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ANNUAL REPORT
R
T2018
D E AR S HAREH O LD ERS
I am proud of the Getty team and what we accomplished in
2018. We achieved another year of strong operational and
financial results and, more importantly, we continued to
execute on our growth strategies. Drawing on our deep
relationships in the convenience and gas sector, we continued
to grow and broaden our portfolio, adding 41 high-quality
properties in 2018 through a combination of portfolio and
individual acquisitions. In addition, we completed six
redevelopment projects in 2018, and have several additional
projects in various stages of progress which we expect to
complete in the coming years. Finally, we further enhanced
our already conservative balance sheet as we efficiently issued
long-term debt and raised permanent equity capital. Our
performance produced growth in earnings for your Company,
which led to an increase in our recurring annual dividend and
strong returns for our shareholders. As we look ahead to 2019,
I am energized by the year we have just concluded and
optimistic about our outlook. I believe we have a first-rate
team in place to execute on our growth strategy and create
value for our shareholders for years to come.
Earnings Growth Supported by A Healthy Net Lease
Portfolio
For the year ended 2018, we grew our net earnings and adjusted
funds from operations (AFFO). We produced AFFO of $1.71
per share, which represented an increase of 3% over the prior
year’s results, reflecting solid operating results, capital raising
activity to fund our growth, and deploying that capital into
attractive investments. Our strong financial results benefited
from a 13% increase in annual revenues in 2018 and our ability
to control our overhead costs, offset by additional borrowing
costs and shares outstanding in order to fund our growth.
On the asset management front, our portfolio continues to
benefit from the health and stability of the convenience and gas
sector. Our portfolio of more than 930 properties continues to
be 99% occupied. Unlike many traditional retail asset classes,
the convenience and gas sector continues to show growth
across its key operating metrics. According to the National
Association of Convenience Stores (NACS), its membership
reported growth in all of its major sales categories over the last
year: (i) fuel volumes, +1.9%; (ii) general convenience store
merchandise, +1.4%; and (iii) convenience store foodservice,
+3.2%.
Relationship-Driven Acquisitions
The growth of the convenience and gas sector continues to
drive 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 extensive relationships in the sector,
Getty was afforded numerous opportunities throughout 2018
to acquire convenience store and gasoline stations and other
automotive related properties. 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 tenant. We evaluated approxi-
mately $1.0 billion of potential transactions during the year
and ultimately acquired 41 properties for $78 million. The
majority of our acquisition activity in 2018 was attributable to
two sale leaseback portfolio transactions with existing
tenants, which accounted for 36 properties and $70 million
of investment, with the balance attributable to five individual
net lease acquisitions, which we acquired for $8 million in
aggregate.
In April 2018, we closed a transaction with GPM Investments,
one of the nation’s largest operators of convenience and
gasoline stations, and an existing Getty tenant. We acquired
the fee simple interests in 30 high-quality properties for $52
million. This transaction expanded our presence in a number
of growing Southern U.S. markets, including Arkansas,
Louisiana, Oklahoma and Texas, particularly in the Dallas-Fort
Worth MSA.
In August 2018, we closed our second transaction with a U.S.
subsidiary of Applegreen, plc, a publicly-traded convenience
and gas operator with a significant presence in Ireland and
the United Kingdom. We acquired fee simple interests in six
properties for $17 million in the greater Columbia, South
Carolina metropolitan market. This transaction was an add-on
to our first portfolio with Applegreen, which was acquired in
2017.
We maintain a significant pipeline of opportunities across the
convenience and gas and other automotive sectors but will
maintain our underwriting discipline as we evaluate future
acquisitions.
Significant Strides Made in Redeveloping Assets
Our redevelopment program took a significant step forward in
2018 with the completion of six projects. In addition, we made
progress in terms of leasing relationships with potential national
retail tenants. The projects completed in 2018 include new-to-
industry convenience and gas, automotive retail, financial
services, urgent care and foodservice facilities. New tenants
added to our portfolio include AutoZone, Convenient MD and
TruMark Financial. We invested a total of $7.8 million in these
projects and expect to generate incremental rental income of
$0.9 million. In terms of our redevelopment outlook, we have
a solid pipeline. We ended the year with 13 signed leases, and
we have a number of additional sites which we expect will
move into our redevelopment pipeline this year and over the
next several years. We continue to believe that between five
2018
and ten percent of our portfolio can be redeveloped for either
new convenience and gas use or 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.
Maintaining Our Flexible & Conservative Balance Sheet
We prioritize maintaining a conservatively leveraged balance
sheet as we grow the Company. Our philosophy was validated
by the receipt of the Getty’s inaugural Investment Grade Debt
Rating (BBB-) from Fitch Ratings in May 2018. We are gratified
that our progress and growth justified the rating from an
independent agency. Following our investment grade rating,
we refinanced floating rate borrowings in June 2018 with a
$100 million, 10-year fixed rate debt placement with Prudential
and MetLife.
In addition, we further fortified our balance sheet by completing
a refinancing of our credit agreement in March 2018. Our revised
credit agreement significantly extends all of our near-term debt
maturities and provides the Company with additional borrowing
capacity and covenant flexibility.
Finally, we also partially financed our growth in 2018 through
the issuance of $30 million of common equity through the use
of our at-the-market (ATM) program. The ATM program
continues to be a valuable tool for our Company as it is a cost
effective and efficient way to raise equity capital and allows
us to match fund our acquisitions and redevelopment
projects.
Delivering Returns to Shareholders
Our 2018 accomplishments resulted in our Board’s decision
to increase our dividend by 9% to an annualized rate of $1.40
per share – making 2018 the fourth consecutive year that the
Company has rewarded shareholders with a significant
increase in its recurring cash dividend rate. The dividend is
well covered and its increase stems from the stability of our
current portfolio along with our ability to continue to grow our
AFFO.
Commitment to A Focused Growth Strategy
We believe that owning attractive real estate located in both
stable and growing metropolitan markets is a critical
component to creating value in 2019 and beyond. We have an
irreplaceable portfolio which has been assembled and refined
over the past 60 years and which creates a solid platform to
drive ongoing growth. Looking ahead, we plan to remain
focused on executing a highly-targeted strategy to deliver
consistent operating performance and enhance long-term
shareholder value.
First, we will draw upon the stable growth inherent in our core
net lease portfolio which is supported by the ongoing health
of the convenience and gas sector, the stable performance of
our significant tenants, and proactive asset management.
Second, we will continue to expand our portfolio through
disciplined acquisitions in the convenience and gas and other
automotive related sectors, with a focus on growth markets.
We continue to dedicate additional Company resources to 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.
Third, we will continue to pursue redevelopment projects to
unlock embedded value in our existing portfolio. As the Company
enters the fourth year of its redevelopment strategy, we are
experiencing a significant uptick in both completing existing
projects and in attracting well known national retail tenants for
new projects.
Thank You!
I am proud of Getty’s accomplishments in 2018 and would like
to conclude by personally thanking our management team and
employees for all of their hard work during the past year. I
would also like to thank our Board and shareholders for their
continued support.
Best Regards,
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)
(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)
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
2016
829
2017
907
2018
933
115,271
Dividends Declared Growth (a)
Dividends Declared Growth (a)
120,153
136,106
38,411
Regular Special
Regular Special
47,186
47,706
1.12
1.26
1.15
1.15
1.1 1.17
22,825
22,825
(0.68)
(0.68)
0.96
0.96
0.85
0.85
64,182
1.87
74,555
73,564
2.00
2.0 1.80
57,092
62,032
69,669
1.67
1.03
2014
2014
1.66
1.16
1.71
1.31
2015
2015
Dividends per Share
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
2013
2013
2018 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)
16,829
16,829
(0.42)
(0.42)
17,419
17,419
(0.43)
(0.43)
17,867
17,867
(0.44)
(0.44)
17,557
17,557
(0.43)
(0.43)
1.03
1.03
1.16
1.16
1.31
1.31
Q1
Q1
Q2
Q2
Q3
Q3
Q4
Q4
2016
2016
2017
2017
2018
2018
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
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2018
OR
(cid:4)
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 (cid:4) No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes (cid:4) No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ⌧ No (cid:4)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No (cid:4)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:4)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
⌧
(cid:4)
Large accelerated filer
Non-accelerated filer
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. (cid:4)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:4) No ⌧
The aggregate market value of common stock held by non-affiliates (32,462,564 shares of common stock) of the Company was $914,470,000 as of June 30, 2018.
Accelerated filer
Emerging growth company
Smaller reporting company
(cid:4)
(cid:4)
(cid:4)
The registrant had outstanding 40,866,854 shares of common stock as of February 27, 2019.
DOCUMENT
Selected Portions of Definitive Proxy Statement for the 2019 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, 2018, pursuant to Regulation 14A.
III
DOCUMENTS INCORPORATED BY REFERENCE
Item
Description
Cautionary Note Regarding Forward-Looking Statements
Page
3
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
5
8
19
19
21
25
26
28
30
43
44
72
72
72
73
73
73
73
73
74
74
93
96
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 core operating performance with the sustainability of the core 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, New York, were appropriate based on the information then available; our claims for reimbursement
of monies expended 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 Restated Credit Agreement
and available cash and cash equivalents; our continued compliance with the covenants in our Restated Credit Agreement, Third Restated
Prudential Note Purchase Agreement and MetLife 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 1A. 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; substantially all of our tenants depending on the same industry for their revenues; 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; counterparty risks; the uncertainty of our estimates, judgments, projections and assumptions
associated with our accounting policies and methods; our ability to successfully manage our investment strategy; potential future
acquisitions and redevelopment opportunities; changes in interest rates and our ability to manage or mitigate this risk effectively; owning
and leasing real estate; our business operations generating sufficient cash for distributions or debt service; adverse developments in
general business, economic or political conditions; 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 or Board of Directors; changes in accounting standards; future impairment
3
charges; terrorist attacks and other acts of violence and war; our information systems; failure to maintain effective internal controls over
financial reporting; and changes in LIBOR reporting practices or the method in which LIBOR is calculated.
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 933 properties are
located in 30 states across the United States and Washington, D.C. Our properties are operated under a variety of nationally recognized
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 February 27,
2019, we had 29 employees.
Company Operations
As of December 31, 2018, we owned 859 properties and leased 74 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 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, 2018, we leased 918 of our properties to tenants under triple-net leases.
Our net lease properties include 814 properties leased under 26 separate unitary or master triple-net leases and 104 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, 2018, our contractual rent weighted average lease
term, excluding renewal options, was approximately 10 years.
Several of our leases provide for additional rent based on the aggregate volume of fuel sold. For the year ended December 31,
2018, 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 invest capital in 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, 2018, we have a remaining commitment to fund
up to $7.6 million in the aggregate with our tenants for our portion of such capital improvements. For additional information regarding
our leases, see Note 2 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
Redevelopment. As of December 31, 2018, we were actively redeveloping six of our properties either as a new convenience and
gasoline use or for alternative single-tenant net lease retail uses. For additional information regarding our redevelopment properties, see
“Redevelopment Strategy and Activity” below.
5
Vacancies. As of December 31, 2018, nine 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, and other automotive related 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.
During the year ended December 31, 2018, we acquired fee simple interests in 41 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $78.0 million. During the year ended December 31, 2017, we
acquired fee simple interests in 103 convenience store and gasoline station, and other automotive related 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 238 properties, located in various states, for an aggregate purchase price of $536.5
million. These acquisitions included single property transactions and portfolio transactions.
Redevelopment Strategy and Activity
We believe that certain 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 the redeveloped properties can be
leased or sold at higher values than their current use.
For the year ended December 31, 2018, rent commenced on six completed redevelopment projects that were placed back into
service in our net lease portfolio. Since the inception of our redevelopment program in 2015, we have completed nine redevelopment
projects.
For the year ended December 31, 2018, we spent $2.7 million of construction-in-progress costs related to our redevelopment
activities. During the year ended December 31, 2018, we transferred $2.2 million of construction-in-progress to buildings and
improvements on our consolidated balance sheet. In addition, during the year ended December 31, 2018, we spent $4.4 million to
reimburse tenants for capital expenditures related to our redevelopment activities.
As of December 31, 2018, we were actively redeveloping six of our properties either as a new convenience and gasoline use or
for alternative single-tenant net lease retail uses. In addition, to the six properties currently classified as redevelopment, we are in various
stages of feasibility and planning for the recapture of select properties from our net lease portfolio that are suitable for redevelopment
to either a new convenience and gasoline use or for alternative single-tenant net lease retail uses. As of December 31, 2018, we have
signed leases on seven properties, that are currently part of our net lease portfolio, which will be recaptured and transferred to
redevelopment when the appropriate entitlements, permits and approvals have been secured.
The History of Our Company
Our founders started the business in 1955 with the ownership of one gasoline service station in New York City and combined real
estate ownership, leasing and management with service station operation and petroleum distribution. We held our initial public offering
in 1971 under the name Power Test Corp. In 1985, we acquired from Texaco the petroleum distribution and marketing assets of Getty
Oil Company in the Northeast United States along with the Getty® name and trademark in connection with our real estate and the
petroleum marketing business in the United States.
Getty Petroleum Marketing, Inc. (“Marketing”), which was an indirect wholly owned subsidiary of OAO Lukoil (“Lukoil”) from
December 2000 until March 2011, was our principal tenant under a long-term unitary triple-net 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. As of December 31, 2018, 374 of the
properties we own or lease were previously leased to Marketing.
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
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Internal Revenue Code, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including
mortgages and other REITs) or cash and government securities, derive most of its income from rents from real property or interest on
loans secured by mortgages on real property, and distribute to stockholders 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 stockholders 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, 2018, we had three significant tenants by revenue:
(cid:129) We leased 157 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”). In the aggregate, our leases with subsidiaries of
Global represented 17% and 21% of our total revenues for the years ended December 31, 2018 and 2017, respectively.
All of our unitary leases with subsidiaries of Global are guaranteed by the parent company.
(cid:129) 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 13% and 15% of our total revenues for the
years ended December 31, 2018 and 2017, respectively.
(cid:129) We leased 76 convenience store and gasoline station properties pursuant to two separate unitary leases to subsidiaries of
Chestnut Petroleum Dist., Inc. (“Chestnut”). In the aggregate, our leases with subsidiaries of Chestnut represented 11%
and 13% of our total revenues for the years ended December 31, 2018 and 2017, respectively. The largest of these unitary
leases, covering 57 of our properties, is guaranteed by the parent company, its principals and numerous Chestnut
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 regarding pending environmental lawsuits and claims, see “Item 3. Legal Proceedings”
in this Form 10-K.
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
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contamination at the premises that was known at the time the lease commenced, and for environmental contamination 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 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.
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 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”).
Our website also contains our business conduct guidelines (“Code of Ethics”), corporate governance guidelines and the charters
of the Audit, Compensation and Nominating/Corporate Governance 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.
For additional information regarding 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.
8
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 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 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 our 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 preexisting
unknown environmental contamination.
We measure our environmental remediation liabilities 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 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, 2018, we had accrued a total of $59.8 million for our prospective environmental
remediation obligations. This accrual consisted of (a) $14.5 million, which was our estimate of reasonably estimable environmental
remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $45.3
million for future environmental liabilities related to preexisting unknown contamination.
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
9
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.
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.
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
10
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 (i) our tenants do not perform their lease obligations, (ii) we are unable to renew existing leases and promptly recapture and re-lease
or sell our properties, (iii) lease terms upon renewal or re-leasing are less favorable than current or historical lease terms, (iv) the values
of properties that we sell are adversely affected by market conditions, or (v) 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 stockholders 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 $300.0 million senior
unsecured credit agreement (as amended, the “Restated Credit Agreement”), with a group of commercial banks led by Bank of America,
N.A. (the “Bank Syndicate”), 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 Restated Credit Agreement consists of a
$250.0 million unsecured revolving facility (the “Revolving Facility”), which is scheduled to mature in March 2022 and a $50.0 million
unsecured term loan (the “Term Loan”), which is scheduled to mature in March 2023. Subject to the terms of the Restated 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 March 2023 and (b) request that the lenders approve an increase of up to $300.0 million in the amount of the
Revolving Facility and/or Term Loan to $600.0 million in the aggregate.
On June 21, 2018, we entered into a third amended and restated note purchase and guarantee agreement (the “Third Restated
Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with The Prudential
Insurance Company of America (“Prudential”) and certain of its affiliates. Pursuant to the Third 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”), (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”), and (c) 4.75% Series C Guaranteed Senior Notes due February 25,
2025, in the aggregate principal amount of $50.0 million (the “Series C Notes”), that were outstanding under the existing senior note
purchase agreement would continue to remain outstanding under the Third Restated Prudential Note Purchase Agreement and we
authorized and issued our 5.47% Series D Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of
$50.0 million (the “Series D Notes” and, together with the Series A Notes, the Series B Notes and the Series C Notes, the “Notes”). The
Third Restated Prudential Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Notes
prior to their respective maturities.
On June 21, 2018, we entered into a note purchase and guarantee agreement (the “MetLife Note Purchase Agreement”) with the
Metropolitan Life Insurance Company (“MetLife”) and certain of its affiliates. Pursuant to the MetLife Note Purchase Agreement, we
authorized and issued our 5.47% Series E Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of $50.0
million (the “Series E Notes”). The MetLife Note Purchase Agreement does not provide for scheduled reductions in the principal balance
of the Series E Notes prior to its maturity.
On September 19, 2018, we entered into an amendment (the “Amendment”) of our Restated Credit Agreement. The Amendment
modifies the Restated Credit Agreement to, among other things: (i) reflect that we had previously entered into the Third Restated
Prudential Note Purchase Agreement and the MetLife Note Purchase Agreement and (ii) permit borrowings under each of the Revolving
Facility and the Term Loan at three different interest rates, including a rate based on the LIBOR Daily Floating Rate (as defined in the
11
Amendment) plus the Applicable Rate (as defined in the Amendment) for such facility. For additional information, see “Credit
Agreement” and “Senior Unsecured Notes” in Note 4 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
The Restated Credit Agreement, the Third Restated Prudential Note Purchase Agreement and the MetLife Note Purchase
Agreement contain customary financial covenants such as leverage, coverage ratios and minimum tangible net worth, as well as
limitations on restricted payments, which may limit our ability to incur additional debt or pay dividends. The Restated Credit Agreement,
the Third Restated Prudential Note Purchase Agreement and the MetLife 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 Third Restated
Prudential Note Purchase Agreement and the MetLife Note Purchase Agreement require a mandatory offer to prepay the Notes and the
Series E Notes, respectively, 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 Restated Credit
Agreement, our Third Restated Prudential Note Purchase Agreement or our MetLife 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 Restated Credit Agreement, our Third Restated Prudential Note Purchase Agreement and our MetLife
Note Purchase Agreement and the market price of our common stock.
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 Restated Credit Agreement, the lender that is the counterparty to the Third
Restated Prudential Note Purchase Agreement, the lender that is the counterparty to the MetLife 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, 2018, we leased 157 convenience store and gasoline station properties in three separate unitary leases and
three stand-alone leases to subsidiaries of Global. In the aggregate, our leases with subsidiaries of Global represented 17% and 21% of
our total revenues for the years ended December 31, 2018 and 2017, respectively. All of our unitary leases with subsidiaries of Global
are guaranteed by the parent company. As of December 31, 2018, we leased 77 convenience store and gasoline station properties in
three separate unitary leases to United Oil. In the aggregate, our leases with United Oil represented 13% and 15% of our total revenues
for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we leased 76 convenience store and gasoline
station properties in two separate unitary leases to subsidiaries of Chestnut. In the aggregate, our leases with subsidiaries of Chestnut
represented 11% and 13% of our total revenues for the years ended December 31, 2018 and 2017, respectively. The largest of these
unitary leases, covering 57 of our properties, is guaranteed by the parent company, its principals and numerous Chestnut affiliates.
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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.
Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations,
and they require management to make estimates, judgments and assumptions about matters that are inherently uncertain.
Our accounting policies and methods are fundamental to how we record and report our financial position and results of operations.
We have identified several accounting policies as being critical to the presentation of our financial position and results of operations
because they require management to make particularly subjective or complex judgments about matters that are inherently uncertain and
because of the likelihood that materially different amounts would be recorded under different conditions or using different assumptions.
We cannot provide any assurance that we will not make subsequent significant adjustments to our consolidated financial statements.
Estimates, judgments and assumptions underlying our consolidated financial statements include, but are not limited to, receivables and
related reserves, deferred rent receivable, income under direct financing leases, asset retirement obligations (including environmental
remediation obligations and future environmental liabilities for pre-existing unknown environmental contamination), real estate,
depreciation and amortization, carrying value of our properties, impairment of long-lived assets, litigation, accrued liabilities, income
taxes and allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed. If our accounting policies,
methods, judgments, assumptions, estimates and allocations prove to be incorrect, or if circumstances change, our business, financial
condition, revenues, operating expense, results of operations, liquidity, ability to pay dividends or stock price may be materially
adversely affected.
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 additional debt or new equity issuances, 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 additional operating expenses. Under the
circumstances described above, our results of operations, financial condition and growth prospects may be materially adversely affected.
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 additional debt or new equity issuances, our acquisition of properties may result in stockholder 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, to either a new convenience and gasoline use or for alternative single-tenant net lease
retail uses. The success at each stage of our redevelopment program is dependent on numerous factors and risks, including our ability
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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 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 Restated Credit Agreement. Borrowings under our Restated 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 Restated Credit Agreement. Our interest rate risk may materially change in the future if we increase our borrowings under the
Restated Credit Agreement or amend our Restated Credit Agreement, our Third Restated Prudential Note Purchase Agreement or our
MetLife 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.
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 unforeseen impacts of climate change, compliance with any future laws or
regulations designed to prevent or mitigate the impacts of climate change, and any material costs related thereto; 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.
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.
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.
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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, 2018, 47.5% of our properties are concentrated in three states (New York, Massachusetts and Connecticut).
Because of the concentration of our properties in those regions, in the event of adverse economic conditions in those regions, we would
likely experience higher risk of default on payment of rent to us than if our properties were more geographically diversified. Additionally,
the rents on our properties may be subject to a greater risk of default than other properties in the event of adverse economic, political or
business developments, 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,
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.
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We are subject to losses that may not be covered by insurance.
We and 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 stockholders. 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 stockholders equal at least the amount of our taxable income as defined under the Internal Revenue Code. But, we may have to
borrow money or sell assets to satisfy such distribution requirements even if the then prevailing market conditions are not favorable for
these borrowings. 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 stockholders 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 for
taxable years beginning before 2018, we could be required to pay significant income taxes and we would have less money available for
our operations and distributions to stockholders. 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 stockholders 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 Restated Credit Agreement, the Third Restated
Prudential Note Purchase Agreement and the MetLife Note Purchase Agreement prohibit the payments of dividends during certain
events of default. No assurance can be given that our financial performance in the future will permit our payment of any dividends or
that the amount of dividends we pay, if any, will not fluctuate significantly. Under the Maryland General Corporation Law, our ability
to pay dividends would be restricted if, after payment of the dividend, (i) we would not be able to pay indebtedness as it becomes due
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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 stockholders with liquidation preferences. There currently are no stockholders
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
Restated Credit Agreement, the Third Restated Prudential Note Purchase Agreement and the MetLife 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 discourage
large investors from purchasing 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 or Board of Directors could adversely affect our business or the market price
of our common stock.
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 directors, and on the continued contributions of such persons, each of whom may be difficult to
replace. As a REIT, we employ only 29 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 directors, or upon unexpected death,
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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.
Additionally, certain of our directors beneficially own more than 5% of the outstanding shares of our common stock. If any of these
directors cease to be a director of the Company and they or their estate sell a significant portion of such holdings into the public market,
it could adversely affect the market price of our common stock.
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, 2018 and 2017, we incurred $6.2 million and $9.3 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 which could exacerbate,
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.
If we fail to maintain effective internal controls over financial reporting, we may not be able to accurately and timely report our
financial results.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports, effectively prevent
fraud and operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and
operating results would be harmed. We are required to perform system and process evaluation and testing of our internal control over
financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, the effectiveness
of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.
As a result of material weaknesses or significant deficiencies that may be identified in our internal control over financial reporting
in the future, we may also identify certain deficiencies in some of our disclosure controls and procedures that we believe require
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remediation. If we or our independent registered public accounting firm discover any such weaknesses or deficiencies, we will make
efforts to further improve our internal control over financial reporting controls. However, there is no assurance that we will be successful.
Any failure to maintain effective controls or timely effect any necessary improvement of our internal control over financial reporting
controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect the listing of our common
stock on the NYSE. Ineffective internal control over financial reporting and disclosure controls could also cause investors to lose
confidence in our reported financial information, which would likely have a negative effect on the per share trading price of our common
stock.
We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is calculated.
On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase
out LIBOR by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established such that it continues to
exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee
comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a newly-created index, calculated by
reference to short-term repurchase agreements backed by U.S. Treasury securities, called the Secured Overnight Financing Rate
(“SOFR”). The first publication of SOFR was released by the Federal Reserve Bank of New York in April 2018. Whether SOFR will
become a widely-accepted benchmark in place of LIBOR, however, remains in question. As such, the future of LIBOR and potential
alternatives thereto are uncertain at this time. If LIBOR ceases to exist, we may need to renegotiate our Restated Credit Agreement,
which extends beyond 2021, to replace LIBOR with the new standard that is established. The potential effects of the foregoing on our
cost of capital cannot yet be determined.
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, day-to-day consumer goods and
convenience foods, 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 the property is not subject to a lease, we will either redevelop the property or seek an alternative
tenant or buyer for the property. We manage and evaluate our operations as a single segment.
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.
19
The following table summarizes the geographic distribution of our properties as of December 31, 2018. 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
Leased by
Getty Realty
Getty Realty
Total
Properties
by State
Percent
of Total
Properties
New York
Massachusetts
Connecticut
New Jersey
Texas
Virginia
New Hampshire
South Carolina
Maryland
Washington State
California
Pennsylvania
Colorado
Arizona
Oregon
Arkansas
Hawaii
Maine
Ohio
New Mexico
North Carolina
Rhode Island
Florida
Louisiana
Oklahoma
Georgia
Nevada
Washington, D.C.
Delaware
Illinois
North Dakota
Total
207
100
72
47
49
45
45
45
40
31
29
23
23
23
13
10
10
7
6
5
5
5
4
4
3
2
2
2
—
1
1
859
44
11
9
5
—
1
1
—
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
74
251
111
81
52
49
46
46
45
42
31
29
23
23
23
13
10
10
7
6
5
5
5
4
4
3
2
2
2
1
1
1
933
26.9%
11.9
8.7
5.6
5.3
4.9
4.9
4.8
4.5
3.3
3.1
2.5
2.5
2.5
1.4
1.1
1.1
0.8
0.6
0.5
0.5
0.5
0.5
0.4
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
2019
2020
2021
2022
2023
Subtotal
Thereafter
Total
Number of
Leases
Expiring
Percent of
Total Leased
Properties
Percent
of Total
Properties
7
6
8
4
2
27
47
74
9.5%
8.1
10.8
5.4
2.7
36.5
63.5
100%
0.8%
0.6
0.9
0.4
0.2
2.9
5.0
7.9%
20
Revenues from rental properties and tenant reimbursements for the year ended December 31, 2018, were $133.0 million with
respect to 926 average rental properties held during the year for an average revenue per rental property of approximately $143,600.
Revenues from rental properties and tenant reimbursements 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.
Rental property lease expirations and annualized contractual rent as of December 31, 2018, are as follows (in thousands, except
for number of properties):
CALENDAR YEAR
Redevelopment
Vacant
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Thereafter
Total
Number of
Rental
Properties (a)
Annualized
Contractual
Rent (b)
6 $
9
34
37
24
36
23
22
13
77
250
44
358
933 $
—
—
3,360
4,700
2,458
3,046
3,102
2,576
2,696
12,912
18,437
7,017
56,524
116,828
Percentage
of Total
Annualized Rent
—
—
2.9%
4.0
2.1
2.6
2.7
2.2
2.3
11.0
15.8
6.0
48.4
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, 2018, 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 hazardous substances 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, 2018 and
2017, we had accrued $12.2 million and $12.3 million, respectively, for certain of these matters which we believe were appropriate
based on information then currently available. It is possible that losses related to these legal proceedings could exceed the amounts
accrued as of December 31, 2018, 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, New York, 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 the 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, Sprague Operating
Resources LLC (successor to RAD Energy Corp.), Service Station Installation of NY, Inc., 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, 2018, could cause a material adverse effect
on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
21
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. In 2014, the
NJDEP issued a notice of violation directing 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, which we have
rejected on the basis that we are not responsible for the alleged contamination. In December 2018, we agreed with the NJDEP upon
terms of settlement which require us to conduct a limited remedial investigation and limited remedial work at the property in exchange
for NJDEP’s agreement to release us from any future remediation obligations at the property and to withdraw its demand against us for
civil penalties and fines. The settlement agreement remains subject to public notice and final NJDEP approval.
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 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 that it is
probable that this litigation will be resolved in a manner that is unfavorable to us. We are unable to estimate the range of loss in excess
of the amount accrued for the New Jersey MDL Proceedings with certainty 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, 2018, 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 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
22
defendants based on multiple theories, including strict liability – defective design; strict liability – failure to warn; public nuisance;
negligence; trespass; and violation of consumer protection law.
The case was filed in the Court of Common Pleas, Philadelphia County, but was removed by defendants to the United States
District Court for the Eastern District of Pennsylvania and then transferred to the United States District Court for the Southern District
of New York so that it may be managed as part of the ongoing MTBE MDL. In November 2015, plaintiffs 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 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
23
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 the 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 which led to discussions between the CPG and the EPA regarding an alternative
approach to completing the RI/FS, including various adaptive management scenarios focusing on source control interim remedies for
the upper 9-miles of the Lower Passaic River. These discussions between the CPG and the EPA are ongoing.
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.
24
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, in which we
are participating, 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 was scheduled to conclude by mid-
2019, but is likely to be extended.
On June 30, 2018, Occidental filed a complaint in the United States District Court for the District of New Jersey seeking cost
recovery and contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) for its
alleged expenses with respect to the investigation, design, and anticipated implementation of the remedy for the lower 8-miles of the
Passaic River. The complaint lists over 120 defendants, including us, many of which were also named in the NJDEP’s 2003 Directive
and the EPA’s 2016 Notice. We do not know whether this new complaint will impact the EPA’s allocation process or the ultimate
outcome of the matter. We intend to defend the claims consistent with our defenses in the related proceedings.
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 either have
incurred, or expect to incur, at properties previously leased to Marketing pursuant to a 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, as well
as a breach of contract claim seeking to pierce Marketing’s corporate veil. In August 2017, the court denied in part and granted in part
a motion by Lukoil Americas Corporation to dismiss our claims. In the fall of 2018, we appealed the dismissal of our breach of contract
claim, and the defendants have cross-appealed the partial denial of their motion to dismiss. Further trial court litigation is currently
stayed pending completion of a court ordered mediation, which began in 2018 and in which the parties continue to participate. 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.
25
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Capital Stock
Our common stock is traded on the New York Stock Exchange (symbol: GTY). There were approximately 10,895 beneficial
holders of our common stock as of December 20, 2018, of which approximately 924 were holders of record.
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.
Stock Performance Graph
Comparison of Five-Year Cumulative Total Return*
Source: SNL Financial
Getty Realty Corp.
Standard & Poor's 500
Peer Group
12/31/2013 12/31/2014
100.00
100.00
100.00
104.44
113.69
125.75
12/31/2015 12/31/2016 12/31/2017 12/31/2018
207.10
150.33
191.04
182.31
157.22
169.03
105.16
115.26
135.20
163.72
129.05
163.84
Assumes $100 invested at the close of the last day of trading on the New York Stock Exchange on December 31, 2013, in Getty
Realty Corp. common stock, Standard & Poor’s 500 and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
26
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.
27
Item 6. Selected Financial Data
GETTY REALTY CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(in thousands, except per share amounts and number of properties)
2018 (a)
For the Years ended December 31,
2016
2015 (c)
2017 (b)
2014
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 weighted average common shares
outstanding
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
Stockholders’ equity
NUMBER OF PROPERTIES:
Owned
Leased
Total properties
$
$
136,106 $
48,410
(704)
47,706 $
120,153 $
45,048
2,138
47,186 $
115,271 $
39,825
(1,414)
38,411 $
110,776 $
39,478
(2,068)
37,410 $
99,905
19,890
3,528
23,418
1.19
1.17
1.20
1.26
1.16
1.12
1.17
1.11
0.59
0.69
40,171
36,897
33,806
33,420
33,409
40,191
1.31
36,897
1.16
33,806
1.03
33,420
1.15
33,409
0.96
$
$
47,706 $
23,636
(3,948)
6,170
73,564
(2,223)
—
(1,319)
2,409
(45)
(2,570)
(147)
—
69,669 $
$
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)
(93)
(4,639)
4,829
374
—
(18,176)
445
47,403 $
23,418
10,549
(10,218)
21,534
45,283
(5,372)
2,331
(2,756)
3,046
—
—
—
104
42,636
$ 1,043,106 $
970,964 $
1,159,175 1,072,754
379,158
553,695 $
441,636
581,164 $
$
782,166 $
877,306
298,544
430,918 $
783,233 $
896,918
317,093
406,561 $
595,959
686,582
124,425
407,024
859
74
933
828
79
907
740
89
829
753
98
851
757
106
863
(a)
(b)
Includes (from the date of the acquisition) the effect of the $52.6 million acquisition of 30 properties in the E-Z Mart transaction on
April 17, 2018, and the effect of the $17.4 million acquisition of six properties in the Applegreen transaction on August 1, 2018.
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.
28
(c)
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.
Includes special dividends of $0.22 per share and $0.14 per share for the years ended December 31, 2015, and 2014, respectively.
(d)
(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”.
29
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, 2018, we owned 859 properties and leased 74 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 stockholders. 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
stockholders 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 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, 2018, we leased 918 of our properties to tenants under triple-net leases.
Our net lease properties include 814 properties leased under 26 separate unitary or master triple-net leases and 104 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. In addition, certain of our leases require the tenants to invest capital in our properties.
Redevelopment. As of December 31, 2018, we were actively redeveloping six of our properties either as a new convenience and
gasoline use or for alternative single-tenant net lease retail uses.
Vacancies. As of December 31, 2018, nine 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, and other automotive related, 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.
During the year ended December 31, 2018, we acquired fee simple interests in 41 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $78.0 million. Included in these acquisitions was our April 17,
2018, acquisition of fee simple interests in 30 convenience store and gasoline station properties from GPM Investments, LLC (“GPM”).
These properties were simultaneously leased to GPM, a leading regional convenience store and gasoline station operator, under a long-
30
term triple-net unitary lease. The properties are located across Arkansas, Louisiana, Oklahoma and Texas. The total purchase price for
the transaction was $52.6 million, which was funded with funds available under our Revolving Facility. On August 1, 2018, we acquired
fee simple interests in six convenience store and gasoline station 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 properties are located within the metropolitan market of
Columbia, SC. The total purchase price for the transaction was $17.4 million, which was funded with funds available under our
Revolving Facility. In addition to the GPM and Applegreen transactions, in 2018, we acquired fee simple interests in five convenience
store and gasoline station, and other automotive related properties in various transactions for an aggregate purchase price of $8.0 million.
During the year ended December 31, 2017, we acquired fee simple interests in 103 convenience store and gasoline station, and
other automotive related 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 (“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 properties are located primarily within metropolitan markets in the states
of 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 Equity Offering and funds available under our Revolving Facility. On
October 3, 2017, we acquired fee simple interests in 33 convenience store and gasoline station properties and five stand-alone Burger
King quick service restaurants from a U.S. subsidiary of Applegreen. These properties were simultaneously leased to a U.S. subsidiary
of Applegreen under a long-term triple-net unitary lease. The properties are 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 Equity Offering
and funds available under our Revolving Facility. In addition to the Empire and Applegreen transactions, in 2017, we acquired fee
simple interests in 16 convenience store and gasoline station, and other automotive properties in various transactions for an aggregate
purchase price of $22.2 million.
Redevelopment Strategy and Activity
We believe that certain 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 the redeveloped properties can be
leased or sold at higher values than their current use.
For the year ended December 31, 2018, rent commenced on six completed redevelopment projects that were placed back into
service in our net lease portfolio. Since the inception of our redevelopment program in 2015, we have completed nine redevelopment
projects.
For the year ended December 31, 2018, we spent $2.7 million of construction-in-progress costs related to our redevelopment
activities. During the year ended December 31, 2018, we transferred $2.2 million of construction-in-progress to buildings and
improvements on our consolidated balance sheet. In addition, during the year ended December 31, 2018, we spent $4.4 million to
reimburse tenants for capital expenditures related to our redevelopment activities.
As of December 31, 2018, we were actively redeveloping six of our properties either as a new convenience and gasoline use or
for alternative single-tenant net lease retail uses. In addition, to the six properties currently classified as redevelopment, we are in various
stages of feasibility and planning for the recapture of select properties from our net lease portfolio that are suitable for redevelopment
to either a new convenience and gasoline use or for alternative single-tenant net lease retail uses. As of December 31, 2018, we have
signed leases on seven properties, that are currently part of our net lease portfolio, which will be recaptured and transferred to
redevelopment when the appropriate entitlements, permits and approvals have been secured.
Asset Impairment
We perform an impairment analysis for the carrying amounts of our properties in accordance with GAAP when indicators of
impairment exist. We reduced the carrying amounts to fair value, and recorded in continuing and discontinued operations, impairment
charges aggregating $6.2 million and $9.3 million for the years ended December 31, 2018 and 2017, 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
values of certain properties in excess of their fair values, reductions in estimated undiscounted cash flows expected to be received during
the assumed holding period for certain of our properties, and reductions in estimated sales prices from third-party offers based on signed
contracts, letters of intent or indicative bids for certain of our properties. The evaluation of and estimates of anticipated cash flows used
to conduct our impairment analysis are highly subjective and actual results could vary significantly from our estimates.
31
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 stockholders 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 appropriate supplemental non-GAAP measures 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.
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,
2016 and 2015, has 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 property
acquisition costs expensed and other unusual items that are not reflective of our core operating performance. Acquisition costs are
expensed, generally in the period when properties are acquired and are not reflective of our 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, 2018, compared to year ended December 31, 2017
Revenues from rental properties increased by $15.0 million to $116.3 million for the year ended December 31, 2018, as compared
to $101.3 million for the year ended December 31, 2017. The increase in revenues from rental properties was primarily due to $13.4
million of revenue from the properties acquired in 2018 and the second half of 2017. Rental income contractually due from our tenants
included in revenues from rental properties in continuing operations was $114.1 million for the year ended December 31, 2018, as
compared to $99.4 million for the year ended December 31, 2017. Tenant reimbursements, which consist of real estate taxes and other
32
municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements were $16.7
million and $15.8 million for the years ended December 31, 2018 and 2017, respectively. Interest income on notes and mortgages
receivable was $3.1 million for the year ended December 31, 2018, as compared to $3.0 million for the year ended December 31, 2017.
In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent
contractually due 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 includes Revenue Recognition
Adjustments which increased rental revenue by $2.2 million for the year ended December 31, 2018, and $2.0 million for the year ended
December 31, 2017.
Property costs, which are primarily comprised of rent expense, real estate taxes, state and local taxes, municipal charges,
professional fees, maintenance expense and reimbursable tenant expenses, were $23.6 million for the year ended December 31, 2018,
as compared to $22.3 million for the year ended December 31, 2017. The increase in property costs for the year ended December 31,
2018, was principally due to an increase in real estate taxes and property related professional fees.
Impairment charges included in continuing operations were $4.9 million for the year ended December 31, 2018, as compared to
$8.3 million for the year ended December 31, 2017. 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, 2018 and 2017, were attributable to the
effect of adding asset retirement costs due to changes in estimates associated with our environmental liabilities, which increased the
carrying values of certain properties in excess of their fair values, 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.
Environmental expenses included in continuing operations were $4.7 million for the year ended December 31, 2018, as compared
to $3.1 million for the year ended December 31, 2017. The increase in environmental expenses for the year ended December 31, 2018,
was principally due to a $0.7 million increase in environmental legal fees and expenses, and a $1.9 million increase in net environmental
remediation costs, offset by a $1.1 million decrease in environmental litigation accruals. 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 expense was $14.7 million for the year ended December 31, 2018, as compared to $13.9 million for
the year ended December 31, 2017. The increase in general and administrative expense for the year ended December 31, 2018, was
principally due to a $0.4 million increase in stock-based compensation, a $0.2 million increase in employee related expenses and a $0.2
million increase in public company expenses.
Depreciation and amortization expense was $23.6 million for the year ended December 31, 2018, as compared to $19.1 million
for the year ended December 31, 2017. The increase in depreciation and amortization expense was primarily due to depreciation and
amortization of properties acquired offset by 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.
Gains on dispositions of real estate were $3.9 million for the year ended December 31, 2018, as compared to $1.0 million for the
year ended December 31, 2017. The gains were the result of the sale of nine and 12 properties during each of the years ended
December 31, 2018 and 2017, respectively.
Other income was $2.7 million for the year ended December 31, 2018, as compared to $8.5 million for the year ended
December 31, 2017. For the year ended December 31, 2018, other income was primarily attributable to $2.6 million received from
insurance reimbursements. Other income for the year ended December 31, 2017, was primarily attributable to $1.8 million received
from insurance reimbursements and $6.4 million received from legal settlements and judgments.
Interest expense was $22.3 million for the year ended December 31, 2018, as compared to $17.8 million for the year ended
December 31, 2017. The increase was due to higher average borrowings outstanding and an increase in average interest rates on
borrowings outstanding for the year ended December 31, 2018, as compared to the year ended December 31, 2017.
Loss from discontinued operations was $0.7 million for the year ended December 31, 2018, as compared to earnings of $2.1
million for the year ended December 31, 2017. For the year ended December 31, 2018, environmental credits recorded in discontinued
operations were $0.6 million, as compared to $3.2 million for the year ended December 31, 2017. For the year ended December 31,
2018, impairment charges recorded in discontinued operations were $1.3 million, as compared to $1.0 million for the year ended
December 31, 2017, and were attributable to the accumulation of asset retirement costs as a result of increases in estimated
environmental liabilities which increased the carrying values of discontinued properties above their fair values. Environmental expenses
and impairment charges vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the
direction of changes for one period, as compared to prior periods.
33
For the year ended December 31, 2018, FFO was $73.6 million, as compared to $74.6 million for the year ended December 31,
2017. For the year ended December 31, 2018, AFFO was $69.7 million, as compared to $62.0 million for the year ended December 31,
2017. FFO for the year ended December 31, 2018, was impacted by changes in net earnings, but excludes a $3.1 million decrease in
impairment charges, a $4.5 million increase in depreciation and amortization expense and a $2.9 million decrease in gains on dispositions
of real estate. The increase in AFFO for the year ended December 31, 2018, also excludes a $6.3 million decrease in legal settlements
and judgments, a $4.5 million increase in environmental estimates and accretion expense, a $0.8 million increase in insurance
reimbursements, a $1.1 million decrease in environmental litigation accruals, and a $0.2 million decrease in Revenue Recognition
Adjustments.
Basic and diluted earnings per share was $1.17 per share for the year ended December 31, 2018, as compared to $1.26 per share
for the year ended December 31, 2017. Basic and diluted FFO per share for the year ended December 31, 2018, was $1.81 and $1.80
per share, respectively, as compared to $2.00 per share for the year ended December 31, 2017. Basic and diluted AFFO per share for
the year ended December 31, 2018, was $1.71 per share, as compared to $1.66 per share for the year ended December 31, 2017.
Year ended December 31, 2017, compared to year ended December 31, 2016
Revenues from rental properties 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 and Applegreen transactions, respectively. Rental income
contractually due 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 were $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 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 includes Revenue Recognition
Adjustments which 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, 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 values of certain properties in excess of their fair values, 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, were $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 accruals and legal fees, partially offset by a $0.4 million
decrease in net 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 changes in reported environmental expenses for one period, as compared to
prior periods.
General and administrative expense was $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 expense 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.
34
Depreciation and amortization expense 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 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 affiliates of Hanuman Business, Inc. (d/b/a “Ramoco”).
Other income 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 and Applegreen transactions.
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 were $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. Environmental credits recorded in discontinued operations was $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 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 values of certain
properties above their fair values. 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 changes 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 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, a $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 $0.1 million decrease in acquisition costs and a
$1.4 million decrease in Revenue Recognition Adjustments.
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.
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 March 2022, 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 Restated Credit Agreement, proceeds from the sale of shares of our common stock under our ATM
Program and available cash and cash equivalents.
35
Our cash flow activities for the years ended December 31, 2018, 2017 and 2016, 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
2018
Year ended December 31,
2017
2016
$
$
63,346 $
(75,931)
40,514 $
56,742 $
(206,217)
157,094 $
36,874
12,980
(41,011)
Net cash flow from operating activities increased by $6.6 million for the year ended December 31, 2018, to $63.3 million, as
compared to $56.7 million for the year ended December 31, 2017. Net cash provided by operating activities represents cash received
primarily from rental and interest income less cash used for property costs, environmental expense, general and administrative expense
and interest expense. The change in net cash flow provided by operating activities for the years ended December 31, 2018, 2017 and
2016, 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. Because 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 our
redevelopment activities. Net cash flow used in investing activities decreased by $130.3 million for the year ended December 31, 2018,
to a use of $75.9 million, as compared to a use of $206.2 million for the year ended December 31, 2017. The decrease in net cash flow
used in investing activities for the year ended December 31, 2018, was primarily due to a decrease of $136.0 million of property
acquisitions, partially offset by an increase in capital expenditures of $3.4 million and an increase of $1.4 million in additions to
construction in progress.
Financing Activities
Net cash flow provided by financing activities decreased by $116.6 million for the year ended December 31, 2018, to $40.5
million, as compared to a use of $157.1 million for the year ended December 31, 2017. The decrease in net cash flow from financing
activities for the year ended December 31, 2018, was primarily due to a decrease in net proceeds from issuances of common stock of
$87.7 million, an increase in dividends paid of $11.2 million, an increase of $3.2 million in debt issuance costs and a decrease in net
borrowings of $15.0 million.
Credit Agreement
On June 2, 2015, we entered into a $225.0 million senior unsecured credit agreement (the “Credit Agreement”) with a group of
banks led by Bank of America, N.A. (the “Bank Syndicate”). The Credit Agreement consisted of a $175.0 million unsecured revolving
credit facility (the “Revolving Facility”) and a $50.0 million unsecured term loan (the “Term Loan”).
On March 23, 2018, we entered in to an amended and restated credit agreement (as amended, as described below, the “Restated
Credit Agreement”) amending and restating our Credit Agreement. Pursuant to the Restated Credit Agreement, we (a) increased the
borrowing capacity under the Revolving Facility from $175.0 million to $250.0 million, (b) extended the maturity date of the Revolving
Facility from June 2018 to March 2022, (c) extended the maturity date of the Term Loan from June 2020 to March 2023 and (d) amended
certain financial covenants and provisions.
Subject to the terms of the Restated 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 March 2023 and (b) request that the lenders approve an increase
of up to $300.0 million in the amount of the Revolving Facility and/or Term Loan to $600.0 million in the aggregate.
The Restated Credit Agreement incurs interest and fees at various rates based on our total indebtedness to total asset value ratio
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 0.50% to 1.30% or a LIBOR rate plus a margin of 1.50% to 2.30%. The annual commitment fee on the undrawn
funds under the Revolving Facility is 0.15% to 0.25%. The Term Loan bears interest at a rate equal to the sum of a base rate plus a
margin of 0.45% to 1.25% or a LIBOR rate plus a margin of 1.45% to 2.25%. The Term Loan does not provide for scheduled reductions
in the principal balance prior to its maturity.
On September 19, 2018, we entered into an amendment (the “Amendment”) of our Restated Credit Agreement. The Amendment
modifies the Restated Credit Agreement to, among other things: (i) reflect that we had previously entered into (a) an amended and
restated note purchase and guarantee agreement with The Prudential Insurance Company of America (“Prudential”) and certain of its
affiliates and (b) a note purchase and guarantee agreement with the Metropolitan Life Insurance Company (“MetLife”) and certain of
its affiliates; and (ii) permit borrowings under each of the Revolving Facility and the Term Loan at three different interest rates, including
36
a rate based on the LIBOR Daily Floating Rate (as defined in the Amendment) plus the Applicable Rate (as defined in the Amendment)
for such facility.
Senior Unsecured Notes
On June 21, 2018, we entered into a third amended and restated note purchase and guarantee agreement (the “Third Restated
Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with Prudential and certain
of its affiliates. Pursuant to the Third 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”), (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”)
and (c) 4.75% Series C Guaranteed Senior Notes due February 25, 2025, in the aggregate principal amount of $50.0 million (the “Series
C Notes”) that were outstanding under the existing senior note purchase agreement would continue to remain outstanding under the
Third Restated Prudential Note Purchase Agreement and we authorized and issued our 5.47% Series D Guaranteed Senior Notes due
June 21, 2028, in the aggregate principal amount of $50.0 million (the “Series D Notes” and, together with the Series A Notes, Series B
Notes and Series C Notes, the “Notes”). The Third Restated Prudential Note Purchase Agreement does not provide for scheduled
reductions in the principal balance of the Notes prior to their respective maturities.
On June 21, 2018, we entered into a note purchase and guarantee agreement (the “MetLife Note Purchase Agreement”) with
MetLife and certain of its affiliates. Pursuant to the MetLife Note Purchase Agreement, we authorized and issued our 5.47% Series E
Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of $50.0 million (the “Series E Notes”). The MetLife
Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Series E Notes prior to its maturity.
Debt Maturities
The amounts outstanding under our Restated Credit Agreement, Third Restated Prudential Note Purchase Agreement and MetLife
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
Series D Notes
Series E Notes
Total debt
Unamortized debt issuance costs, net
Total debt, net
Maturity
Date
March 2022
March 2023
February 2021
June 2023
February 2025
June 2028
June 2028
Interest Rate
December 31,
2018
December 31,
2017
3.95% $
3.96%
6.00%
5.35%
4.75%
5.47%
5.47%
$
70,000 $
50,000
100,000
75,000
50,000
50,000
50,000
445,000
(3,364)
441,636 $
105,000
50,000
100,000
75,000
50,000
—
—
380,000
(842)
379,158
As of December 31, 2018, we are in compliance with all of the material terms of the Restated Credit Agreement, the Third Restated
Prudential Note Purchase Agreement and the MetLife 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 and Applegreen transactions.
ATM Program
In June 2016, we established an at-the-market equity offering program (the “2016 ATM Program”), pursuant to which we were
able to 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. The 2016 ATM Program was terminated in January 2018.
In March 2018, we established a new at-the-market equity offering program (the “ATM Program”), pursuant to which we are able
to 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
37
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, 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.
During the years ended December 31, 2018 and 2017, we issued 1.1 million and 0.5 million shares of our common stock,
respectively, and received net proceeds of $30.1 million and $13.5 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, 2018, we acquired fee simple interests in 41 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $78.0 million. We accounted for the acquisitions of fee simple
interests as asset acquisitions. During the year ended December 31, 2017, we acquired fee simple interests in 103 convenience store and
gasoline station, and other automotive related 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.
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 alternative single-tenant net lease retail uses. For the year ended December 31, 2018, we spent $2.7 million of
construction-in-progress costs related to our redevelopment activities. In addition, during the year ended December 31, 2018, we spent
$4.4 million to reimburse tenants for capital expenditures related to our redevelopment activities.
Because 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, 2018, we have a remaining commitment to fund up to $7.6 million in the aggregate in capital improvements
in certain properties previously leased to Marketing and now subject to 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 cash 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 Restated
Credit Agreement, the Third Restated Prudential Note Purchase Agreement, the MetLife Note Purchase Agreement and other factors,
and therefore is not assured. In particular, the Restated Credit Agreement, the Third Restated Prudential Note Purchase Agreement and
the MetLife Note Purchase Agreement prohibit the payment of dividends during certain events of default.
Cash dividends paid to our stockholders aggregated $50.5 million, $39.3 million and $36.2 million, for the years ended
December 31, 2018, 2017 and 2016, 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, 2018, were comprised of borrowings under the
Restated Credit Agreement, the Third Restated Prudential Note Purchase Agreement, the MetLife 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.
38
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, 2018, exclusive of extension options and unamortized debt
issuance costs, are summarized below (in thousands):
Operating and capital leases
Credit agreement
Senior unsecured notes
Interest on debt (a)
Estimated environmental remediation expenditures (b)
Capital improvements (c)
Total
Less
Than
One Year
One to
Three
Years
Three
to
Five
Years
6,016 $
—
—
22,597
8,509
106
37,228 $
9,655 $
—
100,000
40,112
18,607
—
168,374 $
4,787 $
120,000
75,000
24,441
8,762
315
233,305 $
More
Than
Five
Years
2,754
—
150,000
27,231
23,943
7,200
211,128
Total
23,212 $
120,000
325,000
114,381
59,821
7,621
650,035 $
$
$
(a) For our Restated Credit Agreement, which bears interest at variable rates, future interest expense was calculated using the cost of
borrowing as of December 31, 2018.
(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”. The SEC’s Financial
Reporting Release (“FRR”) No. 60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies (“FRR 60”), suggests
that companies provide additional disclosure on those accounting policies considered most critical. FRR 60 considers an accounting
policy to be critical if it is important to our financial condition and results of operations and requires significant judgment and estimates
on the part of management in its application. 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
39
in the leases. We may be required to reserve, or provide reserves for a portion of, the recorded deferred rent receivable if it becomes
apparent that the tenant may not make all of its contractual lease payments when due during the current term of the lease.
Direct Financing Leases
Income under direct financing leases is included in revenues from rental properties and is recognized over the lease terms using
the effective interest rate method which produces a constant periodic rate of return on the net investments in the leased properties. 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 because 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.
40
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 our 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 $50.0 million aggregate limit
and is subject to various self-insured retentions and other conditions and limitations. Our intention in purchasing this policy was 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 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 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
41
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 our 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 preexisting
unknown 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, 2018, we had
accrued a total of $59.8 million for our prospective environmental remediation obligations. This accrual consisted of (a) $14.5 million,
which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which
we are responsible, net of estimated recoveries and (b) $45.3 million for future environmental liabilities related to preexisting unknown
contamination. 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 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, $2.4 million,
$3.4 million and $4.1 million of net accretion expense was recorded for the years ended December 31, 2018, 2017 and 2016, respectively,
which is included in environmental expenses. In addition, during the years ended December 31, 2018, 2017 and 2016, we recorded
credits to environmental expenses, included in continuing and discontinued operations, aggregating $1.3 million, $6.9 million and $7.0
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, 2018 and 2017, we increased the carrying values of certain of our properties by $5.1 million
and $5.5 million, 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 in our consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016, were $4.3 million,
$4.3 million and $5.1 million, respectively. Capitalized asset retirement costs were $45.7 million (consisting of $20.4 million of known
environmental liabilities and $25.3 million of reserves for future environmental liabilities) as of December 31, 2018 and $45.4 million
(consisting of $18.7 million of known environmental liabilities and $26.7 million of reserves for future environmental liabilities) as of
December 31, 2017. We recorded impairment charges aggregating $3.9 million and $6.9 million for the years ended December 31, 2018
and 2017, 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.
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
42
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 that 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,
2018 and 2017, we had accrued $12.2 million and $12.3 million, respectively, for certain of these matters which we believe were
appropriate based on information then currently available. It is possible that our assumptions regarding the ultimate allocation method
and share of responsibility that we used to allocate environmental liabilities may change, which may result in our providing an accrual,
or adjustments to the amounts recorded, for environmental litigation accruals. Matters related to our former Newark, New Jersey
Terminal and 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, New York, in particular, 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 these and other pending environmental lawsuits and claims, see “Item 3. Legal Proceedings” and Note 3 in
“Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to interest rate risk, primarily as a result of our $300.0 million senior unsecured credit agreement entered into on
March 23, 2018, and amended on September 19, 2018 (as amended, the “Restated Credit Agreement”), with a group of commercial
banks led by Bank of America, N.A. (the “Bank Syndicate”). The Restated Credit Agreement consists of a $250.0 million unsecured
revolving facility (the “Revolving Facility”), which is scheduled to mature in March 2022 and a $50.0 million unsecured term loan (the
“Term Loan”), which is scheduled to mature in March 2023. Subject to the terms of the Restated 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 March
2023 and (b) request that the lenders approve an increase of up to $300.0 million in the amount of the Revolving Facility and/or Term
Loan to $600.0 million in the aggregate. The Restated Credit Agreement incurs interest and fees at various rates based on our total
indebtedness to total asset value ratio 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 0.50% to 1.30% or a LIBOR rate plus a margin of 1.50% to 2.30%. The
annual commitment fee on the undrawn funds under the Revolving Facility is 0.15% to 0.25%. The Term Loan bears interest at a rate
equal to the sum of a base rate plus a margin of 0.45% to 1.25% or a LIBOR rate plus a margin of 1.45% to 2.25%. The Term Loan does
not provide for scheduled reductions in the principal balance prior to its maturity. We use borrowings under the Restated Credit
Agreement to finance acquisitions and for general corporate purposes. Borrowings outstanding at variable interest rates under the
Restated Credit Agreement as of December 31, 2018, were $120.0 million.
Based on our outstanding borrowings under the Restated Credit Agreement of $120.0 million for the year ended December 31,
2018, an increase in market interest rates of 1.0% for 2019 would decrease our 2019 net income and cash flows by approximately $1.2
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 $120.0 million outstanding borrowings under the Restated Credit Agreement is indicative of our future
average floating interest rate borrowings for 2019 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 Restated 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,
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.
43
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, 2018 and 2017
Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016
Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Page
45
46
47
49
71
44
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, net
Investment in direct financing leases, net
Notes and mortgages receivable
Cash and cash equivalents
Restricted cash
Deferred rent receivable
Accounts receivable, net of allowance of $2,094 and $1,840, respectively
Prepaid expenses and other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ 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
Stockholders’ equity:
$
$
$
Preferred stock, $0.01 par value; 20,000,000 and 10,000,000 shares authorized,
respectively; unissued
Common stock, $0.01 par value; 100,000,000 and 60,000,000 shares authorized,
respectively; 40,854,491 and 39,696,110 shares issued and outstanding, respectively
Additional paid-in capital
Dividends paid in excess of earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
December 31,
2018
2017
631,185 $
409,753
2,168
1,043,106
(150,691)
892,415
85,892
33,519
46,892
1,850
37,722
3,008
57,877
1,159,175 $
117,227 $
324,409
59,821
14,495
62,059
578,011
—
589,497
379,785
1,682
970,964
(133,353)
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
—
—
—
409
638,178
(57,423)
581,164
1,159,175 $
397
604,872
(51,574)
553,695
1,072,754
The accompanying notes are an integral part of these consolidated financial statements.
45
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
2018
Year ended December 31,
2017
2016
$
116,328 $
16,691
3,087
136,106
101,332 $
15,829
2,992
120,153
23,649
4,902
4,711
14,661
470
23,636
72,029
22,345
8,279
3,098
13,879
205
19,089
66,895
96,711
15,017
3,543
115,271
23,205
8,566
2,654
14,155
(448)
19,170
67,302
Gains on dispositions of real estate
3,948
1,041
6,390
Operating income
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 earnings per common share:
Earnings from continuing operations
Earnings (loss) earnings from discontinued operations
Net earnings
Diluted earnings per common share:
Earnings from continuing operations
Earnings (loss) earnings from discontinued operations
Net earnings
Weighted average common shares outstanding:
Basic
Diluted
68,025
54,299
54,359
2,730
(22,345)
48,410
(704)
—
(704)
47,706 $
1.19 $
(0.02)
1.17 $
1.19 $
(0.02)
1.17 $
8,518
(17,769)
45,048
2,138
—
2,138
47,186 $
1.20 $
0.06
1.26 $
1.20 $
0.06
1.26 $
2,027
(16,561)
39,825
(1,236)
(178)
(1,414)
38,411
1.16
(0.04)
1.12
1.16
(0.04)
1.12
40,171
40,191
36,897
36,897
33,806
33,806
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
46
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
2018
Year ended December 31,
2017
2016
$
47,706 $
47,186 $
38,411
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 debt issuance costs
Accretion expense
Stock-based 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
(Issuance) of notes and mortgages receivable
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 debt issuance 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
$
47
23,636
6,170
(3,948)
—
(4,112)
470
(808)
871
2,409
1,777
(814)
(708)
(11,210)
1,907
63,346
(77,972)
(3,794)
(2,657)
3,303
—
(430)
3,015
(530)
3,134
(75,931)
19,089
9,321
(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)
95,000
(130,000)
100,000
(468)
—
(50,503)
(3,393)
(260)
—
—
30,138
40,514
27,929
20,813
48,742 $
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 $
19,170
12,814
(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
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
2018
Year ended December 31,
2017
2016
$
20,790 $
244
9,891
16,435 $
(195)
12,944
15,707
368
17,633
14,495
12,846
9,742
$
3,743 $
1,505 $
1,814
The accompanying notes are an integral part of these consolidated financial statements.
48
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, 2018.
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. For additional information regarding property
acquisitions, see Note 13 – 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.
We evaluate the held for sale classification of our real estate as of the end of each quarter. Assets that are classified as held for
sale are recorded at the lower of their carrying amount or fair value less costs to sell.
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.
49
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, 2018 and 2017.
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 and capital improvements. 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 the 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 that 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, 2018 and 2017.
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, 2018 and 2017, restricted cash of $1,850,000 and $821,000, respectively, consisted of security deposits
received from our tenants.
Revenue Recognition and Deferred Rent Receivable
On January 1, 2018, we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“Topic 606”) using the
modified retrospective method applying it to any open contracts as of January 1, 2018. The new guidance provides a unified model to
determine how revenue is recognized. To determine the proper amount of revenue to be recognized, we perform the following steps:
(i) identify the contract with the customer, (ii) identify the performance obligations within the contract, (iii) determine the transaction
price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when (or as) a performance obligation
is satisfied. Our primary source of revenue consists of revenue from rental properties and tenant reimbursements that is derived from
leasing arrangements, which is specifically excluded from the standard, and thus had no material impact on our consolidated financial
statements or notes to our consolidated financial statements as of December 31, 2018.
We concluded that our revenue consists of rental income from leasing arrangements, which is specifically excluded from the
standard, and thus had no material impact on our consolidated financial statements or notes to our consolidated financial statements as
of December 31, 2018.
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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.
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.
The sales of nonfinancial assets, such as real estate, are to be recognized when control of the asset transfers to the buyer, which
will occur when the buyer has the ability to direct the use of or obtain substantially all of the remaining benefits from the asset. This
generally occurs when the transaction closes and consideration is exchanged for control of the property.
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 $6,170,000, $9,321,000 and $12,814,000 for the years ended December 31, 2018,
2017 and 2016, 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 $2,553,000 of the $6,170,000 in impairments recognized during the year ended December 31, 2018) and (ii) discounted cash
flow models (this method was used to determine $175,000 of the $6,170,000 in impairments recognized during the year ended
December 31, 2018). During the year ended December 31, 2018, we recorded $3,442,000 of the $6,170,000 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 values of certain properties in excess of their fair values.
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 with Hanuman Business, Inc. (d/b/a “Ramoco”) and sold to Ramoco
affiliates 48 of the 61 properties that had been subject to the 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.
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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 below.
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates of fair
value that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the consolidated
financial statements and revenues and expenses during the period reported using a hierarchy (the “Fair Value Hierarchy”) that prioritizes
the inputs to valuation techniques used to measure the fair value. The Fair Value Hierarchy gives the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements). The levels of the Fair Value Hierarchy are as follows: “Level 1” – inputs that reflect unadjusted quoted prices
in active markets for identical assets or liabilities that we have the ability to access at the measurement date; “Level 2” – inputs other
than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not
considered to be active; and “Level 3” – inputs that are unobservable. Certain types of assets and liabilities are recorded at fair value
either on a recurring or non-recurring basis. Assets required or elected to be marked-to-market and reported at fair value every reporting
period are valued on a recurring basis. Other assets not required to be recorded at fair value every 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 our 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 stockholders 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 2015, 2016 and 2017, and tax returns which will be filed for the year ended 2018, remain
open to examination by federal and state tax jurisdictions under the respective statutes of limitations.
New Accounting Pronouncements
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
2016-02 lessor accounting will remain similar to lessor accounting under previous GAAP, while aligning with the FASB’s new revenue
recognition guidance. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, to clarify how to
apply certain aspects of the new leases standard. In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted
Improvements, to give entities another option for transition and to provide lessors with a practical expedient to reduce the cost and
complexity of implementing the new standard. The transition option allows entities to not apply the new leases standard in the
comparative periods in their financial statements in the year of adoption. In December 2018, the FASB issued ASU 2018-20, which
clarifies lessor treatment of sales taxes and other similar taxes collected from lessees, lessor costs paid directly by lessees and recognition
of variable payments for contracts with lease and non-lease components. We elected the package of practical expedients and the lease
and non-lease component practical expedient. We have elected to apply the transition requirements at the January 1, 2019, effective date
52
rather than at the beginning of the earliest comparative period presented and continue to evaluate the impact of the adoption on our
consolidated financial statements. We expect to recognize operating lease liabilities and right of use assets of $22,000,000 to
$32,000,000, which will be presented separately on our consolidated financial statements for the quarter ending March 31, 2019. The
lease liability and right-of-use asset are to be carried at the present value of remaining expected future lease payments.
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 were effective for financial statements issued for annual periods beginning after December 15,
2017, including interim periods within those annual periods. 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.
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 was 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 was effective for
annual periods beginning after December 15, 2017, including interim periods within that reporting period. Effective January 1, 2018,
we adopted ASU 2017-05 on a modified retrospective basis. Upon adoption, we apply the guidance to prospective disposals of
nonfinancial assets within the scope of Subtopic 610-20. The adoption of this guidance did not have an impact on our consolidated
financial statements or notes to our consolidated financial statements.
In August 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to update and simplify disclosure
requirements as well as eliminate outdated, superseded and/or redundant requirements with GAAP. The amendments are effective for
all SEC filings made on or after November 5, 2018. The amendments removed certain SEC guidance that conflicted with GAAP
guidance, under which we previously followed SEC guidance and recorded Gain/(loss) on dispositions of real estate, after Operating
income. We have reclassified Gain/(loss) on dispositions of real estate within Operating income, per GAAP for all periods presented.
NOTE 2. — LEASES
As of December 31, 2018, we owned 859 properties and leased 74 properties from third-party landlords. These 933 properties are
located in 30 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 lease 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. For additional information regarding environmental obligations, see Note 5 – 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 for the years ended December 31, 2018, 2017 and 2016, were $116,328,000, $101,332,000 and
$96,711,000, respectively. Rental income contractually due from our tenants included in revenues from rental properties was
$114,105,000, $99,355,000 and $93,294,000 for the years ended December 31, 2018, 2017 and 2016, 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
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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 were $2,223,000,
$1,976,000 and $3,417,000 for the years ended December 2018, 2017 and 2016, 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,
2018 and 2017, 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, were $16,691,000, $15,829,000 and $15,017,000 for the years ended
December 31, 2018, 2017 and 2016, respectively.
We incurred $579,000, $126,000 and $148,000 of lease origination costs for the years ended December 31, 2018, 2017 and 2016,
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 $85,892,000 investment in direct financing leases as of December 31, 2018, are minimum lease payments
receivable of $139,276,000 plus unguaranteed estimated residual value of $13,928,000 less unearned income of $67,312,000. 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.
Future contractual minimum annual rentals receivable from our tenants, which have terms in excess of one year as of December 31,
2018, are as follows (in thousands):
Year Ending
December 31,
2019
2020
2021
2022
2023
Thereafter
Operating
Leases
Direct
Financing Leases
Total
$
$
102,928 $
102,693
99,593
99,184
99,223
678,106 $
12,864 $
13,156
13,339
13,420
13,467
73,030 $
115,792
115,849
112,932
112,604
112,690
751,136
We have obligations to lessors under non-cancelable operating leases which have terms in excess of one year, principally for
convenience store and gasoline station properties. 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:
2019 – $6,016,000, 2020 – $5,284,000, 2021 – $4,371,000, 2022 – $2,766,000, 2023 – $2,021,000 and $2,754,000 thereafter.
Rent expense, substantially all of which consists of minimum rentals on non-cancelable operating leases, amounted to $4,660,000,
$5,091,000 and $5,376,000 for the years ended December 31, 2018, 2017 and 2016, respectively, and is included in property costs using
the straight-line method. Rent received under subleases for the years ended December 31, 2018, 2017 and 2016, was $9,023,000,
$9,296,000 and $9,153,000, respectively, and is included in rental revenue discussed above.
Major Tenants
As of December 31, 2018, we had three significant tenants by revenue:
(cid:129) We leased 157 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”). In the aggregate, our leases with subsidiaries of
Global represented 17% and 21% of our total revenues for the years ended December 31, 2018 and 2017, respectively.
All of our unitary leases with subsidiaries of Global are guaranteed by the parent company.
(cid:129) 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 13% and 15% of our total revenues for the
years ended December 31, 2018 and 2017, respectively.
(cid:129) We leased 76 convenience store and gasoline station properties pursuant to two separate unitary leases to subsidiaries of
Chestnut Petroleum Dist., Inc. (“Chestnut”). In the aggregate, our leases with subsidiaries of Chestnut represented 11%
and 13% of our total revenues for the years ended December 31, 2018 and 2017, respectively. The largest of these unitary
leases, covering 57 of our properties, is guaranteed by the parent company, its principals and numerous Chestnut
affiliates.
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Getty Petroleum Marketing Inc.
Getty Petroleum Marketing Inc. (“Marketing”) was our largest tenant from 1997 until 2012, leasing substantially all of our
properties acquired or leased prior to 1997 under a master lease. Our master lease with Marketing was terminated in April 2012, as a
consequence of Marketing’s bankruptcy, at which time we either sold or released these properties. As of December 31, 2018, 374 of the
properties we own or lease were previously leased to Marketing, of which 331 properties are subject to long-term triple-net leases with
petroleum distributors in 14 separate property portfolios and 30 properties are leased as single unit triple-net leases. The leases covering
properties previously leased to Marketing are unitary triple-net lease agreements generally with an initial term of 15 years and options
for successive renewal terms of up to 20 years. Rent is scheduled to increase at varying intervals 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 invest capital in our properties, substantially all of which are related to the replacement of USTs that
are owned by our tenants. As of December 31, 2018, we have a remaining commitment to fund up to $7,621,000 in the aggregate with
our tenants for our portion of such capital improvements. 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 life of the various leases.
As part of the triple-net leases for properties previously leased to Marketing, we transferred title of the USTs to our tenants, and
the obligation to pay for the retirement and decommissioning or removal of USTs at the end of their useful lives, or earlier if
circumstances warranted, was fully or partially transferred to our new tenants. We remain contingently liable for this obligation in the
event that our tenants do not satisfy their responsibilities. Accordingly, through December 31, 2018, 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 change of
$1,754,000 (net of accumulated amortization of $1,251,000) is recorded as deferred rental revenue and will be recognized on a straight-
line basis as additional revenues from rental properties over the terms of the various leases.
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,
2018 and 2017, we had accrued $12,231,000 and $12,311,000, respectively, for certain of these matters which we believe were
appropriate based on information then currently available. We have recorded credits aggregating $45,000 for the year ended
December 31, 2018, and provisions aggregating $1,044,000, for environmental litigation accruals for the year ended December 31, 2017,
for certain of these matters. 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 methyl tertiary butyl ether (a
fuel derived from methanol, commonly referred to as “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, New York, in particular, could
cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock
price. During the years ended December 31, 2018 and 2017, we received $147,000 and $6,381,000, respectively, for former legal
litigation settlements.
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
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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 the cost estimate for the preferred remedial action presented therein is in the range of approximately $483,000,000 to $725,000,000.
The EPA has provided comments to the draft RI/FS, which led to discussions between the CPG and the EPA regarding an alternative
approach to completing the RI/FS, including various adaptive management scenarios focusing on source control interim remedies for
the upper 9-miles of the Lower Passaic River. These discussions between the CPG and the EPA are ongoing.
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 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 $130,000,000 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 $14,300,000. 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
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
56
the ROD work, each for a payment to the EPA in the amount of $280,600. The EPA has also been engaged in discussions, in which we
are participating, 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 was scheduled to conclude by mid-
2019, but is likely to be extended.
On June 30, 2018, Occidental filed a complaint in the United States District Court for the District of New Jersey seeking cost
recovery and contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) for its
alleged expenses with respect to the investigation, design, and anticipated implementation of the remedy for the lower 8-miles of the
Passaic River. The complaint lists over 120 defendants, including us, many of which were also named in the NJDEP’s 2003 Directive
and the EPA’s 2016 Notice. We do not know whether this new complaint will impact the EPA’s allocation process or the ultimate
outcome of the matter. We intend to defend the claims consistent with our defenses in the related proceedings.
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 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 that it is
probable that this litigation will be resolved in a manner that is unfavorable to us. We are unable to estimate the range of loss in excess
of the amount accrued with certainty for the New Jersey MDL Proceedings as we do not believe that plaintiffs’ settlement proposal is
realistic and there remains uncertainty as to the allegations in this case as they relate to us, our defenses to the claims, our rights to
indemnification or contribution from other parties and the aggregate possible amount of damages for which we may be held liable. It is
possible that losses related to the New Jersey MDL Proceedings in excess of the amounts accrued as of December 31, 2018, 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 names us and more than 50 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 “defendants’ unfair and deceptive trade practices and acts in the marketing of MTBE and gasoline containing MTBE.” The
plaintiffs also seek to recover costs paid or incurred by the State to detect, treat and remediate MTBE from public and private water
wells and groundwater. The plaintiffs assert causes of action against all defendants based on multiple theories, including strict liability
– defective design; strict liability – failure to warn; public nuisance; negligence; trespass; and violation of consumer protection law.
The case was filed in the Court of Common Pleas, Philadelphia County, but was removed by defendants to the United States
District Court for the Eastern District of Pennsylvania and then transferred to the United States District Court for the Southern District
of New York so that it may be managed as part of the ongoing MTBE MDL proceedings. In November 2015, plaintiffs 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.
57
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 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, New York 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, New York, 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 the 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, Sprague Operating
Resources LLC (successor to RAD Energy Corp.), Service Station Installation of NY, Inc., 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, 2018, 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 Restated Credit Agreement, Third Restated Prudential Note Purchase Agreement and MetLife
Note Purchase Agreement (as defined below) are as follows (in thousands):
Unsecured Revolving Credit Facility
Unsecured Term Loan
Series A Notes
Series B Notes
Series C Notes
Series D Notes
Series E Notes
Total debt
Unamortized debt issuance costs, net
Total debt, net
Credit Agreement
Maturity
Date
March 2022
March 2023
February 2021
June 2023
February 2025
June 2028
June 2028
Interest
Rate
December 31,
2018
December 31,
2017
105,000
50,000
100,000
75,000
50,000
—
—
380,000
(842)
379,158
70,000 $
50,000
100,000
75,000
50,000
50,000
50,000
445,000
(3,364)
441,636 $
3.95% $
3.96%
6.00%
5.35%
4.75%
5.47%
5.47%
$
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 consisted of a $175,000,000 unsecured revolving
credit facility (the “Revolving Facility”) and a $50,000,000 unsecured term loan (the “Term Loan”).
58
On March 23, 2018, we entered into an amended and restated credit agreement (as amended, as described below, the “Restated
Credit Agreement”) amending and restating our Credit Agreement. Pursuant to the Restated Credit Agreement, we (a) increased the
borrowing capacity under the Revolving Facility from $175,000,000 to $250,000,000, (b) extended the maturity date of the Revolving
Facility from June 2018 to March 2022, (c) extended the maturity date of the Term Loan from June 2020 to March 2023 and (d) amended
certain financial covenants and provisions.
Subject to the terms of the Restated 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 March 2023 and (b) request that the lenders approve an increase
of up to $300,000,000 in the amount of the Revolving Facility and/or the Term Loan to $600,000,000 in the aggregate.
The Restated Credit Agreement incurs interest and fees at various rates based on our total indebtedness to total asset value ratio
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 0.50% to 1.30% or a LIBOR rate plus a margin of 1.50% to 2.30%. The annual commitment fee on the undrawn
funds under the Revolving Facility is 0.15% to 0.25%. The Term Loan bears interest at a rate equal to the sum of a base rate plus a
margin of 0.45% to 1.25% or a LIBOR rate plus a margin of 1.45% to 2.25%. The Term Loan does not provide for scheduled reductions
in the principal balance prior to its maturity.
On September 19, 2018, we entered into an amendment (the “Amendment”) of our Restated Credit Agreement. The Amendment
modifies the Restated Credit Agreement to, among other things: (i) reflect that we had previously entered into (a) an amended and
restated note purchase and guarantee agreement with The Prudential Insurance Company of America (“Prudential”) and certain of its
affiliates and (b) a note purchase and guarantee agreement with the Metropolitan Life Insurance Company (“MetLife”) and certain of
its affiliates; and (ii) permit borrowings under each of the Revolving Facility and the Term Loan at three different interest rates, including
a rate based on the LIBOR Daily Floating Rate (as defined in the Amendment) plus the Applicable Rate (as defined in the Amendment)
for such facility.
Senior Unsecured Notes
On June 21, 2018, we entered into a third amended and restated note purchase and guarantee agreement (the “Third Restated
Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with Prudential and certain
of its affiliates. Pursuant to the Third 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”), (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”)
and (c) 4.75% Series C Guaranteed Senior Notes due February 25, 2025, in the aggregate principal amount of $50,000,000 (the “Series
C Notes”) that were outstanding under the existing senior note purchase agreement would continue to remain outstanding under the
Third Restated Prudential Note Purchase Agreement and we authorized and issued our 5.47% Series D Guaranteed Senior Notes due
June 21, 2028, in the aggregate principal amount of $50,000,000 (the “Series D Notes” and, together with the Series A Notes, Series B
Notes and Series C Notes, the “Notes”). The Third Restated Prudential Note Purchase Agreement does not provide for scheduled
reductions in the principal balance of the Notes prior to their respective maturities.
On June 21, 2018, we entered into a note purchase and guarantee agreement (the “MetLife Note Purchase Agreement”) with
MetLife and certain of its affiliates. Pursuant to the MetLife Note Purchase Agreement, we authorized and issued our 5.47% Series E
Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of $50,000,000 (the “Series E Notes”). The MetLife
Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Series E Notes prior to its maturity.
Covenants
The Restated Credit Agreement, the Third Restated Prudential Note Purchase Agreement and the MetLife Note Purchase
Agreement contain customary financial covenants such as leverage, coverage ratios and minimum tangible net worth, as well as
limitations on restricted payments, which may limit our ability to incur additional debt or pay dividends. The Restated Credit Agreement,
the Third Restated Prudential Note Purchase Agreement and the MetLife 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 Third Restated
Prudential Note Purchase Agreement and the MetLife Note Purchase Agreement require 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 Restated Credit Agreement, the Third Restated Prudential Note
Purchase Agreement and the MetLife Note Purchase Agreement, and could result in the acceleration of our indebtedness under the
Restated Credit Agreement, the Third Restated Prudential Note Purchase Agreement and the MetLife 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 Restated Credit Agreement or that, with the giving of any notice, the passage of time, or both, would be an event of default
under the Restated Credit Agreement.
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As of December 31, 2018, we are in compliance with all of the material terms of the Restated Credit Agreement, the Third Restated
Prudential Note Purchase Agreement and the MetLife Note Purchase Agreement, including the various financial covenants described
herein.
Debt Maturities
As of December 31, 2018, scheduled debt maturities, including balloon payments, are as follows (in thousands):
2019
2020
2021
2022 (1)
2023
Thereafter
Total
Revolving
Facility
Term Loan
Senior
Unsecured Notes
$
$
— $
—
—
70,000
—
—
70,000 $
— $
—
—
—
50,000
—
50,000 $
— $
—
100,000
—
75,000
150,000
325,000 $
Total
-
—
100,000
70,000
125,000
150,000
445,000
(1) The Revolving Facility matures in March 2022. Subject to the terms of the Restated Credit Agreement and our continued
compliance with its provisions, we have the option to extend the term of the Revolving Facility for one additional year to
March 2023.
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 our 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 was 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 which existed
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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 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 our 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 preexisting
unknown 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, 2018, we had
accrued a total of $59,821,000 for our prospective environmental remediation obligations. This accrual consisted of (a) $14,477,000,
which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which
we are responsible, net of estimated recoveries and (b) $45,344,000 for future environmental liabilities related to preexisting unknown
contamination. 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 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.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $2,409,000,
$3,448,000 and $4,107,000 of net accretion expense was recorded for the years ended December 31, 2018, 2017 and 2016, respectively,
which is included in environmental expenses. In addition, during the years ended December 31, 2018, 2017 and 2016, we recorded
credits to environmental expenses, included in continuing and discontinued operations, aggregating $1,319,000, $6,854,000 and
$7,007,000, 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, 2018 and 2017, we increased the carrying values of certain of our properties by $5,111,000
and $5,477,000, 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 in our consolidated statements of operations for the years ended December 31, 2018, 2017 and 2016, were $4,255,000,
$4,347,000 and $5,126,000, respectively. Capitalized asset retirement costs were $45,659,000 (consisting of $20,348,000 of known
environmental liabilities and $25,311,000 of reserves for future environmental liabilities) as of December 31, 2018, and $45,380,000
(consisting of $18,692,000 of known environmental liabilities and $26,688,000 of reserves for future environmental liabilities) as of
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December 31, 2017, respectively. We recorded impairment charges aggregating $3,850,000 and $6,932,000 for the years ended
December 31, 2018 and 2017, 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.
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 that 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 paid (refunded) for income taxes for the years ended December 31, 2018, 2017 and 2016, of $244,000, $(195,000) and
$368,000, 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, 2018, 2017 and 2016, were: ordinary income of
89.2%, 100.0% and 61.6%, capital gain distributions of 10.8%, 0.0% and 34.4% and non-taxable distributions of 0.0%, 0.0% and 4.0%,
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 2015, 2016 and 2017, and tax returns which will be filed for the year ended 2018, 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, 2018 or 2017. However, uncertain tax
matters may have a significant impact on the results of operations for any single fiscal year or interim period.
62
NOTE 7. — STOCKHOLDERS’ EQUITY
A summary of the changes in stockholders’ equity for the years ended December 31, 2018, 2017 and 2016, is as follows (in
thousands except per share amounts):
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
Net earnings
Dividends declared — $1.31 per share
Shares issued pursuant to ATM Program, net
Shares issued pursuant to dividend reinvestment
Stock-based compensation and settlements
BALANCE, DECEMBER 31, 2018
Common Stock
Shares
Amount
33,422 $
334 $
Dividends
Paid
in Excess
of Earnings
Additional
Paid-in
Capital
464,338 $
653
256
43
19
34,393 $
4,715
513
48
27
39,696 $
1,106
52
1
40,855 $
7
3
—
—
344 $
14,879
4,409
897
1,136
485,659 $
47
5
1
—
397 $
104,265
13,523
1,270
155
604,872 $
11
1
—
409 $
30,127
1,402
1,777
638,178 $
(58,111) $
38,411
(35,385)
—
(55,085) $
47,186
(43,675)
—
—
—
—
(51,574) $
47,706
(53,555)
—
—
—
(57,423) $
Total
406,561
38,411
(35,385)
14,886
4,412
897
1,136
430,918
47,186
(43,675)
104,312
13,528
1,271
155
553,695
47,706
(53,555)
30,138
1,403
1,777
581,164
On March 1, 2018, and October 23, 2018, our Board of Directors granted 121,650 and 3,000 of restricted stock units (“RSU” or
“RSUs”), respectively, under our Amended and Restated 2004 Omnibus Incentive Compensation Plan. On March 1, 2017, our Board
of Directors granted 94,250 of restricted stock units under our Amended and Restated 2004 Omnibus Incentive Compensation Plan.
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.
On May 8, 2018, our stockholders approved an amendment to our Articles of Incorporation to increase the aggregate number of
shares of stock of all classes which we have the authority to issue from 70,000,000 shares to 120,000,000 shares, by increasing (i) the
aggregate number of shares of common stock which we have the authority to issue from 60,000,000 to 100,000,000 shares, and (ii) the
aggregate number of shares of preferred stock which we have the authority to issue from 10,000,000 to 20,000,000 shares.
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 and Applegreen transactions.
63
ATM Program
In June 2016, we established an at-the-market equity offering program (the “2016 ATM Program”), pursuant to which we were
able to 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. The 2016 ATM Program was terminated in January 2018.
In March 2018, we established a new at-the-market equity offering program (the “ATM Program”), pursuant to which we are able
to 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, 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.
During the years ended December 31, 2018 and 2017, we issued 1,106,000 and 513,000 shares of common stock, respectively,
and received net proceeds of $30,138,000 and $13,528,000, 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, 2018, we paid dividends of $50,503,000 or $1.28 per share. For the year ended December 31,
2017, we paid dividends of $39,299,000 or $1.12 per share.
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,
2018 and 2017, we issued 51,920 and 47,922 shares of common stock, respectively, under the dividend reinvestment plan and received
proceeds of $1,403,000 and $1,271,000, respectively.
Stock-Based Compensation
Compensation cost for our stock-based compensation plans using the fair value method was $1,777,000, $1,350,000 and
$1,426,000 for the years ended December 31, 2018, 2017 and 2016, respectively, and is included in general and administrative expense
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 stockholders. 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 stockholders, 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 124,650, 94,250 and 86,600 RSUs and dividend equivalents in 2018, 2017 and 2016,
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
64
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 stockholder 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, 2018, 2017 and 2016, dividend equivalents aggregating
approximately $749,000, $542,000 and $445,000, 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, 2015
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2016
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2017
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2018
Number of
RSUs
Outstanding
Fair Value
Amount
Average
Per RSU
400,375
86,600 $
(34,650)
(22,550) $
429,775
94,250 $
(51,770)
(23,330) $
448,925
124,650 $
—
— $
573,575
1,593,400 $
635,800
415,400 $
2,484,400 $
1,306,300
587,100 $
3,106,400 $
—
— $
18.40
18.35
18.42
26.36
25.23
25.17
24.92
—
—
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, 2018, 2017 and 2016, was $1,752,000, $1,328,000 and $1,418,000, respectively, and
is included in general and administrative expense in our consolidated statements of operations. As of December 31, 2018, there was
$5,121,000 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 three years. The aggregate intrinsic value of the 573,575 outstanding RSUs and the
289,020 vested RSUs as of December 31, 2018, was $16,869,000 and $8,500,000, respectively.
The following is a schedule of the vesting activity relating to RSUs outstanding:
RSUs VESTED AT DECEMBER 31, 2015
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2016
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2017
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2018
Number of
RSUs Vested
Fair
Value
202,344
54,125 $
(34,650) $
221,819
55,336 $
(51,770) $
225,385
63,635 $
— $
289,020
1,379,600
635,800
1,502,900
1,306,300
1,871,500
—
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 $295,000, $282,000 and $268,000 for the years ended December 31, 2018, 2017 and 2016, respectively. These amounts
are included in general and administrative expense in our consolidated statements of operations. During the year ended December 31,
65
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, 2018.
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, 2018 and 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.
The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings
per common share using the two-class method (in thousands except per share data):
(in thousands):
Earnings from continuing operations
Less dividend equivalents attributable to RSUs outstanding
Earnings from continuing operations attributable to common stockholders
Earnings (loss) from discontinued operations
Less dividend equivalents attributable to RSUs outstanding
Earnings (loss) from discontinued operations attributable to
common stockholders
Net earnings attributable to common stockholders used for
basic and diluted earnings per share calculation
Weighted average common shares outstanding:
Basic
Incremental shares from stock-based compensation
Diluted
Basic earnings per common share
Diluted earnings per common share
NOTE 10. — FAIR VALUE MEASUREMENTS
Debt Instruments
$
2018
Year ended December 31,
2017
2016
48,410 $
(751)
47,659
(704)
—
45,048 $
(567)
44,481
2,138
—
39,825
(482)
39,343
(1,414)
—
(704)
2,138
(1,414)
$
46,955 $
46,619 $
37,929
40,171
20
40,191
1.17 $
1.17 $
36,897
—
36,897
1.26 $
1.26 $
33,806
—
33,806
1.12
1.12
$
$
As of December 31, 2018 and 2017, the carrying value of the borrowings under the Restated Credit Agreement approximated fair
value. As of December 31, 2018 and 2017, the fair value of the borrowings under senior unsecured notes was $335,600,000 and
$233,500,000, respectively. The fair value of the borrowings outstanding as of December 31, 2018 and 2017, was determined using a
discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, risk profile and 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.
66
The following summarizes as of December 31, 2018, 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
$
$
534 $
— $
— $
— $
534 $
— $
534
534
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
Real Estate Assets
Level 1
Level 2
Level 3
Total
$
$
451 $
— $
— $
— $
451 $
— $
451
451
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,
2018 and 2017, of $3,096,000 and $2,785,000, 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, 2018, we sold nine properties, in separate transactions that did not meet the criteria to be
classified as discontinued operations, which resulted in an aggregate gain of $3,888,000, included in gain on dispositions of real estate,
on our consolidated statements of operations. We also received funds from property condemnations resulting in a gain of $60,000,
included in gain on dispositions of real estate, on our consolidated statements of operations.
During the year ended December 31, 2017, we sold 12 properties and a portion of one property, in separate transactions that did
not meet the criteria to be classified as discontinued operations, which resulted in an aggregate gain of $1,025,000, included in gain on
dispositions of real estate, on our consolidated statements of operations. We also received funds from property condemnations resulting
in a gain of $16,000, included in gain on dispositions of real estate, on our consolidated statements of operations.
As of December 31, 2018 and 2017, there were no properties that met criteria to be classified as held for sale.
Activity from discontinued operations was as follows (in thousands):
Total revenues
Impairments
Changes in environmental estimates
Other operating income
Earnings (loss) from operating activities
(Loss) gains from dispositions of real estate
Earnings (loss) from discontinued operations
2018
Year ended December 31,
2017
2016
— $
(1,268)
564
—
(704)
—
(704) $
— $
(1,042)
3,169
11
2,138
—
2,138 $
—
(4,248)
3,010
2
(1,236)
(178)
(1,414)
$
$
67
NOTE 12. — QUARTERLY FINANCIAL DATA
The following is a summary of the quarterly results of operations for the years ended December 31, 2018 and 2017 (unaudited as
to quarterly information) (in thousands, except per share amounts):
Three Months Ended
Year Ended December 31, 2018
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, 2017
Revenues from rental properties
Earnings from continuing operations
Net earnings
Diluted earnings per common share:
Earnings from continuing operations
Net earnings
NOTE 13. — PROPERTY ACQUISITIONS
2018
March 31,
$
28,284 $
10,162
10,032 $
June 30,
September 30, December 31,
29,570 $
11,017
10,944 $
29,452
13,408
13,190
29,022 $
13,823
13,540 $
0.25 $
0.25 $
0.34 $
0.33 $
0.27 $
0.27 $
0.33
0.32
March 31,
$
23,897 $
7,716
9,704 $
June 30,
September 30, December 31,
24,913 $
9,460
9,340 $
28,158
13,321
13,036
24,364 $
14,551
15,106 $
0.22 $
0.28 $
0.41 $
0.43 $
0.24 $
0.24 $
0.33
0.33
$
$
$
$
$
$
During the year ended December 31, 2018, we acquired fee simple interests in 41 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $77,972,000.
On April 17, 2018, we acquired fee simple interests in 30 convenience store and gasoline station properties for $52,592,000 and
entered into a unitary lease with GPM Investments, LLC (“GPM”) at the closing of the transaction. We funded the GPM transaction
through 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 GPM 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 properties are located primarily
within metropolitan markets in the states of Arkansas, Louisiana, Oklahoma and Texas. We accounted for the acquisition of the
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 $31,633,000 of the purchase price to land, $17,489,000 to buildings
and improvements, $4,047,000 to in-place leases, and $577,000 to below-market leases, which is accounted for as a deferred liability.
On August 1, 2018, we acquired fee simple interests in six convenience store and gasoline station properties for $17,412,000 and
entered into a unitary lease with a U.S. subsidiary of Applegreen PLC (“Applegreen”) at the closing of the transaction. We funded the
Applegreen transaction through 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 annually during the initial and renewal terms of the lease. The properties are
all located within the metropolitan market of Columbia, SC. We accounted for the acquisition of the 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 $8,930,000 of the purchase price to land, $6,773,000 to buildings and improvements, $1,371,000 to in-place
leases, $773,000 to above-market leases and $435,000 to below-market leases, which is accounted for as a deferred liability.
In addition, during the year ended December 31, 2018, we also acquired fee simple interests in five convenience store and gasoline
station, and other automotive related properties, in separate transactions, for an aggregate purchase price of $7,968,000. We accounted
for these acquisitions as asset acquisitions. We estimated the fair value of acquired tangible assets for each of these acquisitions
(consisting of land, buildings and improvements) “as if vacant.” Based on these estimates, we allocated $4,929,000 of the purchase price
to land, $2,753,000 to buildings and improvements and $286,000 to in-place leases.
2017
During the year ended December 31, 2017, we acquired fee simple interests in 103 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $214,000,000.
68
On September 6, 2017, we acquired fee simple interests in 49 convenience store and gasoline station properties for $123,126,000
and entered into a unitary lease with Empire Petroleum Partners, LLC (“Empire”) at the closing of the 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 properties are located primarily within metropolitan markets in the states of Arizona, Colorado, Florida,
Georgia, Louisiana, New Mexico and Texas. We accounted for the acquisition of the 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 fee simple interests in 33 convenience store and gasoline station properties and five stand-alone
Burger King quick service restaurants for $68,710,000 and entered into a unitary lease with a U.S. subsidiary of Applegreen at the
closing of the 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 properties are all located
within the metropolitan market of Columbia, SC. We accounted for the acquisition of the 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, and other automotive related properties, in separate transactions, for an aggregate purchase price of $22,164,000. We accounted
for these acquisitions as asset acquisitions. We estimated the fair value of acquired tangible assets for each of these acquisitions
(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.
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.
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 $3,500,000 and $3,189,000 (net of accumulated amortization of $5,160,000 and $4,698,000,
respectively) at December 31, 2018 and 2017, 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 $21,514,000 and $22,714,000 (net of
accumulated amortization of $17,790,000 and $15,578,000, respectively) at December 31, 2018 and 2017, 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. 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 $2,067,000, $1,791,000 and $1,833,000
for the years ended December 31, 2018, 2017 and 2016, respectively. Rent expense included amortization from acquired leases of
$317,000, $320,000 and $333,000 for the years ended December 31, 2018, 2017 and 2016, respectively.
In-place leases are included in prepaid expenses and other assets and had a balance of $38,542,000 and $35,704,000 (net of
accumulated amortization of $9,908,000 and $7,043,000, respectively) at December 31, 2018 and 2017, respectively. The value
associated with in-place leases and lease origination costs are amortized into depreciation and amortization expense over the remaining
life of the lease. Depreciation and amortization expense included amortization from in-place leases of $2,866,000, $1,855,000 and
$1,395,000 for the years ended December 31, 2018, 2017 and 2016, respectively.
69
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,
2019
2020
2021
2022
2023
Thereafter
As Lessee:
Year ending December 31,
2019
2020
2021
2022
2023
Thereafter
Above-Market
Leases
Below-Market
Leases
In-Place
Leases
$
$
158,000 $
152,000
144,000
135,000
135,000
1,330,000
2,054,000 $
2,142,000 $
1,736,000
1,562,000
1,484,000
1,393,000
13,197,000
21,514,000 $
2,994,000
2,973,000
2,954,000
2,942,000
2,940,000
23,739,000
38,542,000
Below-Market
Leases
312,000
222,000
157,000
127,000
126,000
502,000
1,446,000
$
$
NOTE 15. — SUBSEQUENT EVENTS
In preparing our consolidated financial statements, we have evaluated events and transactions occurring after December 31, 2018,
for recognition or disclosure purposes. Based on this evaluation there were no significant subsequent events from December 31, 2018,
through the date the financial statements were issued.
70
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Getty Realty Corp.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the consolidated financial statements, including the related notes, as listed in the accompanying index, and the
financial statement schedules listed in the index appearing under Item 15(a)(2), of Getty Realty Corp. and its subsidiaries (the
“Company”) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control
over financial reporting as of December 31, 2018, 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2018 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,
2018, 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
February 27, 2019
We have served as the Company’s auditor since at least 1975. We have not been able to determine the specific year we began
serving as auditor of the Company.
71
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 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, 2018, 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, 2018.
The effectiveness of our internal control over financial reporting as of December 31, 2018, 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
On February 26, 2019, our Board of Directors amended Article II, Section 2 of our Bylaws to provide that annual meetings of our
stockholders shall be held on such date and at such time annually as shall be set by the Board of Directors. The foregoing description of
the amendment to our Bylaws is only a summary and is qualified in its entirety by reference to the full text of the amendment, a copy of
which is attached hereto as Exhibit 3.7.
72
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 stockholders 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
40
54
58
47
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, 2018.
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.
73
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 75 of this Annual Report on Form 10-K.
Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2018, 2017 and 2016
Schedule III — Real Estate and Accumulated Depreciation and Amortization as of December 31, 2018
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2018
(a) (3) Exhibits
Information in response to this Item is incorporated herein by reference to the Exhibit Index on page 93 of this Annual Report
on Form 10-K.
Item 16. Form 10-K Summary
None.
74
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE II — VALUATION and QUALIFYING ACCOUNTS and RESERVES
for the years ended December 31, 2018, 2017 and 2016
(in thousands)
December 31, 2018:
Allowance for deferred rent receivable
Allowance for accounts receivable
December 31, 2017:
Allowance for deferred rent receivable
Allowance for accounts receivable
December 31, 2016:
Allowance for deferred rent receivable
Allowance for accounts receivable
Balance at
Beginning
of Year
$
$
$
$
$
$
— $
1,840 $
— $
2,006 $
— $
2,634 $
Additions
Deductions
Balance
at End
of Year
— $
480 $
— $
420 $
— $
855 $
— $
226 $
— $
586 $
— $
1,483 $
—
2,094
—
1,840
—
2,006
75
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
As of December 31, 2018
(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
2018
2017
2016
$
970,964 $
84,069
(7,950)
(3,091)
(886)
$
1,043,106 $
$
$
133,353 $
20,549
(1,780)
(530)
(901)
150,691 $
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
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
Bluff, AR
Brookland, AR
Fayetteville, AR
Fayetteville, AR
Hope, AR
Jonesboro, AR
Jonesboro, AR
Little Rock, AR
Rogers, AR
Texarkana, AR
Cochise, AZ
Cochise, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Maricopa, AZ
Phoenix, AZ
Pima, AZ
Pima, AZ
Pima, AZ
Pima, AZ
Pima, AZ
Pinal, 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 Puenta, CA
Lakeside, CA
Los Angeles, CA
$
2,985 $
1,468
2,266
2,867
1,472
868
2,985
978
927
1,592
1,765
4,440
1,331
1,448
1,503
1,602
1,722
1,838
2,177
2,185
2,415
2,868
3,112
3,169
3,204
3,928
1,943
1,261
1,301
1,303
2,085
3,652
4,022
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
819 $
1,319
629
896
473
695
2,655
443
394
534
1,496
2,591
339
465
664
806
544
577
645
573
1,982
1,613
1,519
1,164
1,365
1,594
632
597
744
713
598
728
1,473
459
1,166
1,496
1,018
2,064
404
632
794
1,563
948
1,241
582
1,210
1,020
1,606
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,166 $
149
1,637
1,971
999
173
330
535
533
1,058
269
1,849
992
983
839
796
1,178
1,261
1,532
1,612
433
1,255
1,593
2,005
1,839
2,334
1,311
664
557
590
1,487
2,924
2,549
910
1,058
889
1,217
4,008
950
853
849
492
302
1,486
1,389
6,405
2,695
5,006
77
Accumulated
Depreciation
30
615
23
33
18
338
1285
19
17
21
133
182
30
40
55
68
45
50
53
48
140
128
118
87
106
116
18
49
60
58
52
59
119
271
714
299
589
407
238
128
440
375
201
276
339
282
226
371
2,985 $
1,468
2,266
2,867
1,472
868
2,985
978
927
1,592
1,765
4,440
1,331
1,448
1,503
1,602
1,722
1,838
2,177
2,185
2,415
2,868
3,112
3,169
3,204
3,928
1,943
1,261
1,301
1,303
2,085
3,652
4,022
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
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2018
2007
2018
2018
2018
2007
2007
2018
2018
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2018
2017
2017
2017
2017
2017
2017
2007
2007
2014
2007
2015
2007
2015
2007
2015
2015
2015
2007
2015
2015
2015
Oakland, CA
Ontario, CA
Phelan, CA
Riverside, CA
Riverside, CA
Sacramento, CA
Sacramento, CA
Sacramento, CA
San Dimas, CA
San Jose, CA
San Leandro, CA
Shingle Springs, CA
Stockton, CA
Stockton, CA
Adams, CO
Arapahoe, CO
Arapahoe, CO
Boulder, CO
Broomfield, CO
Castle Rock, CO
El Paso, CO
El Paso, CO
El Paso, CO
Golden, CO
Greenwood Village, CO
Highlands Ranch, CO
Jefferson, CO
Lakewood, CO
Littleton, CO
Lone Tree, CO
Longmont, CO
Louisville, CO
Morrison, CO
Superior, CO
Thornton, CO
Westminster, CO
Wheat Ridge, CO
Avon, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bristol, CT
Brookfield, CT
Darien, CT
Durham, CT
East Hartford, CT
Ellington, CT
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
5,434
6,613
4,611
2,130
2,737
3,193
4,247
5,942
1,941
5,412
5,978
4,751
1,187
3,001
2,157
2,495
2,874
3,900
2,380
5,269
1,382
3,274
3,828
4,641
4,077
4,356
1,785
2,349
4,139
6,612
3,619
6,605
5,081
3,748
5,003
1,457
6,151
731
59
313
350
377
1,594
58
667
994
208
1,295
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
380
298
330
391
-
432
285
-
224
-
4,123
4,523
3,276
1,619
1,216
2,207
2,604
4,233
749
4,219
5,078
3,489
627
1,460
1,579
2,207
2,284
2,875
1,496
3,269
756
2,865
2,798
3,247
2,889
2,921
1,388
1,541
2,272
5,125
2,315
5,228
3,018
2,477
2,722
752
4,201
403
24
204
228
246
1,036
20
434
-
54
842
78
1,311
2,090
1,335
511
1,521
986
1,643
1,709
1,192
1,193
900
1,262
560
1,541
578
288
590
1,025
884
2,000
626
409
1,030
1,394
1,188
1,435
397
808
1,867
1,487
1,304
1,377
2,063
1,271
2,281
705
1,950
378
415
407
452
522
558
470
518
994
378
453
5,434
6,613
4,611
2,130
2,737
3,193
4,247
5,942
1,941
5,412
5,978
4,751
1,187
3,001
2,157
2,495
2,874
3,900
2,380
5,269
1,382
3,274
3,828
4,641
4,077
4,356
1,785
2,349
4,139
6,612
3,619
6,605
5,081
3,748
5,003
1,457
6,151
781
439
611
680
768
1,594
490
952
994
432
1,295
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2015
2015
2015
2015
2014
2015
2015
2015
2007
2015
2015
2015
2015
2015
2017
2017
2017
2015
2017
2015
2017
2017
2017
2015
2015
2015
2017
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2002
1982
1985
1985
1985
2004
1985
1985
2004
1982
2004
Accumulated
Depreciation
298
483
315
144
333
232
343
381
617
297
220
290
132
327
50
29
49
214
67
446
49
36
94
302
246
318
36
170
413
344
302
313
472
281
505
152
445
279
251
225
268
326
316
305
424
994
262
257
Farmington, CT
Franklin, CT
Hamden, CT
Hartford, CT
Manchester, CT
Meriden, CT
Meriden, CT
Middletown, CT
New Haven, CT
New Haven, CT
New Haven, CT
Newington, CT
North Haven, CT
North Haven, CT, CT
Norwalk, CT
Norwalk, CT
Norwich, CT
Old Greenwich, CT
Plymouth, CT
Ridgefield, CT
South Windham, CT
South Windsor, CT
Stamford, CT
Stamford, CT
Stamford, CT
Suffield, 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
Nassau, FL
Nassau, FL
Nassau, FL
Orlando, FL
Houston, GA
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
466
51
645
665
110
208
1,532
133
217
539
1,413
954
90
405
511
-
107
-
931
402
644
545
507
604
507
237
1,434
551
469
515
804
352
925
185
1,215
604
447
717
519
1,031
1,434
848
941
1,963
2,137
2,894
867
1,724
-
447
-
-
323
341
-
735
297
219
(323)
-
669
-
46
941
323
1,219
-
304
1,398
-
16
98
453
603
-
-
-
-
-
59
-
322
-
12
-
-
214
-
1,400
-
-
-
-
-
34
-
303
20
527
432
50
84
989
131
141
351
569
620
365
252
332
402
44
620
605
167
598
337
330
393
330
201
-
335
305
335
516
204
567
74
790
393
-
466
338
670
1,055
418
664
570
382
2,056
401
1,312
79
163
478
118
233
383
465
543
737
373
407
521
334
394
153
225
539
386
599
326
539
1,444
208
193
309
630
639
1,434
216
164
180
288
207
358
433
425
223
447
251
395
361
1,779
430
277
1,393
1,755
838
500
412
466
498
645
665
433
549
1,532
868
514
758
1,090
954
759
405
557
941
430
1,219
931
706
2,042
545
523
702
960
840
1,434
551
469
515
804
411
925
507
1,215
616
447
717
733
1,031
2,834
848
941
1,963
2,137
2,894
901
1,724
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2004
1982
2018
2004
1987
1982
2004
1987
1985
1985
1985
2004
1982
2004
1985
1988
1982
1969
2004
1985
2004
2004
1985
1985
1985
2004
2004
2004
2004
2004
2004
1992
2004
1982
2004
1985
2004
2004
1985
2004
2004
2013
2013
2017
2017
2017
2000
2017
Accumulated
Depreciation
92
312
1
132
206
289
312
349
196
333
208
189
192
95
195
270
226
277
185
378
664
130
164
233
357
505
1,434
138
93
102
167
168
225
269
241
189
447
142
295
204
1,484
121
90
102
129
71
378
37
Richmond, GA
Haleiwa, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Kaneohe, HI
Kaneohe, HI
Waianae, HI
Waianae, HI
Waipahu, HI
Prospect Heights, IL
Bossier, LA
Lake Charles, LA
Lake Charles, LA
Sulphur, LA
Arlington, 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
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
Lowell, MA
Lynn, MA
Lynn, MA
Marlborough, MA
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
3,150
1,522
1,071
1,539
1,769
9,211
1,364
1,977
1,520
1,997
2,458
1,547
2,181
1,069
1,468
777
519
-
600
625
370
725
800
536
1,350
734
390
650
600
1,250
715
450
414
390
427
400
550
1,009
787
353
500
571
1,357
361
-
400
850
550
-
-
30
-
-
-
-
165
-
-
-
-
-
-
-
-
27
535
-
-
305
-
-
12
-
73
29
-
-
-
-
-
2,320
33
98
23
-
327
-
111
168
-
-
90
631
-
-
-
286
1,058
981
1,219
1,192
8,194
822
1,473
648
871
945
698
1,333
620
1,002
375
338
388
600
625
240
725
-
348
1,350
476
254
650
600
1,250
-
450
458
254
325
260
550
657
638
243
322
199
759
201
429
400
850
550
80
2,864
464
120
320
577
1,017
542
669
872
1,126
1,513
849
848
449
466
402
208
147
-
-
435
-
800
200
-
331
165
-
-
-
715
-
2,276
169
200
163
-
679
149
221
346
372
598
250
202
-
-
-
3,150
1,522
1,101
1,539
1,769
9,211
1,364
2,142
1,520
1,997
2,458
1,547
2,181
1,069
1,468
777
546
535
600
625
675
725
800
548
1,350
807
419
650
600
1,250
715
450
2,734
423
525
423
550
1,336
787
464
668
571
1,357
451
631
400
850
550
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2017
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2018
2017
2018
2018
2018
1985
1996
2011
2011
1991
2011
2011
1991
2011
1985
1985
2011
2011
2011
2012
2011
1988
1992
1990
1991
2011
1985
2014
1989
1985
2012
2017
1985
1996
2011
2011
2011
Accumulated
Depreciation
236
325
82
184
310
562
329
360
469
609
789
28
71
18
17
18
178
51
-
-
245
-
605
127
-
289
143
-
-
-
325
-
64
118
151
111
-
494
42
169
235
131
45
247
69
-
-
-
Maynard, MA
Melrose, MA
Methuen, MA
Methuen, MA
Methuen, MA
Methuen, MA
Newton, 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
Worchester, MA
Accokeek, MD
Baltimore, MD
Baltimore, MD
Beltsville, MD
Beltsville, MD
Beltsville, MD
Beltsville, MD
Bladensburg, MD
Bowie, MD
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
736
600
300
380
490
650
691
400
550
650
573
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
498
978
196
692
802
2,259
525
731
1,050
1,130
571
1,084
98
-
134
64
98
-
98
18
-
-
238
-
45
-
(373)
-
-
2
57
545
-
114
-
92
209
711
105
-
-
-
64
394
-
-
-
10
383
8
812
-
-
-
-
-
-
-
-
-
479
600
150
246
319
650
450
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
525
731
1,050
1,130
571
1,084
81
355
-
284
198
269
-
339
166
-
-
381
-
247
-
124
-
-
169
307
595
-
264
-
249
246
1,064
276
-
-
-
214
394
-
-
-
202
559
350
1,008
-
802
1,537
-
-
-
-
-
-
834
600
434
444
588
650
789
418
550
650
811
1,300
624
600
700
400
450
478
771
670
1,200
543
900
542
567
1,723
595
450
600
1,300
414
902
400
500
550
558
881
986
1,008
692
802
2,259
525
731
1,050
1,130
571
1,084
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
2011
1986
1985
1985
2011
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
2017
2010
2007
2007
2009
2009
2009
2009
2009
2009
Accumulated
Depreciation
258
-
234
176
192
-
300
166
-
-
267
-
214
-
59
-
-
107
214
267
-
154
-
174
171
622
212
-
-
-
204
292
-
-
-
130
329
222
29
-
473
814
-
-
-
-
-
-
Capitol Heights, MD
Clinton, MD
College Park, MD
College Park, 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 Hill, MD
Riverdale, MD
Seat Pleasant, MD
Suitland, MD
Upper Marlboro, MD
Biddeford, ME
Lewiston, ME
Davidson, NC
Fayetteville, NC
Kernersville, NC
New Bern, NC
Belfield, ND
Allenstown, NH
Concord, NH
Concord, NH
Derry, NH
Derry, NH
Dover, NH
Dover, NH
Goffstown, NH
Hooksett, NH
Kingston, NH
Londonderry, NH
Londonderry, NH
Manchester, NH
Nashua, NH
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
628
651
445
536
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
468
673
845
618
342
1,776
986
449
350
1,232
1,787
675
900
418
950
650
1,200
1,737
1,562
1,500
703
1,100
550
500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
188
-
-
-
83
-
-
-
-
17
-
-
-
-
-
-
30
-
-
-
628
651
445
536
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
468
673
845
235
222
301
509
338
190
382
467
675
900
158
950
650
1,200
697
824
1,500
458
1,100
550
500
82
-
-
-
-
-
895
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
308
1,475
477
111
243
850
1,320
-
-
277
-
-
-
1,040
738
-
275
-
-
-
628
651
445
536
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
468
673
845
626
530
1,776
986
449
433
1,232
1,787
675
900
435
950
650
1,200
1,737
1,562
1,500
733
1,100
550
500
Date of
Initial
Leasehold or
Acquisition
Investment (1)
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
1985
1985
2017
2018
2007
2007
2007
2007
2011
2011
1987
2011
2011
2011
2012
2007
2011
1985
2011
2011
2011
Accumulated
Depreciation
-
-
-
-
-
555
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
229
79
19
105
168
753
759
-
-
276
-
-
-
457
671
-
235
-
-
-
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
Paramus, NJ
Parlin, NJ
Paterson, NJ
Ridgewood, NJ
Trenton, NJ
Union, NJ
Washington Township, NJ
Watchung, NJ
West Orange, NJ
Bernalillo, NM
Bernalillo, NM
Bernalillo, NM
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
550
750
825
1,132
1,750
500
-
300
525
550
700
939
1,400
1,600
743
450
363
381
1,508
719
406
709
547
1,245
684
495
640
238
1,305
872
515
671
201
664
630
227
382
418
619
703
1,303
437
912
449
800
1,829
2,308
2,322
-
-
-
-
-
-
730
101
-
-
-
12
-
-
20
871
284
323
229
(299)
33
(252)
17
365
169
533
483
182
-
292
439
448
309
(197)
147
544
81
159
17
398
-
214
334
114
409
-
-
-
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
249
203
403
458
1,146
239
594
226
521
1,382
1,830
1,796
83
-
-
-
352
-
-
413
156
-
-
-
351
-
-
279
971
447
404
737
348
212
289
218
799
408
933
707
320
505
596
619
682
360
333
367
596
214
374
233
643
157
412
652
337
688
447
478
526
550
750
825
1,132
1,750
500
730
401
525
550
700
951
1,400
1,600
763
1,321
647
704
1,737
420
439
457
564
1,610
853
1,028
1,123
420
1,305
1,164
954
1,119
510
467
777
771
463
577
636
1,101
1,303
651
1,246
563
1,209
1,829
2,308
2,322
Date of
Initial
Leasehold or
Acquisition
Investment (1)
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
1985
1985
1985
1985
2012
1985
1985
1985
1985
2017
2017
2017
Accumulated
Depreciation
-
-
-
33
-
-
120
156
-
-
-
296
-
-
236
122
278
225
509
282
188
120
185
538
352
170
449
245
436
391
323
342
208
152
296
448
150
158
198
395
58
192
394
140
475
37
43
45
Bernalillo, NM
Dona Ana, 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
Buffalo, NY
Byron, NY
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
Elmont, NY
Elmsford, NY
Elmsford, NY
Fishkill, NY
Floral Park, NY
Flushing, NY
Flushing, NY
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
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
75
282
148
237
476
422
627
313
969
1,158
1,012
115
2,543
1,872
670
1,345
660
787
1,724
389
-
1,453
1,793
616
516
1,936
-
-
-
-
246
-
(1)
-
355
254
-
553
-
54
-
-
-
-
-
-
-
345
382
271
437
372
320
383
313
241
-
-
-
300
-
-
34
-
39
-
993
319
948
-
-
170
241
-
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
176
104
154
306
275
408
151
669
1,158
602
113
1,903
1,872
434
1,345
428
537
2,302
231
581
1,453
1,793
356
320
1,413
84
541
468
1,444
300
296
579
300
320
426
418
-
703
-
193
-
-
-
564
561
696
-
378
426
377
481
455
490
530
532
403
300
-
410
302
640
-
270
-
271
250
415
477
367
-
-
430
437
523
3,682
1,842
1,665
714
469
1,684
935
684
512
724
789
1,205
423
444
877
884
953
1,049
1,910
2,408
1,232
445
457
553
585
609
796
805
940
554
969
1,158
1,012
415
2,543
1,872
704
1,345
699
787
2,717
708
948
1,453
1,793
786
757
1,936
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2017
2017
2015
2006
2000
2013
2006
2006
1981
1985
2011
1976
2013
1985
2013
2013
2013
2013
2013
2013
2011
1972
1967
1967
1972
1985
1985
1985
1985
2000
2006
2011
2006
1965
2013
2011
1985
2011
1985
2006
2011
1978
1971
2011
2011
1998
1998
2013
Accumulated
Depreciation
48
40
366
154
141
188
154
164
286
227
-
515
-
171
-
-
-
184
191
214
-
227
264
361
294
233
316
322
342
228
154
-
210
302
200
-
232
-
233
128
45
333
244
-
-
275
258
170
Flushing, NY
Flushing, NY
Forrest Hills, NY
Franklin Square, NY
Garden City, NY
Garnerville, NY
Glen Head, NY
Glen Head, 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
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 Andover, NY
Ossining, NY
Ozone Park, NY
Peekskill, NY
Pelham, NY
Pelham Manor, NY
Perry, NY
Pleasant Valley, NY
Port Chester, NY
Port Chester, NY
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
1,947
2,478
1,273
153
362
1,508
235
463
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
1,907
985
2,316
1,257
971
189
1,887
1,084
126
527
1,192
425
393
231
58
2,207
1,035
137
1,444
398
941
1,015
-
-
-
331
242
-
216
282
252
-
-
-
284
-
-
-
42
86
-
-
285
110
-
274
-
-
-
-
-
-
-
358
-
-
399
-
-
35
33
198
365
-
-
307
-
62
-
-
1,405
1,801
1,273
137
236
1,508
103
301
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
1,907
985
2,316
827
971
104
1,887
1,084
78
527
1,192
275
256
117
45
2,207
1,035
75
1,044
240
-
1,015
85
542
677
-
347
368
-
348
444
302
-
-
-
341
-
-
825
218
277
1,534
-
401
219
-
536
-
-
-
-
-
430
-
443
-
-
447
-
-
185
170
312
378
-
-
369
400
220
941
-
1,947
2,478
1,273
484
604
1,508
451
745
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
1,907
985
2,316
1,257
971
547
1,887
1,084
525
527
1,192
460
426
429
423
2,207
1,035
444
1,444
460
941
1,015
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2013
2013
2013
1978
1985
2011
1982
1985
1985
2011
2011
2011
1978
2011
2011
2008
1985
1985
2013
2011
1985
1985
2011
1985
2011
2011
2011
2011
2011
2006
2011
1982
2011
2011
1972
2011
2011
1986
1985
1985
1976
2011
2011
1985
2006
1986
2011
2011
Accumulated
Depreciation
162
203
-
195
210
-
348
275
166
-
-
-
202
-
-
537
189
231
416
-
228
202
-
348
-
-
-
-
-
221
-
240
-
-
309
-
-
185
148
171
228
-
-
230
205
209
443
-
Port Jefferson, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Poughkeepsie, NY
Prattsburgh, NY
Rego Park, NY
Riverhead, 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
Stony Brook, NY
Tarrytown, NY
Tuchahoe, NY
Wantagh, NY
Wappingers Falls, NY
Wappingers Falls, NY
Warsaw, NY
Warwick, NY
West Nyack, 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
Clermont, OH
Crestline, OH
Mansfield, OH
Mansfield, OH
Monroeville, OH
Summit, OH
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
185
591
1,020
1,232
1,340
1,306
1,355
553
2,783
724
1,605
350
872
704
344
1,301
1,061
281
749
330
390
301
350
176
956
1,650
640
452
1,488
990
1,049
936
-
1,458
-
-
-
1,021
291
1,907
1,700
2,365
1,045
1,202
922
1,950
2,580
1,530
3,080
-
-
(32)
(60)
-
-
-
-
-
-
66
-
35
246
-
368
301
-
106
89
323
290
281
-
-
-
-
-
-
-
-
569
-
798
588
944
63
1,050
-
-
-
-
-
-
-
-
-
246
591
1,020
1,200
1,280
1,306
1,355
303
2,104
432
1,605
201
872
458
300
1,301
691
130
749
215
254
196
228
105
956
1,650
370
-
1,488
690
1,049
936
303
1,458
375
-
684
665
216
1,907
-
2,365
362
285
332
700
485
385
86
3,019
-
-
-
-
-
-
250
679
292
-
215
-
281
290
-
738
452
-
221
225
428
412
352
-
-
270
452
-
300
-
-
266
-
423
588
260
419
1,125
-
1,700
-
683
917
590
1,250
2,095
1,145
3,265
591
1,020
1,200
1,280
1,306
1,355
553
2,783
724
1,605
416
872
739
590
1,301
1,429
582
749
436
479
624
640
457
956
1,650
640
452
1,488
990
1,049
936
569
1,458
798
588
944
1,084
1,341
1,907
1,700
2,365
1,045
1,202
922
1,950
2,580
1,530
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
2011
2011
2011
2011
2011
2011
2006
2013
1998
2013
1985
2011
1985
1998
2011
1985
1969
2011
1985
1985
1985
1985
1978
2011
2011
1998
2011
2011
2006
2011
2011
1972
2011
1993
1970
1990
1985
1972
2011
2013
2011
2017
2008
2008
2009
2009
2017
Accumulated
Depreciation
14
-
-
-
-
-
-
128
213
241
-
197
-
241
134
-
511
392
-
183
203
263
244
210
-
-
219
323
-
154
-
-
204
-
182
345
114
361
542
-
274
-
64
463
280
587
970
95
Oklahoma City, OK
Oklahoma City, OK
Oklahoma City, OK
Banks, OR
Estacada, OR
Marion, OR
Marion, OR
Pendleton, OR
Portland, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Springfield, OR
Yamhill, OR
Allison Park, PA
Harrisburg, PA
Lancaster, PA
New Kensington, PA
Philadelphia, PA
Philadelphia, PA
Phoenixville, PA
Pottsville, PA, PA
Reading, PA
Barrington, RI
East Providence,, RI
N. Providence, RI
Columbia, SC
Columbia, SC
Columbia, SC
Johns Island, SC
Kershaw, SC
Kershaw, 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
Lexington, SC
Lexington, SC
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
868
1,182
1,311
498
646
543
956
766
4,416
1,071
1,350
1,408
4,215
4,614
1,398
2,867
1,500
399
642
1,375
405
1,252
385
452
750
490
2,298
543
1,995
2,109
2,531
2,561
2,082
2,177
412
633
694
720
816
973
1,036
1,056
1,116
1,436
1,624
1,644
1,682
1,712
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
213
18
-
175
-
89
1
49
180
(1,855)
158
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
371
587
625
498
84
296
456
122
3,368
399
521
524
3,182
3,517
796
394
850
199
300
675
264
814
76
148
-
319
14
353
1,130
1,120
1,612
1,885
1,166
974
145
309
172
219
336
582
434
432
50
472
999
1,283
1,135
1,410
87
497
595
686
-
562
247
500
644
1,048
672
829
884
1,033
1,097
602
2,473
650
413
360
700
316
438
398
305
799
351
429
348
865
989
919
676
916
1,203
267
324
522
501
480
391
602
624
1,066
964
625
361
547
302
868
1,182
1,311
498
646
543
956
766
4,416
1,071
1,350
1,408
4,215
4,614
1,398
2,867
1,500
612
660
1,375
580
1,252
474
453
799
670
443
701
1,995
2,109
2,531
2,561
2,082
2,177
412
633
694
720
816
973
1,036
1,056
1,116
1,436
1,624
1,644
1,682
1,712
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2018
2018
2018
2015
2015
2017
2017
2015
2015
2015
2015
2015
2015
2015
2015
2017
2010
1989
1989
2010
1985
2009
1985
1990
1989
1985
1985
1985
2018
2018
2018
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
Accumulated
Depreciation
19
22
24
-
109
29
50
138
213
174
172
190
226
225
152
192
444
329
360
269
263
177
27
304
799
266
74
255
21
23
21
6
68
84
19
24
41
35
27
30
42
47
77
70
45
27
43
19
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Lexington, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Richland, SC
Arlington, TX
Arlington, TX
Arlington, TX
Arlington, TX
Austin, TX
Austin, TX
Austin, TX
Center, 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
Garland, TX
Grand Prairie, TX
Grand Prairie, TX
Harker Heights, TX
Houston, TX
Houston, TX
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
1,729
1,738
1,901
2,046
2,179
2,230
2,603
3,231
3,234
4,413
464
575
792
868
927
1,114
1,246
1,339
1,643
2,460
2,637
3,217
3,371
3,655
3,950
789
1,352
1,560
1,796
462
2,368
3,511
2,073
1,278
1,425
1,679
1,816
2,370
3,168
2,115
2,208
3,296
4,439
1,413
2,000
2,051
1,689
2,803
461
549
880
1,300
703
1,296
734
1,230
2,036
995
211
230
329
413
432
447
1,177
472
341
891
1,383
812
1,355
1,913
1,148
375
465
552
607
188
1,630
1,982
591
453
327
594
403
603
1,015
1,298
704
3,051
4,000
499
585
1,463
1,465
2,268
1,729
1,738
1,901
2,046
2,179
2,230
2,603
3,231
3,234
4,413
464
575
792
868
927
1,114
1,246
1,339
1,643
2,460
2,637
3,217
3,371
3,655
3,950
789
1,352
1,560
1,796
462
2,368
3,577
2,073
1,278
1,425
1,679
1,816
2,370
3,168
2,164
2,208
3,296
4,439
1,413
2,000
2,042
1,689
2,803
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66
-
-
-
-
-
-
-
49
-
-
-
-
-
(9)
-
-
1,268
1,189
1,021
746
1,476
934
1,869
2,001
1,198
3,418
253
345
463
455
495
667
69
867
1,302
1,569
1,254
2,405
2,016
1,742
2,802
414
887
1,008
1,189
274
738
1,595
1,482
825
1,098
1,085
1,413
1,767
2,153
866
1,504
245
439
914
1,415
579
224
535
88
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2017
2017
2017
2017
2017
2017
2018
2018
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2018
2018
2018
2018
2007
2007
2007
2018
2017
2017
2017
2017
2017
2017
2007
2018
2014
2014
2018
2018
2007
2007
2016
Accumulated
Depreciation
39
31
73
90
50
92
19
30
45
81
16
16
25
35
27
32
78
34
19
71
97
65
104
133
84
15
18
20
23
130
851
1,012
24
38
29
45
35
47
80
721
26
550
754
20
22
1,144
735
220
Keller, TX
Lewisville, TX
Linden, TX
Longview, TX
Mesquite, TX
Midlothian, TX
Nueces, TX
Nueces, TX
Nueces, TX
Port Arthur, TX
Rowlett, TX
San Marcos, TX
San Patricio, TX
Temple, TX
Texarkana, TX
Texarkana, TX
Texarkana, TX
The Colony, TX
Travis, TX
Waco, TX
Wake Village, TX
Watauga, 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
Fairfax, VA
Farmville, VA
Fredericksburg, VA
Fredericksburg, VA
Fredericksburg, VA
Fredericksburg, VA
Glen Allen, VA
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
2,507
494
2,160
1,660
1,687
429
1,526
2,162
2,400
2,648
1,284
1,954
3,138
2,405
1,791
1,861
2,316
4,396
1,711
3,884
1,637
1,771
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
4,454
1,227
1,279
1,289
1,716
3,623
1,037
-
-
-
-
-
-
-
-
-
-
-
-
-
(10)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(185)
110
-
-
-
-
-
-
30
-
-
-
996
110
1,514
1,239
1,093
72
1,056
1,729
1,110
505
840
251
2,687
1,205
992
1,197
1,643
337
1,364
894
685
1,139
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
3,370
622
469
798
996
2,828
412
89
1,511
384
646
421
594
357
470
433
1,290
2,143
444
1,703
451
1,190
799
664
673
4,059
347
2,990
952
632
-
247
-
-
-
368
432
444
-
-
379
498
459
-
196
729
635
713
997
1,084
605
810
521
720
795
625
2,507
494
2,160
1,660
1,687
429
1,526
2,162
2,400
2,648
1,284
1,954
3,138
2,395
1,791
1,861
2,316
4,396
1,711
3,884
1,637
1,771
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
4,454
1,227
1,279
1,319
1,716
3,623
1,037
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2007
2008
2018
2018
2018
2007
2017
2017
2017
2016
2018
2007
2017
2007
2018
2018
2018
2007
2017
2007
2018
2018
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2005
1990
1990
2013
2013
2013
2013
2005
2005
2005
2005
2005
2005
Accumulated
Depreciation
827
239
25
16
23
229
36
37
99
215
16
874
39
664
29
27
24
1,992
31
1,674
34
24
-
87
-
-
-
131
140
153
-
-
126
160
146
-
72
667
204
197
302
328
333
446
288
397
438
344
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
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
Wilbur, WA
Miscellaneous
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
629
45,846
978,973
-
-
-
-
-
-
-
-
(114)
(70)
-
33
(41)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
153
15,133 21,703
64,133 $ 631,185 $
$
1,077
755
1,688
620
903
630
957
633
1,043
820
1,125
620
1,476
600
1,677
520
2,367
755
465
230
1,441
625
596
374
1,091
585
466
435
722
620
1,290
800
4,257
1,288
3,022
1,057
1,725
839
1,176
863
4,800
1,189
4,218
1,245
1,181
767
2,900
834
2,792
1,236
2,019
1,858
831
659
2,035
1,570
4,050
1,656
1,485
533
717
524
1,884
661
2,178
961
955
-
760
639
518
-
671
-
937
718
1,214
1,051
629
476
39,276
60,979
411,921 $ 1,043,106 $
Accumulated
Depreciation
416
342
347
371
452
342
331
286
416
230
344
366
322
240
342
441
386
224
178
201
253
284
176
192
268
337
162
327
430
153
107
135
220
-
127
-
-
144
191
106
26,242
150,691
Date of
Initial
Leasehold or
Acquisition
Investment (1)
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
2015
various
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 $1,046,120,000 at December 31, 2018.
90
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
As of December 31, 2018
(in thousands)
Description
Type of
Loan/Borrower
Mortgage Loans:
Seller financing
Borrower A
Seller financing
Borrower B
Seller financing
Borrower C
Seller financing
Borrower D
Seller financing
Borrower E
Seller financing
Borrower F
Seller financing
Borrower G
Seller financing
Borrower H
Seller financing
Borrower I
Seller financing
Borrower J
Seller financing
Borrower K
Seller financing
Borrower L
Seller financing
Borrower M
Seller financing
Borrower N
Seller financing
Borrower O
Seller financing
Borrower P
Seller financing
Borrower Q
Seller financing
Borrower R
Seller financing
Borrower S
Seller financing
Borrower T
Seller financing
Borrower U
Seller financing
Borrower V
Seller financing
Borrower W
Seller financing
Borrower X
Seller financing
Borrower Y
Seller financing
Borrower Z
Seller financing
Borrower AA
Seller financing
Borrower AB
Seller financing
Borrower AC
Seller financing
Borrower AD
Seller financing
Borrower AE
Seller financing
Borrower AF
Seller financing
Borrower AG
Seller financing
Borrower AH
Seller financing
Borrower AI
Seller financing
Borrower AJ
Seller financing
Borrower AK
Borrower AL
Seller financing
Borrower AM Seller financing
Seller financing
Borrower AN
Seller financing
Borrower AO
Seller financing
Borrower AP
Seller financing
Borrower AQ
Seller financing
Borrower AR
Seller financing
Borrower AS
Seller financing
Borrower AT
Seller financing
Borrower AU
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
East Islip, NY
Middlesex, NJ
Valley Cottage, NY
Brooklyn, NY
Nyack, NY
E. Patchogue, NY
Baldwin, NY
Norwalk, CT
Stafford Springs, CT
Waterbury, CT
Great Barrington, MA
Springfield, MA
Westfield, MA
Milford, CT
Fairfield, CT
Hartford, CT
Wilmington, DE
Clinton, MA
Fairhaven, MA
New Bedford, 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
Ridgefield, NJ
Irvington, NJ
Jersey City, NJ
Colonia, NJ
Swedesboro, NJ
Piscataway, NJ
Glendale, NY
Seaford, NY
Elmont, NY
White Plains, NY
Scarsdale, NY
Pleasant Valley, NY
Bronx, NY
Freeport, NY
Wantagh, NY
91
9.0% 11/2024
9.0%
5/2021
9.0% 10/2020
6/2019
8.0%
9/2022
9.0%
8/2019
9.0%
9/2020
9.0%
4/2022
9.0%
1/2021
9.0%
2/2021
9.0%
4/2021
9.0%
9.0%
7/2019
9.0% 11/2021
3/2025
9.0%
3/2025
9.0%
9.0%
3/2024
9.0% 11/2020
3/2022
9.0%
9/2020
9.0%
9.0% 10/2021
9.0% 10/2021
9.0% 11/2021
1/2022
9.0%
1/2022
9.0%
3/2021
9.0%
3/2023
9.0%
7/2026
8.0%
8/2028
9.5%
1/2023
9.0%
3/2020
9.0%
1/2020
9.0%
3/2021
9.0%
4/2021
9.0%
7/2022
9.0%
7/2025
9.5%
7/2020
9.0%
9.0%
4/2021
9.0% 11/2020
9.0%
7/2025
1/2020
9.0%
9.0% 10/2021
9.0%
2/2021
9.0% 11/2025
9/2020
9.0%
9.0% 12/2019
5/2020
9.0%
5/2022
9.0%
P & I — $
P & I —
P & I —
I(b) —
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
2,000
253
200
300
319
232
171
58
131
303
398
390
70
84
158
458
363
187
237
275
293
300
86
568
210
73
308
306
315
172
300
500
320
77
121
525
488
450
444
337
230
240
206
455
727
229
381
2,000
237
169
265
294
206
153
52
98
277
392
385
68
74
85
403
330
170
216
252
268
268
81
150
148
68
266
263
282
154
193
417
280
69
71
502
419
364
396
300
202
44
180
382
Type of
Description
Loan/Borrower
Borrower AV
Seller financing
Borrower AW Seller financing
Seller financing
Borrower AX
Seller financing
Borrower AY
Seller financing
Borrower AZ
Seller financing
Borrower BA
Seller financing
Borrower BB
Seller financing
Borrower BC
Seller financing
Borrower BD
Seller financing
Borrower BE
Seller financing
Borrower BF
Seller financing
Borrower BG
Seller financing
Borrower BH
Seller financing
Borrower BI
Seller financing
Borrower BJ
Seller financing
Borrower BK
Borrower BL
Seller financing
Borrower BM Seller financing
Seller financing
Borrower BN
Seller financing
Borrower BO
Seller financing
Borrower BP
Seller financing
Borrower BQ
Note receivable
Location(s)
Colonie, NY
Latham, NY
Malta, NY
Newburgh, NY
Coxsackie, NY
Brewster, NY
Cairo, NY
Central Islip, NY
Kenmore, NY
Rochester, NY
Savona, NY
Rochester, NY
Greigsville, NY
Horsham, PA
Warwick, RI
Providence, RI
Warwick, RI
Cranston, RI
E. Providence, RI
York, PA
Ephrata, PA
McConnellsburg, PA
Interest
Rate
Final
Maturity
Date
8/2023
9.0%
1/2021
9.0%
3/2023
9.0%
9/2021
9.0%
9.0%
7/2021
9.0% 10/2022
8/2023
9.0%
6/2023
9.0%
9.0% 12/2020
2/2025
9.0%
9.0%
2/2025
9.0% 10/2025
9.0% 11/2025
7/2024
10.0%
8/2022
9.0%
9/2021
9.0%
9.0% 10/2021
8/2022
9.0%
2/2022
9.0%
2/2021
9.0%
9.0% 10/2020
1/2023
9.0%
Periodic
Payment
Terms (a)
Prior
Liens
Face Value
at
Inception
143
169
572
394
153
554
113
780
74
174
157
230
200
237
333
184
357
153
186
102
265
38
20,908
Amount of
Principal
Unpaid at
Close of Period
136
150
539
359
138
518
107
741
66
171
154
229
200
117
309
167
325
142
171
91
158
36
18,254
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 —
Purchase/leaseback Various-NY
Various-CT
Promissory Note
1/2021
9.5%
9.0% 12/2028
I(b)
(c)
18,400
—
$ 39,308 $
14,720
545
33,519
Total (d)
(a) P & I = Principal and interest paid monthly.
(b) I = Interest only paid monthly with principal deferred.
(c) Note for funding of capital improvements.
(d) 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
Balance at December 31,
2018
2017
2016
$
32,366 $
32,737 $
48,455
4,287
1,505
1,814
(2,368)
(766)
33,519 $
(1,227)
(649)
32,366 $
(16,714)
(818)
32,737
$
92
EXHIBIT INDEX
Exhibit
Number
3.1
GETTY REALTY CORP.
Annual Report on Form 10-K
for the year ended December 31, 2018
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.
3.2
Articles Supplementary to Articles of Incorporation of
Holdings, filed January 21, 1998.
3.3
By-Laws of Getty Realty Corp.
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.
Filed as Exhibit 3.2 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.
Filed as Exhibit 3.2 to the Company’s Current Report
on Form 8-K
2011
(File No. 001-13777) and
incorporated herein by
reference.
on November 14,
filed
3.4
3.5
3.6
3.7
4.1
10.1*
10.2*
10.4*
Articles of Amendment of Holdings, changing its name
to Getty Realty Corp., filed January 30, 1998.
Articles of Amendment of Holdings, filed August 1,
2001.
Articles Supplementary to Articles of Incorporation of
Holdings, filed October 25, 2017.
Filed as Exhibit 3.4 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.
Filed as Exhibit 3.5 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.
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.
Amendment to By-Laws of Getty Realty Corp.
Filed herewith.
Dividend Reinvestment/Stock Purchase Plan.
Retirement and Profit Sharing Plan (restated as of
December 1, 2012).
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.
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.
1998 Stock Option Plan, effective as of January 30,1998. Annexed as Appendix H
to
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
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.
93
Description of Document
Location of Document
Exhibit
Number
10.7*
Form of restricted stock unit grant award under the 2004
Getty Realty Corp. Omnibus Incentive Compensation
Plan, as amended.
10.8*
Amendment to the 2004 Getty Realty Corp. Omnibus
Incentive Compensation Plan dated December 31, 2008.
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.
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.
10.15*
10.18*
10.20**
10.21**
10.28
10.29**
10.30**
10.31
10.32**
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.
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.
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.
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.
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 10.18 to the Company’s Annual Report
on Form 10-K filed on March 16, 2015 (File No. 001-
13777) and incorporated herein by reference.
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.
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.
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.
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.
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, BTIG, LLC,
Capital One Securities, Inc. and JMP Securities LLC,
dated March 9, 2018.
Amended and Restated Credit Agreement, dated as of
March 23, 2018, among Getty Realty Corp., certain of its
subsidiaries party thereto, Bank of America, N.A., as
Administrative Agent and Swing Line Lender, each
lender from time to time party thereto and each L/C Issuer
from time to time party thereto.
Filed as Exhibit 1.1 to the Company’s Current Report
on Form 8-K filed on March 9, 2016 (File No. 001-
13777) and incorporated herein by reference.
Filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on May 9, 2018 (File
No. 001-13777) and incorporated herein by reference.
94
Exhibit
Number
10.33**
10.34**
Description of Document
Location of Document
Third Amended and Restated Note Purchase and
Guarantee Agreement, dated as of June 21, 2018, among
Getty Realty Corp., certain of its subsidiaries party
thereto, the Prudential and certain affiliates of Prudential.
Note Purchase and Guarantee Agreement, dated as of
June 21, 2018, among Getty Realty Corp., certain of its
subsidiaries party thereto, Metropolitan Life Insurance
Company (“MetLife”) and certain affiliates of MetLife.
Filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on July 26, 2018 (File
No. 001-13777) and incorporated herein by reference.
Filed as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed on July 26, 2018 (File
No. 001-13777) and incorporated herein by reference.
10.35*
Form of Indemnification Agreement between
Company and its directors.
the
Filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on October 25, 2018 (File
No. 001-13777) and incorporated herein by reference.
21
23
31.1
31.2
32.1
32.2
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting
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.
Certification of Danion Fielding, Vice President, Chief
Financial Officer and Treasurer, pursuant to Rule 13a-
14(a) under the Securities Exchange Act of 1934, as
amended.
Certification of Christopher J. Constant, President and
Chief Executive Officer, pursuant to Rule 13a-14(b)
under the Securities Exchange Act of 1934, as amended,
and 18 U.S.C. § 1350.
Certification of Danion Fielding, Vice President, Chief
Financial Officer and Treasurer, pursuant to Rule 13a-
14(b) under the Securities Exchange Act of 1934, as
amended, and 18 U.S.C. § 1350.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
Filed herewith.
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Instance Document
XBRL Taxonomy Extension Schema
Filed herewith.
Filed herewith.
XBRL Taxonomy Extension Calculation Linkbase
Filed herewith.
XBRL Taxonomy Extension Definition Linkbase
Filed herewith.
XBRL Taxonomy Extension Label Linkbase
Filed herewith.
XBRL Taxonomy Extension Presentation Linkbase
Filed herewith.
* Management contract or compensatory plan or arrangement.
** Confidential treatment has been granted for certain portions of this Exhibit pursuant to Rule 24b-2 under the Exchange Act, which
portions are omitted and filed separately with the SEC.
The exhibits listed in this Exhibit Index which were filed or furnished with our 2018 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 2018 Annual Report on Form 10-K.
95
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)
February 27, 2019
By:
/S/ EUGENE SHNAYDERMAN
Eugene Shnayderman
Chief Accounting Officer and Controller
(Principal Accounting Officer)
February 27, 2019
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:
By:
/S/ CHRISTOPHER J. CONSTANT
Christopher J. Constant
President, Chief Executive Officer and Director
(Principal Executive Officer)
February 27, 2019
/S/ PHILIP E. COVIELLO
Philip E. Coviello
Director
February 27, 2019
/S/ Mary Lou Malanoski
Mary Lou Malanoski
Director
February 27, 2019
/S/ HOWARD SAFENOWITZ
Howard Safenowitz
Director
February 27, 2019
By:
By:
By:
/S/ MILTON COOPER
Milton Cooper
Director
February 27, 2019
/S/ LEO LIEBOWITZ
Leo Liebowitz
Director and Chairman of the Board
February 27, 2019
/S/ RICHARD E. MONTAG
Richard E. Montag
Director
February 27, 2019
96
AMENDMENT TO THE BYLAWS
OF
GETTY REALTY CORP.
Effective as of February 26, 2019
Exhibit 3.7
The following amendment is made to the Bylaws (the “Bylaws”) of Getty Realty Corp. (the “Corporation”)
pursuant to resolutions adopted by the Board of Directors of the Corporation on February 26, 2019:
1.
Article II, Section 2 of the Bylaws is hereby amended in its entirety to read as follows:
“Section 2. ANNUAL MEETING. An annual meeting of the stockholders for the election of directors
and the transaction of any business within the powers of the Corporation shall be held on such date and at
such time annually as shall be set by the Board of Directors.”
2.
Except as set forth herein, the Bylaws shall remain in full force and effect.
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-GPM-EZ Leasing, 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 February 27, 2019 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
February 27, 2019
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)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 27, 2019
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)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 27, 2019
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)
(ii)
the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2018 (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
the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: February 27, 2019
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)
(ii)
the Annual Report on Form 10-K of the Company for the annual period ended December 31, 2018 (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
the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: February 27, 2019
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.
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CO RPO R ATE DATA
Board of Directors
Christopher J. Constant
Chief Executive Officer and President of Getty Realty Corp.
Milton Cooper
Chairman of the Board of Directors of Kimco Realty Corporation
Philip E. Coviello
Retired Partner of Latham & Watkins LLP
Corporate Headquarters
Getty Realty Corp.
Two Jericho Plaza, Suite 110
Jericho, New York 11753-1681
(516) 478-5400
www.gettyrealty.com
About Our Stock
Our Common Stock is listed on the New York Stock Exchange under
the symbol GTY.
Leo Liebowitz
Chairman of the Board of Directors of Getty Realty Corp.
About Our Shareholders
Mary Lou Malanoski
Chief Financial Officer, Colony S2k Holdings
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
Joshua Dicker
Executive Vice President, General Counsel and Secretary
Danion Fielding
Vice President, Chief Financial Officer and Treasurer
Mark J. Olear
Executive Vice President and Chief Operating Officer
As of February 27, 2019, we had 40,866,854 outstanding shares of
common stock owned by approximately 10,895 shareholders.
Annual Meeting
All shareholders are cordially invited to attend our annual meeting on
April 30, 2019, at 3:30 p.m. at the offices of Arent Fox LLP located at
1301 Avenue of the Americas, 42nd Floor, New York, NY 10019.
Holders of common stock of record at the close of business on
March 6, 2019, 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 -1681
(516) 478 - 5400
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