Good morning and welcome to the Getty Realty's Earnings Conference Call for the Fourth 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. I would like to thank you all for joining us for Getty Realty's fourth quarter and year-end earnings conference call. Yesterday afternoon, the company released its financial results for the quarter and year ended December 31, 2021. The Form 8-K and earnings release are available in the Investor Relations section of our Web site 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 2022 guidance and may also include statements made by management in their remarks and in response to questions, including regarding the company's future 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, 2020, subsequent quarterly reports filed 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 the 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 updated definition of adjusted funds from operations, 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. Welcome to our earnings call for the fourth quarter and full year 2021. Joining us on the call today are Mark Olear, our Chief Operating Officer; and Brian Dickman, our Chief Financial Officer. I will lead off today's call by providing commentary on our year, summarize our performance for the fourth quarter and year-ended 2021 and highlight the company's investment in capital markets activities. As usual, Mark and Brian are prepared to take you through the portfolio and financial results in detail. As we enter 2021, we set a number of goals related to further diversifying and growing our portfolio, scaling our platform, increasing earnings and delivering strong returns to shareholders. I'm pleased to report that we achieved and, in many cases, exceeded all of our 2021 objectives. We invested over 200 million across more than 100 convenience and automotive retail properties during the year, including more than 64 million for the fourth quarter and benefited from a continued strength of our in-place portfolio from which we've collected 100% of this year's rents than all of last year's COVID-related rent deferrals. Our strong external growth, contractual rent escalations and contributions from our completed redevelopment projects resulted in growth of 8% cash rental income, a 14% increase in adjusted funds from operations, or AFFO, and a 7% decrease in our AFFO per share. Our investment activity for the year reflected a more diversified set of target asset classes while maintaining a disciplined investment approach. Our strategy is to acquire high quality real estate across the convenience and automotive retail sectors and to partner with strong and growing regional and national branded operators. Our investment spending in 2021 was the most adverse in the company's history as we acquired a variety of high quality in-store, carwash,…

Thank you, Chris. As of the end of 2021, our portfolio includes 1,019 net lease properties, four active redevelopment sites and five vacant properties. Our weighted average lease term was 8.8 years and our overall occupancy, excluding active redevelopments, remained constant at 99.5%. Our portfolio now spans 38 states across the country plus Washington DC and our annualized base rents, 64% of which come from the top 50 MSAs in the U.S., continue to be well covered by our trailing 12-month tenant rent coverage ratio of 2.6x. During 2021, Getty underwrote a record 2.9 billion of opportunities to acquire freestanding convenience and automotive retail real estate. Convenience stores represented approximately 60% of our underwriting with the remaining 40% being focused on the other automotive retail categories. In terms of our investment activities, we had a very strong quarter in which we acquired and provided development funding for 23 properties totaling 64.4 million, bringing our full year totals to 100 properties and 200 million. The 2021 activity included the acquisition of 97 properties for 94.3 million, with the weighted average initial lease term of 13.8 years and an aggregate initial cash yield of 6.7%. In addition, we ended the year with 5.7 million of funded construction loans for new industry developments, which were occurring interest at 6.9%. To provide more color on our investment activity, we completed three transactions in the convenience and gas sector during the quarter. Highlights of activity in the C&G sector include closing on the second tranche of our sale-leaseback with Flash Markets, a subsidiary of Transit Energy Group. We acquired seven additional properties for 30.3 million in this tranche, which are located throughout the southeastern United States with a concentration around the Charlotte, North Carolina MSA. Completing the acquisition of our second development funding project with…

Thanks, Mark. Good morning, everyone. Before I provide a recap of earnings, I want to note that we've updated our definition of AFFO to adjust for stock-based compensation and amortization of debt issuance costs. This update was based on a comprehensive review of AFFO definitions across the net lease sector and was done to improve the comparability of Getty's AFFO when evaluating our results alongside our net lease peers. Our earnings release last night provided our results under both the updated and prior definitions. My commentary this morning will focus on our updated definition. With that said, we reported AFFO per share of $0.54 for the fourth quarter, representing a year-over-year increase of 8% versus the $0.50 per share reported in the fourth quarter of 2020. FFO was $0.47 per share for the fourth quarter of 2021. For the full year 2021, AFFO per share was $2.08, representing a year-over-year increase of 7% versus $1.94 per share reported in 2020. FFO was $1.88 per share for the full year of 2021. Our total revenues were 39.4 million for the fourth quarter and 155.4 million for the year, representing year-over-year increases of 6.1% and 5.5%, respectively. Base rental income grew 8.7% to 35.6 million for the fourth quarter and 8.1% to 137.5 million for 2021. Strong acquisition activity over the last 12 months and recurring rent escalators in our leases were the primary drivers of the increase with additional contribution from rent commencements that completed redevelopment projects. On the expense side, G&A costs increased for both the quarter and the year, primarily due to employee-related expenses, including non-cash stock-based compensation, and for the year $800,000 of retirement and severance expenses. Property costs declined in the fourth quarter and for the year due to reductions in both property operating expenses and leasing…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions]. Our first question is from Brad Heffern with RBC Capital Markets. Please proceed with your question.

Hi. Good morning, everyone. I was wondering if you could walk through the current pipeline and a directional expectation for acquisition volumes and cap rates in '22.

This is Chris. I'll start and then Mark can maybe address in more detail. And I think as we laid out a more diversified strategy, which you've seen in recent years is an accelerating pace of investment activity or diversity within the asset classes, how we're deploying that capital, where we're deploying that capital, and we expect those trends to continue. But Mark, maybe you want to comment on the current state of the pipeline.

Yes. So as we mentioned, we had a record year coming out of last year and opportunities in our initial underwriting criteria. And coming out of last year, going into this year, through the first few months of the year, we're ahead of the pace we were at last year this time as far as active underwriting. And that's the result of the efforts of our acquisition investment team. But you're starting to see the delivery of the entrée into the car wash vertical two to three years ago. We brought in our investment criteria into other automotive verticals approximately a year or so ago, and we're starting to deliver in those sectors and we expect to continue to grow momentum with regard to seeing opportunities that are out there in all those verticals. And by creating as much opportunity as possible, we feel confident to maintain our standards for qualifying real estate, qualifying geographies, market qualities, tenant balance sheet, tenant operation quality. So we don't have to deviate from our commitment to the standards that we've delivered on in the past.

Okay, got it. Thanks for that. And then just on the cap rate front, it seems like your acquisition number has been pretty stable for the past few quarters. Is that consistent with what you're seeing in the market? And then have you seen any sort of upward pressure on cap rates from where rates have gone, or are you may be seeing anything out of the competition that you're seeing?

There's a few questions in there. We certainly do not see any thinning out of competition. There's a lot of capital chasing transactions. And that leads to the second answer, which is we have not really seen cap rates respond to whether it's our costs or the market in general. We expect that to eventually filter in, but I think it's going to take six, nine months plus just given how much capital is chasing net lease retail assets.

Okay. Thank you.

Thank you. Our next question is from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Hi. Thanks. Good morning. Just sticking with acquisitions I guess and thinking about on the funding side. So Brian, Getty ended '21 a little below the long-term leverage target at 4.6x you mentioned. Where do you expect leverage to be roughly at year end? And are you planning to increase leverage from current levels as you fund investments and redeploy the proceeds from the dispositions?

Yes. Good morning, Todd. The short answer there is balance sheet leverage philosophy remains unchanged. So, obviously, as we go through the year, as you mentioned, we do have a material amount of liquidity coming out of the recent capital raising. But we're going to pursue the same path we really have, right. So as that investment activity drives capital needs, we'll work through our cash balances. We obviously have the revolver to continue to fund acquisitions, and we'll utilize the ATM program as it's prudent and appropriate to do so. In terms of year-end leverage, again, I would just say, our range, the 4.5x to 5.5x is still applicable and the actual number will really be dependent on the underlying activity.

Okay. And I appreciate the change in methodology, the reporting methodology around the new guidance. For the equity-based comp and amortization of debt issuance costs, I'm just curious if you can sort of provide maybe what the guidance would look like on a comparable basis to the '21 guidance, just in order to improve comparability as you transition to the new reporting methodology, or at least provide a little bit of detail around those line items, just to help us sort through it a bit here?

Yes, of course. In 2021, it was about a $0.11 aggregate difference there. And I would think that I would use for your question, Todd, a similar number there. So you'd be looking at $1.97 to $1.99 on a comparable basis.

Okay. And then just a bigger picture question. I'm just curious, if you could maybe talk a little bit about, provide some insights perhaps around the impact that maybe a shock in gas prices might have on the gas segment here in the near term and potentially in the longer term, if prices stay high for an extended period of time, just any insights just given the fluid and developing situation overseas?

So I'll do my best to answer that, although this is pretty unprecedented what's happening in my time here. But typically rapid movements in wholesale prices, which is what we're seeing right now, leads to margin compression at the Street level. But the positive for Getty right now or for our tenants, excuse me, is that we are starting from a very strong place from a retail fuel margin, plus or minus $0.30, which is pretty significant and above the historical average of our profitability per gallon pump. As the prices moved up rapidly, I think you -- or if you're an operator, you'd probably expect to see some margin compression. The good news is I think the consumer has been absorbing that across the board with prices for everything going up. So this isn't just isolated to the cost of gasoline in their daily lives. And our tenants at this point have not seen any erosions of volume. In fact, I think it's going the other way as the virus has subsided. So multiple factors at play. This is certainly an unprecedented time, but I think the one thing I would leave you with that we're starting from a very strong place from a profitability standpoint from the fuel side of the business.

Okay. Do you think that this could potentially create any added uncertainty in the transaction market, either around gas stations but also even car washes and other automotive if sort of consumption is changing, or there's some potential behavioral changes, if anything, were to endure for an extended period of time, could there be some hiccups in the transaction market for some of these segments at all?

Gosh, I really don't see this from a transaction market perspective, especially as you get away from the CNG portion of our business. Mark might want to comment on that. But in my view, our CNG tenants are healthy. And there's a significant amount of transaction activity across our pipeline that is certainly some in the CNG area, but in all of our other asset verticals as well.

I don't see any impact on the ability to transact.

Okay, all right. Thank you.

Thank you. Our next question is from Wes Golladay with Baird. Please proceed with your question.

Hi. Good morning, guys. Can you give us an update on what you expect for G&A this year? And can you also comment on the uptick in the environmental expense that was about 2 million this quarter?

Yes. Sure, Wes. This is Brian. In terms of G&A, I think last year we were around $20 million. If you apply in this environment kind of typical 4% or 5%, that will get you to about $21 million. I feel like that's a good number for the year. And of that, about $5 million, again round numbers, is stock-based comp. So hopefully that gives you some guidance around that. And in terms of environmental, it was primarily around a litigation accrual in the fourth quarter that, Chris, I don't know if you want to go in any more of that. But it was a relatively nominal litigation accrual related to potential settlement on one of our active and ongoing cases.

Sorry. Go ahead, Wes.

Okay. And then on the dispositions, is there any more to do with that tenant? And I guess what drove the decision to sell? Was it the tenant coming to you saying they wanted to buy it? And if you could also kind of give some more color, were these at the bottom 10% of the portfolio, bottom quartile? How should we think about the quality of these assets?

Yes, I wouldn't put these assets in a quartile. This is a portfolio that all leads to one tenant, the properties. Our tenant was looking to invest in the property to update and modernize the stores. We were debating whether how we structure that? And ultimately, our tenant felt most comfortable putting the investment in if he owned the properties and that led to a negotiation. And we ultimately decided to exit that.

I wouldn't characterize the bottom about 10, but certainly properties that needed some updating on the capital --

Got it. I believe you said the pipeline was about 60/40 C stores last year. Do you expect that to be the same this year? And is there any segment where you have just a higher close rate of the volume that you're seeing?

I think we'd like to grow all sectors and continue to balance the pipeline across all the verticals. I think sometimes it's the snapshot in time as the lumpiness of different opportunities present themselves to us. So the key is growing a top line pipeline to give us the most opportunities that we can have a really good view of in our underwriting model. So I think the goal is to grow all sectors throughout the pipeline.

Got it. Thanks for the time.

Thank you. [Operator Instructions]. Our next question is from James Allen Villard with Ladenburg Thalmann. Please proceed with your question.

Good morning, guys.

Good morning.

Was the drive-thru restaurant transaction a one-off deal, or do you view QSR as another growth vertical as you move forward?

Yes, it certainly fits with our broader convenience, automotive, retail, right. So as we think about our property characteristics that we like to buy, we think those assets fit well with the portfolio, fits well with our themes on the convenience, consumer spending money while they're out in their vehicles. We have a number in our portfolio already. So this is just another transaction for us. And we certainly expect to continue to invest in that sector as well as our other verticals as we go forward.

Okay, that's it for me. Thanks for the answer.

We have reached the end of the question-and-answer session. And I will now turn the call over to Chris Constant for closing remarks.

Great. Well, thanks everyone for attending our fourth quarter call for 2021. We appreciate the interest in Getty and we look forward to getting back on with everybody at the end of April when we report our first quarter 2022 results.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.