2019 ANNUAL REPORT
D E AR S HAREH O LD ERS
2019 was another successful year for Getty as our team
continued to grow our portfolio with high-quality real estate,
driving increases in earnings and creating value for our
shareholders. Our existing portfolio delivers consistent results,
and our key priority remains expanding our company through
focused investments in targeted industries and metropolitan
markets.
Continued Execution of Core Business Strategy
We executed on all aspects of our growth strategy in 2019 as
we acquired 27 high-quality properties for $87.2 million through
a combination of portfolio and individual acquisitions. This
activity also reflects our extremely disciplined investment
approach, which carefully considers real estate attributes as
well as the operational and credit quality of our prospective
tenants. During the year, we reviewed approximately $1.3 billion
of actionable opportunities, with more than one-third of the
activity in other automotive categories. Included in our
acquisitions were two portfolio sale-leaseback transactions in
the Los Angeles, CA, and Las Vegas, NV metropolitan areas
where we acquired 10 properties, plus 17 individual property
transactions in highly sought-after core markets. As we continue
through 2020, we have a significant pipeline across the
convenience & gas and other automotive sectors, and we
expect to remain active while maintaining our underwriting
discipline.
Our redevelopment program also continues to make positive
strides as we completed four projects and signed a number of
new leases with national retail tenants in 2019. The completed
projects included two new-to-industry convenience & gas
locations leased to Sheetz and Big Y, both of whom are highly
successful convenience store operators in their respective
regions. The other two sites were ground leased to a local
developer for a variety of retail uses. We invested a total of
$1.1 million in these four projects and expect to generate an
incremental return on our investment of approximately 40%. In
terms of our redevelopment outlook, we maintain a solid pipeline,
ending the year with 12 signed leases. We also have a number
of additional sites which we expect to move into our
redevelopment pipeline this year and over the next several
years. We continue to believe that between five and ten percent
of our current portfolio can be redeveloped for either new
convenience & gas use or alternative retail uses. 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.
On the asset management front, we signed two leases for
individual convenience & gas locations, sold nine properties,
and exited five third-party leased sites during 2019. The net
result being that our portfolio of 945 properties continues to be
99% occupied. i
Driving Growth and Shareholder Returns
Due to the strong execution of our business initiatives, we
delivered a 5% increase in rental income, and increased net
earnings and adjusted funds from operations per share (AFFO)
in 2019. After taking into account additional borrowing costs
and newly issued shares from the Company’s 2019 capital
raising activities, we were able to grow our AFFO per share
to $1.72 for the year.
Our 2019 accomplishments resulted in our Board’s decision
to increase our dividend by 6% to an annualized rate of $1.48
per share – making 2019 the fifth consecutive year that the
Company has rewarded shareholders with a significant increase
in its recurring cash dividend rate. The dividend remains well-
covered and its increase stems from the stability of our current
portfolio along with our expectation of continued growth in
AFFO.
Maintaining Our Flexible & Conservative Balance Sheet
We prioritize maintaining a conservatively leveraged balance
sheet as we grow. To further this philosophy, we issued long-
term and permanent capital to fund our business activities
throughout 2019. Specifically, in the third quarter of 2019, we
issued $125 million of 10-year, 3.52% senior unsecured notes
to AIG, Mass Mutual and Prudential. As a result of this extremely
successful issuance, Getty ended 2019 with the smallest
percentage of floating rate debt in the Company’s history at
less than 5%.
In addition, we also partially financed our growth in 2019 through
the issuance of $14.2 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.
We expect to maintain a conservative leverage profile and
actively manage our capital structure to prudently grow over
the long-term.
Ongoing Health of Convenience & Gas and Other
Automotive Sectors
We continue to demonstrate that the value of owning attractive
real estate located in both stable and growing metropolitan
markets is a critical component to creating long-term shareholder
value. We believe our national portfolio located in 33 states is
largely irreplaceable in today’s marketplace as we have 57%
of our revenue coming from top 25 MSAs. In addition, our
service and consumer-oriented properties serve many aspects
of the retail marketplace which are basically insulated from the
growth of e-commerce. For the convenience store and gasoline
station industry, 2019 was another year of sales growth as
retail fuels benefited from stable volumes and input costs, and
convenience sales grew by 2.3% nationally. With that said, we
and our tenants are mindful of advances in technology, such
as the increase in sales of pure battery electric vehicles. While
the convenience store and gasoline station industry is evolving,
our tenants are placing additional emphasis on branding and
customer loyalty inside their stores in order to drive higher
margin sales and reduce their overall dependence on customer
visits derived solely from refueling. We believe that our portfolio
of well-located properties in major metropolitan markets will
remain resilient and thrive in the ever-changing consumer retail
landscape.
Commitment to Our Focused Growth Strategy
We remain focused on executing a highly targeted strategy to
deliver growth. First, we are expanding our portfolio through
disciplined acquisitions in the convenience & gas and other
automotive sectors. Second, we remain committed to our
redevelopment strategy and expect to complete a steady
number of projects on an annual basis with well-known,
nationally recognized retail tenants, which further
demonstrates the embedded value inherent in our existing
portfolio. Finally, we are committed to proactive asset
management, which includes benefiting from the stable
growth inherent in our core net lease portfolio, steady
performance of our tenants, and asset recycling.
I am particularly excited about two initiatives that we expect
will materially benefit Getty in 2020 and beyond. The first
initiative involves realigning our team and adding staff to
focus on external growth and overseeing our growing
portfolio. The second initiative, which is broadening our
investment criteria to include acquisitions of properties in
“other automotive” sectors including car washes and
automotive parts & service, is currently adding significant
volume to our transaction pipeline. These categories are an
ideal complement to our portfolio, allowing us to expand our
investment prospects, while drawing on much of the
underwriting expertise we have built throughout Getty’s
history. The properties suited to these businesses are in
almost all cases of similar size and location to our existing
portfolio. In addition, many of these service-oriented sub-
sectors within the other automotive category remain highly
internet-resistant, and are growing and consolidating, which
creates transaction opportunities for the Company. We are
excited that in the second half of 2019, we were able to close
on a number of property acquisitions in these sectors.
Looking ahead, we believe we can make meaningful inroads
into the other automotive sectors and create a recurring set of
opportunities which is similar in size to what we typically
underwrite annually in the convenience & gas sector.
Thank You!
I am very proud of Getty’s 2019 accomplishments and as I look
ahead to 2020, I am optimistic. I believe we have the right
growth strategy and a first-rate team in place to execute on it
and create value for our shareholders for years to come. I 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
25,000
20,000
15,000
10,000
5,000
20,000
15,000
10,000
5,000
0
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
Dividends Declared Growth (a)
2017
907
2018
933
2019
945
2015 Quarterly Performance (a)
120,153
136,106
140,655
Dividends Declared Growth (a)
2015 Quarterly Performance (a)
AFFO (Per Share in parentheses)
18,546
(0.54)
11,038
(0.33)
12,796
(0.38)
Net Income
(Per Share)
Regular Special
1.15
0.96
22,825
(0.68)
Funds From Operations
(Per Share)
0.85
Adjusted Funds From Operations
(Per Share)
25,000
20,000
15,000
10,000
5,000
Q1
Q2
Q3
Q4
Dividends Per Share
2013
2014
2015
1.16
Q2
Q1
1.31
Q3
47,186
AFFO (Per Share in parentheses)
47,706
49,723
1.26
1.17
1.19
74,555
73,564
2.00
18,546
(0.54)
1.80
62,032
11,038
(0.33)
1.66
69,669
12,796
(0.38)
1.71
77,833
22,825
(0.68)
1.86
71,816
1.72
1.42
Q4
Regular Special
1.15
0.96
0.85
2013
2014
2015
AFFO (Per Share)
Revenue
AFFO (Per Share)
Revenue
17,520
(0.42)
18,145
(0.43)
18,148
(0.43)
18,004
(0.43)
30,000
34,049
34,288
36,428
35,890
40,000
Q1
Q2
Q3
Q4
20,000
10,000
0
Q1
Q2
Q3
Q4
20,000
15,000
10,000
5,000
0
17,520
(0.42)
18,145
(0.43)
18,148
(0.43)
18,004
(0.43)
30,000
34,049
34,288
36,428
35,890
40,000
Q1
Q2
Q3
Q4
20,000
10,000
0
Q1
Q2
Q3
Q4
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.
2019 Quarterly Performance (a) 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, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13777
GETTY REALTY CORP.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
11-3412575
(I.R.S. employer
identification no.)
Two Jericho Plaza, Suite 110
Jericho, New York 11753-1681
(Address of principal executive offices) (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
Trading Symbol(s)
GTY
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes No
Indicate by check mark 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
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.
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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The aggregate market value of common stock held by non-affiliates (33,222,707 shares of common stock) of the Company was $1,021,930,000 as of June 30, 2019.
Accelerated filer
Emerging growth company
Smaller reporting company
☐
☐
The registrant had outstanding 41,380,165 shares of common stock as of February 27, 2020.
DOCUMENT
Selected Portions of Definitive Proxy Statement for the 2020 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, 2019, pursuant to Regulation 14A.
III
DOCUMENTS INCORPORATED BY REFERENCE
Item Description
Cautionary Note Regarding Forward-Looking Statements
TABLE OF CONTENTS
1
Business
1A Risk Factors
1B Unresolved Staff Comments
2
3
4
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
5
6
7
7A Quantitative and Qualitative Disclosures About Market Risk
8
9
9A Controls and Procedures
9B Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
10 Directors, Executive Officers and Corporate Governance
11
12
13
14
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 III
PART IV
15
16
Exhibits and Financial Statement Schedules
Form 10-K Summary
Exhibit Index
Signatures
Page
3
5
8
19
19
21
25
26
28
29
41
42
73
73
73
74
74
74
74
75
76
76
96
100
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
statements regarding our network of convenience store and gasoline station properties; substantial compliance of our properties with
federal, state and local provisions enacted or adopted pertaining to environmental matters; the 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 and our senior unsecured notes; 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
3
discouraging a third-party takeover; changes in LIBOR reporting practices or the method in which LIBOR is calculated or changes to
alternative rates if LIBOR is discontinued; the loss of a member or members of our management team or Board of Directors; changes
in accounting standards; future impairment charges; terrorist attacks and other acts of violence and war; our information systems; and
failure to maintain effective internal controls over financial reporting.
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 945 properties are
located in 33 states across the United States and Washington, D.C. Our tenants operate our properties under a variety of national and
regional convenience store, motor fuel, automotive service and other retail brands.
We are internally 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, 2020,
we had 31 employees.
Company Operations
As of December 31, 2019, we owned 877 properties and leased 68 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, automotive service and other retail 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 services or
other retail 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 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
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 lease 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, 2019, we leased 931 of our properties to tenants under triple-net leases.
Our net lease properties include 813 properties leased under 28 separate unitary or master triple-net leases and 118 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, 2019, 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,
2019, 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, 2019, we have a remaining commitment to fund
up to $7.1 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, 2019, we were actively redeveloping five 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, 2019, 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, 2019, we acquired fee simple interests in 27 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $87.2 million. 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. 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 255 properties, located in various states, for an aggregate purchase price of $606.0
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, 2019 and 2018, rent commenced on four and six completed redevelopment projects,
respectively, that were placed back into service in our net lease portfolio. Since the inception of our redevelopment program in 2015,
we have completed 13 redevelopment projects.
For the year ended December 31, 2019, we spent $0.4 million (net of write-offs) of construction-in-progress costs related to our
redevelopment activities. During the year ended December 31, 2019, we transferred $0.5 million of construction-in-progress to
buildings and improvements on our consolidated balance sheet.
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, 2019, we were actively redeveloping five of our properties either as a new convenience and gasoline use or
for alternative single-tenant net lease retail uses. In addition to the five 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,
2019, 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.
Major Tenants
As of December 31, 2019, we had three significant tenants by revenue:
• We leased 153 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 18% and 17% of our total revenues for the years ended December 31, 2019 and 2018, respectively.
All of our unitary leases with subsidiaries of Global are guaranteed by the parent company.
• We leased 77 convenience store and gasoline station properties pursuant to three separate unitary leases to Apro, LLC
(d/b/a “United Oil”). In the aggregate, our leases with United Oil represented 13% of our total revenues for each of the
years ended December 31, 2019 and 2018.
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• We leased 75 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% of our total revenues for each of the years ended December 31, 2019 and 2018. 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”.
The History of Our Company
Our founders started the business in 1955 with the ownership of one gasoline service station in New York City and combined
real estate ownership, leasing and management with service station operation and petroleum distribution. We held our initial public
offering in 1971 under the name Power Test Corp. In 1985, we acquired from Texaco the petroleum distribution and marketing assets
of Getty Oil Company in the Northeast United States along with the Getty® name and trademark in connection with our real estate
and the petroleum marketing business in the United States.
We elected to be treated as a REIT under the federal income tax laws beginning January 1, 2001. 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 if certain REIT qualifications are met. To meet the applicable
requirements of the Internal Revenue Code, a REIT must, among other things, invest substantially all of its assets in interests in real
estate (including mortgages and other REITs) or cash and government securities, derive most of its income from rents from real
property or interest on loans secured by mortgages on real property, and distribute to 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.
Getty Petroleum Marketing, Inc. (“Marketing”), an indirect wholly owned subsidiary of OAO Lukoil from December 2000 until
March 2011, was our largest tenant until 2012 under a unitary triple-net master lease. The master lease with Marketing was terminated
effective April 30, 2012, pursuant to Marketing’s 2011 bankruptcy, which included the liquidation of Marketing and the distribution
of its assets to creditors. As of December 31, 2019, 365 of the properties we own or lease were previously leased to Marketing.
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
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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.
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 and, from time to time, may have significant liability accruals as a result of environmental
laws and regulations, which costs and accruals could significantly increase, and reduce our profitability or have a material adverse
effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price.
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. 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. Additionally, 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.
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
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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.
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 does not satisfy them, and we are required to accrue for environmental liabilities that we
believe are allocable to others under our leases if we determine that it is probable that our tenant will not meet its environmental
obligations. 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 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. We may ultimately be responsible to pay for environmental liabilities as the
property owner if our tenant fails to pay them. 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 preexisting contamination. We have also agreed to be responsible for environmental contamination that existed
prior to the sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation)
during the first five years after the sale of the properties.
In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained
continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and
continues to be discovered. As a result, we have developed an 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, 2019, we had accrued a total of $50.7 million for our prospective
environmental remediation obligations. This accrual consisted of (a) $12.4 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) $38.3 million for future environmental liabilities related to preexisting unknown contamination.
9
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.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon
initial assessment 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, 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 allocation of
responsibilities to others, 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, 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
derived upon facts known to us at this time, which are subject to significant change as circumstances change, and as environmental
contingencies become more clearly defined and reasonably estimable.
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. As a result, our estimates in respect of recoveries from state UST remediation funds could change, which could
adversely affect our accruals for environmental remediation liabilities.
Any changes to our estimates or our assumptions that form the basis of our estimates may result in our providing an accrual, or
adjustments to the amounts recorded, for environmental remediation liabilities. 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.
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
10
generally will not be adversely affected, which in turn could negatively impact our rental revenues. We are subject to risks that the
terms governing renewal or re-leasing of our properties (including, compliance with numerous federal, state and local laws and
regulations related to the protection of the environment, such as the remediation of contamination and the retirement and
decommissioning or removal of long-lived assets, the cost of required renovations, or replacement of USTs and related equipment)
may be less favorable than current lease terms.
We are also subject to the risk that we may receive less net proceeds from the properties we sell as compared to their current
carrying value or that the value of our properties may be adversely affected by unfavorable general economic conditions. Unfavorable
general economic conditions may also negatively impact our ability to re-lease or sell our properties. Numerous properties compete
with our properties in attracting tenants to lease space. The number of available or competitive properties in a particular area could
have a material adverse effect on our ability to lease or sell our properties and on the rents we are able to charge. In addition to the risk
of disruption in rent receipts, we are subject to the risk of incurring real estate taxes, maintenance, environmental and other expenses
at vacant properties. The financial distress, default or bankruptcy of our tenants may also lead to protracted and expensive processes
for retaking control of our properties than would otherwise be the case, including, eviction or other legal proceedings related to or
resulting from the tenant’s default. These risks are greater with respect to certain of our tenants who lease multiple properties from us.
If a tenant files for bankruptcy protection it is possible that we would recover substantially less than the full value of our claims
against the tenant. If (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., 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 $300.0 million
unsecured revolving facility (the “Revolving Facility”), which is scheduled to mature in March 2022. 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 to $600.0 million in the aggregate. We have also issued $450.0 million of senior unsecured
notes. 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 and our senior unsecured notes 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 and our senior unsecured notes also contain customary events of
default, including cross defaults to each other, change of control and failure to maintain REIT status (provided that the senior
unsecured notes require a mandatory offer to prepay the notes upon a change in control in lieu of a change of control event of default).
Our ability to meet the terms of the agreements is dependent upon our continued ability to meet certain criteria, as further described in
Note 4 in “Item 8. Financial Statements and Supplementary Data” in this Form 10-K, the performance of our tenants and the other
risks described in this section. If we are not in compliance with one or more of our covenants, which could result in an event of default
under our Restated Credit Agreement or our senior unsecured notes, 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
11
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 and our senior unsecured notes, 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 lenders that are the counterparties to our
senior unsecured notes 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, 2019, we leased 153 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 18% and 17% of
our total revenues for the years ended December 31, 2019 and 2018, respectively. All of our unitary leases with subsidiaries of Global
are guaranteed by the parent company. As of December 31, 2019, 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% of our total revenues for each
of the years ended December 31, 2019 and 2018. As of December 31, 2019, we leased 75 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% of our total revenues for each of the years ended December 31, 2019 and 2018. The largest of these unitary leases,
covering 57 of our properties, is guaranteed by the parent company, its principals and numerous Chestnut affiliates.
We may also undertake additional transactions with these or other existing tenants, which would further concentrate our sources
of rental revenues. Many of our tenants, including those noted above, are part of larger corporate organizations and the financial
distress of one subsidiary or other affiliated companies or businesses in those organizations may negatively impact the ability or
willingness of our tenant to perform its obligations under its lease with us. The failure of a major tenant or their default in their rental
and other obligations to us is likely to have a material adverse effect on our business, financial condition, results of operations,
liquidity, ability to pay dividends or stock price.
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.
12
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 expect to 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, for 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
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 or our senior unsecured notes, 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.
13
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.
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.
Recent federal tax legislation (the “2017 Legislation”) included 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 Legislation changed 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 Legislation do not 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 Legislation and any other regulatory or administrative developments and
proposals and the potential effects thereof on an investment in our common stock.
14
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, 2019, 45.9% 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.
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.
15
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 2019, 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 and senior
unsecured notes 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 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 our senior unsecured notes 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
16
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.
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 is discontinued, pursuant to the Second Amendment to
the Restated Credit Agreement, our interest rate for our borrowings under the Restated Credit Agreement will be based on SOFR or an
alternative rate otherwise agreed upon. Such an event would not affect our ability to borrow or maintain already outstanding
borrowings, but the alternative rate could be higher and more volatile than LIBOR prior to its discontinuance. Accordingly, the
potential effects of the foregoing on our cost of capital cannot yet be determined.
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 31 employees and have a cost-effective management structure. We do not have any employment
agreements with any of our executives. In the event of the loss of key management personnel or directors, or upon unexpected death,
disability or retirement, we may not be able to find replacements with comparable skill, ability and industry expertise, which could
have a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock
17
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, 2019 and 2018, we incurred $4.0 million and $6.2 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 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
18
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.
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, automotive services and other retail 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 independently obtain and maintain a program of insurance which we believe adequately covers our owned and leased
properties for casualty and liability risks. Our insurance program is underwritten in view of primary insurance coverages in amounts
and on other terms satisfactory to us, which we require to be provided by most of our tenants for properties they lease from us,
including in respect to casualty, liability, pollution legal liability, fire and extended coverage risks.
19
The following table summarizes the geographic distribution of our properties as of December 31, 2019. 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
California
Washington State
Arizona
Colorado
Pennsylvania
Oregon
Arkansas
Hawaii
North Carolina
Maine
Nevada
Ohio
Florida
Georgia
New Mexico
Rhode Island
Louisiana
Oklahoma
Illinois
Kentucky
Washington, D.C.
Alabama
Delaware
Minnesota
North Dakota
Total
205
100
69
46
49
46
45
45
40
35
31
23
23
22
13
11
10
8
7
6
6
5
5
5
5
4
4
2
2
2
1
—
1
1
877
42
9
8
5
—
1
—
—
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
—
—
68
247
109
77
51
49
47
45
45
42
35
31
23
23
22
13
11
10
8
7
6
6
5
5
5
5
4
4
2
2
2
1
1
1
1
945
26.2%
11.5
8.2
5.4
5.2
5.0
4.8
4.8
4.5
3.7
3.3
2.4
2.4
2.3
1.4
1.2
1.1
0.9
0.7
0.6
0.6
0.5
0.5
0.5
0.5
0.4
0.4
0.2
0.2
0.2
0.1
0.1
0.1
0.1
100%
20
The properties that we lease from third-parties have a remaining lease term, including renewal and extension option terms,
averaging approximately eight 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
2020
2021
2022
2023
2024
Subtotal
Thereafter
Total
Number of
Leases
Expiring
Percent of
Total Leased
Properties
Percent
of Total
Properties
9
8
5
2
4
28
40
68
13.2%
11.8
7.4
2.9
5.9
41.2
58.8
100%
1.0%
0.9
0.5
0.2
0.4
3.0
4.2
7.2%
Revenues from rental properties for the year ended December 31, 2019, were $137.7 million with respect to 937 average rental
properties held during the year for an average revenue per rental property of approximately $147,000. 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.
Rental property lease expirations and annualized contractual rent as of December 31, 2019, are as follows (in thousands, except
for number of properties):
CALENDAR YEAR
Redevelopment
Vacant
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Total
Number of
Rental
Properties (a)
Annualized
Contractual
Rent (b)
5 $
9
28
25
36
26
26
39
77
248
44
75
307
945 $
—
—
2,300
2,503
3,149
3,549
3,642
6,356
12,889
19,089
7,254
10,961
52,526
124,218
Percentage
of Total
Annualized Rent
—
—
1.9%
2.0
2.5
2.9
2.9
5.1
10.4
15.4
5.8
8.8
42.3
100.0%
(a) With respect to a unitary master lease that includes properties that we lease from third-parties, the expiration dates refer to the
dates that the leases with the third-parties expire and upon which date our tenant must vacate those properties, not the expiration
date of the unitary master lease itself.
(b) Represents the monthly contractual rent due from tenants under existing leases as of December 31, 2019, 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,
2019 and 2018, we had accrued $17.8 million and $12.2 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, 2019, 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.
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 the 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 NJDEP published the terms of the settlement in the New Jersey Register for
public comment and executed the Settlement Agreement on January 29, 2020, after addressing any public comments received. The
NJDEP submitted a Stipulation of Dismissal to the Office of Administrative Law, which terminated the matter with prejudice and
without costs. No civil penalties, fines or other payments to the NJDEP are required to be made by us in connection with the
disposition of this matter.
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 possible loss or range of loss in excess of the amount accrued for the New Jersey
MDL Proceedings as we do not believe that plaintiffs’ settlement proposal is realistic and there remains uncertainty as to the
allegations in this case as they relate to us, our defenses to the claims, our rights to indemnification or contribution from other parties
and the aggregate possible amount of damages for which we may be held liable. It is possible that losses related to the New Jersey
MDL Proceedings could exceed the amounts accrued as of December 31, 2019, which 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
22
of MTBE or gasoline containing MTBE who are alleged to have distributed, stored and sold MTBE gasoline in Pennsylvania. The
complaint seeks compensation for natural resource damages and for injuries sustained as a result of “defendants’ unfair and deceptive
trade practices and act in the marketing of MTBE and gasoline containing MTBE.” The plaintiffs also seek to recover costs paid or
incurred by the State to detect, treat and remediate MTBE from public and private water wells and groundwater. The plaintiffs assert
causes of action against all defendants based on multiple theories, including strict liability – defective design; strict liability – failure
to warn; public nuisance; negligence; trespass; and violation of consumer protection law.
The case was filed in the Court of Common Pleas, Philadelphia County, but was removed by defendants to the United States
District Court for the Eastern District of Pennsylvania and then transferred to the United States District Court for the Southern District
of New York so that it may be managed as part of the ongoing MTBE MDL 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.
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 (“PRPs”) 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 we sold in October 2013). We responded to the Directive by asserting that we are not liable. In 2005, the
NJDEP initiated litigation in the Superior Court of Essex County against Occidental Chemical Corporation (“Occidental”), Tierra
Solutions, Inc. (“Tierra”), Maxus Energy Corporation (“Maxus”), Repsol YPF, S.A., YPF, S.A., YPF Holdings, Inc. and CLH
Holdings, Inc. as former owners, operators and/or affiliates of the Diamond Shamrock Corporation facility located at 80 Lister Avenue
in Newark, New Jersey in the matter of the NJDEP et al. v. Occidental Chemical Corp. et al., alleging these entities are responsible for
the discharge of 2,3,8,8-TCDD (“dioxin”) and other hazardous substances from the Lister facility. The Defendants asserted third-party
claims against over 300 third-party defendants, including us, seeking contribution or cost recovery for the claims asserted by the
NJDEP. On December 12, 2013, the NJDEP entered into a Consent Judgment resolving the NJDEP’s claims against all third-party
defendants, and releasing third-party defendants for any obligation to comply with the terms of the Directive and for future natural
resource damage claims that may be brought by the State of New Jersey to the extent such claims do not exceed 20% of the aggregate
23
funds paid by the third-party defendants in settlement of the state court litigation. Subject to this reservation of rights by the NJDEP,
the demands made by the NJDEP pursuant to the Directive, as they apply to us, are resolved.
In 2004, the United States Environmental Protection Agency (“EPA”) issued General Notice Letters (“GNL”) to over 100
entities, including us, alleging that they are PRPs at the Diamond Alkali Superfund Site, which includes a 17-mile stretch of the Lower
Passaic River. In May 2007, over 70 GNL recipients, including us, entered into an Administrative Settlement Agreement and Order on
Consent (“AOC”) with the EPA to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for the 17-mile stretch of the
Lower Passaic River, which 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 interim 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, which sets forth various
alternatives for remediating the 17-mile stretch of the Lower Passaic River. In October 2018, the EPA issued a letter directing the
CPG to prepare a streamlined feasibility study for the upper 9-miles of the Lower Passaic River based on an iterative approach using
adaptive management strategies. On August 12, 2019, the CPG submitted a draft Interim Remedy Feasibility Study to the EPA which
identifies various targeted dredge and cap alternatives, which the EPA is still evaluating.
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”) with the EPA 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 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 PRPs 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 (who the EPA considers
the primary contributor of dioxin and other pesticides in the Lower Passaic River generated from the production of Agent Orange at its
Diamond Alkali Company plant and a discharger of other contaminants of concern (“COCs”) to the Lower Passaic River), for
remedial design of the remedy selected in the ROD, after which the EPA plans to begin negotiations with “major” PRPs for
implementation and/or payment of the selected remedy. The Notice also stated that the EPA believes that some of the PRPs and other
parties not yet identified will be eligible for a cash out settlement with the EPA. On September 30, 2016, Occidental entered into an
agreement with the EPA to perform the remedial design for the remedy selected for the lower 8-miles of the Lower Passaic River. In
December 2019, Occidental submitted a report to the EPA on the progress of the remedial design work, which is still ongoing.
Occidental has asserted that it is entitled to indemnification by Maxus and Tierra for its liability in connection with the Diamond
Alkali Superfund Site. Occidental has also asserted that Maxus and Tierra’s parent company, YPF, S.A. (“YPF”) and certain of its
affiliates must indemnify Occidental. On June 16, 2016, Maxus and Tierra filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. In the Chapter 11 proceedings, YPF 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 in the Maxus/Tierra bankruptcy proceedings
for costs incurred by the CPG relating to the Lower Passaic River. In July 2017, an amended Chapter 11 plan of liquidation became
effective and, in connection therewith, Maxus/Tierra and certain other parties, including us, entered into a mutual contribution release
agreement pertaining to certain past costs, but not future remedy costs.
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 PRPs to resolve their alleged liability for the lower 8-mile remedial action that is the subject of the ROD, who the EPA stated
did not discharge any of the eight hazardous substances identified as a COC in the ROD. The letter also stated that other parties who
did not discharge dioxins, furans or polychlorinated biphenyls (which are considered the COCs posing the greatest risk to the river)
may also be eligible for cash out settlements, and that the EPA would begin a process for identifying other PRPs for negotiation of
similar cash out settlements. 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. In August 2017,
the EPA appointed an independent third party allocation expert to conduct allocation proceedings with most of the remaining
recipients of the Notice, which is anticipated to lead to additional offers of cash out settlements to certain additional parties and/or 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
allocation proceedings, which we are participating in, were scheduled to conclude by mid-2019, but have been extended and are still
ongoing.
24
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 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 whom were also named in the NJDEP’s 2003 Directive and the
EPA’s 2016 Notice. Factual discovery is ongoing, and we are defending 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,
10.9 AOC and Notice do not obligate us to fund or perform any 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.
Based on currently known facts and circumstances, we do not believe that this matter is reasonably likely to have a material
impact on our results of operations, including, among other factors, because we do not believe that there was any use or discharge of
dioxins, furans or polychlorinated biphenyls in connection with our former petroleum storage operations at our former Newark, New
Jersey Terminal, and because there are numerous other parties who will likely bear any costs of remediation and/or damages.
However, our ultimate liability, if any, in the pending and possible future proceedings pertaining to the Lower Passaic River, and/or
one or more adverse determinations related to this matter, are uncertain and subject to numerous contingencies which cannot be
predicted and the outcome of which are not yet known. Therefore, it is possible that the ultimate liability resulting from this matter and
the impact on our results of operations could be material.
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, Sharon Irni, 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 possible loss or range of loss
in excess of the amount we have accrued for this lawsuit. It is possible that losses related to this case could exceed the amounts
accrued, as of December 31, 2019, which could cause a material adverse effect on our business, financial condition, results of
operations, liquidity, ability to pay dividends or stock price.
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 a motion by
Lukoil Americas Corporation to dismiss our statutory environmental claims but granted a motion to dismiss our breach of contract
claim. In the fall of 2018, we appealed the dismissal of our breach of contract claim, and the defendants cross-appealed the denial of
their motion to dismiss our statutory claims. Further trial court litigation was stayed pending completion of a court-ordered mediation,
which began in 2018 and which is presently inactive. On March 19, 2019, the appellate court granted our appeal and rejected the
defendants’ cross-appeal, thereby reinstating our breach of contract claim and confirming that our statutory environmental claims may
move forward. The case is currently in the early stages of discovery, and it is not yet possible to predict or estimate the potential
recovery, if any, 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 14,824 beneficial
holders of our common stock as of February 5, 2020, of which approximately 895 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
12/31/2014 12/31/2015 12/31/2016 12/31/2017 12/31/2018 12/31/2019
231.65
173.86
191.97
174.56
138.29
135.65
100.69
101.38
107.72
100.00
100.00
100.00
156.76
113.51
130.97
198.30
132.23
153.43
Assumes $100 invested at the close of the last day of trading on the New York Stock Exchange on December 31, 2014, 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)
2019
For the Years ended December 31,
2017 (b)
2016
2018 (a)
2015 (c)
OPERATING DATA:
Total revenues
Net earnings
Basic and diluted per share amounts:
Net earnings
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Dividends declared per share (d)
$
$
140,655 $
49,723 $
136,106 $
47,706 $
120,153 $
47,186 $
115,271 $
38,411 $
110,776
37,410
1.19
41,072
41,110
1.42
1.17
40,171
40,191
1.31
1.26
36,897
36,897
1.16
1.12
33,806
33,806
1.03
1.11
33,420
33,420
1.15
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) 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
$
$
49,723 $
25,161
(1,063)
4,012
77,833
(960)
—
(5,386)
2,006
5,896
(4,866)
(2,707)
—
71,816 $
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
970,964 $
$ 1,113,651 $ 1,043,106 $
1,211,777 1,161,948 1,072,754
379,158
553,695 $
444,409
581,164 $
469,065
589,439 $
$
782,166 $
877,306
298,544
430,918 $
783,233
896,918
317,093
406,561
877
68
945
859
74
933
828
79
907
740
89
829
753
98
851
(a)
Includes (from the date of 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.
(b) Includes (from the date of 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.
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.
(c)
(d) Includes a special dividend of $0.22 per share for the year ended December 31, 2015.
(e) During the fourth quarter of 2017, we revised our definition of AFFO. AFFO for the years ended December 31, 2017, 2016 and
2015, have been restated to conform to our revised definition. For additional information, see “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations – General – Supplemental Non-GAAP Measures”.
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the “Cautionary Note Regarding Forward-Looking
Statements”; the sections in Part I entitled “Item 1A. Risk Factors”; the selected financial data in Part II entitled “Item 6. Selected
Financial Data”; and the consolidated financial statements and related notes in “Item 8. Financial Statements and Supplementary
Data”.
This section of this Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018.
Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found
in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
General
Real Estate Investment Trust
We are a REIT specializing in the ownership, leasing and financing of convenience store and gasoline station properties. As of
December 31, 2019, we owned 877 properties and leased 68 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, automotive service and other retail 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 service or
other retail 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.
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 lease 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, 2019, we leased 931 of our properties to tenants under triple-net leases.
Our net lease properties include 813 properties leased under 28 separate unitary or master triple-net leases and 118 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, 2019, we were actively redeveloping five 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, 2019, 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
29
strong primary markets that serve high density population centers. A key element of our investment strategy is to invest in properties
that will promote geographic and tenant diversity in our property portfolio.
During the year ended December 31, 2019, we acquired fee simple interests in 27 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $87.2 million. Included in these acquisitions was our June 17,
2019, acquisition of fee simple interests in six convenience store and gasoline station properties from 1234 M Division Street Inc.
(“1234 M”). These properties were simultaneously leased to 1234 M under a long-term triple-net unitary lease. The properties are
located in the metro Los Angeles, CA area. The total purchase price for the transaction was $24.7 million, which was funded with
funds available under our Revolving Facility. Also included was our November 22, 2019, acquisition of fee simple interests in four car
wash properties from Go Car Wash Propco Inc. These properties were simultaneously leased to QNC OpCo Inc (“QNC”) under a
long-term triple-net unitary lease. The properties are located in Las Vegas, NV. The total purchase price for the transaction was $14.1
million, which was funded with funds available under our Revolving Facility. In addition to the 1234 M and QNC transactions, in
2019, we acquired fee simple interests in 17 convenience store and gasoline station, and other automotive related properties in various
transactions for an aggregate purchase price of $48.3 million.
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-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. Also
included was our August 1, 2018, acquisition of 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.
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, 2019 and 2018, rent commenced on four and six completed redevelopment projects,
respectively, that were placed back into service in our net lease portfolio. Since the inception of our redevelopment program in 2015,
we have completed 13 redevelopment projects.
For the year ended December 31, 2019, we spent $0.4 million (net of write-offs) of construction-in-progress costs related to our
redevelopment activities. During the year ended December 31, 2019, we transferred $0.5 million of construction-in-progress to
buildings and improvements on our consolidated balance sheet.
For the year ended December 31, 2018, we spent $2.7 million (net of write-offs) 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, 2019, we were actively redeveloping five of our properties either as a new convenience and gasoline use or
for alternative single-tenant net lease retail uses. In addition to the five 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,
2019, 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 impairment charges aggregating $4.0 million and $6.2
million for the years ended December 31, 2019 and 2018, 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
30
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 and estimates of anticipated cash flows used to conduct our impairment
analysis are highly subjective and actual results could vary significantly from our estimates. For a discussion of the risks associated
with asset impairments, see “Item 1A. Risk Factors – Our assets may be subject to impairment charges.”
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.
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”.
31
Results of Operations
Year ended December 31, 2019, compared to year ended December 31, 2018
Revenues from rental properties increased by $4.7 million to $137.7 million for the year ended December 31, 2019, as
compared to $133.0 million for the year ended December 31, 2018. The increase in revenues from rental properties was primarily due
to $4.7 million of revenue from the properties acquired in 2019 and the second half of 2018. Rental income contractually due from our
tenants included in revenues from rental properties was $119.3 million for the year ended December 31, 2019, as compared to $114.1
million for the year ended December 31, 2018. Tenant reimbursements, which are included in revenues from rental properties, and
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 $17.5 million and $16.7 million for the years ended December 31, 2019 and 2018, respectively.
Interest income on notes and mortgages receivable was $2.9 million for the year ended December 31, 2019, as compared to $3.1
million for the year ended December 31, 2018.
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 $1.0 million and $2.2 million for the years ended December 31, 2019 and 2018,
respectively.
Property costs, which are primarily comprised of rent expense, real estate and other state and local taxes, municipal charges,
professional fees, maintenance expense and reimbursable tenant expenses, were $25.0 million for the year ended December 31, 2019,
as compared to $23.6 million for the year ended December 31, 2018. The increase in property costs for the year ended December 31,
2019, was principally due to an increase in reimbursable real estate taxes and an increase in professional fees related to property
redevelopments.
Impairment charges were $4.0 million for the year ended December 31, 2019, as compared to $6.2 million for the year ended
December 31, 2018. Impairment charges are recorded when the carrying value of a property is reduced to fair value. Impairment
charges for the years ended December 31, 2019 and 2018, 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 were $5.4 million for the year ended December 31, 2019, as compared to $4.2 million for the year
ended December 31, 2018. The increase in environmental expenses for the year ended December 31, 2019, was principally due to a
$5.8 million increase in environmental litigation accruals, offset by a $4.5 million decrease in net environmental remediation costs and
estimates, and a $0.2 million decrease in environmental legal and professional fees. Environmental expenses vary from period to
period and, accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental
expenses for one period, as compared to prior periods.
General and administrative expense was $15.2 million for the year ended December 31, 2019, as compared to $14.7 million for
the year ended December 31, 2018. The increase in general and administrative expense for the year ended December 31, 2019, was
principally due to a $0.7 million increase in stock-based compensation, a $0.2 million increase in employee related expenses, $0.3
million of non-recurring employee related expenses attributable to retirement costs, partially offset by a $0.6 million decrease in legal
and other professional fees.
Depreciation and amortization expense was $25.2 million for the year ended December 31, 2019, as compared to $23.6 million
for the year ended December 31, 2018. 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 $1.1 million for the year ended December 31, 2019, as compared to $3.9 million for the
year ended December 31, 2018. The gains were the result of the sale of nine properties during each of the years ended December 31,
2019 and 2018.
Other income was $7.6 million for the year ended December 31, 2019, as compared to $2.7 million for the year ended
December 31, 2018. For the year ended December 31, 2019, other income was primarily attributable to $4.9 million received from
environmental insurance reimbursements and $2.7 million received from legal settlements and judgments. Other income for the year
ended December 31, 2018, was primarily attributable to $2.6 million received from environmental insurance reimbursements.
32
Interest expense was $24.6 million for the year ended December 31, 2019, as compared to $22.3 million for the year ended
December 31, 2018. The increase was due to higher average borrowings outstanding for the year ended December 31, 2019, as
compared to the year ended December 31, 2018.
For the year ended December 31, 2019, FFO was $77.8 million, as compared to $73.6 million for the year ended December 31,
2018. For the year ended December 31, 2019, AFFO was $71.8 million, as compared to $69.7 million for the year ended
December 31, 2018. FFO for the year ended December 31, 2019, was impacted by changes in net earnings, but excludes a $2.2 million
decrease in impairment charges, a $1.6 million increase in depreciation and amortization expense and a $2.8 million decrease in gains
on dispositions of real estate. The increase in AFFO for the year ended December 31, 2019, also excludes a $2.6 million increase in
legal settlements and judgments, a $4.5 million decrease in environmental estimates and accretion expense, a $2.3 million increase in
insurance reimbursements, a $5.9 million increase in environmental litigation accruals, and a $1.2 million decrease in Revenue
Recognition Adjustments.
Basic and diluted earnings per share was $1.19 per share for the year ended December 31, 2019, as compared to $1.17 per share
for the year ended December 31, 2018. Basic and diluted FFO per share for the year ended December 31, 2019, was $1.86 per share as
compared to $1.81 and $1.80 per share, respectively, for the year ended December 31, 2018. Basic and diluted AFFO per share for the
year ended December 31, 2019, was $1.72 per share, as compared to $1.71 per share for the year ended December 31, 2018.
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 Revolving Facility, proceeds from the sale of shares of our common stock under our ATM
Program and available cash and cash equivalents.
Our cash flow activities for the years ended December 31, 2019, 2018 and 2017, are summarized as follows (in thousands):
Net cash flow provided by operating activities
Net cash flow (used in) investing activities
Net cash flow (used in) provided by financing activities
Operating Activities
2019
Year ended December 31,
2018
76,774 $
(82,553)
(19,299) $
66,361 $
(78,946)
40,514 $
$
$
2017
59,253
(208,728)
157,094
Net cash flow from operating activities increased by $10.4 million for the year ended December 31, 2019, to $76.8 million, as
compared to $66.4 million for the year ended December 31, 2018. 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, 2019,
2018 and 2017, is primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above and the
other changes in assets and liabilities on our consolidated statements of cash flows.
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 increased by $3.7 million for the year ended December 31, 2019,
to a use of $82.6 million, as compared to a use of $78.9 million for the year ended December 31, 2018. The increase in net cash flow
from investing activities for the year ended December 31, 2019, was primarily due to an increase of $9.2 million of property
acquisitions and a $1.7 million decrease in proceeds from dispositions of real estate, partially offset by a decrease in capital
expenditures of $3.8 million, a decrease in additions to construction in progress of $2.3 million and an increase of $1.3 million in
collection of notes and mortgages receivable.
Financing Activities
Net cash flow used in financing activities decreased by $59.8 million for the year ended December 31, 2019, to a use of $19.3
million, as compared to net cash flow of $40.5 million for the year ended December 31, 2018. The decrease in net cash flow from
financing activities for the year ended December 31, 2019, was primarily due to a decrease in net proceeds from issuances of common
stock of $15.9 million, an increase in dividends paid of $6.4 million, offset by a decrease in net borrowings of $40.0 million and a $2.8
million decrease in debt issuance costs.
33
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 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, 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 “First Amendment”) of our Restated Credit Agreement. The First
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 First Amendment) plus the Applicable Rate
(as defined in the First Amendment) for such facility.
On September 12, 2019, in connection with prepayment of the Term Loan, we entered into a consent and amendment (the
“Second Amendment”) of our Restated Credit Agreement. The Second Amendment modifies the Restated Credit Agreement to,
among other things, (a) increase our borrowing capacity under the Revolving Facility from $250.0 million to $300.0 million and (b)
decrease lender commitments under the Term Loan to $0.0 million.
Senior Unsecured Notes
On September 12, 2019, we entered into a fourth amended and restated note purchase and guarantee agreement (the “Fourth
Restated Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with Prudential
and certain of its affiliates. Pursuant to the Fourth 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”), (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”) and (d) 5.47% Series D Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of $50.0
million (the “Series D Notes”) that were outstanding under the existing senior note purchase agreement would continue to remain
outstanding under the Fourth Restated Prudential Note Purchase Agreement and we authorized and issued our 3.52% Series F
Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $50.0 million (the “Series F Notes” and,
together with the Series A Notes, Series B Notes, Series C Notes and Series D Notes, the “Notes”). The Fourth 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 their
maturity.
On September 12, 2019, we entered into a note purchase and guarantee agreement (the “AIG Note Purchase Agreement”) with
American General Life Insurance Company. Pursuant to the AIG Note Purchase Agreement, we authorized and issued our 3.52%
Series G Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $50.0 million (the “Series G Notes”).
The AIG Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Series G Notes prior to
their maturity.
34
On September 12, 2019, we entered into a note purchase and guarantee agreement (the “MassMutual Note Purchase
Agreement”) with Massachusetts Mutual Life Insurance Company and certain of its affiliates. Pursuant to the MassMutual Note
Purchase Agreement, we authorized and issued our 3.52% Series H Guaranteed Senior Notes due September 12, 2029, in the
aggregate principal amount of $25.0 million (the “Series H Notes”). The MassMutual Note Purchase Agreement does not provide for
scheduled reductions in the principal balance of the Series H Notes prior to their maturity.
The Notes, the Series E Notes, the Series G Notes, and the Series H Notes, respectively issued thereunder, are collectively
referred to as the “senior unsecured notes.”
Debt Maturities
The amounts outstanding under our Restated Credit Agreement and our senior unsecured notes, exclusive of extension options,
are as follows (in thousands):
Revolving Facility
Term Loan
Series A Notes
Series B Notes
Series C Notes
Series D Notes
Series E Notes
Series F Notes
Series G Notes
Series H Notes
Total debt
Unamortized debt issuance costs, net (a)
Total debt, net
Maturity
Date
March 2022
March 2023
February 2021
June 2023
February 2025
June 2028
June 2028
September 2029
September 2029
September 2029
Interest
Rate
December 31,
2019
December 31,
2018
3.29% $
—
6.00%
5.35%
4.75%
5.47%
5.47%
3.52%
3.52%
3.52%
$
20,000 $
—
100,000
75,000
50,000
50,000
50,000
50,000
50,000
25,000
470,000
(2,949)
467,051 $
70,000
50,000
100,000
75,000
50,000
50,000
50,000
—
—
—
445,000
(3,364)
441,636
(a) Unamortized debt issuance costs, related to the Revolving Facility, at December 31, 2019 and 2018, of $2,014 and $2,773,
respectively, are included in prepaid expenses and other assets on our consolidated balance sheets.
As of December 31, 2019, we are in compliance with all of the material terms of the Restated Credit Agreement and our senior
unsecured notes.
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 March 2018, we established an 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 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, 2019 and 2018, we issued 0.4 million and 1.1 million shares of common stock and
received net proceeds of $14.2 million and $30.1 million, respectively, under the ATM Program. 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.
35
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, 2019, we acquired fee simple interests in 27 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $87.2 million. 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. 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, 2019 and 2018,
rent commenced on four and six completed redevelopment projects, respectively, that were placed back into service in our net lease
portfolio. Since the inception of our redevelopment program in 2015, we have completed 13 redevelopment projects.
For the year ended December 31, 2019, we spent $0.4 million (net of write-offs) of construction-in-progress costs related to our
redevelopment activities. For the year ended December 31, 2018, we spent $2.7 million (net of write-offs) 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, 2019, we have a remaining commitment to fund up to $7.1 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, our senior unsecured notes and other factors, and therefore is not assured. In particular, the Restated
Credit Agreement and our senior unsecured notes prohibit the payment of dividends during certain events of default.
Regular quarterly dividends paid to our stockholders aggregated $56.9 million, $50.5 million and $39.3 million, for the years
ended December 31, 2019, 2018 and 2017, respectively. There can be no assurance that we will continue to pay dividends at historical
rates.
Contractual Obligations
Our significant contractual obligations and commitments, excluding extension options and unamortized debt issuance costs, as
of December 31, 2019, were comprised of borrowings under the credit agreement, our senior unsecured notes, operating and finance
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.
36
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, 2019, exclusive of extension options and
unamortized debt issuance costs, are summarized below (in thousands):
Operating and finance 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
5,515 $
—
—
22,915
6,347
94
34,871 $
7,665 $
20,000
100,000
34,237
17,380
—
179,282 $
3,879 $
—
75,000
26,184
7,515
2,635
115,213 $
More
Than
Five
Years
1,845
—
275,000
40,075
19,481
4,400
340,801
Total
18,904 $
20,000
450,000
123,411
50,723
7,129
670,167 $
$
$
(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, 2019.
(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 that are 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
37
provided for 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 Litigation” 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
38
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.
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. Assumptions used are property and geographic specific and may include, among
other things, capitalization rates, market rental rates and EBITDA to rent coverage ratios.
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 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 does not satisfy them, and we are required to accrue for environmental liabilities that we
believe are allocable to others under our leases if we determine that it is probable that our tenant will not meet its environmental
obligations. 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 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. We may ultimately be responsible to pay for environmental liabilities as the
property owner if our tenant fails to pay them.
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.
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 preexisting contamination. We have also agreed to be responsible for environmental contamination that existed
prior to the sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation)
during the first five years after the sale of the properties.
In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained
continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and
39
continues to be discovered. As a result, we have developed an 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, 2019, we had accrued a total of $50.7 million for our prospective environmental remediation obligations. This accrual
consisted of (a) $12.4 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) $38.3 million for future environmental
liabilities related to preexisting unknown contamination. 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 liabilities are accreted for the change in present value due to the passage of time and, accordingly, $2.0 million,
$2.4 million and $3.4 million of net accretion expense was recorded for the years ended December 31, 2019, 2018 and 2017,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2019, 2018 and 2017, we
recorded credits to environmental expenses aggregating $5.4 million, $1.3 million and $6.9 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, 2019 and 2018, we increased the carrying values of certain of our properties by $1.9
million and $5.1 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 our 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, 2019, 2018 and 2017, were $4.1
million, $4.3 million and $4.3 million, respectively. Capitalized asset retirement costs were $39.7 million (consisting of $22.2 million
of known environmental liabilities and $17.5 million of reserves for future environmental liabilities) as of December 31, 2019, and
$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. We recorded impairment charges aggregating $3.7 million and $3.9 million for the years ended
December 31, 2019 and 2018, respectively, for capitalized asset retirement costs.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon
initial assessment 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, 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 allocation of
responsibilities to others, 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, 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
derived upon facts known to us at this time, which are subject to significant change as circumstances change, and as environmental
contingencies become more clearly defined and reasonably estimable.
Any changes to our estimates or our assumptions that form the basis of our estimates may result in our providing an accrual, or
adjustments to the amounts recorded, for environmental remediation liabilities.
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. In addition to the environmental insurance policy purchased by the Company,
40
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.
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.
Environmental Litigation
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of December 31,
2019 and 2018, we had accrued $17.8 million and $12.2 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 and September 12, 2019 (as amended, the “Restated Credit Agreement”),
with a group of commercial banks led by Bank of America, N.A. The Restated Credit Agreement currently consists of a $300.0
million unsecured revolving facility (the “Revolving Facility”), which is scheduled to mature in March 2022. 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 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%. 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, 2019, were $20.0 million.
Based on our outstanding borrowings under the Restated Credit Agreement of $20.0 million for the year ended December 31,
2019, an increase in market interest rates of 1.0% for 2020 would decrease our 2020 net income and cash flows by approximately $0.2
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 $20.0 million outstanding borrowings under the Restated Credit Agreement is indicative of our
future average floating interest rate borrowings for 2020 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.
41
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, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Page
43
44
45
47
70
42
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 $0 and $2,094, respectively
Right-of-use assets - operating
Right-of-use assets - finance
Prepaid expenses and other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY:
Borrowings under credit agreement
Senior unsecured notes, net
Environmental remediation obligations
Dividends payable
Lease liability - operating
Lease liability - finance
Accounts payable and accrued liabilities
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 20,000,000 authorized; unissued
Common stock, $0.01 par value; 100,000,000 shares authorized; 41,367,846 and
40,854,491 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,
2019
2018
669,351 $
442,220
2,080
1,113,651
(165,892)
947,759
82,366
30,855
21,781
1,883
41,252
3,063
21,191
987
60,640
1,211,777 $
20,000 $
449,065
50,723
15,557
21,844
4,191
60,958
622,338
—
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
—
—
60,650
1,161,948
120,000
324,409
59,821
14,495
—
—
62,059
580,784
—
—
—
414
656,127
(67,102)
589,439
1,211,777 $
409
638,178
(57,423)
581,164
1,161,948
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
43
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenues:
Revenues from rental properties
Interest on notes and mortgages receivable
Total revenues
Operating expenses:
Property costs
Impairments
Environmental
General and administrative
Allowance for doubtful accounts
Depreciation and amortization
Total operating expenses
2019
Year ended December 31,
2018
2017
$
137,736 $
2,919
140,655
133,019 $
3,087
136,106
117,161
2,992
120,153
24,978
4,012
5,428
15,183
194
25,161
74,956
23,645
6,170
4,151
14,661
470
23,636
72,733
22,340
9,321
(71)
13,879
205
19,089
64,763
Gains on dispositions of real estate
1,063
3,948
1,041
Operating income
Other income, net
Interest expense
Net earnings
Basic earnings per common share:
Net Earnings
Diluted earnings per common share:
Net Earnings
Weighted average common shares outstanding:
Basic
Diluted
$
$
$
66,762
67,321
56,431
7,593
(24,632)
49,723 $
2,730
(22,345)
47,706 $
8,524
(17,769)
47,186
1.19 $
1.17 $
1.26
1.19 $
1.17 $
1.26
41,072
41,110
40,171
40,191
36,897
36,897
The accompanying notes are an integral part of these consolidated financial statements.
44
GETTY REALTY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
2019
Year ended December 31,
2018
2017
$
49,723 $
47,706 $
47,186
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
Deferred rent receivable
Allowance for uncollectible accounts
Amortization of above-market and below-market leases
Amortization of investment in direct financing 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
Deposits for property acquisitions
(Issuance) of notes and mortgages receivable
Collection of notes and mortgages receivable
Net cash flow (used in) investing activities
25,161
4,012
(1,063)
(3,530)
194
(623)
3,526
971
2,006
2,468
(740)
(503)
(12,931)
8,103
76,774
(87,157)
(14)
(365)
1,558
(510)
(464)
4,399
(82,553)
23,636
6,170
(3,948)
(4,112)
470
(808)
3,015
871
2,409
1,777
(814)
(708)
(11,210)
1,907
66,361
(77,972)
(3,794)
(2,657)
3,303
(430)
(530)
3,134
(78,946)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreements
Repayments under credit agreements
Proceeds from senior unsecured notes
Payments of finance lease liability
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 (used in) provided by 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
75,000
(175,000)
125,000
(542)
(56,889)
(556)
(347)
(115)
—
14,150
(19,299)
(25,078)
48,742
23,664 $
95,000
(130,000)
100,000
(468)
(50,503)
(3,393)
(260)
—
—
30,138
40,514
27,929
20,813
48,742 $
$
45
19,089
9,321
(1,041)
(3,644)
205
(522)
2,511
771
3,448
1,350
(1,295)
489
(19,798)
1,183
59,253
(214,000)
(434)
(1,255)
2,739
2,346
—
1,876
(208,728)
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
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
2019
Year ended December 31,
2018
2017
$
23,030 $
304
7,544
20,790 $
244
9,891
16,435
(195)
12,944
15,557
14,495
12,846
$
1,206 $
3,743 $
1,505
The accompanying notes are an integral part of these consolidated financial statements.
46
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
Changes in environmental estimates and impairments, which were recorded in prior periods, that were related to properties
previously classified as discontinued operations are now included in operating expenses in environmental and impairments,
respectively. These amounts have been reclassified to conform to the presentation of the current period financial statements. These
reclassifications had no effect on our previously reported net earnings. Further, these amounts are now included with amounts related
to properties that were sold subsequent to the change in the definition of discontinued operations, and therefore all impacts from
previously disposed properties are within the same financial statement line items.
In connection with our adoption of Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), as described below, we
adopted the practical expedient that alleviates the requirement to separately present lease and non-lease rental income. As a result,
tenant reimbursements are now included within revenues from rental properties in our consolidated statements of operations. To
facilitate comparability, we have reclassified prior period amounts related to tenant reimbursements to conform to the presentation of
the current period financial statements.
Debt issuance costs of $2,773,000 that were previously included within borrowings under credit agreement as of December 31,
2018, are now presented in prepaid expenses and other assets. The change in classification for debt issuance costs is due to the
fluctuating nature of the outstanding balance related to the Revolving Facility. As of December 31, 2019, debt issuance costs of
$2,014,000 are presented in prepaid expenses and other assets.
Real Estate
Real estate assets are stated at cost less accumulated depreciation and amortization. For acquisitions of real estate 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. Assumptions used are property and
geographic specific and may include, among other things, capitalization rates, market rental rates and EBITDA to rent coverage ratios.
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
47
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.
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 periodically assess whether there are any indicators that the value of our net investments in direct financing leases may be
impaired. When determining a possible impairment, we take into consideration the collectability of direct financing lease receivables
for which a reserve would be required if any losses are both probable and reasonably estimable. In addition, we determine whether
there has been a permanent decline in the current estimate of the residual value of the property. If this review indicates a permanent
decline in the fair value of the asset below its carrying value, we recognize an impairment charge. There were no impairments of any
of our direct financing leases during the years ended December 31, 2019 and 2018.
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, 2019 and 2018.
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.
48
Restricted Cash
Restricted cash consists of cash that is contractually restricted or held in escrow pursuant to various agreements with
counterparties. At December 31, 2019 and 2018, restricted cash of $1,883,000 and $1,850,000, 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, 2019 and 2018.
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 review our accounts receivable, including its deferred rent receivable, related to
base rents, straight-line rents, tenant reimbursements and other revenues for collectability. Our evaluation of collectability primarily
consists of reviewing past due account balances and considers such factors as the credit quality of our tenant, historical trends of the
tenant, changes in tenant payment terms and current economic trends. In addition, with respect to tenants in bankruptcy, we estimate
the probable recovery through bankruptcy claims. If a tenant’s accounts receivable balance is considered uncollectable, we will write
off the related receivable balances and cease to recognize lease income, including straight-line rent unless cash is received. If the
collectability assessment subsequently changes to probable, any difference between the lease income that would have been recognized
if collectability had always been assessed as probable and the lease income recognized to date, is recognized as a current-period
adjustment to revenues from rental properties. Our reported net earnings are directly affected by our estimate of the collectability of
our accounts receivable.
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 $4,012,000, $6,170,000 and $9,321,000 for the years ended December 31, 2019,
2018 and 2017, respectively. 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 $296,000 of the $4,012,000 in
impairments recognized during the year ended December 31, 2019) and (ii) discounted cash flow models (this method was used to
determine $0 of the $4,012,000 in impairments recognized during the year ended December 31, 2019). During the year ended
December 31, 2019, we recorded $3,716,000 of the $4,012,000 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. For the years ended December 31, 2019, 2018 and 2017, impairment charges
aggregating $1,202,000, $1,268,000 and $1,042,000, respectively, were related to properties that were previously disposed of by us.
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
49
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.
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 2016, 2017 and 2018, and tax returns which will be filed for the year
ended 2019, remain open to examination by federal and state tax jurisdictions under the respective statutes of limitations.
New Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (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,
50
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 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 elected to apply the transition
requirements at the January 1, 2019, effective date rather than at the beginning of the earliest comparative period presented. Our
consolidated financial statements for the year ending December 31, 2019, are presented under the new standard, while the comparative
periods presented were not adjusted and continue to be reported in accordance with our historical accounting policy. For additional
information regarding new lease accounting standard, see Note 2 – Leases.
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 applies to financial assets measured at amortized cost and certain other
instruments, including notes and mortgages receivable and net investments in direct financing leases. This standard does not apply to
receivables arising from operating leases, which are within the scope of Topic 842. ASU 2016-13 became effective for us and was
adopted on January 1, 2020 and requires a modified retrospective approach through a cumulative-effect adjustment to retained
earnings. We do not expect ASU 2016-13 will have a material effect on our consolidated financial statements.
NOTE 2. — LEASES
As of December 31, 2019, we owned 877 properties and leased 68 properties from third-party landlords. These 945 properties
are located in 33 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, automotive service and other retail
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 service or other retail 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 lease 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.
We adopted ASU 2016-02 as of January 1, 2019. 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.
For leases in which we are the lessor, we are (i) retaining classification of our historical leases as we are not required to reassess
classification upon adoption of the new standard, (ii) expensing indirect leasing costs in connection with new or extended tenant
leases, the recognition of which would have been deferred under prior accounting guidance and (iii) aggregating revenue from our
lease components and non-lease components (comprised of tenant reimbursements) into revenue from rental properties.
Revenues from rental properties for the years ended December 31, 2019, 2018 and 2017, were $137,736,000, $133,019,000 and
$117,161,000, respectively. Rental income contractually due from our tenants included in revenues from rental properties was
$119,293,000, $114,105,000 and $99,355,000 for the years ended December 31, 2019, 2018 and 2017, respectively.
In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due during
the periods presented. As a result, revenues from rental properties include non-cash adjustments recorded for deferred rental revenue
due to the recognition of rental income on a straight-line basis over the current lease term, the net amortization of above-market and
below-market leases, rental income recorded under direct financing leases using the effective interest method which produces a
constant periodic rate of return on the net investments in the leased properties and the amortization of deferred lease incentives (the
“Revenue Recognition Adjustments”). Revenue Recognition Adjustments included in revenues from rental properties were $960,000,
$2,223,000 and $1,976,000 for the years ended December 2019, 2018 and 2017, respectively.
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Tenant reimbursements, which are included in revenues from rental properties and 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
$17,483,000, $16,691,000 and $15,829,000 for the years ended December 31, 2019, 2018 and 2017, respectively.
We incurred $373,000, $579,000 and $126,000 of lease origination costs for the years ended December 31, 2019, 2018 and
2017, 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 $82,366,000 investment in direct financing leases as of December 31, 2019, are lease payments
receivable of $126,412,000 plus unguaranteed estimated residual value of $13,928,000 less unearned income of $57,974,000. The
components of the $85,892,000 investment in direct financing leases as of December 31, 2018, are lease payments receivable of
$139,276,000 plus unguaranteed estimated residual value of $13,928,000 less unearned income of $67,312,000.
Future contractual annual rentals receivable from our tenants, which have terms in excess of one year as of December 31, 2019,
are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
Operating
Leases
Direct
Financing Leases
$
$
109,923 $
110,666
110,369
110,508
108,480
666,010
1,215,956 $
13,156
13,339
13,420
13,467
13,611
59,419
126,412
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future
contractual minimum annual rentals receivable from our tenants, which have terms in excess of one year as of December 31, 2018,
would have been as follows (in thousands):
2019
2020
2021
2022
2023
Thereafter
Total
Operating
Leases
Direct
Financing Leases
$
$
102,928 $
102,693
99,593
99,184
99,223
678,106
1,181,727 $
12,864
13,156
13,339
13,420
13,467
73,030
139,276
For leases in which we are the lessee, ASU 2016-02 requires leases with durations greater than twelve months to be recognized
on our consolidated balance sheets. We elected the package of transition provisions available for expired or existing contracts, which
allowed us to carryforward our historical assessments of (i) whether contracts are or contain leases, (ii) lease classification and
(iii) initial direct costs.
As of January 1, 2019, we recognized operating lease right-of-use assets of $25,561,000 (net of deferred rent expense) and
operating lease liabilities of $26,087,000, which were presented on our consolidated financial statements. The right-of-use assets and
lease liabilities are carried at the present value of the remaining expected future lease payments. When available, we use the rate
implicit in the lease to discount lease payments to present value; however, our current leases did not provide a readily determinable
implicit rate. Therefore, we estimated our incremental borrowing rate to discount the lease payments based on information available
and considered factors such as interest rates available to us on a fully collateralized basis and terms of the leases. ASU 2016-02 did not
have a material impact on our consolidated balance sheets or on our consolidated statements of operations. The most significant
impact was the recognition of right-of-use assets and lease liabilities for operating leases, while our accounting for finance leases
remained substantially unchanged.
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The following presents the lease-related assets and liabilities (in thousands):
Assets
Right-of-use assets - operating
Right-of-use assets - finance
Total lease assets
Liabilities
Lease liability - operating
Lease liability - finance
Total lease liabilities
The following presents the weighted average lease terms and discount rates of our leases:
Weighted-average remaining lease term (years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases (a)
Finance leases
$
$
$
$
December 31,
2019
21,191
987
22,178
21,844
4,191
26,035
9.3
11.5
5.31%
17.18%
(a) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
The following presents our total lease costs (in thousands):
Operating lease cost
Finance lease cost
Amortization of leased assets
Interest on lease liabilities
Short-term lease cost
Total lease cost
The following presents supplemental cash flow information related to our leases (in thousands):
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
As of December 31, 2019, scheduled lease liabilities mature as follows (in thousands):
December 31,
2019
4,496
542
812
181
6,031
December 31,
2019
4,369
812
542
$
$
$
$
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less: amount representing interest
Present value of lease payments
Operating
Leases
Direct
Financing Leases
$
$
4,057 $
3,558
2,894
2,774
2,910
12,168
28,361
(6,517)
21,844 $
1,369
1,273
1,093
856
785
2,022
7,398
(3,207)
4,191
As previously disclosed in our 2018 Annual Report on Form 10-K and under the previous lease accounting standard, future
minimum annual rentals payable under such leases, excluding renewal options, as of December 31, 2018, would have been 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.
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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 eight
years, including renewal options. Future minimum annual rentals payable under such leases, excluding renewal options, are as
follows: 2020 – $5,515,000, 2021 – $4,625,000, 2022 – $3,040,000, 2023 – $2,319,000, 2024 – $1,560,000 and $1,845,000 thereafter.
Rent expense, substantially all of which consists of minimum rentals on non-cancelable operating leases, amounted to
$4,664,000, $4,660,000 and $5,091,000 for the years ended December 31, 2019, 2018 and 2017, respectively, and is included in
property costs. Rent received under subleases for the years ended December 31, 2019, 2018 and 2017, was $8,699,000, $9,023,000
and $9,296,000, respectively, and is included in rental revenue discussed above.
Major Tenants
As of December 31, 2019, we had three significant tenants by revenue:
• We leased 153 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 18% and 17% of our total revenues for the years ended December 31, 2019 and 2018, respectively.
All of our unitary leases with subsidiaries of Global are guaranteed by the parent company.
• We leased 77 convenience store and gasoline station properties pursuant to three separate unitary leases to Apro, LLC
(d/b/a “United Oil”). In the aggregate, our leases with United Oil represented 13% of our total revenues for each of the
years ended December 31, 2019 and 2018.
• We leased 75 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% of our total revenues for each of the years ended December 31, 2019 and 2018. The largest of these unitary leases,
covering 57 of our properties, is guaranteed by the parent company, its principals and numerous Chestnut affiliates.
Getty Petroleum Marketing Inc.
Getty Petroleum Marketing Inc. (“Marketing”) was our largest tenant from 1997 until 2012 under a unitary triple-net master
lease that 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, 2019, 365 of the properties we own or lease were previously leased to Marketing, of which 324
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 the leases. Several of the leases provide for additional rent
based on the aggregate volume of fuel sold. In addition, the majority of the leases require the tenants to 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, 2019, we have a
remaining commitment to fund up to $7,129,000 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, 2019, 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
$1,532,000 (net of accumulated amortization of $1,473,000) 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.
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Legal Proceedings
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of December 31,
2019 and 2018, we had accrued $17,820,000 and $12,231,000, respectively, for certain of these matters which we believe were
appropriate based on information then currently available. We recorded provisions aggregating $5,896,000 for the year ended
December 31, 2019, and credits aggregating $45,000, for environmental litigation accruals for the year ended December 31, 2018, 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, 2019 and 2018, we received $2,707,000 and $147,000,
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 (“PRPs”) 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 we sold in October 2013). We responded to the Directive by asserting that we are not liable. In 2005, the
NJDEP initiated litigation in the Superior Court of Essex County against Occidental Chemical Corporation (“Occidental”), Tierra
Solutions, Inc. (“Tierra”), Maxus Energy Corporation (“Maxus”), Repsol YPF, S.A., YPF, S.A., YPF Holdings, Inc. and CLH
Holdings, Inc. as former owners, operators and/or affiliates of the Diamond Shamrock Corporation facility located at 80 Lister Avenue
in Newark, New Jersey in the matter of the NJDEP et al. v. Occidental Chemical Corp. et al., alleging these entities are responsible for
the discharge of 2,3,8,8-TCDD (“dioxin”) and other hazardous substances from the Lister facility. The Defendants asserted third-party
claims against over 300 third-party defendants, including us, seeking contribution or cost recovery for the claims asserted by the
NJDEP. On December 12, 2013, the NJDEP entered into a Consent Judgment resolving the NJDEP’s claims against all third-party
defendants, and releasing third-party defendants for any obligation to comply with the terms of the Directive and for future Natural
Resource Damage claims that may be brought by the State of New Jersey to the extent such claims do not exceed 20% of the
aggregate funds paid by the third-party defendants in settlement of the state court litigation. Subject to this reservation of rights by the
NJDEP, the demands made by the NJDEP pursuant to the Directive, as they apply to us, are resolved.
In 2004, the United States Environmental Protection Agency (“EPA”) issued General Notice Letters (“GNL”) to over 100
entities, including us, alleging that they are PRPs at the Diamond Alkali Superfund Site, which includes a 17-mile stretch of the Lower
Passaic River. In May 2007, over 70 GNL recipients, including us, entered into an Administrative Settlement Agreement and Order on
Consent (“AOC”) with the EPA to perform a Remedial Investigation and Feasibility Study (“RI/FS”) for the 17-mile stretch of the
Lower Passaic River, which 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 interim 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, which sets forth various
alternatives for remediating the 17-mile stretch of the Lower Passaic River. In October 2018, the EPA issued a letter directing the
CPG to prepare a streamlined feasibility study for the upper 9-miles of the Lower Passaic River based on an iterative approach using
adaptive management strategies. On August 12, 2019, the CPG submitted a draft Interim Remedy Feasibility Study to the EPA which
identifies various targeted dredge and cap alternatives, which the EPA is still evaluating.
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”)with the EPA 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 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
55
engineered cap with an estimated cost of $1,380,000,000. On March 31, 2016, we and more than 100 other PRPs 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 (who the EPA
considers the primary contributor of dioxin and other pesticides in the Lower Passaic River generated from the production of Agent
Orange at its Diamond Alkali Company plant and a discharger of other contaminants of concern (“COCs”) to the Lower Passaic
River), for remedial design of the remedy selected in the ROD, after which the EPA plans to begin negotiations with “major” PRPs for
implementation and/or payment of the selected remedy. The Notice also stated that the EPA believes that some of the PRPs and other
parties not yet identified will be eligible for a cash out settlement with the EPA. On September 30, 2016, Occidental entered into an
agreement with the EPA to perform the remedial design for the remedy selected for the lower 8-miles of the Lower Passaic River. In
December 2019, Occidental submitted a report to the EPA on the progress of the remedial design work, which is still ongoing.
Occidental has asserted that it is entitled to indemnification by Maxus and Tierra for its liability in connection with the Diamond
Alkali Superfund Site. Occidental has also asserted that Maxus and Tierra’s parent company, YPF, S.A. (“YPF”) and certain of its
affiliates must indemnify Occidental. On June 16, 2016, Maxus and Tierra filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. In the Chapter 11 proceedings, YPF 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 in the Maxus/Tierra bankruptcy
proceedings for costs incurred by the CPG relating to the Lower Passaic River. In July 2017, an amended Chapter 11 plan of
liquidation became effective and, in connection therewith, Maxus/Tierra and certain other parties, including us, entered into a mutual
contribution release agreement pertaining to certain past costs, but not future remedy costs.
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 PRPs to resolve their alleged liability for the lower 8-mile remedial action that is the subject of the ROD, who the EPA stated
did not discharge any of the eight hazardous substances identified as a COC in the ROD. The letter also stated that other parties who
did not discharge dioxins, furans or polychlorinated biphenyls (which are considered the COCs posing the greatest risk to the river)
may also be eligible for cash out settlements, and that the EPA would begin a process for identifying other PRPs for negotiation of
similar cash out settlements. 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. In August 2017,
the EPA appointed an independent third party allocation expert to conduct allocation proceedings with most of the remaining
recipients of the Notice , which is anticipated to lead to additional offers of cash out settlements to certain additional parties and/or 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
allocation proceedings, which we are participating in, were scheduled to conclude by mid-2019, but have been extended and are still
ongoing.
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 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 whom were also named in the NJDEP’s 2003 Directive and the
EPA’s 2016 Notice. Factual discovery is ongoing, and we are defending 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,
10.9 AOC and Notice do not obligate us to fund or perform any 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.
Based on currently known facts and circumstances, we do not believe that this matter is reasonably likely to have a material
impact on our results of operations, including, among other factors, because we do not believe that there was any use or discharge of
dioxins, furans or polychlorinated biphenyls in connection with its former petroleum storage operations at our former Newark, New
Jersey Terminal, and because there are numerous other parties who will likely bear any costs of remediation and/or damages.
However, our ultimate liability, if any, in the pending and possible future proceedings pertaining to the Lower Passaic River, and/or
one or more adverse determinations related to this matter, are uncertain and subject to numerous contingencies which cannot be
predicted and the outcome of which are not yet known. Therefore, it is possible that the ultimate liability resulting from this matter and
the impact on our results of operations could be material.
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,
56
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
possible loss or range of loss in excess of the amount accrued for the New Jersey MDL Proceedings as we do not believe that
plaintiffs’ settlement proposal is realistic and there remains uncertainty as to the allegations in this case as they relate to us, our
defenses to the claims, our rights to indemnification or contribution from other parties and the aggregate possible amount of damages
for which we may be held liable. It is possible that losses related to the New Jersey MDL Proceedings could exceed the amounts
accrued as of December 31, 2019, which 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.
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, Sharon Irni, 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
57
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 possible loss or range of loss
in excess of the amount we have accrued for this lawsuit. It is possible that losses related to this case could exceed the amounts
accrued, as of December 31, 2019, which 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 and our senior unsecured notes are as follows (in thousands):
Revolving Facility
Term Loan
Series A Notes
Series B Notes
Series C Notes
Series D Notes
Series E Notes
Series F Notes
Series G Notes
Series H Notes
Total debt
Unamortized debt issuance costs, net (a)
Total debt, net
Maturity
Date
March 2022
March 2023
February 2021
June 2023
February 2025
June 2028
June 2028
September 2029
September 2029
September 2029
Interest
Rate
December 31,
2019
December 31,
2018
3.29% $
—
6.00%
5.35%
4.75%
5.47%
5.47%
3.52%
3.52%
3.52%
$
20,000 $
—
100,000
75,000
50,000
50,000
50,000
50,000
50,000
25,000
470,000
(2,949)
467,051 $
70,000
50,000
100,000
75,000
50,000
50,000
50,000
—
—
—
445,000
(3,364)
441,636
(a) Unamortized debt issuance costs, related to the Revolving Facility, at December 31, 2019 and 2018, of $2,014 and $2,773,
respectively, are included in prepaid expenses and other assets on our consolidated balance sheets.
Credit Agreement
On June 2, 2015, we entered into a $225,000,000 senior unsecured credit agreement (the “Credit Agreement”) with a group of
banks led by Bank of America, N.A. The 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”).
On March 23, 2018, we entered into an amended and restated credit agreement (as amended, 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 “First Amendment”) of our Restated Credit Agreement. The First
Amendment modifies the Restated Credit Agreement to, among other things: (i) reflect that we had previously entered into (a) an
58
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 First Amendment) plus the Applicable Rate
(as defined in the First Amendment) for such facility.
On September 12, 2019, in connection with prepayment of the Term Loan, we entered into a consent and amendment (the
“Second Amendment”) of our Restated Credit Agreement. The Second Amendment modifies the Restated Credit Agreement to,
among other things, (a) increase our borrowing capacity under the Revolving Facility from $250,000,000 to $300,000,000 and
(b) decrease lender commitments under the Term Loan to $0.
Senior Unsecured Notes
On September 12, 2019, we entered into a fourth amended and restated note purchase and guarantee agreement (the “Fourth
Restated Prudential Note Purchase Agreement”) amending and restating our existing senior note purchase agreement with Prudential
and certain of its affiliates. Pursuant to the Fourth 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”), (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”) and (d) 5.47% Series D Guaranteed Senior Notes due June 21, 2028, in the aggregate principal amount of
$50,000,000 (the “Series D Notes”) that were outstanding under the existing senior note purchase agreement would continue to remain
outstanding under the Fourth Restated Prudential Note Purchase Agreement and we authorized and issued our 3.52% Series F
Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $50,000,000 (the “Series F Notes” and,
together with the Series A Notes, Series B Notes, Series C Notes and Series D Notes, the “Notes”). The Fourth 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 their
maturity.
On September 12, 2019, we entered into a note purchase and guarantee agreement (the “AIG Note Purchase Agreement”) with
American General Life Insurance Company. Pursuant to the AIG Note Purchase Agreement, we authorized and issued our 3.52%
Series G Guaranteed Senior Notes due September 12, 2029, in the aggregate principal amount of $50,000,000 (the “Series G Notes”).
The AIG Note Purchase Agreement does not provide for scheduled reductions in the principal balance of the Series G Notes prior to
their maturity.
On September 12, 2019, we entered into a note purchase and guarantee agreement (the “MassMutual Note Purchase
Agreement”) with Massachusetts Mutual Life Insurance Company and certain of its affiliates. Pursuant to the MassMutual Note
Purchase Agreement, we authorized and issued our 3.52% Series H Guaranteed Senior Notes due September 12, 2029, in the
aggregate principal amount of $25,000,000 (the “Series H Notes”). The MassMutual Note Purchase Agreement does not provide for
scheduled reductions in the principal balance of the Series H Notes prior to their maturity.
Covenants
The Restated Credit Agreement and our senior unsecured notes 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 and our senior unsecured notes also contain customary events of
default, including cross defaults to each other, change of control and failure to maintain REIT status (provided that the senior
unsecured notes 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 and our senior unsecured notes, and could result in the acceleration of our indebtedness under
the Restated Credit Agreement and our senior unsecured notes. 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.
As of December 31, 2019, we are in compliance with all of the material terms of the Restated Credit Agreement and our senior
unsecured notes, including the various financial covenants described herein.
59
Debt Maturities
As of December 31, 2019, scheduled debt maturities, including balloon payments, are as follows (in thousands):
2020
2021
2022 (a)
2023
2024
Thereafter
Total
Revolving
Facility
Senior
Unsecured Notes
Total
$
$
— $
—
20,000
—
—
—
20,000 $
— $
100,000
—
75,000
—
275,000
450,000 $
—
100,000
20,000
75,000
—
275,000
470,000
(a) 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 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 does not satisfy them, and we are required to accrue for environmental liabilities that we
believe are allocable to others under our leases if we determine that it is probable that our tenant will not meet its environmental
obligations. 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 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. We may ultimately be responsible to pay for environmental liabilities as the
property owner if our tenant fails to pay them.
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.
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
60
remediation of such preexisting contamination. We have also agreed to be responsible for environmental contamination that existed
prior to the sale of certain properties assuming the contamination is discovered (other than as a result of a voluntary site investigation)
during the first five years after the sale of the properties.
In the course of certain UST removals and replacements at properties previously leased to Marketing where we retained
continuing responsibility for preexisting environmental obligations, previously unknown environmental contamination was and
continues to be discovered. As a result, we have developed an 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, 2019, we had accrued a total of $50,723,000 for our prospective environmental remediation obligations. This accrual
consisted of (a) $12,470,000, 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) $38,253,000 for future environmental
liabilities related to preexisting unknown contamination. 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.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $2,006,000,
$2,409,000 and $3,448,000 of net accretion expense was recorded for the years ended December 31, 2019, 2018 and 2017,
respectively, which is included in environmental expenses. In addition, during the years ended December 31, 2019, 2018 and 2017, we
recorded credits to environmental expenses aggregating $5,386,000, $1,319,000 and $6,854,000, 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. For the years ended December 31,
2019, 2018 and 2017, changes in environmental estimates aggregating, $324,000, $560,000 and $3,169,000, respectively, were related
to properties that were previously disposed of by us.
During the years ended December 31, 2019 and 2018, we increased the carrying values of certain of our properties by
$1,875,000 and $5,111,000, 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 our 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, 2019, 2018 and 2017, were
$4,132,000, $4,255,000 and $4,347,000, respectively. Capitalized asset retirement costs were $39,684,000 (consisting of $22,150,000
of known environmental liabilities and $17,534,000 of reserves for future environmental liabilities) as of December 31, 2019, and
$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. We recorded impairment charges aggregating $3,730,000 and $3,850,000 for the years ended
December 31, 2019 and 2018, respectively, for capitalized asset retirement costs.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon
initial assessment 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, 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 allocation of
responsibilities to others, 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, 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
derived upon facts known to us at this time, which are subject to significant change as circumstances change, and as environmental
contingencies become more clearly defined and reasonably estimable.
61
Any changes to our estimates or our assumptions that form the basis of our estimates may result in our providing an accrual, or
adjustments to the amounts recorded, for environmental remediation liabilities.
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. 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.
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.
NOTE 6. — INCOME TAXES
Net cash paid (refunded) for income taxes for the years ended December 31, 2019, 2018 and 2017, of $304,000, $244,000 and
$(195,000), 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, 2019, 2018 and 2017, were: ordinary
income of 96.6%, 89.2% and 100.0%, capital gain distributions of 3.4%, 10.8% and 0.0% and non-taxable distributions of 0.0%, 0.0%
and 0.0%, respectively.
To qualify for taxation as a REIT, we, among other requirements such as those related to the composition of our assets and gross
income, must distribute annually to our stockholders at least 90% of our taxable income, including taxable income that is accrued by
us without a corresponding receipt of cash. We cannot provide any assurance that our cash flows will permit us to continue paying
cash dividends. Should the Internal Revenue Service 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 2016, 2017 and 2018, and tax returns which will be filed for the year ended 2019, 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, 2019
or 2018. 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, 2019, 2018 and 2017, is as follows (in
thousands except per share amounts):
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
Net earnings
Dividends declared — $1.42 per share
Shares issued pursuant to ATM Program, net
Shares issued pursuant to dividend reinvestment
Stock-based compensation and settlements
BALANCE, DECEMBER 31, 2019
Common Stock
Shares
Amount
34,393 $
344 $
Dividends
Paid
in Excess
of Earnings
Additional
Paid-in
Capital
485,659 $
4,715
513
48
27
39,696 $
1,106
52
1
40,855 $
449
47
17
41,368 $
47
5
1
—
397 $
104,265
13,523
1,270
155
604,872 $
11
1
—
409 $
30,127
1,402
1,777
638,178 $
4
1
—
414 $
14,146
1,450
2,353
656,127 $
(55,085) $
47,186
(43,675)
—
—
—
—
(51,574) $
47,706
(53,555)
—
—
—
(57,423) $
49,723
(59,402)
—
—
—
(67,102) $
Total
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
49,723
(59,402)
14,150
1,451
2,353
589,439
On March 1, 2019, our Board of Directors granted 156,750 restricted stock units (“RSU” or “RSUs”) under our Amended and
Restated 2004 Omnibus Incentive Compensation Plan. On March 1, 2018, and October 23, 2018, our Board of Directors granted
121,650 and 3,000 of RSUs, respectively, 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.
ATM Program
In March 2018, we established an 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
63
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, 2019 and 2018, we issued 449,000 and 1,106,000 shares of common stock and received
net proceeds of $14,150,000 and $30,138,000, respectively, under the ATM Program. 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, 2019, we paid regular quarterly dividends of $56,889,000 or $1.40 per share. For the year
ended December 31, 2018, we paid regular quarterly dividends of $50,503,000 or $1.28 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,
2019 and 2018, we issued 46,896 and 51,920 shares of common stock, respectively, under the dividend reinvestment plan and
received proceeds of $1,451,000 and $1,403,000, respectively.
Stock-Based Compensation
Compensation cost for our stock-based compensation plans using the fair value method was $2,468,000, $1,777,000 and
$1,350,000 for the years ended December 31, 2019, 2018 and 2017, 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 156,750, 124,650 and 94,250 RSUs and dividend equivalents in 2019, 2018 and 2017,
respectively. RSUs granted before 2009 provide for settlement upon termination of employment with the Company or termination of
service from the Board of Directors. RSUs granted in 2009 and thereafter provide for settlement upon the earlier of 10 years after
grant or termination of employment with the Company. On the settlement date each vested RSU will have a value equal to one share
of common stock and may be settled, at the sole discretion of the Compensation Committee, in cash or by the issuance of one share of
common stock. The RSUs do not provide voting or other 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, 2019, 2018 and 2017, dividend equivalents aggregating
64
approximately $997,000, $749,000 and $542,000, 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, 2016
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2017
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2018
Granted
Settled
Cancelled
RSUs OUTSTANDING AT DECEMBER 31, 2019
Number of
RSUs
Outstanding
Fair Value
Amount
Average
Per RSU
429,775
94,250 $
(51,770)
(23,330) $
448,925
124,650 $
— $
— $
573,575
156,750 $
(28,300)
— $
702,025
2,484,400 $
1,306,300
587,100 $
3,106,400 $
— $
— $
5,203,000
943,800
— $
26.36
25.23
25.17
24.92
—
—
33.19
33.35
—
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, 2019, 2018 and 2017, was $2,447,000, $1,752,000 and $1,328,000, respectively,
and is included in general and administrative expense in our consolidated statements of operations. As of December 31, 2019, there
was $7,694,000 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 702,025 outstanding
RSUs and the 349,135 vested RSUs as of December 31, 2019, was $23,076,000 and $11,476,000, respectively.
The following is a schedule of the vesting activity relating to RSUs outstanding:
RSUs VESTED AT DECEMBER 31, 2016
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2017
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2018
Vested
Settled
RSUs VESTED AT DECEMBER 31, 2019
Number of
RSUs Vested
Fair
Value
221,819
55,336 $
(51,770) $
225,385
63,635 $
— $
289,020
88,415 $
(28,300) $
349,135
1,502,900
1,306,300
1,871,500
—
2,906,200
943,800
We have a retirement and profit sharing plan with deferred 401(k) savings plan provisions (the “Retirement Plan”) for
employees meeting certain service requirements and a supplemental plan for executives (the “Supplemental Plan”). Under the terms of
these plans, the annual discretionary contributions to the plans are determined by the Compensation Committee of the Board of
Directors.
Also, under the Retirement Plan, employees may make voluntary contributions and we have elected to match an amount equal
to fifty percent of such contributions but in no event more than three percent of the employee’s eligible compensation. Under the
Supplemental Plan, a participating executive may receive an amount equal to 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 $327,000, $295,000 and $282,000 for the years ended December 31, 2019, 2018 and 2017,
respectively. These amounts are included in general and administrative expense in our consolidated statements of operations. During
the year ended December 31, 2019 and 2017, we distributed $30,000 and $278,000, 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.
65
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, 2019, 2018 and 2017.
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):
Net earnings
Less dividend equivalents attributable to RSUs outstanding
Net earnings attributable to common stockholders used in 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
2019
$
Year ended December 31,
2018
2017
49,723 $
(997)
47,706 $
(751)
48,726
41,072
38
41,110
1.19 $
1.19 $
46,955
40,171
20
40,191
1.17 $
1.17 $
47,186
(567)
46,619
36,897
—
36,897
1.26
1.26
As of December 31, 2019 and 2018, the carrying value of the borrowings under the Restated Credit Agreement approximated
fair value. As of December 31, 2019 and 2018, the fair value of the borrowings under senior unsecured notes was $470,600,000 and
$335,600,000, respectively. The fair value of the borrowings outstanding as of December 31, 2019 and 2018, 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.
The following summarizes as of December 31, 2019, 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
$
$
737 $
— $
— $
— $
737 $
— $
737
737
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
$
$
66
Real Estate Assets
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, 2019 and 2018, of $785,000 and $3,096,000, 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. —ASSETS HELD FOR SALE
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. As of December 31, 2019 and 2018, there were
no properties that met criteria to be classified as held for sale.
During the year ended December 31, 2019, we sold nine properties, in separate transactions, which resulted in an aggregate gain
of $1,114,000, included in gain on dispositions of real estate, on our consolidated statements of operations. We also received funds
from property condemnations resulting in a loss of $51,000, included in gain on dispositions of real estate, on our consolidated
statements of operations.
During the year ended December 31, 2018, we sold nine properties , in separate transactions, 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.
NOTE 12. — QUARTERLY FINANCIAL DATA
The following is a summary of the quarterly results of operations for the years ended December 31, 2019 and 2018 (unaudited
as to quarterly information) (in thousands, except per share amounts):
Three Months Ended
Year Ended December 31, 2019
Revenues from rental properties
Net earnings
Diluted earnings per common share:
Net earnings
Year Ended December 31, 2018
Revenues from rental properties
Net earnings
Diluted earnings per common share:
Net earnings
NOTE 13. — PROPERTY ACQUISITIONS
2019
March 31,
$
$
33,287 $
10,927 $
June 30,
September 30, December 31,
35,692 $
11,890 $
35,197
13,708
33,560 $
13,198 $
$
0.26 $
0.32 $
0.28 $
0.33
March 31,
$
$
31,352 $
10,032 $
June 30,
September 30, December 31,
33,902 $
10,944 $
34,282
13,190
33,483 $
13,540 $
$
0.25 $
0.33 $
0.27 $
0.32
During the year ended December 31, 2019, we acquired fee simple interests in 27 convenience store and gasoline station, and
other automotive related properties for an aggregate purchase price of $87,157,000.
On June 17, 2019, we acquired fee simple interests in six convenience store and gasoline station properties for $24,724,000 and
entered into a unitary lease with 1234M Division Street Inc. (“1234 M”) at the closing of the transaction. We funded the 1234 M
transaction through funds available under our Revolving Facility. The unitary lease provides for an initial term of 15 years, with two
ten-year renewal options. The unitary lease requires 1234 M 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 in the metro Los Angeles, CA area. 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 $18,086,000 of the purchase price to land, $4,789,000 to buildings and improvements, $1,849,000 to in-place
leases.
On November 22, 2019, we acquired fee simple interests in four car wash properties for $14,144,000 and entered into a unitary
lease with a QNC OpCo Inc. (“QNC”) at the closing of the transaction. We funded the QNC transaction through funds available under
our Revolving Facility. The unitary lease provides for an initial term of 15 years, with five five-year renewal options. The unitary
lease requires QNC to pay a fixed annual rent plus all amounts pertaining to the properties, including environmental expenses, real
67
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 in Las Vegas, NV. 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 $2,663,000 of the purchase price to land,
$10,469,000 to buildings and improvements and $1,012,000 to in-place leases.
In addition, during the year ended December 31, 2019, we also acquired fee simple interests in 17 convenience store and
gasoline station, and other automotive related properties, in separate transactions, for an aggregate purchase price of $48,290,000. 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 $18,820,000 of
the purchase price to land, $26,790,000 to buildings and improvements and $2,744,000 to in-place leases, $277,000 to above-market
leases and $341,000 to below-market leases, which is accounted for as a deferred liability.
2018
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.
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 $2,298,000 and $3,500,000 (net of accumulated amortization of $5,653,000 and $5,160,000,
respectively) at December 31, 2019 and 2018, 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 $18,754,000 and $21,514,000 (net of
accumulated amortization of $19,905,000 and $17,790,000, respectively) at December 31, 2019 and 2018, 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 $1,955,000, $2,067,000
and $1,791,000 for the years ended December 31, 2019, 2018 and 2017, respectively. Rent expense included amortization from
acquired leases of $333,000, $317,000 and $320,000 for the years ended December 31, 2019, 2018 and 2017, respectively.
68
In-place leases are included in prepaid expenses and other assets and had a balance of $41,013,000 and $38,542,000 (net of
accumulated amortization of $13,042,000 and $9,908,000, respectively) at December 31, 2019 and 2018, 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 $3,134,000,
$2,866,000 and $1,855,000 for the years ended December 31, 2019, 2018 and 2017, respectively.
The amortization for acquired intangible assets during the next five years and thereafter, assuming no early lease terminations, is
as follows:
As Lessor:
Year ending December 31,
2020
2021
2022
2023
2024
Thereafter
As Lessee:
Year ending December 31,
2020
2021
2022
2023
2024
Thereafter
Above-Market
Leases
Below-Market
Leases
In-Place
Leases
$
$
178,000 $
170,000
161,000
161,000
161,000
1,339,000
2,170,000 $
1,645,000 $
1,488,000
1,410,000
1,319,000
1,319,000
11,573,000
18,754,000 $
2,683,000
2,663,000
2,651,000
2,648,000
2,608,000
27,760,000
41,013,000
Below-Market
Leases
$
$
97,000
31,000
—
—
—
—
128,000
NOTE 15. — SUBSEQUENT EVENTS
In preparing our consolidated financial statements, we have evaluated events and transactions occurring after December 31,
2019, for recognition or disclosure purposes. Based on this evaluation, there were no significant subsequent events from December 31,
2019, through the date the financial statements were issued.
69
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 index appearing under Item 8,
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, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2019 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, 2019, 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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial
statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
70
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.
Purchase Price Allocation for Asset Acquisitions
As described in Notes 1 and 13 to the consolidated financial statements, during the year ended December 31, 2019, the
Company acquired fee simple interests in 27 properties which were accounted for as asset acquisitions for an aggregate purchase price
of $87,157,000. For acquired properties accounted for as asset acquisitions management estimates 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, management allocates 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. The valuation of the applicable assets and liabilities involves
the use of significant estimates and assumptions related to capitalization rates, market rental rates, and EBITDA to rent coverage
ratios.
The principal considerations for our determination that performing procedures relating to the purchase price allocation for asset
acquisitions is a critical audit matter are (i) there was significant judgment by management when developing the fair value
measurements for purchase price allocations, which in turn led to a high degree of auditor judgment and subjectivity in performing
procedures related to these fair value measurements, (ii) significant auditor judgment was necessary to evaluate the audit evidence for
the relevant significant assumptions relating to the tangible and intangible assets, such as the capitalization rates, market rental rates,
and EBITDA to rent coverage ratios, and (iii) the audit effort included the involvement of professionals with specialized skill and
knowledge to assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to purchase
price accounting, including controls over the development of significant inputs and assumptions used in the estimated fair values of
tangible and intangible assets. These procedures also included, among others, the involvement of professionals with specialized skill
and knowledge to assist in testing the process used by management to develop fair value estimates of acquired tangible and intangible
assets, which involved evaluating the appropriateness of the valuation methods used and the reasonableness of the significant
assumptions including capitalization rates, market rental rates, and EBITDA to rent coverage ratios. Evaluating the reasonableness of
the significant assumptions included considering whether these assumptions were consistent with external market data, comparable
transactions, and evidence obtained in other areas of the audit. Testing the process used by management involved testing the
completeness and accuracy of data provided by management.
Environmental Remediation Obligations
As described in Notes 1 and 5 to the consolidated financial statements, as of December 31, 2019 management has accrued a
total of $50,723,000 for their prospective environmental remediation obligations. Management records the fair value 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 contaminations at each property. Management measures their environmental remediation liabilities at fair
value based on expected future net cash flows, adjusted for inflation and discounted to present value.
The principal considerations for our determination that performing procedures relating to environmental remediation obligations
is a critical audit matter are (i) there was significant judgment by management when developing the fair value measurements for the
environmental remediation obligations, which in turn led to a high degree of auditor judgment and subjectivity in performing
procedures related to these fair value measurements, (ii) significant auditor judgment was necessary to evaluate the significant
assumption and audit evidence relating to the projections of future net cash flows, including estimated remediation costs and (iii) the
audit effort included the involvement of professionals with specialized skill and knowledge to assist in performing these procedures
and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the
valuation of the environmental remediation obligation, including controls over the development of the significant inputs and
assumptions including estimated remediation costs. These procedures also included, among others, testing the process used by
management to develop fair value estimates of environmental remediation obligations, which involved evaluating the appropriateness
of the methods and testing the completeness and accuracy of the data provided by management. Evaluating the reasonableness of the
estimated remediation costs assumption included considering whether the assumption was consistent with external market data and
evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating the
reasonableness of the significant assumptions including estimated remediation costs.
71
/s/ PricewaterhouseCoopers LLP
New York, New York
February 27, 2020
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.
72
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,
2019, 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, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019, 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
None.
73
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
Joshua Dicker
Danion Fielding
Mark J. Olear
Age
41
59
48
55
Position
President, Chief Executive Officer and Director
Executive Vice President, General Counsel and Secretary
Vice President, Chief Financial Officer and Treasurer
Executive Vice President and Chief Operating Officer
Officer Since
2012
2008
2016
2014
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. Constant earned an A.B. from Princeton University.
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. Dicker received his B.A. from the State University of New York at Albany, his
JD magna cum laude from New York Law School and his LL.M. from New York University.
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. Mr. Fielding earned an MBA from The
University of North Carolina, Kenan-Flagler Business School, a M.Sc. from University College London and a M.Eng. from the
University of Manchester.
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. Olear earned a B.A. from Upsala College. Mr. Olear is also a board member of the Board of
Trustees for Springpoint Senior Living.
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, 2019.
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.
74
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.
75
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 77 of this Annual Report on Form 10-K.
Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2019, 2018 and 2017
Schedule III — Real Estate and Accumulated Depreciation and Amortization as of December 31, 2019
Schedule IV — Mortgage Loans on Real Estate as of December 31, 2019
(a) (3) Exhibits
Information in response to this Item is incorporated herein by reference to the Exhibit Index on page 96 of this Annual Report
on Form 10-K.
Item 16. Form 10-K Summary
None.
76
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE II — VALUATION and QUALIFYING ACCOUNTS and RESERVES
for the years ended December 31, 2019, 2018 and 2017
(in thousands)
December 31, 2019:
Allowance for accounts receivable
December 31, 2018:
Allowance for accounts receivable
December 31, 2017
Allowance for accounts receivable
Balance at
Beginning
of Year
Additions
Deductions
Balance
at End
of Year
$
$
$
2,094 $
480 $
2,574 $
—
1,840 $
480 $
226 $
2,094
2,006 $
420 $
586 $
1,840
77
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE III — REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION
As of December 31, 2019
(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
2019
2018
2017
$
$
$
$
1,043,106 $
80,518
(4,252)
(2,246)
(3,475)
1,113,651 $
970,964 $
84,069
(7,950)
(3,091)
(886)
1,043,106 $
150,691 $
21,573
(240)
(546)
(5,586)
165,892 $
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
78
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
Accumulated
Depreciation
Phenix City, AL
Brookland, AR
Fayetteville, AR
Fayetteville, AR
Hope, AR
Jonesboro, AR
Jonesboro, AR
Lake Charles, AR
Lake Charles, AR
Little Rock, AR
Little Rock, AR
Pine Bluff, AR
Rogers, AR
Sulphur, AR
Texarkana, AR
Buckeye, AZ
Chandler, AZ
Gilbert, AZ
Gilbert, AZ
Gilbert, AZ
Gilbert, AZ
Glendale, AZ
Mesa, AZ
Mesa, AZ
Mesa, AZ
Peoria, AZ
Phoenix, AZ
Phoenix, AZ
Phoenix, AZ
Queen Creek, AZ
San Tan Valley, AZ
Sierra Vista, AZ
Sierra Vista, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Tucson, AZ
Alhambra, CA
Bellflower, CA
Benicia, CA
Chula Vista, CA
Coachella, CA
Cotati, CA
Fillmore, CA
Grass Valley, CA
Harbor City, CA
Hesperia, CA
$
1,670 $
1,468
2,867
2,266
1,472
2,985
868
1,468
1,069
978
2,763
2,985
927
777
1,592
3,928
1,838
1,602
3,204
3,112
1,448
1,722
2,185
1,503
3,169
1,331
2,415
1,943
2,177
2,868
4,022
1,765
4,440
2,085
1,261
1,303
1,301
3,652
6,591
1,369
2,224
2,385
2,235
6,072
1,354
1,485
4,442
1,643
728 $
1,319
896
629
473
2,655
695
466
449
443
2,266
819
394
402
534
1,594
577
806
1,365
1,519
465
544
573
664
1,164
339
1,982
632
645
1,613
1,473
1,496
2,591
598
597
713
744
728
513
459
1,166
1,496
1,018
2,064
404
632
845
794
1,670 $
1,468
2,867
2,266
1,472
2,985
868
1,468
1,069
978
2,763
2,985
927
777
1,592
3,928
1,838
1,602
3,204
3,112
1,448
1,722
2,185
1,503
3,169
1,331
2,415
1,943
2,177
2,868
4,022
1,765
4,440
2,085
1,261
1,303
1,301
3,652
6,591
1,369
2,224
2,385
2,235
6,072
1,354
1,485
4,442
1,643
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
942 $
149
1,971
1,637
999
330
173
1,002
620
535
497
2,166
533
375
1,058
2,334
1,261
796
1,839
1,593
983
1,178
1,612
839
2,005
992
433
1,311
1,532
1,255
2,549
269
1,849
1,487
664
590
557
2,924
6,078
910
1,058
889
1,217
4,008
950
853
3,597
849
79
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2019
2007
2018
2018
2018
2007
2007
2018
2018
2018
2019
2018
2018
2018
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2019
2007
2007
2014
2007
2015
2007
2015
2019
2007
25
665
77
54
41
1,389
364
40
41
44
31
69
39
41
49
203
88
118
186
207
69
79
83
95
153
53
229
53
93
224
208
202
318
91
85
102
105
104
18
286
748
372
622
521
251
164
33
467
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
Accumulated
Depreciation
Hesperia, CA
Indio, CA
Indio, CA
La Palma, CA
La Puente, CA
Lakeside, CA
Lakewood, CA
Los Angeles, CA
Oakland, CA
Ontario, CA
Phelan, CA
Pomona, CA
Pomona, 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
Torrance, CA
Aurora, CO
Boulder, CO
Broomfield, CO
Broomfield, CO
Castle Rock, CO
Colorado Springs, CO
Colorado Springs, CO
Denver, CO
Englewood, CO
Golden, CO
Golden, CO
Greenwood Village, CO
Highlands Ranch, CO
Lakewood, CO
Littleton, CO
Lone Tree, CO
Longmont, CO
Louisville, CO
Monument, CO
Morrison, CO
Superior, CO
Thornton, CO
Westminster, CO
$
2,055 $
2,727
1,250
1,971
7,615
3,715
2,612
6,612
5,434
6,613
4,611
1,497
2,347
2,737
2,130
3,193
4,247
5,942
1,941
5,412
5,978
4,751
3,001
1,187
5,386
2,874
3,900
2,380
1,785
5,269
1,382
3,274
2,157
2,495
4,641
6,151
4,077
4,356
2,349
4,139
6,612
3,619
6,605
3,828
5,081
3,748
5,003
1,457
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(128)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
492 $
1,486
302
1,389
6,405
2,695
1,804
5,006
4,123
4,523
3,276
674
1,916
1,216
1,619
2,207
2,604
4,233
749
4,219
5,078
3,489
1,460
627
4,017
2,284
2,875
1,496
1,388
3,141
756
2,865
1,579
2,207
3,247
4,201
2,889
2,921
1,541
2,272
5,125
2,315
5,228
2,798
3,018
2,477
2,722
752
80
1,563 $
1,241
948
582
1,210
1,020
808
1,606
1,311
2,090
1,335
823
431
1,521
511
986
1,643
1,709
1,192
1,193
900
1,262
1,541
560
1,369
590
1,025
884
397
2,000
626
409
578
288
1,394
1,950
1,188
1,435
808
1,867
1,487
1,304
1,377
1,030
2,063
1,271
2,281
705
2,055 $
2,727
1,250
1,971
7,615
3,715
2,612
6,612
5,434
6,613
4,611
1,497
2,347
2,737
2,130
3,193
4,247
5,942
1,941
5,412
5,978
4,751
3,001
1,187
5,386
2,874
3,900
2,380
1,785
5,141
1,382
3,274
2,157
2,495
4,641
6,151
4,077
4,356
2,349
4,139
6,612
3,619
6,605
3,828
5,081
3,748
5,003
1,457
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2015
2015
2015
2007
2015
2015
2019
2015
2015
2015
2015
2019
2019
2014
2015
2015
2015
2015
2007
2015
2015
2015
2015
2015
2019
2017
2015
2017
2017
2015
2017
2017
2017
2017
2015
2015
2015
2015
2015
2015
2015
2015
2015
2017
2015
2015
2015
2015
479
353
257
357
361
289
28
474
382
617
403
28
16
410
183
297
438
487
661
380
281
371
418
169
42
86
274
116
64
570
86
63
88
51
386
569
315
407
218
528
439
386
400
164
604
359
646
194
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
Avon, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bridgeport, CT
Bristol, CT
Brookfield, CT
Darien, CT
Durham, CT
Ellington, CT
Farmington, CT
Franklin, CT
Hamden, CT
Hartford, CT
Manchester, CT
Meriden, CT
Middletown, CT
New Haven, CT
New Haven, CT
New Haven, CT
Newington, CT
North Haven, 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
West Haven, CT
West Haven, CT
Westport, CT
Wethersfield, CT
Willimantic, CT
Wilton, CT
Windsor Locks, CT
Windsor Locks, CT
$
731 $
59
350
313
377
1,594
58
667
994
1,295
466
51
645
665
110
1,532
133
1,413
539
217
954
90
511
-
107
-
931
402
644
545
507
604
507
237
1,434
551
804
515
469
925
185
1,215
604
447
717
520
1,434
1,031
50 $
380
330
298
391
-
489
280
-
-
-
447
-
-
323
-
445
(327)
209
297
-
617
39
671
323
1,219
-
304
1,398
-
16
98
466
603
-
-
-
-
-
-
322
-
12
-
-
212
1,400
-
403 $
24
228
204
246
1,036
20
434
-
842
303
20
527
432
50
989
131
569
351
141
620
365
332
402
44
620
605
167
598
337
330
393
330
201
-
335
516
335
305
567
74
790
393
-
466
338
1,055
670
81
378 $
415
452
407
522
558
527
513
994
453
163
478
118
233
383
543
447
517
397
373
334
342
218
269
386
599
326
539
1,444
208
193
309
643
639
1,434
216
288
180
164
358
433
425
223
447
251
394
1,779
361
Accumulated
Depreciation
291
278
300
257
362
338
346
458
994
275
99
340
6
141
235
333
271
261
345
227
202
184
196
162
252
319
198
405
722
137
171
247
406
517
1,434
145
178
109
99
238
297
258
197
447
152
316
1,499
219
781 $
439
680
611
768
1,594
547
947
994
1,295
466
498
645
665
433
1,532
578
1,086
748
514
954
707
550
671
430
1,219
931
706
2,042
545
523
702
973
840
1,434
551
804
515
469
925
507
1,215
616
447
717
732
2,834
1,031
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2002
1982
1985
1985
1985
2004
1985
1985
2004
2004
2004
1982
2018
2004
1987
2004
1987
1985
1985
1985
2004
1982
1985
1988
1982
1969
2004
1985
2004
2004
1985
1985
1985
2004
2004
2004
2004
2004
2004
2004
1982
2004
1985
2004
2004
1985
2004
2004
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Accumulated
Depreciation
Washington, DC
Washington, DC
Callahan, FL
Fernandina Beach, FL
Largo, FL
Orlando, FL
Yulee, FL
Augusta, GA
Augusta, GA
Columbus, GA
Hinesville, GA
Perry, GA
Haleiwa, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Honolulu, HI
Kaneohe, HI
Kaneohe, HI
Waianae, HI
Waianae, HI
Waipahu, HI
Prospect Heights, IL
Roselle, IL
Louisville, KY
Owensboro, KY
Bossier City, LA
Arlington, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Auburn, MA
Barre, MA
Bedford, MA
Bellingham, MA
Bellingham, MA
Belmont, MA
Bradford, MA
Burlington, MA
Burlington, MA
Dracut, MA
Falmouth, MA
Fitchburg, MA
Foxborough, MA
Framingham, MA
Gardner, MA
Gardner, MA
$
941 $
848
2,894
2,137
2,064
867
1,963
3,150
1,843
1,617
995
1,724
1,522
1,539
1,769
1,071
9,211
1,977
1,364
1,997
1,520
2,458
1,547
2,851
3,356
3,810
2,181
519
600
625
725
175
369
536
1,350
734
3,961
390
650
600
1,250
450
414
390
427
400
550
787
- $
-
-
-
-
34
-
-
-
-
-
-
-
-
-
30
-
176
-
-
-
-
-
-
-
-
-
27
-
-
-
244
249
12
-
73
-
29
-
-
-
-
2,371
33
98
23
-
-
664 $
418
2,056
382
1,143
401
570
286
1,077
984
245
1,312
1,058
1,219
1,192
981
8,194
1,473
822
871
648
945
698
1,741
818
1,011
1,333
338
600
625
725
125
240
348
1,350
476
2,042
254
650
600
1,250
450
458
254
325
260
550
638
82
277 $
430
838
1,755
921
500
1,393
2,864
766
633
750
412
464
320
577
120
1,017
680
542
1,126
872
1,513
849
1,110
2,538
2,799
848
208
-
-
-
294
378
200
-
331
1,919
165
-
-
-
-
2,327
169
200
163
-
149
941 $
848
2,894
2,137
2,064
901
1,963
3,150
1,843
1,617
995
1,724
1,522
1,539
1,769
1,101
9,211
2,153
1,364
1,997
1,520
2,458
1,547
2,851
3,356
3,810
2,181
546
600
625
725
419
618
548
1,350
807
3,961
419
650
600
1,250
450
2,785
423
525
423
550
787
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2013
2013
2017
2017
2019
2000
2017
2017
2019
2019
2019
2017
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2018
2019
2019
2019
2017
1985
2011
2011
2011
1986
1991
1991
2011
1985
2019
1985
2011
2011
2011
2011
1988
1992
1990
1991
2011
2014
106
143
124
226
5
400
179
371
19
22
11
64
335
194
331
87
596
392
346
648
500
844
65
6
36
105
124
186
-
-
-
179
277
136
-
299
9
148
-
-
-
-
204
124
159
116
-
51
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
Accumulated
Depreciation
Gardner, MA
Hingham, MA
Hyde Park, MA
Leominster, MA
Littleton, MA
Lowell, MA
Lowell, MA
Lynn, MA
Marlborough, MA
Maynard, MA
Melrose, MA
Methuen, MA
Methuen, MA
Methuen, MA
Methuen, MA
Newton, MA
North Andover, MA
Peabody, MA
Peabody, MA
Randolph, MA
Revere, MA
Rockland, MA
Salem, MA
Seekonk, 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
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Worcester, MA
Accokeek, MD
Baltimore, MD
Baltimore, MD
$
1,009 $
353
500
571
1,357
361
-
850
550
736
600
650
380
490
300
691
393
650
550
573
1,300
579
600
1,073
450
476
714
1,200
125
429
900
450
358
1,012
490
450
1,300
600
508
550
500
498
548
978
196
692
2,259
802
364 $
111
174
-
-
90
633
-
-
98
-
-
64
98
134
101
33
-
-
257
-
45
-
(373)
-
2
57
-
598
114
-
92
209
832
110
-
-
-
394
-
-
465
10
8
788
-
-
-
657 $
243
322
199
759
201
429
850
550
479
600
650
246
319
150
450
256
650
550
430
1,300
377
600
576
450
309
464
1,200
75
279
900
293
321
659
319
450
1,300
600
508
550
500
322
356
636
-
692
722
-
83
716 $
221
352
372
598
250
204
-
-
355
-
-
198
269
284
342
170
-
-
400
-
247
-
124
-
169
307
-
648
264
-
249
246
1,185
281
-
-
-
394
-
-
641
202
350
984
-
1,537
802
1,373 $
464
674
571
1,357
451
633
850
550
834
600
650
444
588
434
792
426
650
550
830
1,300
624
600
700
450
478
771
1,200
723
543
900
542
567
1,844
600
450
1,300
600
902
550
500
963
558
986
984
692
2,259
802
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
1989
1985
2012
2017
1985
1996
2011
2011
1985
2011
2011
1985
1985
1986
1985
1985
2011
2011
1985
2011
1985
2011
1985
2011
1991
1993
2011
1986
1991
2011
1985
1985
1985
1985
2011
2011
2011
1985
2011
2011
1985
1991
1991
2017
2010
2007
2007
536
178
257
152
78
247
85
-
-
277
-
-
182
207
242
312
153
-
-
290
-
222
-
73
-
114
224
-
321
169
-
189
185
711
228
-
-
-
313
-
-
373
138
236
89
-
869
513
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
$
1,130 $
731
525
1,050
571
1,084
628
468
651
536
445
479
1,039
895
422
753
1,153
491
594
662
1,358
457
822
2,523
1,415
1,530
1,267
1,210
696
1,256
582
673
845
618
342
4,233
986
3,791
449
1,776
350
1,601
3,035
1,232
1,787
675
900
418
Beltsville, MD
Beltsville, MD
Beltsville, MD
Beltsville, MD
Bladensburg, MD
Bowie, MD
Capitol Heights, MD
Capitol Heights, MD
Clinton, MD
College Park, MD
College Park, MD
District Heights, MD
District Heights, MD
Ellicott City, MD
Fort Washington, MD
Greater Landover, MD
Greenbelt, MD
Hyattsville, MD
Hyattsville, 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
Suitland, MD
Upper Marlboro, MD
Biddeford, ME
Lewiston, ME
Maple Grove, MN
Fayetteville, NC
Kannapolis, NC
Kernersville, NC
Lexington, NC
New Bern, NC
Raleigh, NC
Rockingham, NC
Belfield, ND
Allenstown, NH
Concord, NH
Concord, NH
Derry, NH
Gross Amount at Which Carried
at Close of Period
Cost
Capitalized
Subsequent
to Initial
Investment
Building and
Improvements
Total
Cost
Accumulated
Depreciation
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2007
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
2009
1985
1985
2019
2018
2019
2007
2017
2007
2019
2019
2007
2007
2011
2011
1987
0
-
-
-
-
-
-
-
-
-
-
-
-
602
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
244
73
44
16
105
141
179
16
39
760
802
-
-
276
0 $
-
-
-
-
-
-
-
-
-
-
-
-
895
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
391
308
3,278
477
3,175
111
1,475
243
452
2,802
850
1,320
-
-
276
1,130 $
731
525
1,050
571
1,084
628
468
651
536
445
479
1,039
895
422
753
1,153
491
594
662
1,358
457
822
2,523
1,415
1,530
1,267
1,210
696
1,256
582
673
845
626
530
4,233
986
3,791
449
1,776
433
1,601
3,035
1,232
1,787
675
900
434
Land
- $ 1,130 $
731
-
525
-
1,050
-
571
-
1,084
-
628
-
468
-
651
-
536
-
445
-
479
-
1,039
-
-
-
422
-
753
-
1,153
-
491
-
594
-
662
-
1,358
-
457
-
822
-
2,523
-
1,415
-
1,530
-
1,267
-
1,210
-
696
-
1,256
-
582
-
673
-
845
-
235
8
222
188
955
-
509
-
616
-
338
-
301
-
190
83
1,149
-
233
-
382
-
467
-
675
-
900
-
158
16
84
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
Accumulated
Depreciation
Derry, NH
Dover, NH
Dover, NH
Goffstown, NH
Hooksett, NH
Kingston, NH
Londonderry, NH
Londonderry, NH
Manchester, NH
Nashua, NH
Nashua, NH
Nashua, NH
Nashua, NH
Nashua, NH
Nashua, NH
Northwood, NH
Pelham, NH
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
Freehold, NJ
Hasbrouck Heights, NJ
Hillsborough, NJ
Lake Hopatcong, NJ
Lawrence Township, NJ
Livingston, NJ
Long Branch, NJ
Midland Park, NJ
Mountainside, NJ
North Bergen, NJ
North Plainfield, NJ
Paramus, NJ
Parlin, NJ
Paterson, NJ
Ridgewood, NJ
$
950 $
650
1,200
1,737
1,562
1,500
703
1,100
550
825
750
1,750
500
550
1,132
500
-
525
550
939
1,400
1,600
700
743
450
363
382
1,507
719
406
547
709
1,246
494
640
238
1,305
1,303
872
515
201
664
630
227
382
418
619
704
- $
-
-
-
-
-
30
-
-
-
-
-
-
-
-
-
730
-
-
12
-
-
-
20
871
284
322
246
(284)
29
17
(252)
383
683
538
182
-
-
54
494
309
(189)
147
543
86
161
17
423
950 $
650
1,200
697
824
1,500
458
1,100
550
825
750
1,750
500
550
780
500
317
525
550
600
1,400
1,600
700
484
350
200
300
1,000
72
227
346
168
811
95
416
100
800
1,146
568
335
150
134
410
175
249
203
403
458
85
0 $
-
-
1,040
738
-
275
-
-
-
-
-
-
-
352
-
413
-
-
351
-
-
-
279
971
447
404
753
363
208
218
289
818
1,082
762
320
505
157
358
674
360
341
367
595
219
376
233
669
950 $
650
1,200
1,737
1,562
1,500
733
1,100
550
825
750
1,750
500
550
1,132
500
730
525
550
951
1,400
1,600
700
763
1,321
647
704
1,753
435
435
564
457
1,629
1,177
1,178
420
1,305
1,303
926
1,009
510
475
777
770
468
579
636
1,127
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2011
2011
2011
2012
2007
2011
1985
2011
2011
2011
2011
2011
2011
2011
2017
2011
1996
2011
2011
1985
2011
2011
2011
1985
1986
1986
1990
2000
1985
1985
1985
1985
1985
1978
1985
1985
2000
2012
1985
1985
1989
1985
1985
1978
1985
1985
1985
1985
0
-
-
522
676
-
245
-
-
-
-
-
-
-
56
-
146
-
-
310
-
-
-
247
161
306
255
548
292
195
193
150
588
265
509
268
449
68
306
374
233
186
312
478
162
196
207
443
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
Accumulated
Depreciation
Somerset, NJ
Union, NJ
Vernon, NJ
Washington Township, NJ
Watchung, NJ
West Orange, NJ
Albuquerque, NM
Albuquerque, NM
Albuquerque, NM
Albuquerque, NM
Las Cruces, NM
Fernley, NV
Las Vegas, NV
Las Vegas, NV
Las Vegas, NV
Las Vegas, 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
Buffalo, NY
Byron, NY
Chester, NY
Churchville, NY
Corona, NY
Cortlandt Manor, NY
Dobbs Ferry, NY
Dobbs Ferry, NY
$
683 $
437
671
913
450
800
2,308
3,682
1,829
2,322
1,842
1,665
3,472
2,814
3,752
3,094
714
223
1,684
936
684
157
470
789
652
390
423
1,049
1,910
953
884
2,408
877
1,232
282
75
627
476
422
236
313
969
1,158
1,012
2,543
1,872
670
1,345
469 $
410
678
684
342
702
478
541
447
526
468
1,444
2,817
2,251
3,137
2,264
300
296
579
300
320
426
418
-
702
193
-
564
561
-
-
696
-
-
328
426
532
490
150
454
403
300
-
410
640
-
270
-
914 $
649
1,115
1,278
568
1,223
2,308
3,682
1,829
2,322
1,842
1,665
3,472
2,814
3,752
3,094
714
469
1,684
935
684
512
724
789
1,204
444
423
1,049
1,910
953
884
2,408
877
1,232
504
457
940
796
425
608
554
969
1,158
1,012
2,543
1,872
704
1,345
231 $
212
444
365
118
423
-
-
-
-
-
-
-
-
-
-
-
246
-
(1)
-
355
254
-
552
54
-
-
-
-
-
-
-
-
222
382
313
320
3
372
241
-
-
-
-
-
34
-
445 $
239
437
594
226
521
1,830
3,141
1,382
1,796
1,374
221
655
563
615
830
414
173
1,105
635
364
86
306
789
502
251
423
485
1,349
953
884
1,712
877
1,232
176
31
408
306
275
154
151
669
1,158
602
1,903
1,872
434
1,345
86
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
1985
1985
1985
1985
1985
2017
2017
2017
2017
2017
2015
2019
2019
2019
2019
2006
2000
2013
2006
2006
1981
1985
2011
1976
1985
2013
2013
2013
2013
2013
2013
2013
2011
1967
1967
1985
1985
1985
1985
2000
2006
2011
2006
2013
2011
1985
2011
381
234
395
439
174
524
74
84
65
80
69
468
20
16
23
17
166
167
221
166
177
310
255
-
563
176
-
217
225
-
-
252
-
-
315
290
377
347
9
271
258
166
-
227
235
-
242
-
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
East Hampton, NY
East Meadow, NY
East Pembroke, NY
Eastchester, NY
Elmont, NY
Elmsford, NY
Elmsford, NY
Fishkill, NY
Floral Park, NY
Flushing, NY
Flushing, NY
Flushing, NY
Flushing, NY
Forest 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
$
660 $
-
787
1,724
389
-
1,453
1,793
616
516
1,947
2,478
1,936
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
751
1,281
719
1,448
1,907
985
2,316
1,257
971
189
1,887
1,084
126
527
1,192
39 $
1,903
-
993
319
948
-
-
170
241
-
-
-
-
331
242
-
216
282
252
-
-
-
284
-
-
-
42
86
-
-
285
110
274
-
-
-
-
-
-
-
-
380
-
-
399
-
-
428 $
1,670
537
2,302
231
581
1,453
1,793
356
320
1,405
1,801
1,413
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
489
1,281
719
1,448
1,907
985
2,316
827
971
104
1,887
1,084
78
527
1,192
87
271 $
233
250
415
477
367
-
-
430
437
542
677
523
-
347
368
-
348
444
302
-
-
-
341
-
-
825
218
277
1,534
-
401
219
536
-
-
-
-
-
-
430
-
465
-
-
447
-
-
Accumulated
Depreciation
242
52
138
68
357
268
-
-
302
290
191
239
200
-
220
238
-
348
305
188
-
-
-
225
-
-
557
196
242
490
-
259
206
383
-
-
-
-
-
-
238
-
273
-
-
332
-
-
699 $
1,903
787
2,717
708
948
1,453
1,793
786
757
1,947
2,478
1,936
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
1,025
1,281
719
1,448
1,907
985
2,316
1,257
971
569
1,887
1,084
525
527
1,192
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1985
1988
2006
2011
1978
1971
2011
2011
1998
1998
2013
2013
2013
2013
1978
1985
2011
1982
1985
1985
2011
2011
2011
1978
2011
2011
2008
1985
1985
2013
2011
1985
1985
1985
2011
2011
2011
2011
2011
2011
2006
2011
1982
2011
2011
1972
2011
2011
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Accumulated
Depreciation
Niskayuna, NY
Ossining, NY
Peekskill, NY
Pelham, NY
Pelham, NY
Perry, NY
Pleasant Valley, NY
Port Chester, NY
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
Rye, NY
Sag Harbor, NY
Saint Albans, NY
Sayville, NY
Scarsdale, NY
Shrub Oak, NY
Sleepy Hollow, NY
Spring Valley, NY
Staten Island, NY
Staten Island, NY
Staten Island, NY
Stony Brook, NY
Tarrytown, NY
Tuckahoe, NY
Wantagh, 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
$
425 $
231
2,207
137
1,035
1,444
398
1,015
185
591
1,020
1,340
1,306
1,355
1,232
553
2,783
724
1,605
872
704
330
344
1,301
1,061
282
749
301
350
390
176
956
1,650
640
1,488
990
1,049
936
-
1,458
-
-
291
-
1,021
1,907
2,365
1,700
35 $
197
-
307
-
-
183
-
3,084
-
-
(60)
-
-
(32)
-
-
-
-
-
35
106
246
-
398
316
-
323
290
89
281
-
-
-
-
-
-
-
569
-
798
543
1,050
944
63
-
-
-
275 $
117
2,207
75
1,035
1,044
240
1,015
246
591
1,020
1,280
1,306
1,355
1,200
303
2,104
432
1,605
872
458
215
300
1,301
691
130
749
196
228
254
105
956
1,650
370
1,488
690
1,049
936
303
1,458
375
-
216
684
665
1,907
2,365
-
88
185 $
311
-
369
-
400
341
-
3,023
-
-
-
-
-
-
250
679
292
-
-
281
221
290
-
768
468
-
428
412
225
352
-
-
270
-
300
-
-
266
-
423
543
1,125
260
419
-
-
1,700
460 $
428
2,207
444
1,035
1,444
581
1,015
3,269
591
1,020
1,280
1,306
1,355
1,200
553
2,783
724
1,605
872
739
436
590
1,301
1,459
598
749
624
640
479
457
956
1,650
640
1,488
990
1,049
936
569
1,458
798
543
1,341
944
1,084
1,907
2,365
1,700
Date of
Initial
Leasehold or
Acquisition
Investment (1)
1986
1985
2011
1985
2011
2006
1986
2011
1985
2011
2011
2011
2011
2011
2011
2006
2013
1998
2013
2011
1985
1985
1998
2011
1985
1969
2011
1985
1985
1985
1978
2011
2011
1998
2011
2006
2011
2011
1972
2011
1993
1970
1972
1990
1985
2011
2011
2013
185
202
-
253
-
221
217
-
189
-
-
-
-
-
-
138
250
253
-
-
251
191
161
-
558
414
-
292
274
208
234
-
-
230
-
166
-
-
213
-
221
388
631
131
375
-
-
387
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
Accumulated
Depreciation
Akron, OH
Crestline, OH
Loveland, OH
Mansfield, OH
Mansfield, OH
Monroeville, OH
Oklahoma City, OK
Oklahoma City, OK
Oklahoma City, OK
Stillwater, OK
Banks, OR
Estacada, OR
McMinnville, OR
Pendleton, OR
Portland, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Salem, OR
Silverton, OR
Springfield, OR
Stayton, OR
Allison Park, PA
Harrisburg, PA
Lancaster, PA
New Kensington, PA
Philadelphia, PA
Philadelphia, PA
Phoenixville, PA
Pottsville, PA
Reading, PA
Barrington, RI
East Providence, RI
N. Providence, RI
Blythewood, SC
Chapin, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
Columbia, SC
$
1,530 $
1,202
1,045
922
1,950
2,580
1,311
1,182
868
2,800
498
646
2,867
766
4,416
1,071
1,408
4,614
4,215
1,350
956
1,398
543
1,500
399
642
1,375
405
1,252
385
452
750
490
2,297
543
3,217
1,682
575
868
792
2,460
3,371
1,436
464
2,637
1,643
927
1,995
- $
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
213
56
-
175
-
89
1
49
180
(1,637)
158
-
-
-
-
-
-
-
-
-
-
-
-
-
385 $
285
362
332
700
485
625
587
371
1,469
498
84
394
122
3,368
399
524
3,517
3,182
521
456
796
296
850
199
300
675
264
814
76
148
-
319
14
353
2,405
1,135
345
455
463
1,569
2,016
472
253
1,254
1,302
495
1,130
89
1,145 $
917
683
590
1,250
2,095
686
595
497
1,331
-
562
2,473
644
1,048
672
884
1,097
1,033
829
500
602
247
650
413
398
700
316
438
398
305
799
351
646
348
812
547
230
413
329
891
1,355
964
211
1,383
341
432
865
1,530 $
1,202
1,045
922
1,950
2,580
1,311
1,182
868
2,800
498
646
2,867
766
4,416
1,071
1,408
4,614
4,215
1,350
956
1,398
543
1,500
612
698
1,375
580
1,252
474
453
799
670
660
701
3,217
1,682
575
868
792
2,460
3,371
1,436
464
2,637
1,643
927
1,995
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2017
2008
2017
2008
2009
2009
2018
2018
2018
2019
2015
2015
2017
2015
2015
2015
2015
2015
2015
2015
2017
2015
2017
2010
1989
1989
2010
1985
2009
1985
1990
1989
1985
1985
1985
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2018
147
494
98
301
631
1,058
56
50
44
5
-
140
307
177
273
223
242
288
289
220
80
194
46
495
337
363
300
273
196
67
305
799
282
230
273
117
78
29
62
44
128
186
126
28
175
34
48
73
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
$
2,109 $
2,531
2,082
2,177
2,230
1,036
3,655
1,114
1,339
1,246
3,950
2,561
1,624
4,413
973
2,179
633
1,729
694
1,056
720
1,738
816
1,712
2,603
3,231
3,234
1,901
1,644
2,046
1,116
1,796
1,560
1,352
789
2,368
462
3,511
1,711
2,073
2,162
1,526
2,400
1,425
3,168
1,278
1,816
2,370
Columbia, SC
Columbia, SC
Elgin, SC
Elgin, SC
Gaston, SC
Gilbert, SC
Irmo, SC
Irmo, SC
Irmo, SC
Irmo, SC
Irmo, SC
Johns Island, 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
Lexington, SC
Pelion, SC
West Columbia, SC
West Columbia, SC
West Columbia, SC
Arlington, TX
Arlington, TX
Arlington, TX
Arlington, TX
Austin, TX
Austin, TX
Austin, TX
Austin, TX
Center, TX
Corpus Christi, TX
Corpus Christi, TX
Corpus Christi, TX
El Paso, TX
El Paso, TX
El Paso, TX
El Paso, TX
El Paso, TX
Gross Amount at Which Carried
at Close of Period
Cost
Capitalized
Subsequent
to Initial
Investment
Building and
Improvements
Total
Cost
Accumulated
Depreciation
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2018
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2018
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2018
2018
2018
2017
2017
2017
2017
2018
2018
2018
2018
2007
2007
2007
2017
2018
2017
2017
2017
2017
2017
2017
2017
2017
79
72
122
151
165
76
240
57
62
141
151
42
81
145
54
91
43
69
74
85
64
56
48
34
64
102
154
132
49
162
139
53
47
42
36
911
134
1,083
55
57
65
63
173
50
140
67
61
83
989 $
919
916
1,203
1,296
602
1,913
447
472
1,177
1,148
676
625
995
391
703
324
461
522
624
501
549
480
302
734
1,230
2,036
880
361
1,300
1,066
607
552
465
375
1,630
188
1,982
347
591
433
470
1,290
327
1,015
453
403
603
2,109 $
2,531
2,082
2,177
2,230
1,036
3,655
1,114
1,339
1,246
3,950
2,561
1,624
4,413
973
2,179
633
1,729
694
1,056
720
1,738
816
1,712
2,603
3,231
3,234
1,901
1,644
2,046
1,116
1,796
1,560
1,352
789
2,368
462
3,577
1,711
2,073
2,162
1,526
2,400
1,425
3,168
1,278
1,816
2,370
Land
- $ 1,120 $
1,612
-
1,166
-
974
-
934
-
434
-
1,742
-
667
-
867
-
69
-
2,802
-
1,885
-
999
-
3,418
-
582
-
1,476
-
309
-
1,268
-
172
-
432
-
219
-
1,189
-
336
-
1,410
-
1,869
-
2,001
-
1,198
-
1,021
-
1,283
-
746
-
50
-
1,189
-
1,008
-
887
-
414
-
738
-
274
-
1,595
66
1,364
-
1,482
-
1,729
-
1,056
-
1,110
-
1,098
-
2,153
-
825
-
1,413
-
1,767
-
90
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
Building and
Improvements
Total
Cost
Accumulated
Depreciation
El Paso, TX
Fort Worth, TX
Garland, TX
Garland, TX
Garland, TX
Grand Prairie, TX
Grand Prairie, TX
Harker Heights, TX
Houston, TX
Houston, TX
Keller, TX
Lewisville, TX
Linden, TX
Longview, TX
Mathis, TX
Mesquite, TX
Midlothian, TX
Port Arthur, TX
Rowlett, TX
San Marcos, TX
Temple, TX
Texarkana, TX
Texarkana, TX
Texarkana, TX
The Colony, 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
Emporia, VA
Fairfax, VA
Fairfax, VA
Fairfax, VA
$
1,679 $
2,115
4,439
3,296
2,208
2,000
1,413
2,051
1,689
2,803
2,507
494
2,160
1,660
3,138
1,687
429
2,648
1,284
1,954
2,405
2,316
1,861
1,791
4,396
3,884
1,637
1,771
649
1,327
735
1,582
656
1,388
1,757
712
1,718
2,062
2,014
1,083
1,464
840
779
1,004
3,364
3,348
4,454
1,825
Land
- $ 1,085 $
866
439
245
1,504
1,415
914
579
224
535
996
110
1,514
1,239
2,687
1,093
72
505
840
251
1,205
1,643
1,197
992
337
894
685
1,139
649
1,327
735
1,150
409
1,020
1,313
712
1,718
1,603
1,516
1,083
1,085
840
398
385
2,227
2,351
3,370
1,190
225
-
-
-
-
-
(9)
-
-
-
72
-
-
-
-
-
-
-
-
(10)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(185)
110
-
-
-
-
91
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2017
2007
2014
2014
2018
2018
2018
2007
2007
2016
2007
2008
2018
2018
2017
2018
2007
2016
2018
2007
2007
2018
2018
2018
2007
2007
2018
2018
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2005
1990
1990
2019
2013
2013
2013
79
767
935
683
60
52
47
1,169
791
322
879
267
58
37
68
53
239
314
38
937
704
55
64
67
2,149
1,774
78
55
-
-
-
165
102
155
180
-
-
172
188
-
148
-
84
677
5
355
386
241
594 $
1,474
4,000
3,051
704
585
499
1,463
1,465
2,268
1,511
456
646
421
451
594
357
2,143
444
1,703
1,190
673
664
799
4,059
2,990
952
632
-
-
-
432
247
368
444
-
-
459
498
-
379
-
196
729
1,137
997
1,084
635
1,679 $
2,340
4,439
3,296
2,208
2,000
1,413
2,042
1,689
2,803
2,507
566
2,160
1,660
3,138
1,687
429
2,648
1,284
1,954
2,395
2,316
1,861
1,791
4,396
3,884
1,637
1,771
649
1,327
735
1,582
656
1,388
1,757
712
1,718
2,062
2,014
1,083
1,464
840
594
1,114
3,364
3,348
4,454
1,825
Gross Amount at Which Carried
at Close of Period
Initial Cost
of Leasehold
or Acquisition
Investment to
Company (1)
Cost
Capitalized
Subsequent
to Initial
Investment
Land
Building and
Improvements
Total
Cost
Fairfax, VA
Farmville, VA
Fredericksburg, VA
Fredericksburg, VA
Fredericksburg, VA
Fredericksburg, VA
Glen Allen, VA
Glen Allen, VA
King William, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Mechanicsville, VA
Montpelier, VA
Norfolk, VA
Petersburg, VA
Portsmouth, VA
Richmond, VA
Ruther Glen, VA
Sandston, VA
Spotsylvania, VA
Springfield, VA
Auburn, WA
Bellevue, WA
Chehalis, WA
Colfax, WA
Federal Way, WA
Fife, WA
Kent, WA
Monroe, WA
Port Orchard, WA
Puyallup, WA
Puyallup, WA
Puyallup, WA
Renton, WA
Seattle, WA
Seattle, WA
Silverdale, WA
Snohomish, WA
South Bend, WA
Tacoma, WA
Tacoma, WA
Tenino, WA
Vancouver, WA
Wilbur, WA
Miscellaneous
$
2,078 $
1,227
1,279
1,716
1,289
3,623
1,037
1,077
1,688
1,125
903
1,476
957
1,677
1,043
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
4,050
2,035
1,485
1,884
717
2,178
955
760
518
671
937
1,214
629
44,237
$ 1,049,787 $
- $
-
-
-
30
-
-
-
-
-
-
-
14
-
-
(114)
(70)
-
33
(41)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,365 $
622
469
996
798
2,828
412
322
1,068
505
273
876
324
1,157
223
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
2,394
465
952
1,223
193
1,217
955
121
518
671
219
163
153
15,516 23,858
63,864 $ 669,351 $
92
Date of
Initial
Leasehold or
Acquisition
Investment (1)
2013
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
2005
1990
2005
1990
2005
2005
2005
2005
2013
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
various
Accumulated
Depreciation
232
358
479
426
309
470
369
446
366
366
372
355
394
307
485
446
230
369
368
346
257
366
473
454
286
228
257
323
363
225
245
343
431
207
551
418
196
172
136
282
-
162
-
-
184
244
136
26,331
165,892
2,078 $
713 $
1,227
605
1,279
810
1,716
720
1,319
521
3,623
795
1,037
625
1,077
755
1,688
620
1,125
620
903
630
1,476
600
971
647
1,677
520
1,043
820
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
4,050
1,656
2,035
1,570
1,485
533
1,884
661
717
524
2,178
961
955
-
760
639
518
-
671
-
937
718
1,214
1,051
629
476
35,895
59,753
444,300 $ 1,113,651 $
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 $1,128,728,000 at December 31, 2019.
93
GETTY REALTY CORP. and SUBSIDIARIES
SCHEDULE IV—MORTGAGE LOANS ON REAL ESTATE
As of December 31, 2019
(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
Smithtown, NY
Nyack, NY
Baldwin, NY
Norwalk, CT
Stafford Springs, CT
Waterbury, CT
Great Barrington, MA
Westfield, MA
Bristol, CT
Middletown, CT
Simsbury, CT
Milford, CT
Fairfield, CT
Hartford, CT
Wilmington, DE
Fairhaven, MA
New Bedford, MA
Fitchburg, MA
Oxford, MA
Kernersville/Lexington, NC
Pelham, NH
Bayonne, NJ
Belleville, NJ
Ridgefield, NJ
Irvington, NJ
Jersey City, NJ
Colonia, NJ
Swedesboro, NJ
Glendale, NY
Seaford, NY
Elmont, NY
Scarsdale, NY
Pleasant Valley, NY
Freeport, NY
Colonie, NY
Latham, NY
Malta, NY
Coxsackie, NY
Brewster, NY
Lindenhurst, NY
Kenmore, NY
Rochester, NY
Savona, NY
94
9.0% 11/2024
9.0%
5/2021
9.0% 10/2020
6/2020
8.0%
1/2027
9.0%
9/2022
9.0%
9/2020
9.0%
4/2022
9.0%
1/2021
9.0%
2/2021
9.0%
4/2021
9.0%
9.0% 11/2021
5/2026
9.0%
5/2026
9.0%
5/2026
9.0%
3/2025
9.0%
3/2025
9.0%
9.0%
3/2024
9.0% 11/2020
9.0%
9/2020
9.0% 10/2021
9.0% 10/2021
3/2023
9.0%
7/2026
8.0%
1/2023
9.0%
3/2020
9.0%
3/2021
9.0%
4/2021
9.0%
7/2022
9.0%
7/2025
9.5%
7/2020
9.0%
4/2021
9.0%
7/2025
9.0%
9.0%
1/2020
9.0% 10/2021
9.0% 11/2025
9/2020
9.0%
5/2020
9.0%
8/2023
9.0%
1/2021
9.0%
3/2023
9.0%
9.0%
7/2021
9.0% 10/2022
6/2026
9.5%
9.0% 12/2020
2/2025
9.0%
2/2025
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
280
253
300
319
232
171
58
303
76
308
192
398
390
70
84
458
363
187
86
568
73
308
315
172
300
500
320
77
525
488
450
337
230
206
143
169
572
153
554
350
74
174
157
712
222
368
2,000
280
231
260
286
200
148
50
268
75
305
190
384
377
66
72
389
320
165
79
53
67
256
273
149
188
410
270
66
444
404
353
290
195
173
133
145
527
134
501
347
64
167
151
Type of
Loan/Borrower
Description
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
Note receivable
Location(s)
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
Periodic
Payment
Terms (a)
Prior
Liens
9.0% 10/2025
9.0% 11/2025
7/2024
10.0%
8/2022
9.0%
9.0%
9/2021
9.0% 10/2021
8/2022
9.0%
2/2022
9.0%
9.0%
2/2021
9.0% 10/2020
1/2023
9.0%
Face Value
at
Inception
230
200
237
333
184
357
153
186
102
265
38
17,457
Amount of
Principal
Unpaid at
Close of Period
225
196
101
304
162
315
138
166
88
142
35
15,079
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
9.5%
1/2021
9.0% 12/2028
I(b)
(c)
18,400
—
$ 35,857 $
14,720
1,056
30,855
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,
2019
2018
2017
$
33,519 $
32,366 $
32,737
1,734
4,287
1,505
(3,771)
(627)
30,855 $
(2,368)
(766)
33,519 $
(1,227)
(649)
32,366
$
95
EXHIBIT INDEX
Exhibit
Number
3.1
GETTY REALTY CORP.
Annual Report on Form 10-K
for the year ended December 31, 2019
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
Holdings, filed January 21, 1998.
to Articles of Incorporation of
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
Articles of Amendment of Holdings, changing its name to
Getty Realty Corp., filed January 30, 1998.
3.5
Articles of Amendment of Holdings, filed August 1, 2001.
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.
3.6
Articles Supplementary
Holdings, filed October 25, 2017.
to Articles of Incorporation of
3.7
Amendment to By-Laws of Getty Realty Corp.
4.1
Dividend Reinvestment/Stock Purchase Plan.
Filed as Exhibit 3.1 to the Company’s Quarterly
the quarter ended
Report on Form 10-Q
September 30, 2017
and
incorporated herein by reference.
(File No. 001-13777)
for
Filed as Exhibit 3.7 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2018
(File No. 001-13777) and incorporated herein by
reference.
Included under the heading “Description of Plan” on
pages 5 through 18 of the Company’s Registration
Statement on Form S-3D filed on April 22, 2004 (File
No. 333-114730) and incorporated herein by reference.
4.2
Description of Securities.
Filed with this 10-K.
10.1*
Retirement and Profit Sharing Plan (restated as of December 1,
2012).
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.
10.4*
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 Incentive Compensation
Plan.
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.
96
Exhibit
Number
10.7*
10.8*
Description of Document
Location of Document
Form of restricted stock unit grant award under the 2004 Getty
Realty Corp. Omnibus Incentive Compensation Plan, as
amended.
Amendment
Incentive Compensation Plan dated December 31, 2008.
the 2004 Getty Realty Corp. Omnibus
to
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*
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.
10.18*
Getty Realty Corp. Amended and Restated 2004 Omnibus
Incentive Compensation Plan.
10.20** 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.
10.21** 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.
10.28
10.29**
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 America (“Prudential”) and
certain affiliates of Prudential.
10.30** Transaction Agreement between Empire Petroleum Partners,
LLC and Getty Realty Corp., dated June 22, 2017.
10.31
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.
10.32** 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 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.
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.
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.
10.33** 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
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.
97
Exhibit
Number
and certain affiliates of Prudential.
Description of Document
Location of Document
10.34** Note Purchase and Guarantee Agreement, dated as of June 21,
2018, among Getty Realty Corp., certain of its subsidiaries
party
Insurance Company
thereto, Metropolitan Life
(“MetLife”) and certain affiliates of MetLife.
10.35*
Form of Indemnification Agreement between the Company
and its directors.
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.
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.
10.36**
Fourth Amended and Restated Note Purchase and Guarantee
Agreement, dated as of September 12, 2019, among Getty
Realty Corp., certain of its subsidiaries party thereto, the
Prudential and certain affiliates of Prudential.
Filed as Exhibit 10.1 to the Company’s Quarterly
Report on Form 10-Q filed on September 30, 2019
(File No. 001-13777) and incorporated herein by
reference.
10.37** Note Purchase and Guarantee Agreement, dated as of
September 12, 2019, among Getty Realty Corp., certain of its
subsidiaries party
thereto and American General Life
Insurance Company (“AIG”).
Filed as Exhibit 10.2 to the Company’s Quarterly
Report on Form 10-Q filed on September 30, 2019
(File No. 001-13777) and incorporated herein by
reference.
10.38**
10.39
Note Purchase and Guarantee Agreement, dated as of
September 12, 2019, among Getty Realty Corp., certain of its
thereto, Massachusetts Mutual Life
subsidiaries party
Insurance Company (“MassMutual”) and certain of
its
affiliates.
Consent and Second Amendment, dated as of September 12,
2019, to Credit Agreement among Getty Realty Corp., certain
of its subsidiaries party thereto, Bank of America, N.A. as
Administrative Agent, Swing Line Lender, an L/C Issuer and
as a Lender, and the other leaders party thereto.
Filed as Exhibit 10.3 to the Company’s Quarterly
Report on Form 10-Q filed on September 30, 2019
(File No. 001-13777) and incorporated herein by
reference.
Filed as Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q filed on September 30, 2019
(File No. 001-13777) and incorporated herein by
reference.
21
23
31.1
31.2
32.1
32.2
Subsidiaries of the Company.
Filed herewith.
Consent of Independent Registered Public Accounting Firm.
Filed herewith.
Certification of Christopher J. Constant, President and Chief
Executive Officer, pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended.
Filed herewith.
Certification of Danion Fielding, Vice President, Chief
Financial Officer and Treasurer, pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
Filed herewith.
Certification of Christopher J. Constant, President and Chief
Executive Officer, pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934, as amended, and 18 U.S.C. §
1350.
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.
101.INS
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema
Filed herewith.
Filed herewith.
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase
Filed herewith.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
Filed herewith.
101.LAB Inline XBRL Taxonomy Extension Label Linkbase
Filed herewith.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
Filed herewith.
98
Exhibit
Number
Description of Document
Location of Document
104
Cover Page Interactive Data File
Formatted as Inline XBRL and contained in Exhibit
101.
* 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 2019 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 2019 Annual Report on Form 10-K.
99
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, 2020
By:
/S/ EUGENE SHNAYDERMAN
Eugene Shnayderman
Chief Accounting Officer and Controller
(Principal Accounting Officer)
February 27, 2020
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, 2020
/S/ PHILIP E. COVIELLO
Philip E. Coviello
Director
February 27, 2020
/S/ Mary Lou Malanoski
Mary Lou Malanoski
Director
February 27, 2020
/S/ HOWARD SAFENOWITZ
Howard Safenowitz
Director
February 27, 2020
By:
By:
By:
/S/ MILTON COOPER
Milton Cooper
Director
February 27, 2020
/S/ LEO LIEBOWITZ
Leo Liebowitz
Director and Chairman of the Board
February 27, 2020
/S/ RICHARD E. MONTAG
Richard E. Montag
Director
February 27, 2020
100
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
Exhibit 4.2
As of December 31, 2019, Getty Realty Corp. (“we”, “our”, “us” or the “Company”) has its common stock, $0.01 par value
per share (“common stock”) registered under Section 12 of the Securities Exchange Act of 1934.
The following description of our common stock, which is not complete and is subject to, and qualified in its entirety by
reference to, our charter and bylaws, each of which is filed or incorporated by reference as an exhibit to our Annual Report on Form
10-K of which this Exhibit is a part, and the Maryland General Corporation Law (“MGCL”). You should read our charter and bylaws
and the applicable provisions of the MGCL for a complete statement of the provisions described under this caption “Description of
Common Stock” and for other provisions that may be important to you.
Common Stock
Under our charter, we have the authority to issue 100,000,000 shares of common stock, par value $0.01 per share. At
December 31, 2019, we had outstanding 41,367,846 shares of common stock. Our common stock is traded on the New York Stock
Exchange under the symbol “GTY.”
Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the
stockholders. For the election of our board of directors, holders of common stock are not entitled to cumulative voting rights. Our
common stockholders are entitled to receive ratably such dividends that we declare out of funds legally available therefor. In the event
of a liquidation, dissolution or winding up of Getty, holders of our common stock have the right to a ratable portion of the assets
remaining after payment of liabilities and liquidation preferences of any outstanding shares of our preferred stock. The holders of our
common stock have no preemptive rights or rights to convert their common stock into other securities. The rights of the holders of our
common stock will be subject to, and may be adversely affected by, the rights of the holders of our preferred stock.
Under the MGCL and our charter, a distribution (whether by dividend, redemption or other acquisition of shares) to holders
of shares of our common stock may be made only if, after giving effect to the distribution, our total assets are greater than our total
liabilities plus the amount necessary to satisfy the preferential rights upon dissolution of stockholders whose preferential rights on
dissolution are superior to the holders of common stock. We have complied with this requirement in all of our prior distributions to
holders of common stock.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its charter, merge, sell all or substantially all of
its assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless approved by the
affirmative vote of stockholders holding at least two-thirds of the shares entitled to vote on the matter. A Maryland corporation may
provide, however, in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes
entitled to be cast on the matter. Our charter provides for approval of these matters by the affirmative vote of the holders of shares
entitled to cast a majority of all the votes entitled to be cast on the matter.
Ownership and Transfer Restrictions
For us to qualify as a REIT under the Code, not more than 50% in value of our outstanding capital stock may be owned,
actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a
taxable year. Our capital stock also must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12
months or during a proportionate part of a shorter taxable year. In addition, rent from related party tenants (generally, a tenant of a
REIT owned, actually or constructively, 10% or more by the REIT, or a 10% owner of the REIT) is not qualifying income for
purposes of the income tests under the Code. Our charter prohibits any holder from owning, or being deemed to own by virtue of the
constructive ownership provisions of the Code, shares of our capital stock to the extent that such ownership or deemed ownership
would result in the Company failing to qualify as a REIT.
In addition, subject to certain exceptions specified in our charter, (a) no holder may (i) own, or be deemed to own by virtue of
certain constructive ownership provisions of the 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 Code, in excess of 9.9% (by value or number of shares, whichever is more restrictive) of the
outstanding shares of our common stock; (b) no holder may (i) own, or be deemed to own by virtue of certain constructive ownership
provisions of the Code, in excess of 5.0% of the number (in value or in number of shares, whichever is more restrictive) of any class
or series of the outstanding shares of our preferred stock or (ii) own, or be deemed to own by virtue of certain other constructive
ownership provisions of the Code, in excess of 9.9% (by value or number of shares, whichever is more restrictive) of any class or
series of outstanding shares of our preferred stock; and (c) no holder may (i) own, or be deemed to own by virtue of certain
constructive ownership provisions of the Code, in excess of 5.0% (in value) of the aggregate of the outstanding shares of our capital
stock or (ii) own, or be deemed to own by virtue of certain other constructive ownership provisions of the Code, in excess of 9.9% (in
value) of the aggregate of the outstanding shares of our capital stock.
The constructive ownership rules under the Code are complex and may cause shares of capital stock owned actually or
constructively by a group of related individuals or entities or both to be deemed constructively owned by one individual or entity. As a
result, the acquisition of less than 5.0% of our outstanding common stock, 5.0% of our outstanding preferred stock or 5.0% of our
outstanding capital stock (or the acquisition of an interest in an entity that owns, actually or constructively, our capital stock) by an
individual or entity could cause that individual or entity (or another individual or entity) to own our stock in excess of the above
ownership limits.
Our board of directors may waive the ownership limit and the related party limit (as described below) with respect to a
particular stockholder if evidence satisfactory to our board of directors and our tax counsel is presented that such ownership will not
then or in the future jeopardize our status as a REIT. Because rent from related party tenants is not qualifying rent for purposes of the
gross income tests under the Code, our charter provides that no individual or entity may own, or be deemed to own by virtue of certain
constructive ownership provisions of the Code (which differ from the constructive ownership provisions applied to the above
ownership limits), in excess of 9.9% in value of the outstanding common stock of a tenant of the Company. We refer to this ownership
limit as the related party limit. As a condition of any waiver, our board of directors may require a ruling from the Internal Revenue
Service (the “IRS”), an opinion of counsel satisfactory to it or an undertaking, or both from the applicant with respect to preserving
our REIT status. The foregoing restrictions on transferability and ownership will not apply if our board of directors determines that it
is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. If shares of capital stock in excess of the
ownership limit or the related party limit, or shares which would otherwise cause the REIT to be beneficially owned by less than 100
persons or which would otherwise cause us to be “closely held” within the meaning of the Code or would otherwise result in our
failure to qualify as a REIT, are issued or transferred to any person, that issuance or transfer shall be null and void to the intended
transferee, and the intended transferee would acquire no rights to the stock. Shares transferred in excess of the ownership limit or the
related party limit, or shares which would otherwise cause us to be “closely held” within the meaning of the Code or would otherwise
result in our failure to qualify as a REIT, will automatically be transferred to a trustee of a trust for the benefit of one or more
charitable beneficiaries selected by us. While these shares are held in trust, the trustee will be entitled to receive, in trust for the
beneficiary, all dividends and other distributions and will be entitled to exercise all voting rights with respect to those shares. Within
20 days of the transfer, the trustee shall sell the shares held in the trust to one of more persons, designated by the trustee, whose
ownership of the shares will not violate the ownership limit. The net proceeds shall be divided as follows: the intended transferee will
receive the lesser of (i) the price paid by the intended transferee or, if the intended transferee did not give value for such shares
(through a gift, devise or otherwise), a price per share equal to the market value of the shares on the date of the purported transfer to
the intended transferee and (ii) the price per share received by the trustee from the sale or other disposition of the shares held in the
trust. Any net sales proceeds in excess of the amount payable to the intended transferee shall be immediately paid to the charitable
beneficiary.
In addition, until the trustee has sold the shares of stock held in trust, such shares are purchasable by us at a price equal to the
lesser of (i) the price per share in the transaction that resulted in such transfer to the trust (or, in the case of a devise or gift, the market
price at the time of such devise or gift) and (ii) the market price for the stock on the date we determine to purchase the stock.
All certificates representing shares of our capital stock will bear a legend referring to the restrictions described above.
Our board of directors granted exemptions from the ownership limit to certain existing stockholders (Leo Liebowitz, Howard
Safenowitz and Milton Cooper and their affiliated trusts and partnerships) who own shares of our common stock in excess of the
ownership limits.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare, Inc., 462 South 4th Street, Suite 1600 Louisville, KY
40202.
Possible Anti-Takeover Effects of Maryland Law and our Charter and Bylaws
Our charter and bylaws contain certain provisions that may make it more difficult for a third party to acquire control of us
without the approval of our board of directors. In addition, certain provisions of the Maryland General Corporation Law may hinder or
delay an attempted takeover of our company other than through negotiation with our board of directors. These provisions could
discourage attempts to acquire us or remove our management even if some or a majority of our stockholders believe this action to be
in their best interest, including attempts that might result in our stockholders’ receiving a premium over the market price of their
shares of our capital stock.
Number of Directors; Vacancies. The number of directors on our board of directors may only be altered by the action of a
majority of our entire board of directors. A vacancy resulting from an increase in the number of directors may be filled by a majority
vote of the entire board of directors. A vacancy on our board of directors for any cause other than an increase in the number of
directors may be filled by a majority of the remaining directors, although such majority may be less than a quorum. Any individual so
elected as director holds office until the next annual meeting of stockholders and until his successor is elected and qualifies.
Power to Issue Preferred Stock. Our board of directors has the authority, without further action by the holders of our common
stock, to issue shares of preferred stock in one or more classes or series and to fix the relative designations, powers, preferences and
privileges of the preferred stock, any or all of which may be greater than the rights of the common stock. Our board of directors,
without stockholder approval, can issue preferred stock with voting, conversion or other rights that could adversely affect the voting
power and other rights of the holders of common stock.
Power to Reclassify Shares of Our Stock. Our charter authorizes our board of directors to classify and reclassify any unissued
shares of stock into one or more classes or series of stock, and to divide and classify shares of any class into one or more series of such
class. Prior to issuance of classified or reclassified shares of any class or series, our board of directors is required by the Maryland
General Corporation Law and by our charter to set the preferences, conversion or other rights, voting powers, restrictions, limitations
as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series.
Special Stockholders’ Meetings. Our bylaws provide that special meetings of stockholders may be called only by our
president, chairman of the board, chief executive officer or board of directors, or by our stockholders only upon the written request of
stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.
Advance Notice Provisions. Our bylaws establish an advance written notice procedure for stockholders seeking to nominate
candidates for election as directors at any annual meeting of stockholders and to bring business before an annual meeting of our
stockholders. Our bylaws provide that only persons who are nominated by or at the direction of our board of directors or by a
stockholder who has given timely written notice to our secretary before the meeting to elect directors will be eligible for election as
our directors. Our bylaws also provide that any matter to be presented at any meeting of stockholders must be presented either by our
board of directors or by a stockholder in compliance with the procedures in our bylaws. A stockholder must give timely written notice
to our secretary of its intention to present a matter before an annual meeting of stockholders.
Restrictions of Transfer. The ownership and transfer restriction provisions in our charter described above could have the
effect of delaying, deferring or preventing a takeover or other transaction in which stockholders might receive a premium for their
stock over the then prevailing market price or which stockholders might believe to be otherwise in their best interest.
Maryland Business Combination Act. In addition to these provisions of our charter and bylaws, we are subject to the
provisions of 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.
Maryland Control Share Acquisition Act. 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.
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, 2020 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, 2020
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, 2020
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, 2020
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, 2019 (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, 2020
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, 2019 (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, 2020
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, 2020, we had 41,380,165 outstanding shares of
common stock owned by approximately 14,824 shareholders.
Annual Meeting
All shareholders are cordially invited to attend our annual meeting on
April 28, 2020, 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 3, 2020, are entitled to vote at the meeting. A notice of meeting,
proxy statement and proxy were mailed to our shareholders
with this report.
Investor Relations Information
Shareholders are informed about Company news through the issuance
of press releases. Shareholders inquiries, comments or suggestions
concerning Getty Realty Corp. are welcome. Investors, brokers,
securities analysts and others desiring financial information should
contact Investor Relations at (516) 478-5400 or by writing to:
Investor Relations
Getty Realty Corp.
Two Jericho Plaza, Suite 110
Jericho, New York 11753-1681
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