,000, $148,000 and $120,000 of lease origination costs for the years ended December 31, 2017, 2016 and
2015, 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 $89,587,000 investment in direct financing leases as of December 31, 2017, are minimum lease
payments receivable of $154,441,000 plus unguaranteed estimated residual value of $13,979,000 less unearned income of
$78,833,000. 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.
53
Future contractual minimum annual rentals receivable from our tenants, which have terms in excess of one year as of
December 31, 2017, are as follows (in thousands):
Year Ending
December 31,
2018
2019
2020
2021
2022
Thereafter
$
Operating
Leases
Direct
Financing Leases
Total
95,991 $
97,000
93,252
90,210
89,582
676,461
12,872 $
13,079
13,375
13,552
13,616
87,947
108,863
110,079
106,627
103,762
103,198
764,408
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 nine years,
including renewal options. Future minimum annual rentals payable under such leases, excluding renewal options, are as follows: 2018
— $6,062,000, 2019 — $5,378,000, 2020 — $4,271,000, 2021 — $3,358,000, 2022 — $1,753,000 and $3,328,000 thereafter.
Rent expense, substantially all of which consists of minimum rentals on non-cancelable operating leases, amounted to
$5,091,000, $5,376,000 and $5,918,000 for the years ended December 31, 2017, 2016 and 2015, respectively, and is included in
property costs using the straight-line method. Rent received under subleases for the years ended December 31, 2017, 2016 and 2015,
was $9,296,000, $9,153,000 and $9,653,000, respectively, and is included in rental revenue discussed above.
Major Tenants
As of December 31, 2017, we had three significant tenants by revenue:
• We leased 163 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”). In the aggregate, our leases with
subsidiaries of Global Partners represented 21% of our total revenues for the years ended December 31, 2017 and 2016.
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% of our total revenues for the years
ended December 31, 2017 and 2016.
• We leased 76 convenience store and gasoline station properties pursuant to two separate unitary leases to subsidiaries
of Chestnut Petroleum Dist., Inc. (“Chestnut Petroleum”). In the aggregate, our leases with subsidiaries of Chestnut
Petroleum represented 13% and 15% of our total revenues for the years ended December 31, 2017 and 2016,
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.
Marketing and the Master Lease
As of December 31, 2017, 383 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 with the U.S. Bankruptcy Court
for Chapter 11 bankruptcy protection. The bankruptcy proceedings resulted in the termination of the Master Lease effective April 30,
2012, followed by the liquidation of Marketing, which culminated with final distributions to creditors in November 2015. 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.
As of December 31, 2017, we have entered into long-term triple-net leases with petroleum distributors for 14 separate property
portfolios comprising 338 properties in the aggregate and 28 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 or 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, 2017, we have a
remaining commitment to fund up to $8,735,000 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.
54
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, 2017, we removed $13,813,000 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 $3,005,000 was 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.
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, may 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,
2017 and 2016, we had accrued $12,311,000 and $11,768,000, 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 $1,044,000
and $801,000 for certain of these matters during the years ended December 31, 2017 and 2016, 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, our MTBE litigations in the states of New Jersey, Pennsylvania
and Maryland, and our lawsuit with the State of New York pertaining to a property formerly owned by us in Uniondale NY, 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
involves bank-to-bank dredging and installing an engineered cap with an estimated cost of $1,380,000,000. On March 31, 2016, we
55
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.
By letter dated March 30, 2017, the EPA advised the recipients of the Notice that it would be entering into cash out settlements
with 20 potentially responsible parties to resolve their alleged liability for the lower 8-mile remedial action that is the subject of the
ROD. The letter also stated that the EPA would begin a process for identifying other potentially responsible parties for negotiation of
cash out settlements to resolve their alleged liability for the lower 8-mile remedial action that is the subject of the ROD. We were not
included in the initial group of 20 parties identified by the EPA for cash out settlements. In January 2018, the EPA published a notice
of its intent to enter into a final settlement agreement with 15 of the identified 20 parties to resolve their respective alleged liability for
the ROD work, each for a payment to the EPA in the amount of $280,600. The EPA has also been engaged in discussions with the
remaining recipients of the Notice regarding a proposed framework for an allocation process that will lead to offers of cash-out
settlements to certain additional parties and a consent decree in which parties that are not offered a cash-out settlement will agree to
perform the lower 8-mile remedial action. The EPA-commenced allocation process is scheduled to conclude by mid-2019.
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.
The majority of the named defendants have already settled their cases with the State of New Jersey. A portion of the case
(“bellwether” trials) has 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 plaintiffs’
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 we have accrued for the New Jersey MDL Proceedings as we do not believe that plaintiffs’ settlement proposal is realistic and
there remains uncertainty as to the allegations in this case as they relate to us, our defenses to the claims, our rights to indemnification
or contribution from other parties and the aggregate possible amount of damages for which we may be held liable. It is possible that
losses related to the New Jersey MDL Proceedings in excess of the amounts accrued as of December 31, 2017, 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.
56
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 proceedings. 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.
MTBE Litigation – State of Maryland
On December 17, 2017, the State of Maryland, by and through the Attorney General on behalf of the Maryland Department of
Environment and the Maryland Department of Health (the “State of Maryland”), filed a Complaint in the Circuit Court for Baltimore
City related to alleged statewide MTBE contamination in Maryland (the “Complaint”). The Complaint was served upon us on January
19, 2018. The Complaint names us and more than 60 other defendants, including 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 the defendants’ unfair and deceptive trade practices in the marketing of MTBE and gasoline containing MTBE.
The plaintiffs also seek to recover costs paid or incurred by the State of Maryland to detect, investigate, treat and remediate MTBE
from public and private water wells and groundwater, punitive damages and the award of attorneys’ fees and litigation costs. The
plaintiffs assert causes of action against all defendants based on multiple theories, including strict liability – defective design; strict
liability – failure to warn; strict liability for abnormally dangerous activity; public nuisance; negligence; trespass; and violations of
Titles 4, 7 and 9 of the Maryland Environmental Code.
On February 14, 2018, defendants removed the case to the United States District Court for the District of Maryland. It is unclear
whether the matter will ultimately be removed to the MTBE MDL proceedings or remain in federal court in Maryland. 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.
Uniondale, NY Litigation
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 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 in later
stages and, as it nears completion, a schedule for trial will be established. We are unable to estimate the range of loss in excess of the
amount we have accrued for this lawsuit. It is possible that losses related to this case, in excess of the amounts accrued, as of
December 31, 2017, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability
to pay dividends or stock price.
NOTE 4. — DEBT
The amounts outstanding under our Credit Agreement and Second Restated Prudential Note Purchase Agreement (both defined
below) are as follows (in thousands):
Unsecured Revolving Credit Facility
Unsecured Term Loan
Series A Notes
Series B Notes
Series C Notes
Total debt
Unamortized debt issuance costs, net
Total debt, net
Maturity
Date
June 2018
June 2020
February 2021
June 2023
February 2025
57
Interest
Rate
December 31,
2016
December 31,
2017
105,000 $
50,000
100,000
75,000
50,000
380,000
(842 )
379,158 $
3.72 % $
3.85 %
6.00 %
5.35 %
4.75 %
$
75,000
50,000
100,000
75,000
—
300,000
(1,456 )
298,544
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 unsecured revolving
credit facility (the “Revolving Facility”), which is scheduled to mature in June 2018 and a $50,000,000 unsecured 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.
On February 21, 2017, we entered into a First Amendment to the Credit Agreement to permit the Second Restated Prudential
Note Purchase Agreement described under “Senior Unsecured Notes” below.
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 Term Loan does not provide for
scheduled reductions in the principal balance prior to its maturity.
Senior Unsecured Notes
On February 21, 2017, we entered into a second amended and restated note purchase and guarantee agreement (the “Second
Restated Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with The
Prudential Insurance Company of America (“Prudential”) and certain affiliates of Prudential. Pursuant to the Second Restated
Prudential Note Purchase Agreement, we agreed that our (a) 6.0% Series A Guaranteed Senior Notes due February 25, 2021, in the
original aggregate principal amount of $100,000,000 (the “Series A Notes”) and (b) 5.35% Series B Guaranteed Senior Notes due
June 2, 2023, in the original aggregate principal amount of $75,000,000 (the “Series B Notes”) that were outstanding under the
existing senior note purchase agreement would continue to remain outstanding under the Second Restated Prudential Note Purchase
Agreement and we authorized and issued our 4.75% Series C Guaranteed Senior Notes due February 25, 2025, in the aggregate
principal amount of $50,000,000 (the “Series C Notes” and, together with the Series A Notes and Series B Notes, the “Notes”). The
Second Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Notes
prior to their respective maturities.
Covenants
The Credit Agreement and the Second Restated Prudential Note Purchase Agreement contain 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 and the Second Restated Prudential Note
Purchase Agreement also contain customary events of default, including cross defaults to each other, change of control and failure to
maintain REIT status (provided that the Second Restated Prudential Note Purchase Agreement requires a mandatory offer to prepay
the Notes upon a change in control in lieu of a change of control event of default). 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 or under the Second
Restated Prudential Note Purchase Agreement and could result in the acceleration of our indebtedness under the Credit Agreement and
the Second Restated Prudential Note Purchase Agreement. We may be prohibited from drawing funds under the Revolving Facility if
there is any event or condition that constitutes an event of default under the Credit Agreement or that, with the giving of any notice,
the passage of time, or both, would be an event of default under the Credit Agreement.
As of December 31, 2017, we are in compliance with all of the material terms of the Credit Agreement and Second Restated
Prudential Note Purchase Agreement, including the various financial covenants described herein.
58
Debt Maturities
As of December 31, 2017, scheduled debt maturities, including balloon payments, are as follows (in thousands):
2018 (a)
2019
2020
2021
2022
Thereafter
Total
Revolving
Facility
Term Loan
Senior
Unsecured Notes
105,000 $
—
—
—
—
—
105,000 $
— $
—
50,000
—
—
—
50,000 $
— $
—
—
100,000
—
125,000
225,000 $
Total
105,000
—
50,000
100,000
—
125,000
380,000
$
(a) The Revolving Facility matures in June 2018 and may be extended for one year at our election, subject to the terms of the
Credit Agreement and our continued compliance with its provisions.
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. 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.
In July 2012, we purchased a 10-year pollution legal liability insurance policy covering substantially all of our properties at that
time 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. In addition to the environmental insurance policy purchased by the Company, we also took assignment of certain
environmental insurance policies, and rights to reimbursement for claims made thereunder, from Marketing, by order of the U.S.
Bankruptcy Court during Marketing’s bankruptcy proceedings. Under these assigned polices, we have received and expect to continue
to receive reimbursement of certain remediation expenses for covered claims.
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 tenant or other counterparty 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 tenant or other counterparty will not meet its environmental obligations. We may ultimately be
responsible to pay for environmental liabilities as the property owner if our tenant or other 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 capability, 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 substantially 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 for environmental contamination
discovered (other than as a result of a voluntary site investigation) during the first 10 years of the lease term (or a shorter period for a
minority of such leases). After expiration of such 10-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
59
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 10 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. We have also agreed to be responsible for environmental contamination that existed prior to the
sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation) during the
first five years after the sale of the properties. For 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.
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 have 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 10 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
We measure our environmental remediation liabilities 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 liabilities 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, 2017, we had accrued a total of $63,565,000 for our prospective environmental remediation obligations. This accrual
consisted of (a) $18,537,000, which was our best estimate of reasonably estimable environmental remediation liability, including
obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $45,028,000 for future environmental
liabilities related to preexisting unknown contamination. As of December 31, 2016, we had accrued a total of $74,516,000 for our
prospective environmental remediation obligations. This accrual consisted of (a) $29,507,000, which was our best estimate of
reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of
estimated recoveries and (b) $45,009,000 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, $3,448,000,
$4,107,000 and $4,829,000 of net accretion expense was recorded for the years ended December 31, 2017, 2016 and 2015,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2017, 2016 and 2015, we
recorded credits to environmental expenses, included in continuing and discontinued operations, aggregating $6,854,000, $7,007,000
and $4,639,000, 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 environmental
litigation accruals.
During the years ended December 31, 2017 and 2016, we increased the carrying value of certain of our properties by $5,477,000
and $11,346,000, respectively, due to changes 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.
Capitalized asset retirement costs are being depreciated over the estimated remaining life of the UST, a 10-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, 2017, 2016 and 2015, were $4,347,000, $5,126,000 and $5,997,000, respectively. Capitalized asset retirement costs
were $45,380,000 (consisting of $18,692,000 of known environmental liabilities and $26,688,000 of reserves for future environmental
liabilities) and $49,125,000 (consisting of $20,636,000 of known environmental liabilities and $28,489,000 of reserves for future
environmental liabilities) as of December 31, 2017 and 2016, respectively. We recorded impairment charges aggregating $6,932,000
and $11,658,000 for the years ended December 31, 2017 and 2016, respectively, in continuing and discontinued operations for
capitalized asset retirement costs.
60
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.
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, and possible changes in the environmental rules and regulations, enforcement
policies, and reimbursement programs of various states.
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. 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.
NOTE 6. — INCOME TAXES
Net cash (refunded) paid for income taxes for the years ended December 31, 2017, 2016 and 2015, of $(195,000), $368,000 and
$341,000, 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, 2017, 2016 and 2015, were: ordinary
income of 100.0%, 61.6% and 83.8%, capital gain distributions of 0.0%, 34.4% and 16.2% and non-taxable distributions of 0.0%,
4.0% 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 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 2014, 2015 and 2016, and tax returns which will be filed for the year ended 2017, 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, 2017
or 2016. However, uncertain tax matters may have a significant impact on the results of operations for any single fiscal year or interim
period.
61
NOTE 7. — SHAREHOLDERS’ EQUITY
A summary of the changes in shareholders’ equity for the years ended December 31, 2017, 2016 and 2015, is as follows (in
thousands):
BALANCE, DECEMBER 31, 2014
Net earnings
Dividends declared — $1.15 per share
Stock-based compensation and settlements
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 and settlements
BALANCE, DECEMBER 31, 2016
Net earnings
Dividends declared — $1.16 per share
Shares issued pursuant to Equity Offering, net
Shares issued pursuant to ATM Program, net
Shares issued pursuant to dividend reinvestment
Stock-based compensation and settlements
BALANCE, DECEMBER 31, 2017
Common Stock
Shares
Amount
33,417 $
Additional
Paid-in
Capital
334 $ 463,314 $
Dividends
Paid
in Excess
of Earnings
5
33,422 $
1,024
—
334 $ 464,338 $
653
256
43
19
34,393 $
4,715
513
48
27
39,696 $
14,879
7
4,409
3
897
—
—
1,136
344 $ 485,659 $
104,265
47
13,523
5
1,270
1
—
155
397 $ 604,872 $
Total
(56,624 ) $ 407,024
37,410
37,410
(38,897 )
(38,897 )
1,024
—
(58,111 ) $ 406,561
38,411
38,411
(35,385 )
(35,385 )
14,886
—
4,412
—
—
897
1,136
—
(55,085 ) $ 430,918
47,186
47,186
(43,675 )
(43,675 )
104,312
—
13,528
—
1,271
—
155
—
(51,574 ) $ 553,695
On March 1, 2017, our Board of Directors granted 94,250 restricted stock units (“RSU” or “RSUs”) under our Amended and
Restated 2004 Omnibus Incentive Compensation Plan. We have a stock option plan (the “Stock Option Plan”) under which our
authorization to grant options has expired. As of December 31, 2017, there were no options outstanding. As of December 31, 2016,
there were 5,000 options outstanding which were exercisable at $27.68 and expired on May 15, 2017. As of December 31, 2016, the
5,000 stock options outstanding had no intrinsic value.
On October 24, 2017, our Board of Directors approved Articles Supplementary to our Articles of Incorporation, as amended, to
reclassify 10,000,000 authorized shares of preferred stock, par value $.01 per share, into the same number of authorized but unissued
shares of common stock, par value $.01 per share, subject to further classification or reclassification and issuance by our Board of
Directors. The Articles Supplementary were filed with the Maryland State Department of Assessments and Taxation on October 25,
2017, and became effective on that date.
Equity Offering
On July 10, 2017, we entered into an underwriting agreement (the “Underwriting Agreement”) with Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities LLC and KeyBanc Capital Markets Inc., as representatives of the several
underwriters (the “Underwriters”), pursuant to which we sold to the Underwriters 4,100,000 shares of common stock (the “Equity
Offering”). Pursuant to the terms of the Underwriting Agreement, we granted the Underwriters a 30-day option to purchase up to an
additional 615,000 shares of common stock. We received net proceeds from the Equity Offering, including the full exercise by the
Underwriters of their option to purchase additional shares, of $104,312,000 after deducting the underwriting discount and offering
expenses. The net proceeds of the Equity Offering were used to repay amounts outstanding under our Revolving Facility and
subsequently were used to fund the Empire Transaction and Applegreen Transaction.
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
62
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 years ended December 31, 2017 and 2016, we issued 513,000 and 653,000 shares of common stock, respectively,
and received net proceeds of $13,528,000 and $14,886,000, respectively. 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, 2017, we paid regular quarterly cash dividends of $39,299,000 or $1.12 per share. 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).
On November 25, 2015, our Board of Directors declared a special dividend of $0.22 per share payable in either cash or common
stock. 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 made cash
payments aggregating $2,941,000 and issued 255,747 shares of common stock to our shareholders.
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 years ended December 31,
2017 and 2016, we issued 47,922 and 42,681 shares of common stock, respectively, under the dividend reinvestment plan and
received process of $1,271,000 and $897,000, respectively.
Stock-Based Compensation
Compensation cost for our stock-based compensation plans using the fair value method was $1,350,000, $1,426,000 and
$1,090,000 for the years ended December 31, 2017, 2016 and 2015, 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, extended the term to May 2019 and increased the
aggregate maximum number of shares of common stock that may be subject to awards granted during any calendar year to 100,000. In
May 2017, the Second Amended and Restated 2004 Omnibus Incentive Compensation Plan (the “Second Restated Plan”) was
approved at our annual meeting of shareholders, in order to, among other things, (i) increase by 500,000 to a total of 1,500,000 the
aggregate number of shares that the Company may issue under awards granted pursuant to the Second Restated Plan; (ii) increase
from 100,000 to 200,000 the maximum number of shares that may be subject to awards made in a calendar year to all participants
under the Second Restated Plan; and (iii) extended the term of the Second Restated Plan to May 2022. RSUs awarded under the
Second Restated 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 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 94,250, 86,600 and 79,250 RSUs and dividend equivalents in 2017, 2016 and 2015,
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 10 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
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, 2017, 2016 and 2015, dividend equivalents aggregating
63
approximately $542,000, $445,000 and $464,000, 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, 2014
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2015
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2016
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2017
Number of
RSUs
Outstanding
Fair Value
Amount
Average
Per RSU
332,525
79,250 $
(8,160 ) $
(3,240 ) $
400,375
86,600 $
(34,650 ) $
(22,550 ) $
429,775
94,250 $
(51,770 ) $
(23,330 ) $
448,925
1,429,700 $
144,300 $
55,600 $
1,593,400 $
635,800 $
415,400 $
2,484,400 $
1,306,300 $
587,100 $
18.04
17.68
17.16
18.40
18.35
18.42
26.36
25.23
25.17
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, 2017, 2016 and 2015, was $1,328,000, $1,418,000 and $1,083,000, respectively,
and is included in general and administrative expenses in our consolidated statements of operations. As of December 31, 2017, there
was $3,767,000 of unrecognized compensation cost related to RSUs granted under the 2004 Plan, which cost is expected to be
recognized over a weighted average period of approximately two years. The aggregate intrinsic value of the 448,925 outstanding
RSUs and the 225,385 vested RSUs as of December 31, 2017, was $12,193,000 and $6,121,000, respectively.
The following is a schedule of the vesting activity relating to RSUs outstanding:
RSUs VESTED AT DECEMBER 31, 2014
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2015
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2016
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2017
Number of
RSUs Vested
Fair
Value
154,855
55,649 $
(8,160 ) $
202,344
54,125 $
(34,650 ) $
221,819
55,336 $
(51,770 ) $
225,385
954,400
144,300
1,379,600
635,800
1,502,900
1,306,300
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 10 percent of eligible compensation, reduced by the
amount of any contributions allocated to such executive under the Retirement Plan. Contributions, net of forfeitures, under the
retirement plans approximated $282,000, $268,000 and $284,000 for the years ended December 31, 2017, 2016 and 2015,
respectively. These amounts are included in general and administrative expenses in our consolidated statements of operations. During
the year ended December 31, 2017 and 2016, we distributed $278,000 and $469,000, respectively from the Supplemental Plan to
former officers of the Company. There were no distributions from the Supplemental Plan for the year ended December 31, 2015.
64
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 shares of our common stock in settlement of 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 no options outstanding as of December 31, 2017. There were 5,000 stock options excluded from the earnings per
share calculations below as they were anti-dilutive as of December 31, 2016 and 2015, respectively.
(in thousands):
Earnings from continuing operations
Less dividend equivalents attributable to RSUs outstanding
Earnings from continuing operations attributable to common shareholders
Earnings (loss) from discontinued operations
Less dividend equivalents attributable to RSUs outstanding
Earnings (loss) from discontinued operations attributable to
common 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
NOTE 10. — FAIR VALUE MEASUREMENTS
Debt Instruments
$
2017
Year ended December 31,
2016
2015
45,048 $
(567 )
44,481
2,138
—
39,825 $
(482 )
39,343
(1,414 )
—
39,478
(460 )
39,018
(2,068 )
—
2,138
(1,414 )
(2,068 )
$
46,619 $
37,929 $
36,950
36,897
449
1.26 $
33,806
430
1.12 $
33,420
400
1.11
$
As of December 31, 2017 and 2016, the carrying value of the borrowings outstanding under the Credit Agreement approximated
fair value. As of December 31, 2017 and 2016, the fair value of the borrowings under the senior unsecured notes was $233,500,000
and $181,000,000, respectively. The fair value of the borrowings outstanding as of December 31, 2017 and 2016, 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.
Supplemental Retirement Plan
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.
The following summarizes as of December 31, 2017, 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:
Deferred compensation
Level 1
Level 2
Level 3
Total
451 $
— $
— $
— $
451 $
— $
451
451
$
$
65
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:
Deferred compensation
Real Estate Assets
Level 1
Level 2
Level 3
Total
$
$
565 $
— $
— $
— $
565 $
— $
565
565
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, 2017 and 2016, of $2,785,000 and $2,718,000, 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.
NOTE 11. — DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
We report as discontinued operations 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.
During the year ended December 31, 2017, we sold 12 properties and a portion of one property resulting in a recognized gain of
$1,025,000 that did not meet the criteria to be classified as discontinued operations and, as a result, the gain on dispositions of real
estate for the year ended December 31, 2017, was reflected in our earnings from continuing operations. We also received funds from
property condemnations resulting in a gain of $16,000.
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.
As a result of a change in circumstances that was previously considered unlikely, we reclassified the remaining two properties
from held for sale to held and used as these properties no longer met the criteria to be held for sale during the second quarter of 2017.
The properties that were reclassified to held and used were measured and recorded at the lower of (i) their carrying amount before the
properties were classified as held for sale, adjusted for any depreciation expense that would have been recognized had the properties
been continuously classified as held and used, or (ii) the fair value at the date of the subsequent decision not to sell. As of December
31, 2017, there were no properties that met criteria to be classified as held for sale.
Real estate held for sale consisted of the following at December 31, 2017 and 2016 (in thousands):
Land
Buildings and improvements
Accumulated depreciation and amortization
Real estate held for sale, net
Year ended December 31,
2017
2016
— $
—
—
—
— $
117
528
645
—
645
$
$
66
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):
Total revenues
Impairments
Other operating income
Earnings (loss) from operating activities
(Loss) gains from dispositions of real estate
Earnings (loss) from discontinued operations
NOTE 12. — QUARTERLY FINANCIAL DATA
2017
Year ended December 31,
2016
2015
$
$
— $
(1,042 )
3,180
2,138
—
2,138 $
— $
(4,248 )
3,012
(1,236 )
(178 )
(1,414 ) $
121
(5,746 )
3,218
(2,407 )
339
(2,068 )
The following is a summary of the quarterly results of operations for the years ended December 31, 2017 and 2016 (unaudited
as to quarterly information) (in thousands, except per share amounts):
Three Months Ended
Year Ended December 31, 2017
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, 2016
Revenues from rental properties
Earnings from continuing operations
Net earnings
Diluted earnings per common share:
Earnings from continuing operations
Net earnings
March 31,
$
23,897 $
7,716
9,704 $
June 30,
September 30, December 31,
28,158
13,321
13,036
24,913 $
9,460
9,340 $
24,364 $
14,551
15,106 $
0.22 $
0.28 $
0.41 $
0.43 $
0.24 $
0.24 $
0.33
0.33
March 31,
$
24,073 $
7,751
7,703 $
June 30,
September 30, December 31,
24,775
9,335
8,328
23,989 $
9,210
8,804 $
23,874 $
13,529
13,576 $
0.23 $
0.23 $
0.40 $
0.40 $
0.27 $
0.26 $
0.27
0.24
$
$
$
$
$
$
NOTE 13. — PROPERTY ACQUISITIONS
During the year ended December 31, 2017, we acquired fee simple interests in 103 convenience store and gasoline station
properties for an aggregate purchase price of $214,000,000.
We evaluated these transactions under the new framework for determining whether an integrated set of assets and activities
meets the definition of a business, pursuant to ASU 2017-01, which we early adopted effective January 1, 2017. Acquisitions that do
not meet the definition of a business are accounted for as asset acquisitions. An integrated set of assets and activities does not qualify
as a business if substantially all of the fair value of the gross assets is concentrated in either a single identifiable asset or a group of
similar identifiable assets. We evaluated each of the acquisitions and determined that substantially all the fair value related to each
acquisition is concentrated in a similar identifiable operating property. Accordingly, these transactions did not meet the definition of a
business and consequently were accounted for as asset acquisitions. In each of these transactions, we allocated the total consideration
for each acquisition to the individual assets acquired on a relative fair value basis.
On September 6, 2017, we acquired fee simple interests in 49 convenience store and gasoline station properties (the “Empire
Properties”) for $123,126,000 and entered into a unitary lease with Empire Petroleum Partners, LLC (“Empire”) at the closing of the
transaction (the “Empire Transaction”). We funded the Empire Transaction through a combination of funds from our Equity Offering
and funds available under our Revolving Facility. The unitary lease provides for an initial term of 15 years, with four five-year
renewal options. The unitary lease requires Empire 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 scheduled to increase annually during the initial and renewal terms of the lease. The Empire Properties are located
primarily within metropolitan markets in the states of Arizona, Colorado, Florida, Georgia, Louisiana, New Mexico and Texas.
67
We accounted for the acquisition of the Empire Properties as an asset acquisition. We estimated the fair value of acquired
tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $75,674,000 of
the purchase price to land, $38,205,000 to buildings and improvements, $189,000 to above market leases and $9,058,000 to in-place
leases.
On October 3, 2017, we acquired 38 fee simple properties (the “Applegreen Properties”) for $68,710,000 and entered into a
unitary lease with U.S. subsidiary of Applegreen PLC (“Applegreen”) at the closing of the transaction (the “Applegreen Transaction”).
We funded the Applegreen Transaction through a combination of funds from our Equity Offering and funds available under our
Revolving Facility. The unitary lease provides for an initial term of 15 years, with four five-year renewal options. The unitary lease
requires Applegreen 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 scheduled to
increase on the fifth anniversary of the commencement of the lease and annually thereafter. The Applegreen Properties consist of 33
convenience store and gasoline stations, and five stand-alone Burger King quick service restaurants located within the metropolitan
market of Columbia, SC.
We accounted for the acquisition of the Applegreen Properties as an asset acquisition. We estimated the fair value of acquired
tangible assets (consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $36,874,000 of
the purchase price to land, $27,431,000 to buildings and improvements, $961,000 to above market leases, $1,104,000 to below market
leases, which is accounted for as a deferred liability, and $4,548,000 to in-place leases.
In addition, during the year ended December 31, 2017, we acquired fee simple interests in 16 convenience store and gasoline
station properties, in separate transactions, for an aggregate purchase price of $22,164,000. We accounted for these transactions as
asset acquisitions. We estimated the fair value of acquired tangible assets for each of these transactions (consisting of land, buildings
and improvements) “as if vacant.” Based on these estimates, we allocated $5,800,000 of the purchase price to land, $14,424,000 to
buildings and improvements, $1,028,000 to below market leases, which is accounted for as a deferred liability, and $2,969,000 to in-
place leases.
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.
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 in the United Oil
Transaction 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 Second Restated Prudential Note Purchase
Agreement to fund the transaction. The unaudited pro forma condensed financial information is not indicative of the results of
operations that would have been achieved had the transaction 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
$
$
$
118,045
40,872
1.21
Total revenues for the United Oil Transaction included in continuing operations were $17,625,000, $17,631,000 and
$10,177,000 for the years ended December 31, 2017, 2016 and 2015, respectively. Net earnings for the United Oil Transaction were
$12,087,000, $11,762,000 and $6,952,000 for the years ended December 31, 2017, 2016 and 2015, respectively.
NOTE 14. — ACQUIRED INTANGIBLE ASSETS
Acquired above-market (when we are a lessor) and below-market leases (when we are a lessee) are included in prepaid expenses
and other assets and had a balance of $3,189,000 and $2,527,000 (net of accumulated amortization of $4,698,000 and $4,210,000,
68
respectively) at December 31, 2017 and 2016, 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 $22,714,000 and $22,539,000 (net of
accumulated amortization of $15,578,000 and $13,619,000, respectively) at December 31, 2017 and 2016, 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 $35,704,000 and $20,984,000 (net
of accumulated amortization of $7,043,000 and $5,187,000, respectively) at December 31, 2017 and 2016, 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 $1,791,000, $1,833,000 and $1,426,000 for the years ended
December 31, 2017, 2016 and 2015, respectively. Rent expense included amortization from acquired leases of $320,000 for the year
ended December 31, 2017, and $333,000 for the years ended December 31, 2016 and 2015. 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 $1,855,000, $1,395,000 and $1,019,000 for the years ended
December 31, 2017, 2016 and 2015, 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,
2018
2019
2020
2021
2022
Thereafter
As Lessee:
Year ending December 31,
2018
2019
2020
2021
2022
Thereafter
Above-Market
Leases
Below-Market
Leases
In-Place
Leases
$
$
124,000 $
107,000
101,000
92,000
83,000
919,000
1,426,000 $
2,155,000 $
2,075,000
1,669,000
1,495,000
1,416,000
13,904,000
22,714,000 $
2,587,000
2,567,000
2,503,000
2,474,000
2,456,000
23,117,000
35,704,000
Below-Market
Leases
317,000
312,000
222,000
157,000
127,000
628,000
1,763,000
$
$
NOTE 15. — SUBSEQUENT EVENTS
We have evaluated events and transactions occurring after December 31, 2017, for recognition or disclosure purposes. Based on
this evaluation there were no significant subsequent events from December 31, 2017, through the date the financial statements were
issued.
69
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Getty Realty Corp.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Getty Realty Corp. and its subsidiaries as of December 31,
2017 and 2016, and the related consolidated statements of operations and of cash flows for each of the three years in the period ended
December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have
audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2017 and December 31, 2016, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 2017 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, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by
the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated 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 the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
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 1, 2018
We have served as the Company’s auditor since at least 1975. We have not determined the specific year we began serving as
auditor of the Company.
70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
reports filed or furnished pursuant to the Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
As required by Rules 13a-15(b) and 13d-15(b) of the Exchange Act, 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 (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of December 31,
2017, at the reasonable assurance level.
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,
2017.
The effectiveness of our internal control over financial reporting as of December 31, 2017, 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, 2017, 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 properties leased to United Oil accounted for 21%
of our total assets at December 31, 2017. 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, is
provided below (in thousands):
Operating Data:
Total income
Total costs of operations and operating expenses
Net income
Balance Sheet Data:
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Year ended December 31,
2017
2016
1,258,169 $
1,241,369
4,749 $
1,161,150
1,134,585
24,338
December 31,
2017
2016
107,845 $
250,407
67,658
279,332 $
73,019
262,228
65,031
140,794
$
$
$
$
71
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
Age
39
53
57
46
Position
President, Chief Executive Officer and Director
Executive Vice President and Chief Operating Officer
Executive Vice President, General Counsel and Secretary
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 Executive Vice President, General Counsel and Secretary since May 2017. He was 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, 2017.
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.
72
Item 15. Exhibits and Financial Statement Schedules
(a) (1) Financial Statements
PART IV
Information in response to this Item is included in “Item 8. Financial Statements and Supplementary Data” of this Annual
Report on Form 10-K.
(a) (2) Financial Statement Schedules
The following Financial Statement Schedules are included beginning on page 74 of this Annual Report on Form 10-K.
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, 2017, 2016 and 2015
Schedule III — Real Estate and Accumulated Depreciation and Amortization as of December 31, 2017
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2017
(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.
Item 16. Form 10-K Summary
None.
73
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 referred to in our report dated March 1, 2018 appearing in the 2017 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 1, 2018
74
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE II — VALUATION and QUALIFYING ACCOUNTS and RESERVES
for the years ended December 31, 2017, 2016 and 2015
(in thousands)
December 31, 2017:
Allowance for deferred rent receivable
Allowance for accounts receivable
December 31, 2016:
Allowance for deferred rent receivable
Allowance for accounts receivable
December 31, 2015:
Allowance for deferred rent receivable
Allowance for accounts receivable
Balance at
Beginning
of Year
Additions
Deductions
Balance
at End
of Year
$
$
$
$
$
$
— $
2,006 $
— $
2,634 $
— $
420 $
— $
855 $
— $
586 $
— $
1,483 $
7,009 $
4,160 $
— $
1,778 $
7,009 $
3,304 $
—
1,840
—
2,006
—
2,634
75
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
As of December 31, 2017
(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
2017
2016
2015
$
$
$
$
782,166 $
205,598
(10,623 )
(4,520 )
(1,657 )
970,964 $
120,576 $
17,018
(1,301 )
(1,229 )
(1,711 )
133,353 $
783,233 $
19,097
(13,590 )
(6,379 )
(195 )
782,166 $
107,370 $
16,629
(776 )
(2,559 )
(88 )
120,576 $
595,959
233,785
(20,606 )
(25,019 )
(886 )
783,233
100,690
15,663
(3,246 )
(5,313 )
(424 )
107,370
76
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Brookland, AR
Jonesboro, AR
Jonesboro, AR
Buckeye, AZ
Chandler, AZ
Gilbert, AZ
Gilbert, AZ
Gilbert, AZ
Gilbert, AZ
Glendale, AZ
Glendale, AZ
Mesa, AZ
Mesa, AZ
Mesa, AZ
Phoenix, AZ
Phoenix, AZ
Queen Creek, AZ
San Tan Valley, AZ
Sierra Vista, AZ
Sierra Vista, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
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
$
1,468 $
868
2,985
3,928
1,838
1,448
1,602
3,112
3,204
1,331
1,722
1,503
2,185
3,169
2,177
2,415
2,868
4,022
1,765
4,440
1,261
1,301
1,303
2,085
3,652
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
1,319 $
695
2,655
1,594
577
465
806
1,519
1,365
339
544
664
573
1,164
645
1,982
1,613
1,473
1,496
2,591
597
744
713
598
728
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
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
149 $
173
330
2,334
1,261
983
796
1,593
1,839
992
1,178
839
1,612
2,005
1,532
433
1,255
2,549
269
1,849
664
557
590
1,487
2,924
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
77
Accumulated
Depreciation
564
313
1,181
29
13
10
17
30
27
8
11
14
12
22
13
52
32
30
63
45
12
15
15
13
15
257
679
226
557
294
226
93
413
270
145
199
320
203
163
267
215
348
227
106
256
167
1,468 $
868
2,985
3,928
1,838
1,448
1,602
3,112
3,204
1,331
1,722
1,503
2,185
3,169
2,177
2,415
2,868
4,022
1,765
4,440
1,261
1,301
1,303
2,085
3,652
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
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2007
2007
2007
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2007
2007
2014
2007
2015
2007
2015
2007
2015
2015
2015
2007
2015
2015
2015
2015
2015
2015
2015
2014
2015
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Sacramento, CA
Sacramento, CA
San Dimas, CA
San Jose, CA
San Leandro, CA
Shingle Springs, CA
Stockton, CA
Stockton, CA
Adams, CO
Aurora, CO
Boulder, CO
Broomfield, CO
Broomfield, CO
Castle Rock, CO
Colorado Springs, CO
Colorado Springs, CO
Colorado Springs, CO
Denver, CO
Englewood, 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
Wheat Ridge, CO
Avon, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bristol, CT
Brookfield, CT
Darien, CT
Durham, CT
East Hartford, CT
Ellington, CT
Fairfield, CT
Farmington, CT
Franklin, CT
Hartford, CT
4,247
5,942
1,941
5,412
5,978
4,751
1,187
3,001
2,157
2,874
3,900
2,380
1,785
5,269
1,382
3,274
3,828
1,457
2,495
4,641
4,077
4,356
2,349
4,233
6,612
3,619
6,605
5,081
3,748
5,003
6,151
731
59
313
350
378
1,594
58
667
994
208
1,295
430
466
51
571
1,643
1,709
1,192
1,193
900
1,262
560
1,541
578
590
1,025
884
397
2,000
626
409
1,030
705
288
1,394
1,188
1,435
808
1,867
1,487
1,304
1,377
2,063
1,271
2,281
1,950
495
415
407
452
523
558
721
528
994
378
453
201
163
478
200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
167
380
298
330
391
-
683
295
-
224
-
51
-
447
-
2,604
4,233
749
4,219
5,078
3,489
627
1,460
1,579
2,284
2,875
1,496
1,388
3,269
756
2,865
2,798
752
2,207
3,247
2,889
2,921
1,541
2,366
5,125
2,315
5,228
3,018
2,477
2,722
4,201
403
24
204
228
246
1,036
20
434
-
54
842
280
303
20
371
78
Accumulated
Depreciation
247
275
573
214
159
209
95
236
13
12
154
17
9
322
12
9
23
110
7
218
178
229
123
297
248
217
225
340
202
364
321
266
224
193
235
290
294
352
388
994
243
239
133
86
284
105
4,247
5,942
1,941
5,412
5,978
4,751
1,187
3,001
2,157
2,874
3,900
2,380
1,785
5,269
1,382
3,274
3,828
1,457
2,495
4,641
4,077
4,356
2,349
4,233
6,612
3,619
6,605
5,081
3,748
5,003
6,151
898
439
611
680
769
1,594
741
962
994
432
1,295
481
466
498
571
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2015
2015
2007
2015
2015
2015
2015
2015
2017
2017
2015
2017
2017
2015
2017
2017
2017
2015
2017
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2002
1982
1985
1985
1985
2004
1985
1985
2004
1982
2004
1985
2004
1982
2004
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Hartford, CT
Manchester, CT
Meriden, CT
Meriden, CT
Middletown, CT
Middletown, CT
Montville, CT
New Britain, CT
New Haven, CT
New Haven, CT
New Haven, CT
Newington, CT
North Haven, CT
North Haven, CT
Norwalk, CT
Norwalk, CT
Norwich, CT
Old Greenwich, CT
Plainville, CT
Plymouth, CT
Ridgefield, CT
South Windham, CT
South Windsor, CT
Stamford, CT
Stamford, CT
Stamford, CT
Suffield, CT
Tolland, CT
Vernon, CT
Wallingford, CT
Waterbury, CT
Waterbury, CT
Waterbury, CT
Watertown, CT
Watertown, CT
West Haven, CT
West Haven, CT
Westport, CT
Wethersfield, CT
Willimantic, CT
Wilton, CT
Windsor Locks, CT
Windsor Locks, CT
Washington, DC
Washington, DC
Callahan, FL
233
383
466
543
552
364
365
137
373
642
525
334
153
394
226
539
386
600
191
326
539
1,444
208
193
307
633
639
443
1,434
216
164
180
288
207
358
433
425
223
447
251
396
361
1,779
430
277
838
665
110
208
1,532
133
1,039
57
391
217
539
1,413
954
405
90
511
-
107
-
545
931
402
644
545
507
604
507
237
108
1,434
551
469
515
804
352
925
185
1,215
604
447
717
519
1,031
1,434
848
941
2,894
-
323
342
-
550
-
332
-
297
454
(319 )
-
-
669
47
941
323
1,220
-
-
304
1,398
-
16
96
456
603
379
-
-
-
-
-
59
-
322
-
12
-
-
215
-
1,400
-
-
-
432
50
84
989
131
675
24
254
141
351
569
620
252
365
332
402
44
620
354
605
167
598
337
330
393
330
201
44
-
335
305
335
516
204
567
74
790
393
-
466
338
670
1,055
418
664
2,056
79
Accumulated
Depreciation
123
176
258
290
288
191
173
72
166
408
154
176
89
175
188
232
199
236
100
172
351
606
122
157
219
309
493
248
1,434
130
86
95
156
163
213
242
224
180
447
132
273
190
1,468
100
74
18
665
433
550
1,532
683
1,039
389
391
514
993
1,094
954
405
759
558
941
430
1,220
545
931
706
2,042
545
523
700
963
840
487
1,434
551
469
515
804
411
925
507
1,215
616
447
717
734
1,031
2,834
848
941
2,894
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2004
1987
1982
2004
1987
2004
1982
2004
1985
1985
1985
2004
2004
1982
1985
1988
1982
1969
2004
2004
1985
2004
2004
1985
1985
1985
2004
1982
2004
2004
2004
2004
2004
1992
2004
1982
2004
1985
2004
2004
1985
2004
2004
2013
2013
2017
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Fernandina Beach, FL
Orlando, FL
Yulee, FL
Augusta, GA
Perry, GA
Haleiwa, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Kaneohe, HI
Kaneohe, HI
Waianae, HI
Waianae, HI
Waipahu, HI
Bossier City, LA
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
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
Littleton, MA
Lowell, MA
2,137
867
1,963
3,150
1,724
1,522
1,071
1,539
1,769
9,211
1,364
1,978
1,520
1,997
2,458
2,181
519
175
-
600
625
369
725
800
536
1,350
734
390
650
600
1,250
715
400
450
518
390
427
400
550
1,009
787
353
499
571
1,357
361
1,755
500
1,393
2,864
412
464
111
320
577
1,017
542
642
872
1,126
1,513
848
208
261
147
-
-
400
-
800
200
-
331
165
-
-
-
715
-
-
371
169
200
163
-
695
149
221
341
372
598
250
-
34
-
-
-
-
21
-
-
-
-
137
-
-
-
-
27
211
535
-
-
271
-
-
12
-
73
29
-
-
-
-
-
-
311
33
98
23
-
343
-
111
164
-
-
90
382
401
570
286
1,312
1,058
981
1,219
1,192
8,194
822
1,473
648
871
945
1,333
338
125
388
600
625
240
725
-
348
1,350
476
254
650
600
1,250
-
400
450
458
254
325
260
550
657
638
243
322
199
759
201
80
Accumulated
Depreciation
32
355
26
101
9
314
79
173
290
527
313
329
439
569
734
18
171
140
40
-
-
212
-
524
119
-
279
137
-
-
-
278
-
-
118
113
143
105
-
455
33
160
215
110
11
246
2,137
901
1,963
3,150
1,724
1,522
1,092
1,539
1,769
9,211
1,364
2,115
1,520
1,997
2,458
2,181
546
386
535
600
625
640
725
800
548
1,350
807
419
650
600
1,250
715
400
450
829
423
525
423
550
1,352
787
464
663
571
1,357
451
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2017
2000
2017
2017
2017
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2017
1985
1986
1996
2011
2011
1991
2011
2011
1991
2011
1985
1985
2011
2011
2011
2012
2011
2011
1988
1992
1990
1991
2011
1985
2014
1989
1985
2012
2017
1985
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
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 Roxbury, MA
Westborough, 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
-
400
850
550
736
600
300
380
490
650
691
393
400
550
650
574
1,300
579
600
1,073
400
450
476
714
125
1,200
429
900
450
358
1,012
490
450
600
1,300
350
508
400
500
550
548
497
978
692
802
2,259
194
-
-
-
355
-
284
198
269
-
344
170
166
-
-
353
-
247
-
124
-
-
169
308
558
-
264
-
249
247
994
258
-
-
-
214
394
-
-
-
202
501
350
-
802
1,537
623
-
-
-
98
-
134
64
98
-
103
33
18
-
-
209
-
45
-
(373 )
-
-
2
58
508
-
114
-
92
210
641
87
-
-
-
64
394
-
-
-
10
326
8
-
-
-
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
319
450
600
1,300
200
508
400
500
550
356
322
636
692
-
722
81
Accumulated
Depreciation
52
-
-
-
239
-
226
171
177
-
287
142
166
-
-
247
-
206
-
45
-
-
100
205
218
-
139
-
160
156
544
196
-
-
-
202
271
-
-
-
122
294
209
-
432
759
623
400
850
550
834
600
434
444
588
650
794
426
418
550
650
783
1,300
624
600
700
400
450
478
772
633
1,200
543
900
542
568
1,653
577
450
600
1,300
414
902
400
500
550
558
823
986
692
802
2,259
Date of
Initial
Leasehold or
Acquisition
Investment (1)
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
1985
2011
2011
2011
1986
1985
2011
2011
2011
1991
1985
1991
2010
2007
2007
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
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
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 Hills, MD
Riverdale, MD
Riverdale, MD
Seat Pleasant, MD
Suitland, MD
Upper Marlboro, MD
Biddeford, ME
Lewiston, ME
Kernersville, NC
Lexington, NC
Madison, NC
New Bern, NC
Belfield, ND
Allenstown, NH
Concord, NH
Concord, NH
Derry, NH
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
895
1,039
422
1,153
491
594
662
753
457
1,358
822
696
1,210
1,267
1,415
1,530
2,523
1,256
582
788
468
673
845
618
342
449
1,776
396
350
1,232
1,787
675
900
418
-
-
-
-
-
-
-
-
-
-
-
-
895
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
308
111
1,475
350
243
850
1,320
-
-
276
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
188
-
-
-
83
-
-
-
-
16
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
-
1,039
422
1,153
491
594
662
753
457
1,358
822
696
1,210
1,267
1,415
1,530
2,523
1,256
582
788
468
673
845
235
222
338
301
46
190
382
467
675
900
158
82
Accumulated
Depreciation
-
-
-
-
-
-
-
-
-
-
-
-
507
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
214
104
10
197
156
745
717
-
-
276
525
731
1,050
1,130
571
1,084
628
651
445
536
388
479
895
1,039
422
1,153
491
594
662
753
457
1,358
822
696
1,210
1,267
1,415
1,530
2,523
1,256
582
788
468
673
845
626
530
449
1,776
396
433
1,232
1,787
675
900
434
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2007
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
1985
1985
2007
2017
2007
2007
2007
2007
2011
2011
1987
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Derry, NH
Dover, NH
Dover, NH
Goffstown, NH
Hooksett, NH
Kingston, NH
Londonderry, NH
Londonderry, NH
Manchester, NH
Nashua, 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
Flemington, NJ
Flemington, NJ
Fort Lee, NJ
Franklin Twp., NJ
Freehold, NJ
Hasbrouck Heights, NJ
Hillsborough, NJ
Lake Hopatcong, NJ
Livingston, NJ
Long Branch, NJ
Mcafee, NJ
Midland Park, NJ
Mountainside, NJ
North Bergen, NJ
North Plainfield, NJ
950
650
1,200
1,737
1,562
1,500
703
1,100
550
500
550
750
825
1,132
1,750
500
-
301
525
550
700
939
1,400
1,600
743
450
362
382
1,508
719
407
709
547
1,245
683
494
639
237
1,305
872
515
671
201
663
630
228
-
-
-
1,040
738
-
275
-
-
-
-
-
-
352
-
-
413
156
-
-
-
351
-
-
279
971
447
403
737
347
209
289
218
796
411
597
616
323
505
596
606
652
362
337
368
606
-
-
-
-
-
-
30
-
-
-
-
-
-
-
-
-
730
100
-
-
-
12
-
-
20
871
285
321
229
(300 )
29
(252 )
17
362
173
198
393
186
-
292
426
418
311
(192 )
148
553
950
650
1,200
697
824
1,500
458
1,100
550
500
550
750
825
780
1,750
500
317
245
525
550
700
600
1,400
1,600
484
350
200
300
1,000
72
227
168
346
811
445
95
416
100
800
568
335
437
150
134
410
175
83
Accumulated
Depreciation
-
-
-
392
666
-
225
-
-
-
-
-
-
10
-
-
95
156
-
-
-
282
-
-
226
83
250
195
470
273
170
91
177
488
329
82
397
222
424
353
275
291
185
118
281
417
950
650
1,200
1,737
1,562
1,500
733
1,100
550
500
550
750
825
1,132
1,750
500
730
401
525
550
700
951
1,400
1,600
763
1,321
647
703
1,737
419
436
457
564
1,607
856
692
1,032
423
1,305
1,164
941
1,089
512
471
778
781
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2011
2011
2011
2012
2007
2011
1985
2011
2011
2011
2011
2011
2011
2017
2011
2011
1996
1987
2011
2011
2011
1985
2011
2011
1985
1986
1986
1990
2000
1985
1985
1985
1985
1985
1985
1978
1985
1985
2000
1985
1985
1985
1989
1985
1985
1978
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Nutley, NJ
Paramus, NJ
Parlin, NJ
Paterson, NJ
Ridgewood, NJ
Somerville, NJ
Trenton, NJ
Union, NJ
Washington Township, NJ
Watchung, NJ
West Orange, NJ
Albuquerque, NM
Albuquerque, NM
Albuquerque, NM
Albuquerque, NM
Las Cruces, NM
Fernley, NV
Alfred Station, NY
Amherst, NY
Astoria, NY
Avoca, NY
Batavia, NY
Bay Shore, NY
Bayside, NY
Brewster, NY
Briarcliff Manor, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronx, NY
Bronxville, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Brooklyn, NY
Buffalo, NY
Byron, NY
434
382
418
619
703
253
1,303
436
912
450
799
1,829
2,308
2,322
3,682
1,842
1,665
714
223
1,684
936
684
157
470
789
652
423
390
877
884
953
1,049
1,910
2,408
1,232
-
100
76
148
236
282
422
476
627
313
969
329
192
368
233
638
184
157
406
595
339
675
447
478
526
541
468
1,444
300
296
579
300
320
426
418
-
714
-
193
-
-
-
564
561
696
-
396
378
427
432
456
563
481
490
532
403
300
178
59
153
17
393
132
-
209
277
115
397
-
-
-
-
-
-
-
246
-
(1 )
-
355
254
-
564
-
54
-
-
-
-
-
-
-
396
345
382
388
374
457
334
320
313
241
-
283
249
203
403
458
201
1,146
239
594
226
521
1,382
1,830
1,796
3,141
1,374
221
414
173
1,105
635
364
86
306
789
502
423
251
877
884
953
485
1,349
1,712
1,232
-
67
31
104
154
176
275
306
408
151
669
84
Accumulated
Depreciation
213
141
121
190
350
95
48
151
355
106
428
9
11
11
12
10
264
142
116
155
142
151
263
199
-
467
-
165
-
-
-
152
158
176
-
220
202
237
257
195
387
279
285
308
198
142
612
441
571
636
1,096
385
1,303
645
1,189
565
1,196
1,829
2,308
2,322
3,682
1,842
1,665
714
469
1,684
935
684
512
724
789
1,216
423
444
877
884
953
1,049
1,910
2,408
1,232
396
445
458
536
610
739
756
796
940
554
969
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
1985
1985
1985
1985
1987
2012
1985
1985
1985
1985
2017
2017
2017
2017
2017
2015
2006
2000
2013
2006
2006
1981
1985
2011
1976
2013
1985
2013
2013
2013
2013
2013
2013
2011
1970
1972
1967
1972
1985
1967
1985
1985
1985
2000
2006
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Chester, NY
Churchville, NY
Corona, NY
Corona, NY
Cortland Manor, NY
Dobbs Ferry, NY
Dobbs Ferry, NY
East Hampton, NY
East Pembroke, NY
Eastchester, 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
Great Neck, NY
Hartsdale, NY
Hawthorne, NY
Hopewell Junction, NY
Huntington Station, NY
Hyde Park, NY
Katonah, 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
1,158
1,012
115
2,543
1,872
670
1,345
660
787
993
1,724
389
-
1,453
1,793
617
516
1,936
1,947
2,478
1,273
153
393
362
1,508
235
463
369
500
1,626
2,084
1,163
141
990
1,084
1,028
503
547
2,717
1,429
333
313
719
751
1,281
1,448
-
410
302
640
-
270
-
271
250
415
-
477
368
-
-
431
437
523
542
677
-
347
350
368
-
348
444
413
302
-
-
-
341
-
-
825
218
277
1,534
-
401
219
-
536
-
-
-
-
300
-
-
34
-
39
-
-
-
319
949
-
-
170
241
-
-
-
-
331
-
242
-
216
282
280
252
-
-
-
284
-
-
-
42
86
-
-
285
110
-
274
-
-
1,158
602
113
1,903
1,872
434
1,345
428
537
578
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
450
1,626
2,084
1,163
84
990
1,084
203
327
356
1,183
1,429
217
204
719
489
1,281
1,448
85
Accumulated
Depreciation
-
194
302
165
-
223
-
224
118
23
-
310
220
-
-
247
226
140
134
167
-
170
166
183
-
348
245
216
143
-
-
-
178
-
-
511
182
221
343
-
198
197
-
314
-
-
1,158
1,012
415
2,543
1,872
704
1,345
699
787
993
1,724
708
949
1,453
1,793
787
757
1,936
1,947
2,478
1,273
484
393
604
1,508
451
745
649
752
1,626
2,084
1,163
425
990
1,084
1,028
545
633
2,717
1,429
618
423
719
1,025
1,281
1,448
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2011
2006
1965
2013
2011
1985
2011
1985
2006
2017
2011
1978
1971
2011
2011
1998
1998
2013
2013
2013
2013
1978
2006
1985
2011
1982
1985
1985
1985
2011
2011
2011
1978
2011
2011
2008
1985
1985
2013
2011
1985
1985
2011
1985
2011
2011
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Mount Kisco, NY
Mount Vernon, NY
Nanuet, NY
Naples, 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
Ozone Park, NY
Peekskill, NY
Pelham, NY
Pelham Manor, NY
Perry, NY
Pleasant Valley, NY
Port Chester, NY
Port Chester, NY
Port Jefferson, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Prattsburg, NY
Rego Park, NY
Riverhead, NY
Rochester, NY
Rockaway Park, NY
Rockville Centre, NY
Rye, NY
Sag Harbor, NY
Sayville, NY
Scarsdale, NY
Shrub Oak, NY
Sleepy Hollow, NY
Spring Valley, NY
St. Albans, NY
Staten Island, NY
Staten Island, NY
Staten Island, NY
1,907
985
2,316
1,257
971
1,887
189
1,084
126
527
1,192
425
295
231
58
2,207
1,035
137
1,444
398
941
1,015
388
591
1,020
1,232
1,340
1,306
1,355
553
2,783
724
595
1,605
350
872
704
344
1,301
1,061
281
749
330
357
390
301
-
-
-
430
-
-
442
-
447
-
-
185
346
318
378
-
-
369
400
220
941
-
435
-
-
-
-
-
-
250
679
292
290
-
215
-
281
290
-
864
457
-
221
162
225
428
-
-
-
-
-
-
357
-
399
-
-
35
243
204
365
-
-
307
-
62
-
-
293
-
-
(32 )
(60 )
-
-
-
-
-
-
-
66
-
35
246
-
494
306
-
106
35
89
323
1,907
985
2,316
827
971
1,887
104
1,084
78
527
1,192
275
192
117
45
2,207
1,035
75
1,044
240
-
1,015
246
591
1,020
1,200
1,280
1,306
1,355
303
2,104
432
305
1,605
201
872
458
300
1,301
691
130
749
215
230
254
196
86
Accumulated
Depreciation
-
-
-
204
-
-
208
-
286
-
-
185
170
139
202
-
-
206
189
206
387
-
244
-
-
-
-
-
-
118
175
229
133
-
193
-
231
108
-
547
370
-
174
137
197
235
1,907
985
2,316
1,257
971
1,887
546
1,084
525
527
1,192
460
538
435
423
2,207
1,035
444
1,444
460
941
1,015
681
591
1,020
1,200
1,280
1,306
1,355
553
2,783
724
595
1,605
416
872
739
590
1,301
1,555
587
749
436
392
479
624
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2011
2011
2011
2006
2011
2011
1982
2011
1972
2011
2011
1986
1998
1985
1976
2011
2011
1985
2006
1986
2011
2011
1985
2011
2011
2011
2011
2011
2011
2006
2013
1998
2008
2013
1985
2011
1985
1998
2011
1985
1969
2011
1985
1985
1985
1985
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
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
Akron, OH
Crestline, OH
Loveland, OH
Mansfield, OH
Mansfield, OH
Monroeville, OH
Banks, OR
Estacada, OR
McMinnville, OR
Pendleton, OR
Portland, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Silverton, OR
Springfield, OR
Stayton, OR
Allentown, PA
Allison Park, PA
Harrisburg, PA
Lancaster, PA
New Kensington, PA
Philadelphia, PA
412
352
-
-
270
452
-
300
-
-
567
266
-
423
590
260
419
1,125
-
1,700
-
1,145
917
683
590
1,250
2,095
-
562
2,473
644
1,048
672
829
884
1,033
1,097
500
602
247
156
650
413
360
700
316
350
176
956
1,650
640
452
1,488
990
1,049
936
203
-
1,458
-
-
-
1,021
291
1,907
1,700
2,365
1,530
1,202
1,045
922
1,950
2,580
498
646
2,867
766
4,416
1,071
1,350
1,408
4,215
4,614
956
1,398
543
358
1,500
399
642
1,375
405
290
281
-
-
-
-
-
-
-
-
486
569
-
798
590
944
63
1,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31
-
213
18
-
175
228
105
956
1,650
370
-
1,488
690
1,049
936
122
303
1,458
375
-
684
665
216
1,907
-
2,365
385
285
362
332
700
485
498
84
394
122
3,368
399
521
524
3,182
3,517
456
796
296
233
850
199
300
675
264
87
Accumulated
Depreciation
215
186
-
-
209
282
-
142
-
-
342
193
-
143
298
98
347
453
-
161
-
43
422
29
255
528
867
-
79
77
100
154
126
124
137
163
162
20
109
11
130
394
321
360
238
254
640
457
956
1,650
640
452
1,488
990
1,049
936
689
569
1,458
798
590
944
1,084
1,341
1,907
1,700
2,365
1,530
1,202
1,045
922
1,950
2,580
498
646
2,867
766
4,416
1,071
1,350
1,408
4,215
4,614
956
1,398
543
389
1,500
612
660
1,375
580
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
1978
2011
2011
1998
2011
2011
2006
2011
2011
1986
1972
2011
1993
1970
1990
1985
1972
2011
2013
2011
2017
2008
2017
2008
2009
2009
2015
2015
2017
2015
2015
2015
2015
2015
2015
2015
2017
2015
2017
1985
2010
1989
1989
2010
1985
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Philadelphia, PA
Pottsville, PA
Reading, PA
Ashaway, RI
Barrington, RI
East Providence, RI
N. Providence, RI
Ballentine, SC
Blythewood, SC
Chapin, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Elgin, SC
Elgin, SC
Gaston, SC
Gilbert, SC
Irmo, SC
Irmo, SC
Irmo, SC
Irmo, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Pelion, SC
Richland, SC
W. Columbia, SC
W. Columbia, SC
W. Columbia, SC
W. Columbia, SC
W. Columbia, SC
Austin, TX
1,252
452
750
619
490
2,297
543
1,246
3,217
1,682
464
792
868
927
1,643
2,460
2,637
3,371
2,082
2,177
2,230
1,036
1,114
1,339
3,655
3,950
633
694
720
816
973
1,056
1,624
1,712
1,729
1,738
2,179
4,413
1,901
575
412
1,116
1,436
1,644
2,046
462
-
1
49
-
180
(1,845 )
158
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
814
148
-
402
319
14
353
69
2,405
1,135
253
463
455
495
1,302
1,569
1,254
2,016
1,166
974
934
434
667
867
1,742
2,802
309
172
219
336
582
432
999
1,410
1,268
1,189
1,476
3,418
1,021
345
145
50
472
1,283
746
274
438
305
799
217
351
438
348
1,177
812
547
211
329
413
432
341
891
1,383
1,355
916
1,203
1,296
602
447
472
1,913
1,148
324
522
501
480
391
624
625
302
461
549
703
995
880
230
267
1,066
964
361
1,300
188
88
Accumulated
Depreciation
158
304
799
114
249
29
237
16
13
9
3
5
7
5
4
14
19
21
14
17
18
8
6
7
27
17
5
8
7
5
6
9
9
4
8
6
10
16
15
3
4
15
14
5
18
125
1,252
453
799
619
670
452
701
1,246
3,217
1,682
464
792
868
927
1,643
2,460
2,637
3,371
2,082
2,177
2,230
1,036
1,114
1,339
3,655
3,950
633
694
720
816
973
1,056
1,624
1,712
1,729
1,738
2,179
4,413
1,901
575
412
1,116
1,436
1,644
2,046
462
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2009
1990
1989
2004
1985
1985
1985
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2007
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Austin, TX
Austin, TX
Austin, TX
Corpus Christi, TX
Corpus Christi, TX
Corpus Christi, TX
El Paso, TX
El Paso, TX
El Paso, TX
El Paso, TX
El Paso, TX
El Paso, TX
Ft Worth, TX
Garland, TX
Garland, TX
Harker Heights, TX
Houston, TX
Houston, TX
Keller, TX
Lewisville, TX
Mathis, 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
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
2,368
3,511
1,711
1,526
2,162
2,400
1,278
1,425
1,679
1,816
2,370
3,168
2,115
3,296
4,439
2,051
1,689
2,803
2,507
494
3,138
429
2,648
1,954
2,405
4,396
3,884
649
656
712
735
1,327
1,388
1,582
1,757
1,718
1,083
1,464
2,014
2,062
840
779
1,004
1,825
2,078
3,348
1,630
1,916
347
470
433
1,290
453
327
594
403
603
1,015
1,249
3,051
4,000
1,463
1,465
2,268
1,511
384
451
357
2,143
1,703
1,190
4,059
2,990
-
247
-
-
-
368
432
444
-
-
379
498
459
-
196
729
635
713
997
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9 )
-
-
-
-
-
-
-
-
(10 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(185 )
110
-
-
-
738
1,595
1,364
1,056
1,729
1,110
825
1,098
1,085
1,413
1,767
2,153
866
245
439
579
224
535
996
110
2,687
72
505
251
1,205
337
894
649
409
712
735
1,327
1,020
1,150
1,313
1,718
1,083
1,085
1,516
1,603
840
398
385
1,190
1,365
2,351
89
Accumulated
Depreciation
792
941
8
9
9
25
10
7
11
9
12
20
679
418
573
1,120
680
119
775
227
10
219
116
811
624
1,835
1,574
-
72
-
-
-
108
115
126
-
-
104
132
120
-
60
657
168
163
248
2,368
3,511
1,711
1,526
2,162
2,400
1,278
1,425
1,679
1,816
2,370
3,168
2,115
3,296
4,439
2,042
1,689
2,803
2,507
494
3,138
429
2,648
1,954
2,395
4,396
3,884
649
656
712
735
1,327
1,388
1,582
1,757
1,718
1,083
1,464
2,014
2,062
840
594
1,114
1,825
2,078
3,348
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2007
2007
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2007
2014
2014
2007
2007
2016
2007
2008
2017
2007
2016
2007
2007
2007
2007
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2005
1990
1990
2013
2013
2013
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
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
Renton, WA
Seattle, WA
Seattle, WA
Silverdale, WA
Snohomish, WA
South Bend, WA
Tacoma, WA
Tacoma, WA
Tenino, WA
Vancouver, WA
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
563
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
1,485
717
1,884
2,178
955
760
518
671
937
1,214
1,084
605
810
521
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
533
524
661
961
-
639
-
-
718
1,051
-
-
-
30
-
-
-
-
-
-
-
-
-
-
-
(114 )
(70 )
-
33
(41 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,370
622
469
798
996
2,828
412
322
1,068
273
324
223
505
876
1,157
1,612
235
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
952
193
1,223
1,217
955
121
518
671
219
163
90
Accumulated
Depreciation
270
309
414
267
368
406
319
386
317
322
347
419
317
306
266
386
230
319
365
299
222
317
409
318
161
128
145
182
205
127
138
193
243
117
236
310
111
77
97
159
-
91
-
-
104
138
4,454
1,227
1,279
1,319
1,716
3,623
1,037
1,077
1,688
903
957
1,043
1,125
1,476
1,677
2,367
465
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
1,485
717
1,884
2,178
955
760
518
671
937
1,214
Date of
Initial
Leasehold or
Acquisition
Investment (1)
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
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2015
various
Accumulated
Depreciation
77
23,845
Wilbur, WA
Miscellaneous
629
43,892
$ 914,488 $
-
476
36,068
11,671
56,476 $ 589,497 $ 381,467 $ 970,964 $ 133,353
629
55,563
153
19,495
1)
Initial cost of leasehold or acquisition investment to company represents the aggregate of the cost incurred during the year in
which we purchased the property for owned properties or purchased a leasehold interest in leased properties. Cost capitalized
subsequent to initial investment includes investments made in previously leased properties prior to their acquisition.
2) Depreciation of real estate is computed on the straight-line method based upon the estimated useful lives of the assets, which
generally range from 16 to 25 years for buildings and improvements, or the term of the lease if shorter. Leasehold interests are
amortized over the remaining term of the underlying lease.
3) The aggregate cost for federal income tax purposes was approximately $967,355,000 at December 31, 2017.
91
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
As of December 31, 2017
(in thousands)
Description
Location(s)
Interest
Rate
Final
Maturity
Date
Periodic
Payment
Terms (a)
Prior
Liens
Face Value
at
Inception
Amount of
Principal
Unpaid at
Close of Period
Type of
Loan/Borrower
Mortgage Loans:
Borrower A
Borrower B
Borrower C
Borrower D
Borrower E
Borrower F
Borrower G
Borrower H
Borrower I
Borrower J
Borrower K
Borrower L
Borrower M
Borrower N
Borrower O
Borrower P
Borrower Q
Borrower R
Borrower S
Borrower T
Borrower U
Borrower V
Borrower W
Borrower X
Borrower Y
Borrower Z
Borrower AA
Borrower AB
Borrower AC
Borrower AD
Borrower AE
Borrower AF
Borrower AG
Borrower AH
Borrower AI
Borrower AJ
Borrower AK
Borrower AL
Borrower AM
Borrower AN
Borrower AO
Borrower AP
Borrower AQ
Borrower AR
Borrower AS
Borrower AT
Borrower AU
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
East Islip, NY
Middlesex, NJ
Valley Cottage, NY
Nyack, NY
E. Patchogue, NY
Baldwin, NY
Bristol, CT
Norwalk, CT
Stafford Springs, CT
Waterbury, CT
Great Barrington, MA
Hadley, MA
Springfield, MA
Westfield, MA
Hartford, CT
Wilmington, DE
Westfield, MA
Rockland, MA
Clinton, MA
Fairhaven, MA
New Bedford, MA
Billerica, MA
Fitchburg, MA
Worcester, MA
S. Yarmouth, MA
Harwich Port, MA
Southbridge, MA
Oxford, MA
Kernersville/Lexington, NC
Concord, NH
Pelham, NH
Bayonne, NJ
Spotswood, NJ
Belleville, NJ
Neptune City, NJ
Ridgefield, NJ
Irvington, NJ
Jersey City, NJ
Union City, NJ
Colonia, NJ
Swedesboro, NJ
Magnolia, NJ
Piscataway, NJ
Seaford, NY
Elmont, NY
White Plains, NY
Scarsdale, NY
92
9.0 % 11/2024
9.0 % 5/2021
9.0 % 10/2020
9.0 % 9/2022
9.0 % 8/2019
9.0 % 9/2020
9.0 % 3/2021
9.0 % 4/2022
9.0 % 1/2021
9.0 % 2/2021
9.0 % 4/2021
9.0 % 7/2022
9.0 % 7/2019
9.0 % 11/2021
9.0 % 3/2024
9.0 % 11/2020
9.0 % 11/2020
9.0 % 4/2021
9.0 % 3/2022
9.0 % 9/2020
9.0 % 10/2021
9.0 % 3/2023
9.0 % 10/2021
9.0 % 11/2021
9.0 % 1/2022
9.0 % 1/2022
9.0 % 3/2021
9.0 % 3/2023
8.0 % 7/2026
9.5 % 8/2028
9.0 % 1/2023
9.0 % 3/2020
9.0 % 1/2020
9.0 % 3/2021
9.0 % 5/2024
9.0 % 4/2021
10.0 % 7/2022
9.0 % 7/2018
9.0 % 9/2019
9.0 % 7/2020
9.0 % 4/2021
9.0 % 6/2020
9.0 % 11/2020
9.0 % 1/2020
9.0 % 10/2021
9.0 % 2/2021
9.0 % 11/2025
P & I — $
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
P & I —
743 $
255
431
253
200
300
230
319
232
171
58
78
131
303
70
84
165
134
158
458
363
98
187
237
275
293
300
86
568
210
73
308
306
315
362
172
300
500
800
320
77
53
121
488
450
444
337
741
236
392
244
175
278
211
302
212
157
53
74
103
284
69
77
151
123
136
415
339
95
174
222
258
275
276
83
217
157
70
275
272
290
358
159
198
453
725
289
70
47
99
434
374
407
309
Type of
Loan/Borrower
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
Description
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Seller financing
Location(s)
Glenville, NY
Pleasant Valley, NY
Bronx, NY
Freeport, NY
Wantagh, NY
Ballston, NY
Colonie, NY
Latham, NY
Malta, NY
Newburgh, NY
Coxsackie, NY
Brewster, NY
Cairo, NY
Central Islip, NY
Kenmore, NY
Rochester, NY
Savona, NY
Hatboro, PA
Gettysburg, PA
Horsham, PA
Warwick, RI
Providence, RI
Warwick, RI
Cranston, RI
E. Providence, RI
York, PA
Pottsville, PA
Ephrata, PA
McConnellsburg, PA
Interest
Rate
Final
Maturity
Date
9.0 % 4/2021
9.0 % 9/2020
9.0 % 12/2019
9.0 % 5/2020
9.0 % 5/2032
9.0 % 5/2020
9.0 % 8/2023
9.0 % 1/2021
9.0 % 3/2023
9.0 % 9/2021
9.0 % 7/2021
9.0 % 10/2022
9.0 % 8/2023
9.0 % 6/2023
9.0 % 12/2020
9.0 % 2/2025
9.0 % 2/2025
9.0 % 4/2021
9.0 % 11/2020
10.0 % 7/2024
9.0 % 8/2022
9.0 % 9/2021
9.0 % 10/2021
9.0 % 8/2022
9.0 % 2/2022
9.0 % 2/2021
9.0 % 3/2023
9.0 % 10/2020
9.0 % 1/2023
Periodic
Payment
Terms (a)
Prior
Liens
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 —
Face Value
at
Inception
325
230
240
206
455
225
143
169
572
394
153
554
113
780
74
174
157
84
69
237
333
184
357
153
186
102
23
265
38
19,811
Amount of
Principal
Unpaid at
Close of Period
300
209
84
185
396
202
139
155
553
367
142
530
110
758
68
174
157
78
11
132
317
171
334
146
175
94
23
241
37
17,646
Note receivable
Total (c)
Purchase/leaseback Various-NY
9.5 % 1/2021
I(b)
18,400
$ 38,211 $
14,720
32,366
(a) P & I = Principal and interest paid monthly.
(b) I = Interest only paid monthly with principal deferred.
(c) 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
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,
2017
2016
2015
$
32,737 $
48,455 $
34,226
1,505
1,814
17,876
(1,227 )
(649 )
—
32,366 $
(16,714 )
(818 )
—
32,737 $
(2,883 )
(764 )
—
48,455
$
93
EXHIBIT INDEX
GETTY REALTY CORP.
Annual Report on Form 10-K
for the year ended December 31, 2017
Exhibit
Number
3.1
3.2
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.
Annexed as Appendix D to the Joint Proxy/Prospectus
that is a part of the Company’s Registration Statement
on Form S-4 filed on January 12, 1998 (File No. 333-
44065) and incorporated herein by reference.
Articles Supplementary to Articles of Incorporation of
Holdings, filed January 21, 1998.
3.3
By-Laws of Getty Realty Corp.
Articles of Amendment of Holdings, changing its name
to Getty Realty Corp., filed January 30, 1998.
Filed as Exhibit 3.4 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008
incorporated herein by
(File No. 001-13777) and
reference.
Articles of Amendment of Holdings, filed August 1,
2001.
3.4
3.5
3.6
Articles Supplementary to Articles of Incorporation of
Holdings, filed October 25, 2017.
4.1
Dividend Reinvestment/Stock Purchase Plan.
Filed as Exhibit 3.2 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008
incorporated herein by
(File No. 001-13777) and
reference.
Filed as Exhibit 3.2 to the Company’s Current Report
2011
incorporated herein by
on Form 8-K
(File No. 001-13777) and
reference.
on November 14,
filed
Filed as Exhibit 3.5 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008
incorporated herein by
(File No. 001-13777) and
reference.
Filed as Exhibit 3.1 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended September
30, 2017 (File No. 001-13777) and incorporated herein
by reference.
Included under the heading “Description of Plan” on
pages 5 through 18 of the Company’s Registration
Statement on Form S-3D filed on April 22, 2004 (File
No. 333-114730) and incorporated herein by reference.
10.1*
Retirement and Profit Sharing Plan (restated as of
December 1, 2012).
10.2*
1998
Stock Option
Plan,
effective
as
January 30,1998.
Filed as Exhibit 10.1 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2012
(File No. 001-13777) and
incorporated herein by
reference.
of
Annexed as Appendix H
the Joint Proxy
Statement/Prospectus that is a part of the Company’s
filed on
Registration Statement on Form S-4
January 12,
and
incorporated herein by reference.
(File No. 333-44065)
1998
to
10.3*
Form of Indemnification Agreement between
Company and its directors.
the
Filed as Exhibit 10.5 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008
(File No. 001-13777) and
incorporated herein by
reference.
94
Exhibit
Number
10.4*
Description of Document
Location of Document
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).
Filed as Exhibit 10.6 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008
(File No. 001-13777) and
incorporated herein by
reference.
10.6*
2004 Getty Realty Corp. Omnibus
Compensation Plan.
Incentive
Annexed as Appendix B. to the Company’s Definitive
Proxy Statement filed on April 9, 2004 (File No. 001-
13777) and incorporated herein by reference.
10.7*
10.8*
10.10**
10.15*
10.18*
10.19
10.20**
10.21**
10.22**
10.23**
10.24**
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 the Company’s Annual
Report on Form 10-K for the year ended December 31,
2008 (File No. 001-13777) and incorporated herein by
reference.
Amendment to the 2004 Getty Realty Corp. Omnibus
Incentive Compensation Plan dated December 31, 2008.
Filed as Exhibit 10.19 to the Company’s Annual
Report on Form 10-K for the year ended December 31,
2008 (File No. 001-13777) and incorporated herein by
reference.
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 the Company’s Quarterly
Report on Form 10-Q filed on 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 the Company’s Quarterly
Report on Form 10-Q filed on May 10, 2013 (File
No. 001-13777) and incorporated herein by reference.
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.
Settlement Agreement regarding claims of Getty
Inc., and Leemilt’s
Properties Corp., GettyMart
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 Quarterly
Report on 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 its subsidiaries party thereto, the
Prudential Insurance Company of America, and the
Prudential Retirement Insurance and Annuity Company.
Filed as Exhibit 10.2 to the Company’s Quarterly
Report on 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 Quarterly
Report on 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 Quarterly
Report on 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 Quarterly
Report on Form 10-Q filed on August 10, 2015 (File
No. 001-13777) and incorporated herein by reference.
95
Exhibit
Number
10.27
10.28
10.29**
10.30**
21
23
31.1
31.2
32.1
32.2
Description of Document
Location of Document
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 Current Report
on Form 8-K filed on June 6, 2016 (File No. 001-
13777) and incorporated herein by reference.
First Amendment, dated as of February 21, 2017, to
Credit Agreement 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 Quarterly
Report on Form 10-Q filed on May 5, 2017 (File No.
001-13777) and incorporated herein by reference.
Second Amended and Restated Note Purchase and
Guarantee Agreement, dated as of February 21, 2017,
among Getty Realty Corp., certain of its subsidiaries
party thereto, the Prudential Insurance Company of
(“Prudential”) and certain affiliates of
America
Prudential.
Filed as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed on May 5, 2017 (File No.
001-13777) and incorporated herein by reference.
Transaction Agreement between Empire Petroleum
Partners, LLC and Getty Realty Corp., dated June 22,
2017.
Filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on July 28, 2017 (File No.
001-13777) and incorporated herein by reference.
Subsidiaries of the Company.
Filed herewith.
Consent of Independent Registered Public Accounting
Filed herewith.
Firm.
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.
Filed herewith.
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.
Filed herewith.
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.
Filed herewith.
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.
Filed herewith.
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
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.
96
The exhibits listed in this Exhibit Index which were filed or furnished with our 2017 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 2017 Annual Report on Form 10-K.
97
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Getty Realty Corp.
(Registrant)
By:
/S/ DANION FIELDING
Danion Fielding
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
March 1, 2018
By:
/S/ EUGENE SHNAYDERMAN
Eugene Shnayderman
Chief Accounting Officer and Controller
(Principal Accounting Officer)
March 1, 2018
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 1, 2018
/S/ LEO LIEBOWITZ
Leo Liebowitz
Director and Chairman of the Board
March 1, 2018
/S/ MILTON COOPER
Milton Cooper
Director
March 1, 2018
By:
By:
By:
/S/ HOWARD SAFENOWITZ
Howard Safenowitz
Director
March 1, 2018
/S/ PHILIP E. COVIELLO
Philip E. Coviello
Director
March 1, 2018
/S/ RICHARD E. MONTAG
Richard E. Montag
Director
March 1, 2018
98
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-EPP Leasing, LLC
GTY-NEC, LLC
GTY-Pacific Leasing, LLC
GTY-SC 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
Delaware
Delaware
Delaware
New York
New York
New Jersey
* Ninety-nine percent owned by the Company, representing the limited partner units, and one percent owned by Getty Properties
Corp., representing the general partner interest.
EXHIBIT 23. CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No.333-221836) and Form S-8 (No.
333-115672 and 333-223054) of Getty Realty Corp. of our report dated March 1, 2018 relating to the financial statements, financial
statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 1, 2018
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Christopher J. Constant, certify that:
1. I have reviewed this Annual Report on Form 10-K of Getty Realty Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
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)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 1, 2018
By:
/s/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
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)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 1, 2018
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, 2017 (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 1, 2018
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, 2017 (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 1, 2018
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
Executive 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 1, 2018, we had 39,710,287 outstanding shares of com-
mon stock owned by approximately 10,922 shareholders.
Annual Meeting
All shareholders are cordially invited to attend our annual meeting on
May 08, 2018 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 13, 2018, are entitled to vote at the meeting. A notice of meeting,
proxy statement and proxy were mailed to our shareholders
with this report.
Investor Relations Information
Shareholders are informed about Company news through the issuance
of press releases. Shareholders inquiries, comments or suggestions
concerning Getty Realty Corp. are welcome. Investors, brokers, securi-
ties 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 11753-1681
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.
462 South 4th St
Suite 1600
Louisville, KY 40202
(800) 368-5948
www.computershare.com
Two Jericho Plaza, Suite 110
Jericho, NY 11753
( 516 ) 478 - 5400
G
E
T
T
Y
R
E
A
L
T
Y
C
O
R
P
.
2
0
1
7
A
N
N
U
A
L
R
E
P
O
R
T