Good morning, and welcome to Getty Realty’s Earnings Conference Call for the Second Quarter of 2021. This call is being recorded. After the presentation, there will be an opportunity to ask questions. 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 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. Yesterday afternoon, the company released its financial results for the quarter ended June 30, 2021. 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 2021 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 and 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, 2020, our subsequent quarterly report on Form 10-Q and our 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 operation, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer.

Thank you, Josh. Good morning, everyone, and welcome to our earning call for the second quarter of 2021. With Josh and me on the call today are Mark Olear, our Chief Operating Officer; and Brian Dickman, our Chief Financial Officer. I will begin today’s call by providing an overview of our performance for the second quarter of 2021, and highlight the continue execution of our growth initiatives. And then, we'll pass the call to Mark and Brian to discuss our portfolio and financial results in more detail The net result of our stable-in-place portfolio and a continued execution of our investment strategies was a 4.5% increase in total revenues, and almost 19% increase in adjusted funds from operations and 11.4% increase in AFFO per share. The company invested $44.1 million for the quarter, another $4.6 million just after quarter end bringing our year to-date total investment activity to $79 million in aggregate. The quarter was highlighted by the growing and steady pace of our investment activity in convenience of automotive retail assets. We continue to successfully execute on our multiple investment strategies, which include traditional sale leasebacks, creative acquisitions of net leased properties and construction loans for new-to-industry assets. We also broadened our portfolio further during the quarter by adding both new geographies as we added the State of Michigan and new tenants as we added both Valvoline and Mavis tires to our roster. The company also continues to benefit from the strong performance of target asset classes as evidenced by our stable rent coverage of 2.6 times. Once again Getty realized full normalized collections of our recurring rental income during the quarter, as well as the COVID-related deferments we agreed to in 2020, which were due this quarter. More broadly, industry data published this month by the National Association…

Thank you, Chris. At the end of the quarter, our portfolio includes 994 net lease properties, six active redevelopment sites and five vacant properties. Our weighted average lease term was approximately 8.9 years and our overall occupancy excluding active redevelopments remain constant at 99.5%. Our portfolio remains spread over 35 states plus Washington D.C. and our annualized base rents 65% of which come from the top 15 MSAs in the U.S., continue to be well covered by our trailing 12-month tenant rent coverage ratio of 2.6 times. In terms of our investment activities, we had another busy quarter in which we invested $44.1 million in 53 properties and subsequent to the quarter and we acquired one additional property of $4.6 million bringing our year-to-date investment activity to $79 million across 60 properties. Our completed acquisitions during the second quarter included purchase of 46 Valvoline branded oil change centers for $31 million. The triple net leases which are guaranteed by Valvoline Inc were acquired with 11.5 years of remaining base term and have multiple renewal options. The properties are located primarily throughout the Detroit, Grand Rapids, Lansing, MSAs in Michigan and the Toledo metropolitan area in Ohio. Additionally, we've closed on the acquisition of three additional car wash properties for $10.4 million during the quarter. These properties were added to our existing unitary lease with WhiteWater Express car wash and have approximately 15 years remaining on the base term of multiple renewal options. These properties are located in Cincinnati, Ohio. Subsequent to the quarter end, the company acquired a Mavis Tire Center located in the Chicago, Illinois MSA for $4.6 million. In aggregate, we expect all of our completed acquisitions to generate cash yields that are in line with our historical quoted acquisition cap rate range for our targeted asset classes.…

Thanks Mark. Good morning everyone. Start with a recap of earnings, AFFO, which we believe best reflects the company's core operating performance was $.49 per share for the second quarter, representing a year-over-year increase of 11.1%. AFFO was also $0.49 per share for the quarter. Our total revenues were $38.7 million, representing a year-over-year increase of 4.5%. Rental income, which excludes tenant reimbursement and interest on notes and mortgages receivable grew more than 8% to $34.4 million. Strong acquisition activity over the last 12 months [Indiscernible] our leases were the primary drivers of the increase, additional contribution for rent [Indiscernible] projects. On the expense side, G&A costs increase in the quarter primarily due to employee-related expenses including stock-based compensation and non-recurring retirement costs, as well as certain professional fees. Property costs and environmental expenses both decreased in the quarter, the reduction in property costs was largely driven by decreases in real estate taxes and certain professional fees related to redevelopment activities and the decline in environmental expenses was mostly attributable to lower professional fees and related expenses that flow through to AFFO. As we note each quarter environmental expenses are subject to a number of estimates and non-cash adjustments and will continue to be highly variable. Turning to the balance sheet, our capital markets activities, we ended the quarter with $542.5 million of total debt outstanding, including $525 million long-term fixed-rate unsecured notes and $17.5 million drawn against our $300 million revolving credit facility. Our weighted average borrowing cost was 4.2% and the weighted average maturity of our debt was 6.8 years. In addition, our total debt to total market capitalization was 29%, our total debt to total asset value was 38% and our net debt-to-EBITDA was five times. Each of these leverage metrics are calculated according to the terms…

Thanks, Brian. Operator, we will take questions.

Thank you. [Operator Instructions] Our first question comes from Todd Thomas with KeyBanc. Please proceed with your question.

Hi. Thanks. Good morning. First question I have is just on investment activity, which increased in the quarter compared to the first quarter. But looks like closings have slowed up a little bit in the last one to two months since the last update. I realized there's no incremental investment activity in the guidance. But just curious if you can comment generally on the pipeline and the pace of investments going forward as we move further into the second half of the year?

So, this is Mark. As we broaden our investment strategy that we announced recently to include all other automotive asset classes. We're pretty comfortable in addition of CNG opportunities. We're pretty comfortable with the current state of our pipeline, the pace of opportunities both inbound and opportunities that we've been generating through our business development. And so I think that some of the closings are just merely a factor of timing in the pace of the deal in each individual deal. But I think we're pretty comfortable where the pipeline is right now.

Okay. And you -- I think you indicated that initial yields or cap rates are in line with the market. What does that look like today? What were the cap rates for the acquisitions completed in the quarter? And can you talk about cap rate trends in terms of the future here?

Sure. So, our acquisitions, as I said, its been in the mid to high 6% range. Some of that compression is due to kind of the overall market tightening and kind of as well as I just referenced our broadening of our investment targets through different automotive verticals and some of those being more mature and more competitive. But we continue to feel comfortable that we'll be able to deliver creative acquisitions as we've done over the last few years.

Okay. And then, just on the construction loans, can you just talk about that opportunity that you have there. Your desire to originate more construction loans. And also, can you just remind us what kind of premium spread on pricing through the sale leasebacks you're achieving relative to market pricing?

Yes. I think on the loan program, broadly speaking, the industries that we target have been consolidating obviously. Multiples are high as you'd expect. And certain of our operators have chosen to really focus on their organic growth pipelines. And as we partner with existing relationships or new relationships, it's really a way continue for our operators to grow their business and for Getty to find a path to the ownership at the end of the construction period. So I think the opportunity will continue to grow for us quite comfortable. We have the redevelopment capabilities in-house and this is a natural extension from that team. So we're pretty comfortable operating there. In terms of premium yield, there's certainly a premium over the acquisition market. I would call it significant. And it does vary a little bit by sector, but I think we like the opportunity. We think its going to continue to grow and certainly applicable to all the target asset class that we're focused on.

And is that an opportunity though that that you -- do you have an opportunity you feel to ramp that program up or more meaningfully?

I think it's going to continue to grow over time. I don't want to put a number on it or a target range behind, Todd, but I certainly feel like it's an avenue to deploy capital accretively.

It's Brian. The one thing I would add. I think we spoke about the objective someone reiterated what Chris said, its not to build a large loan portfolio per se. That that's not the business that we're looking to get into. It's ways that we can add value to our partners, to our tenant partners and continue to work with them to help grow their platforms which obviously helps us grow as well. And as Chris said, explicitly it gives us another path to feed simple ownership of the type of assets we want to own. And that's probably the key -- those last two pieces are really key component to it.

Okay. All right. Thank you.

Thank you. [Operator Instructions] Our next question comes from John Massocca with Ladenburg Thalmann. Please proceed with your questions.

Good morning.

Good morning, John.

So maybe just a little more on the kind of construction loan opportunity you said and ultimately trying to pull those assets onto your balance sheet. I mean are those type of transactions you're looking at primarily kind of Greenfield de novo construction? Or is that like redevelopment where you're kind of coming in and kind of funding a developers redevelopment of an existing maybe out-of-date kind of c-store concept and they're revamping that?

Yes. It's Mark. We've got a little bit of both, both with our existing in-place tenants where they want to put material capital improvements into our lease properties. We'll partner with them to bring them up to industry standards. I would say, it's more heavily tilted towards the greenfield as you said the de novo buildings where it's a net new operation for our tenant partners where it is truly state of the art. So, in addition to all the financial metrics that were just discussed, it's kind of a reinforcement of our partnership with operators that I want to be on the leading edge and new-to-industry delivering all the latest and greatest in meeting the consumer demands. So these are not only state of the art facilities, but obviously have a tremendously long useful life, present well, look great. And it's -- the program is repeatable with these key partners where it's ease relationship to rinse and repeat on their new program. And we've become kind of a dependable partner for them in that process.

And I guess maybe big picture, I mean how big is the opportunity set in terms of -- essentially how much kind of de novo construction is there out there in the c-store space right now? Is it -- it does seem like some of the M&A activities going to be a little bit more muted I guess maybe in the near term?

Todd has sort of a similar questions. I don't want to put a box around it, John. But what I would tell you is, if you look across the c-store sector, the car wash sector in particular, right, there is a significant amount of growth with what we call chain store operators, right? So as the traditional mom-and-pop c-store operator or car wash may be going away, there's an opportunity for tenants in the space to grow their brand with their prototype store that Mark was talking about the state-of-the-art facility, whether that's a Express car wash tunnel or whether that's a 5,000, 6,000 square foot c-store with a QSR inside of it. The opportunity is certainly there for c-stores car washes to create the brand recognition which also has the royalty partner, M&A absence side of it, whether it becomes sort of that go to destination that the consumer is looking for right across specific region or a chunk of the country. So, again, I think its certainly repeatable, but I'll not going to put up high frame or a dollar amount behind, but I think the opportunity is.

Okay. And then on the balance sheet side of things, I mean, how should we think about ATM issuance going forward? I think if I heard correctly, you issued $9 million during the quarter in terms of dollar amount, which would seem on a gross invested basis maybe a little bit kind of light versus kind of in-place portfolio today. But I know that can kind of be variable quarter to quarter. But should we kind of still expect maybe on a net debt to EBITDA this 5% range to be a good target? That's like 5x range to be a good target going forward?

Yes. John I think the ATM issuance itself is obviously a function of a number of different factors. Leveraged metrics as you alluded to, liquidity at the time, in terms of on balance sheet, stock price and investment pipeline and all the rest. What we're really focused on as I said in my prepared remarks is ensuring that we maintain strong liquidity access to capital that we keep low to moderate leverage. And if you just go back to the end of 2020, we ended the year at -- I think it was just under five times on leverage. The revolver was undrawn completely what was in January where we paid off the year end balance. And as a result of some asset sales and legal settlements there's a lot of cash on the balance sheet. So if you go back to again the end of the year, you'll see that that back pattern and I think that back kind of lends itself to us being a little bit less active on the ATM in this first half of the year. And so I think as you go forward, we'll continue as we have and we stated in a number of our peers do to utilize the ATM. It’s a great tool for our business. Leverage is right down the middle I think we typically said, 4.5 to 5.5, maybe at different points in time five to six times, but we're low to the middle end of that range. And that's really what we're looking at as we execute on the ATM.

Thank you. Our next question comes from Joshua Dennerlein with Bank of America. Please proceed with your questions.

Hey. Good morning everyone. I guess I was just curious on maybe a impact on inflation on your portfolio. Could you remind us maybe what percent of your portfolios has escalators linked to like the CPI or for sticks. Just trying to get a sense of what we can see an acceleration there as a result of more inflation?

Yes. It's Brian, Josh. One fact I'll start with is upwards of 97%, 98% of our leases do have some escalator in them. So the bulk of the portfolio does have annual escalators. Of that roughly two thirds is annual escalators. And then the balance is your typical, your 10% every five years or something they're about. On a CPI basis it's the minimus. There might be one or two leases. That's not a typical structure in our leases at least to date. So the blend of all that is about 1.6 annual. And I think it's a nice way to start off each year. Obviously, growth in our earnings, and our value creation will be acquisition and redevelopment based as it is for most in our space. But I think that going into year with that level of escalator is helpful. And then the other thing I'll add. Given that the majority of our activity is sales leaseback activity as Mark and Chris said, we have and will continue to buy existing leases. But at least when you're originating your own leases and my humble opinion it gives us at least some opportunity. And the environment and the markets really changing from where it is and where it's been to -- at least have that conversation with tenants and prospective tenants about getting either different levels or different types or frequency of escalators in the leases. So a little bit more control over our destiny so to speak that if we were only acquiring existing leases.

Yes, interesting. Have those conversations changed a lot maybe in the last like year or two? Or is like what you would want in a lease?

I would think that if you're talking specifically about escalators it's more as Brian just mentioned. We strive for annuals. Do our best to get an increase if not something in certainly near term, but not a material change in the dynamic of those conversations.

Okay, awesome. Thanks guys. We'll leave it there.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Mr. Christopher Constant for closing remarks.

Great. Thank you, operator. Thank you everyone for participating in our call this morning. We look forward to getting back on. We look forward our Q3 earnings in October. And we appreciate your interest in Getty.

This concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.