Good morning everyone, and welcome to Getty Realty's Earnings Conference Call for the Second Quarter of 2020. This call is being recorded. Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company will read a safe harbor statement and provide information about our non-GAAP financial measures. Please go ahead, Mr. Dicker.

Thank you, Operator. I would like to thank you all for joining us for Getty Realty's second quarter earnings conference call. This morning, the company released its financial results for the quarter ended June 30, 2020. The Form 8-K and earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2020 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company's response to the COVID-19 pandemic, future company operations, future financial performance and the company's acquisition or redevelopment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's Annual Report on Form 10-K for the year ended December 31, 2019, our subsequent quarterly reports filed on Form 10-Q and other filings made with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. The company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also please refer to our earnings release for a discussion of our use of non-GAAP financial measures including our definition of adjusted funds from operations or AFFO and our reconciliation of those measures to net earnings. With that, it is my pleasure to turn the call over to Christopher Constant, our Chief Executive Officer.

Thank you, Josh. Good morning everyone, and welcome to our call for the second quarter ended 2020. With Josh and me on the call today are Mark Olear, our Chief Operating Officer and Danion Fielding, our Chief Financial Officer. Similar to last quarter, we will provide an update on our business in the context of the ongoing COVID-19 pandemic, and also provide our customary quarterly review of our portfolio and financial statements. Regarding COVID-19, I can report that to date, even though the pandemic has had a profound impact on the US economy in general, it has not had any meaningful negative impact on Getty's financial results. Our strategic focus on essential segment of the retail economy, the strength of our portfolio and the efforts of the entire Getty team have resulted in strong quarterly performance for our company. I continue to be proud of the result and hard work that our employees have shown during this stressful period. We are executing on all our initiatives within the company and are maintaining Getty's high quality standards under challenging circumstances. The net result of our efforts combined with the resilience of our convenience and gas and other automotive portfolio of net leased assets was another quarter of earnings growth where our quarterly AFFO increased by 3% and on a per share basis grew to $0.44 as compared to $0.43 in the prior year's quarter. Turning to our strategic objectives. Year-to-date, Getty acquired 15 high quality properties for approximately $69 million, including the acquisition of three properties during the quarter. While the transaction market had taken a pause for most of the second quarter and continues to be restricted in certain ways by the COVID-19 situation, we are beginning to again see opportunities emerge. In addition, we completed two more redevelopment projects…

Thank you, Chris. In terms of our investment activities for the second quarter, we were able to close on three single asset transactions which were previously under contract, and later in the quarter, we started reengaging in transactions from our pipeline, which were put on hold during the early stages of the COVID-19 pandemic. For the second quarter, we invested $11.3 million in these three high-quality assets. These include two convenience and gas assets in New York State, which are leased to Speedway. The properties acquired are subject to a triple net lease with 8.5 years remaining on their base lease term, and multiple renewal options. Additionally, we closed on the acquisition of a Car Wash location in Cincinnati, Ohio. The subjects - the site is subject to a 15 year triple net lease with Zips Car Wash. Getty's aggregate initial cash yield on our second quarter acquisitions was 6.8%. We remain highly committed to growing our portfolio in the convenience and gas sector as well as our other auto-related categories including car washes and automotive service centers. The COVID-19 pandemic had an impact on the overall transaction market during the second quarter as transactions parties focused on their core operations and many transactions were put on hold. With that said, as business conditions for our target asset class stabilize, we have seen a noticable increase in activity in our pipeline. As a result, we expect that we will be able to resume our acquisition activities in the second half of 2020, although we do not dismiss the continued transaction activity from possible COVID-19 developments. As we move through the underwriting process on potential transactions, Getty will remain committed to its core principles of acquiring high quality real estate and partnering with strong tenants in our target asset classes. Moving…

Thank you, Mark. For the second quarter, our total revenues were $37.0 million, an increase of 8% over the prior year's quarter, and our rental income, which excludes tenant reimbursement and interest on notes and mortgages receivable also grew 8% to $36.3 million. Our growth and rental income continues to be driven by rent escalated in our leases, plus additional rent from recently completed acquisitions and redevelopment projects. During the second quarter of 2020 we experienced increases in both property costs and general and administrative expenses, driven primarily by reimbursable real estate taxes and employee-related expenses. For more information on specific expense movements, please refer to this morning's earnings release. Our FFO for the quarter was $18.6 million or $0.44 per share, as compared to $19.6 million or $0.47 per share for the prior year's quarter. Our AFFO, for the quarter was $18.6 million or $0.44 per share, as compared to $18.1 million or $0.43 per share for the prior year's quarter. Turning to the balance sheet and capital markets activities. We ended the second quarter 2020 with $525 million of total borrowings, which includes $75 million under our credit agreement and $450 million of long-term fixed rate debt. Our weighted average borrowing cost is 4.6%, the weighted average maturity of our debt is 4.9 years and 86% of our debt being fixed rate. And our earlier step maturity remains at $100 million Series A which matures in February 2021. As of today we have $225 million of undrawn capacity on our revolving credit facility, which can be used to fund operations or for growth over the near to medium term. At quarter end our debt to total capitalization stood at 31%, our debt to total asset value was 42% and our net debt to EBITDA was 5.3 times. Lastly, we used our ATM program to fortify our balance sheet during the quarter as we issued $12.2 million of capital at an average price of $30.16 per share. We have $67 million available to us under our existing at-the-market program. Our environmental liability ended this quarter and year at $49.3 million, down $1.5 million for the year. For the quarter, the company's net environmental remediation spending was approximately $2.1 million. Given the uncertainty related to the COVID-19 pandemic, the related showed in place restrictions and the length and depth of economic impact to the US economy and businesses, we withdrew our 2020 AFFO per share guidance in conjunction with our first quarter 2020 result and given the continued uncertainty related to COVID-19, we are not reinstating guidance at this point. With that I will turn the call back over to Chris.

That concludes our prepared remarks. So let me ask the operator to open the call for questions.

[Operator Instructions] Your first question comes from the line of Craig Mailman with KeyBanc Capital Markets. Please proceed with your question.

Maybe if we could drill in a little bit more to the acquisition pipeline. It sounds like you guys have a pretty good opportunities out there. Could you just drill in a little bit and kind of give some more color on how much of that is C-store versus Car Wash or other auto related opportunities?

Sure. This is Mark. So I would say the pipeline is pretty consistent with the pipeline over the last few years on that mix. It is a bit lumpy on either side. So it's close to 50-50 at - over time. We're looking at what we feel is a good number of portfolio transactions that have been presented to us in the last few weeks. Certainly, we continue to filter those through our normal, we haven't deviated from our underwriting standards. So some of those get discounted pretty quickly and some of those continue to advance through the underwriting and look forward to updating those as the year goes on.

And I know, would you say portfolio transactions relate to M&A that could be more sizable, similar to the Apple Green that you guys did. More recently are these kind of small portfolios that are going to be onesies, twosies kind of packs together?

Typically when we use the word portfolio, we're talking about more than a handful of sites in any given deal. But the pipe, as Mark has talked about in the past, we look at single assets, we look at small packages one or two sites and we also look at large packages right. If that could have 15, 20 to up to minus 50 locations in any given package. So again, I think our pipeline and our underwriting and our desire to continue to transact still has both aspects to it, right. We like the portfolio, we like the 15 year unitary lease that we're doing our sale leaseback on and we also like to buy individual assets where we like the real estate and we like the tenant.

And you guys have a good amount of liquidity here with the wide capacity and an additional ATM, but to the extent you were able to find one of these larger portfolio transactions, what are the thoughts on financing that in this environment. Do you have to come back to the equity market? Or can you - given there is dry powder with debt capacity?

Depends on the size of the transaction Craig, but we were in the ATM market in the second quarter. We certainly think that the debt markets are open for us, should we need to take advantage of them. So now our desire has been for the last several years and we'll continue to be to have a fairly balanced capital structure. So I don't think you'll see us get too far into one avenue whether that would be debt or core equity, right. But again, some of that depends on the size of any given transaction or multiple transactions that closed - fairly close to one another, and - but again on balance, we prefer to be conservative and take advantage of both types of financing.

And just remind us, given kind of your leverage targets, how much debt capacity do you have under that - those existing kind of thresholds?

Yes. No, I think we would certainly have enough runway. If we continue to use both debt and equity to certainly be in the call it plus or minus $100 million, somewhere in that range.

Your next question comes from the line of Michael Gorman with BTIG. Please proceed with your question.

If we could just stick with the acquisitions question for a minute there. Can you spend some time just as the acquisition market starts to ramp up again, have you guys seen an increase in competition from other buyers just given the performance of C-stores and gas stations over the last three months.

I think the competition, over my time here at Getty has certainly recognized the strength of the CNG sector, and it has been steadily growing. Given that, I think the transaction market really took a kind of a two month pause and now we're really starting to dive back into underwriting. It's a little premature to say that there is - new players are significantly more competition, but across the public sector as well as some of the private funds and then every year there are more and more people coming into the CNG sector, right. The sector is growing, its consolidating. The store format themselves are getting larger and becoming more appealing for - to a whole host of institutional real estate investors. So I don't think it's anything new Mike, but I do think it's a little premature to say that there is X number of new entrants, because of the performance during the pandemic.

And then, maybe just stepping back, I mean, from the strategic perspective. Obviously, there have been some headlines lately with seemingly flashy numbers about declining miles driven, because of work from home, and in the grand scheme, it works out to be smaller numbers, but maybe just in your conversations with your tenants and as you're thinking about your underwriting going forward, how are you thinking about that? What are you hearing from your tenants in terms of what they expect? Again recognizing that we're early sort of the long-term impact on daily commuter traffic and maybe C-store positioning?

Yes. I think the first thing I would say there is, it is highly regional, right. So across the country every situation in each major market is different. So as you have more - when we started the pandemic and you had more of the immediate shutdowns on the coastal regions, right, our tenants in New York and in California certainly felt that first, the way tenants were in the middle of the country, really hadn't felt anything at all. I think the expectation is, especially for tenants that are more driving commuting towns as that that will, the office will come back, right, people will continue to drive. The C-store quite frankly has been doing very well and while customer visits are downright, because people are driving generally the amount that they're purchasing at the store has gone up significantly. Right? So net-net, on a profitability standpoint, on my remarks, I said that generally the C-store is up year-over-year, right?

Right.

And that's because, people are stopping less, right? They are buying more per visit.

And maybe just one last one for Danion. Recognizing it's a small number because your collections have been so high, but as you think about the deferral agreements in those conversations with tenants. Does that - has that changed any of the accounting with those tenants under deferral agreements in terms of straight lines or in terms of AR write-offs or anything like that or is that just kind of been typical of the standard agreement?

No, it hasn't affected the leases. We would like to under the FASB, the COVID treatment which has enabled us to not have to look at those leases and recall. But obviously, with the deferrals, you do see that increase in the AR balance at the moment, as we sit here today and hopefully over the next 6 to 12 months as we collect on those deferrals that should climb back in.

Your next question comes from the line of Joshua Dennerlein with Bank of America. Please proceed with your question.

I guess, Chris, maybe kind of big picture. How do you think about balancing future acquisitions versus preserving cash in this environment just in case things kind of turn to the worse? I know your portfolio has fallen really well. But, how does it create a certain outlook for the country?

Yes. It's - sure, I think it comes back to Craig's question from earlier. I mean we're not - we are certainly not an organization that is going to be overly aggressive when it comes to leverage. And as we think about growth, we are certainly measuring that against having available - availability under the revolver, having a larger than normal cash balance on hand, and we will make sure that to the extent there is a future impact to our business that we have ample funds available to us to weather anything that that comes our way. But it's certainly part of the overall equation as we look to grow, we're not going to put ourselves in a position where we may be at risk to the extent there with some negative impacts to the company.

And I don't think we touched on it, when we talked about the transaction market. But I guess, cap rates, what are kind of the early reads and maybe like your expectations for cap rate trend, it seems like there is lot of occurrence going on?

I think it's very early. Again like Mark said, we are really just kind of starting to dial back in acquisitions. My personal view is if everyone in our sector thought that there would be significant swings in cap rates at the start of the pandemic, I really don't see that. Obviously there's competitive dynamic across the private and public buyers. The assets have held in very well in terms of their profitability. And in terms of underwriting four-wall EBITDAR, but there may be small movements. Again, I think it's - you won't see anything meaningful, and quite frankly, I think it's still a little too early to put a number or even a band around that.

One last one from me. You mentioned in the press release you collected 98% of July's rent. Is that kind of normal for this time in the month and then that extra 2% kind of trickle in normally later, is that extra 2% all those kind of deferred or?

No. Quite frankly, we've got 98% and then we deferred just over 0.5% and then we've got 1.4% which we've abated and don't think we're going to collect. That's not normal for Getty. I think it's still strong and I think that 2%, right, is something that Getty will work through, either through deferrals or through effective asset management. But I certainly don't think we're operating in a normal environment right.

[Operator Instructions] Your next question comes from the line of John Massocca with Ladenburg Thalmann. Please proceed with your question.

So let me touch again on deferral and kind of catchment you did collect. And I guess could you quantify what percentage - or what kind of with the numbers for rent that you didn't collect in 2Q that kind of flows through the revenue line item. And then what was kind of any rent that was written off due to kind of your view on collectability?

So we collected, as we said, a little more than 96% in Q2. We deferred 2.3% right, and those deferrals, some of them kicked in as early as the month of July. As we commented on what we deferred in July, we received substantially all of that back. So we're - we think we're in a good spot there. And the balance, which is roughly 1.4% of our normal ABR right, we either abated or we just don't think we're going to collect. So for the second quarter, right, I think it's a little less than 4% of rent that was at issue right, or an issue for us and again we think we're going to be in a good spot to collect the majority of that, but there is certainly a few situations, albeit small that we need to work through.

But did all 4% - all that 4% flow through into your 2Q numbers?

No. Sorry, sorry. The 2.3% yes, that did. The 1.4%, no.

And then, just sticking with the income statement, a little bit. G&A was a little bit elevated versus kind of both 1Q and the year-over-year. Was this something one-time-ish flowing through those numbers, or may be just non-cash charges...

The reason for - yes, it's a good question. The reason for the increase is primarily stock based compensation. So it's non-cash, but it does flow - hit our G&A line and flow through into our AFFO. We don't back that up.

And then lastly, kind of, as we kind of think about unit level coverage going forward. I know it's a little bit of trailing 12-month number and it really be - the first impacts from COVID will really be kind of 1Q stuff, has you have given it's quarter in arrears, but was there a significant impact from your view, from kind of that that end of 1Q on the coverage at all or was current debt price...

It lags a quarter behind, right. And typically it's pre-pandemic. The business is somewhat seasonal because you have the summer driving period. And typically you don't see much movement in that number. When we receive the financial information and publish it, next quarter, that will have the full impact of three months of COVID in it, right. So I think maybe next quarter is really the quarter to dive in and see how much, if any our tenants were impacted by the COVID situation. Again, to go back to our comments from last quarter, we had a significant drop in volumes, but a lot of that was made up by fuel margins that were $0.50, $0.60, $0.70 a gallon, right, because of the price of oil. So some of that was offset and the C-stores themselves were - again some are doing quite well, depending on where they were. So I think on balance, right, you may see that number move more than it normally would. But I don't expect it to be a dramatic move.

Okay. And may even if you look like 1Q given kind of the Northeast focus of the portfolio and there should have been some level of impact on the tail end. I mean, is that what you're seeing or was it pretty much kind of offset by those margin increases and maybe...

They were earlier in the pandemic. Given the fact that things really started to hit specifically in the Northeast, kind of mid-March, right. I don't think there was as much of an impact to the first quarter, but it's hard for us to see that, when we get typically quarterly financial results again, it kind of gets lost in the summer presentations.

Your next question comes from the line of Anthony Paolone with JPMorgan. Please proceed with your question.

Just a few small info. Just to clarify and make sure we're clear on it here, Dan, that 1.4%, you didn't recognize it in 2Q and it looks like that's out obviously for 3Q as well. So there's no change from like a recognition point of view that you anticipate now from like a revenue standpoint?

That's correct, Tony.

And then Danion did you give ROI CapEx for the rest of the year like what you expect to spend on sort of the redevelopment pipeline stuff?

On the redevelopment, Mark has that.

I think we break it out in the remarks by the life of the project, not necessarily by year.

I mean is that order of magnitude. Is it much to spend the rest of this year.

Yes, I mean, Tony, what we talked about on Slide 15 the 11 projects that are currently working on, we have about another $6 million to be invested in those projects. But those are really over the next three years. So it is - that is spread out.

And then, I think I may have missed this. Did you give - did you comment on the ATM in the quarter?

Yes, we did. There was $12.2 million of issuance in the quarter and which was at an average price of $30.16.

At this time we have no further questions, I would like to turn it back to Mr. Constant for any closure or further remarks.

Great. Well thank you all for participating this morning. We appreciate your interest in Getty, and we look forward to speaking with everyone, when we close our third quarter in October.

This now concludes our conference call. You may disconnect at this time.