Getty Realty Corp. (GTY) Q2 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to Getty Realty's Second Quarter 2026 Earnings Call. This call is being recorded. [Operator Instructions] 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 and operating results for the quarter ended June 30, 2026. The Form 8-K and earnings release are available on the Investor Relations section of our website at gettyrealty.com. Certain statements made during this call are not based on historical information and may constitute forward-looking statements. These statements reflect 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 2026 guidance and may include statements made by management, including those regarding the company's future operations, future financial performance or investment 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, 2025, as well as any subsequent filings 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 today. The company undertakes no duty to update any forward-looking statements that may be made during 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, let me turn the call over to Christopher Constant, our Chief Executive Officer.

Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the second quarter of 2026. Joining us on the call today are Brian Dickman, our Chief Financial Officer; and RJ Ryan, our Chief Investment Officer. I will lead off today's call by providing highlights of Getty's quarterly financial performance and investment activity. RJ will then discuss our portfolio and investments in greater detail, and Brian will provide additional information regarding our earnings, balance sheet and 2026 AFFO per share guidance. Getty continues to differentiate itself through its focused investment strategy and relationship-driven sale-leaseback approach to deal origination. Our investment platform is producing consistent external growth, while our in-place portfolio generates durable cash flows. Our results for the second quarter reflect both of these dynamics as we increased our annualized base rent by 15%, grew our AFFO per share by 5.1% and increased our full year 2026 earnings guidance for the second time this year. The foundation of our results remains our in-place portfolio, which was largely constructed over the last decade through direct sale-leaseback transactions featuring appropriate initial rents, long initial lease terms and contractual rent escalators. The portfolio is essentially fully occupied, has an average remaining lease term of more than 10 years and continues to produce stable rent coverage. Despite the economic volatility driven by geopolitical events, our tenants and their businesses have once again proven their resilience and ability to perform during rapidly changing operating conditions. Looking at our portfolio, based on site level reporting we received from our convenience store tenants, fuel margins averaged $0.46 per gallon for the first quarter of 2026, which was an increase of more than 10% compared to fuel margins they reported in the first quarter of 2025. Equally important, the challenging macro conditions have not resulted in a material deterioration in consumer demand across our core categories. Public company operators have reported modest increases in same-store sales and recent market level data indicates continued year-over-year growth in both convenience-oriented retail sales and automotive service revenue. Turning to our investment activities. Year-to-date, we have deployed more than $172 million at an initial cash yield of 7.6%. Beyond what we have closed, we have approximately $95 million of investments under contract as well as a robust pipeline of transactions under signed nonbinding letters of intent. The transaction market for convenience and automotive retail properties remains constructive, and we continue to see an acceleration in the pace of our sourcing and underwriting, which we expect to translate into additional closings as we move through the balance of the year. We are also in an excellent capital position as our recent capital markets activities have provided us with significant liquidity and an attractive cost of capital to fund our 2026 business plan. We currently have more than $190 million of unsettled forward equity and significant capacity under our $450 million revolver. When we look at the spectrum of opportunities under contract and in our pipeline, we are confident that we can deploy this capital in a productive and accretive manner. As we think about our prospects for the rest of 2026 and beyond, I take comfort in the quality of our portfolio, including its proven durability and ongoing diversification. And I'm confident that the direct sale-leaseback platform we've built can drive disciplined growth as we lean into our differentiated expertise in sourcing, underwriting and closing investments and our core convenience and automotive retail sectors. We remain committed to our disciplined underwriting approach, which prioritizes owning high-quality assets in densely populated or growing metro areas with strong access, visibility and retail synergies, which is leased to both established and emerging creditworthy operators. With that, I'll let RJ discuss our portfolio and investment activities.

Thank you, Chris. At quarter end, our lease portfolio included 1,220 net lease properties and 1 active redevelopment site. Excluding the active redevelopment, occupancy was 99.8% and our weighted average lease term was 10.3 years. Our net lease portfolio spans 46 states plus Washington, D.C., with 59% of our annualized base rent coming from top 50 MSAs and 75% coming from top 100 MSAs. Our rents are well covered with a trailing 12-month rent coverage ratio of 2.5x. Turning to our investment activities. For the quarter, we invested $128.3 million, which included the acquisition of 35 properties for $117.7 million and the incremental development funding of $10.6 million. The initial cash yield on these investments was 7.4%. The weighted average lease term on acquired assets for the quarter was 18.3 years. Two highlights from this quarter's investment activity include: one, the continued expansion of our investment efforts as 28 of the acquired properties, representing approximately 60% of ABR acquired were either automotive service or drive-thru QSRs assets; and two, the addition of 6 new tenants to the portfolio, furthering our tenant diversification. Subsequent to quarter end, we invested an additional $13.5 million, bringing our year-to-date total investments to $172.1 million at a 7.6% initial cash yield. Looking ahead, as Chris mentioned, we currently have approximately $95 million of investments under contract and a significant pipeline of investments under executed letters of intent. The majority of assets under contract are in the auto service sector, followed by drive-thru QSRs and convenience stores. These are primarily or predominantly development funding transactions with initial cash yields in the high 7% area. The pipeline of investments under executed LOIs includes opportunities across all of our convenience and automotive retail sectors with the majority representing traditional relationship sale-leaseback transactions in the convenience store space. Moving to our redevelopment platform. During the quarter, rent commenced on redevelopment property in Bergen County, New Jersey that is now leased to a Take 5 Oil Change franchisee. We invested approximately $0.4 million in this project and expect to generate a return on invested capital of 18%. At quarter end, we had 4 signed leases for redevelopments and had additional projects in various stages of negotiation in our pipeline. With respect to our asset management activities, we extended 1 unitary lease by 10 years during the quarter. The lease generates $2.9 million of ABR or 1.3% of total ABR, and the new expiration date is December 31, 2039. The net result of this extension, combined with our first quarter leasing activities and recent acquisitions is an increase to our weighted average lease term and a further reduction in ABR expiring through the end of 2027, which is now approximately 2% of total ABR. In addition, we sold 4 properties during the quarter for gross proceeds of $8.2 million. With that, I will turn the call over to Brian to discuss our financial results.

Thanks, RJ. Good morning, everyone. Starting with headline earnings. AFFO per share was $0.62 in Q2 2026 and $1.25 for the first half of 2026, representing growth of 5.1% and 5%, respectively, over the prior year period. A more detailed description of our quarterly and year-to-date results, including AFFO and net income can be found in our earnings release. Our corporate presentation also contains additional information regarding our earnings and dividend per share growth over the last several years. Moving to G&A expenses. Management focuses on the ratio of G&A, excluding stock-based compensation and nonrecurring retirement costs to cash rental and interest income. That ratio was 9.3% for Q2 2026 and 9.2% for the first half of 2026, representing decreases of 60 basis points and 100 basis points, respectively, as compared to the prior year period. As mentioned on prior calls, we expect full-year G&A growth to be less than 2% and for our G&A ratio to fall below 9% as we continue to benefit from our efforts to scale the company while maintaining appropriate levels of overhead. Turning to the balance sheet and liquidity. As of June 30, net debt to EBITDA was 5.3x or 4.3x, including unsettled forward equity, which is well within our stated target leverage of 4.5x to 5.5x. Fixed charge coverage for the quarter was 4x. We ended the quarter with approximately $1.1 billion of total debt outstanding, including $1 billion of senior unsecured notes with a weighted average interest rate of 4.6% and a weighted average maturity of 5.5 years and $73 million drawn on our $450 million revolver. We have no debt maturities until June 2028. During the quarter, we settled approximately 1.5 million shares of common stock subject to outstanding forward sale agreements for net proceeds of approximately $39.8 million. We also entered into new forward agreements to sell approximately 1.8 million shares of common stock for anticipated gross proceeds of $60.6 million. In total, we currently have 5.8 million shares of common stock subject to outstanding forward sale agreements, which upon settlement are anticipated to raise gross proceeds of approximately $190.5 million. We continue to be in a very strong capital position with more than $570 million of total liquidity at quarter end and have more than sufficient capital to fund our under contract pipeline and additional investment activity as we move through 2026. With respect to our earnings outlook, as a result of our year-to-date investment activity, we are increasing our full year 2026 AFFO per share guidance to a range of $2.52 to $2.54 from our prior guidance of $2.50 to $2.52. As a reminder, our guidance reflects the current run rate from our in-place portfolio with certain expense and credit loss variability and does not include any prospective investment or capital activities. We think this approach remains appropriate for our business and look forward to updating everyone on the positive impact our investment activity has on our earnings as we move through the balance of the year. With that, I'll ask the operator to open the call up for questions.

[Operator Instructions] And our first question will come from Mitch Germain with Citizens Bank.

Nice quarter. Chris, I know that I believe a couple of years ago, you brought someone on focusing on the QSR industry. You've seen significant momentum there. Have you expanded that team? Is it just a population of the deals that have hit your underwriting? Is there anything specific that you point out to with regards to the momentum you're seeing now?

I would just say, I think it's the success of the person we brought on, right, to focus on that. And also, it takes time to build relationships in this sector through traditional and other forms of business development. And what we're starting to see is quarter-to-quarter success in that sector, like we've seen in the other sectors that we focused on. So we're really happy with how that's progressed. And again, I think as the year goes on, we anticipate balanced volumes across the investment program. By that, it means our automotive retail asset classes that we focus on.

Great. That's super helpful. I think the last quarter, RJ has spoken about cap rates kind of mid- to high 7% range. It looks like, obviously, for the quarter, they were at the lower end of that range. Was there any specific transaction that kind of brought the cap rate lower than what you've been seeing recently? Or is that just really more broadly the market kind of correcting itself there?

No, I think our view is there's a lot of volume in that kind of mid-7% range, Mitch. And again, this is just one quarter of activity. So some of that might be based on the volume of, say, one transaction or several transactions. But generally, I still think we see cap rates in that plus or minus 7.5% range, and there's going to be deals that Getty does that touch 8 like we did at the start of the second quarter -- excuse me, third quarter. And we anticipate blending out some additional volume into that middle 7% area.

[indiscernible] please. I would add, this is Brian. I think it's important also to acknowledge, right, the improving cost of capital over the better part of this year and that opening up opportunities for us to compete for a wider swath of transactions, many of which we couldn't compete for a year ago in that low to mid-7 areas. So I think if you take what Chris said and just expanded a little bit, we're going to continue to execute as we have been for several years in that mid- to high 7s. But with the improving cost of capital, we have an opportunity to compete again, for a greater range of transactions. And I think you'll continue to see this blend in the mid-7s. But from our perspective, this is exactly where we want to be when you look at the magnitude of activity and the increase of activity. And yes, that cap rate has come down a little bit on a blend, but our spreads have largely remained constant, if not increased a little bit in some instances.

And our next question will come from Jana Galan with Bank of America.

This is Dan Byun on for Jana Galan. Could you clarify if that $19.3 million advanced aggregate funding is included in that $95 million pipeline?

No, that would have already been deployed. That's just the balance of capital that's been deployed for those projects, and it would be incremental funding to that, that's in the $95 million. And then when those projects are completed, it will no longer be mortgage notes receivable, it will be real estate subject to a long-term lease.

And also just kind of talking about the rent coverage, you held it at 2.5, but the sub-1x bucket rose by 70 bps. Are there any specific tenants or sectors driving that? Are you seeing any softening at all to kind of note?

No, certainly no softening. We've seen really stable coverage across tenants, leases, sectors. That bucket continues to be the same portfolio of ramping new-to-industry car washes. There's just some incremental individual units that aged into our reporting this quarter. So same portfolio, ramping car washes. We acknowledge they're ramping maybe at a little bit of a slower rate than we've seen from some of the other new-to-industry car washes that we funded, but they're, on average, just over 2 years into their operating histories. We're seeing decent trajectory there. So nothing that's causing us any great concern at this point as they continue to push into their third year where they more typically stabilize.

And we'll go next to Upal Rana with KeyBanc Capital Markets.

I just want to get a sense on your investment pool today. Given the improved cost of capital, has your pool meaningfully increased in terms of what you're looking at? Or is this really just the same pool that you can now just move down the risk curve given the improved cost of capital?

It's RJ. Certainly, the improved cost of capital, as Brian brought up earlier and Chris, it's just opening up more opportunities. So our underwriting pace so far this year is at or above a record pace, and I think some of the velocity you're seeing reflects that. So long story short, I think having that improved cost of capital just opens up things that a year ago, maybe we couldn't really act on, that's now just opening up opportunities for us and leading to that increased velocity.

Got you. Okay. And then maybe just on the pace and the visibility in the back half. Obviously, at this point, you've completed and what you have committed already in the pipeline, you're kind of near last year's volume. So just wanted to kind of get a sense of what maybe the back half could potentially look like.

I mean I think that sort of -- I'll answer the question with what you said there, which is we're sitting here in July, right, with visibility into kind of roughly what we did last year with still several months before we get to the end of the year. So we feel very good about our ability to continue to source bring deals in and get those closed before year-end. So Again, I think what we've been messaging is what we've done over the last couple of years, we view as the floor. And now we're sort of -- we have the team, the systems in place and what RJ mentioned in terms of underwriting and Brian mentioned in terms of cost of capital, we see that as upside to that floor in '26 and beyond.

And moving on to Rob Stevenson with Huntington.

Chris, any new sort of tangential types of assets that you don't already own today that you guys are underwriting today to any significant degree?

I mean I'll start by saying the sectors that we invest in large, fragmented, healthy and given what some of the comments we've made from some of the prior questions, there's a lot to work on. I think we're always looking at are there ways for us to extend. But when we think about what -- how we've been successful, right, building knowledge, it's building relationships, it's opportunity set and users of sale-leaseback financing. So I'm not going to say we're not looking at new asset classes, Rob, but we're trying to be really thoughtful as we think about extending beyond the 4 asset classes that we focus on today. So I guess I would say that there's a lot to work on in the 4 we have. We're really happy with the team and the pace and the opportunities we've closed on. But we're always thinking about how we continue to scale and get, right? Our goals are growth, diversification, really scaling this business into a much larger platform.

Okay. And speaking of scaling, how do you view the opportunity to potentially scale the development program over the next couple of years? I mean, versus where you are today and the partners that you have, like where do you think that, that goes over time?

Yes. I mean we came up with development funding as a way to provide a product for tenants in our -- in the sectors we invest in and to grow with certain partners that we're looking to build their prototype stores as opposed to refinance their balance sheet or grow through acquisition. So it's really a product that we offer to tenants. And we're happy if there's a sale leaseback component. We'happy if there's a development component. There's maybe a slight premium on the development side, but then there is a little bit of a time before -- as you deploy that capital, right? So it takes time for it to come on to the balance sheet and actually put all that money to work. So we're happy with being able to offer tenants that we like both sale-leaseback financing and development funding, but we view it as another path to fee ownership and another path to growth. So it's -- we're really trying to work with our partners and figure out what's best for them and then how we can finance that accretively for us.

Okay. I guess said another way, is the demand there accelerating at this point? Or is it pretty much what it is in terms of -- from your partner standpoint on that?

It and flows. It's really how our tenant or our operating partner thinks about their growth, right? If there's someone that likes to grow through acquisition, right, we have a product for them. If it's someone that's really focused on site selection, developing their prototype stores, they can use our balance sheet to accelerate their growth. So sometimes we have transactions like the one that we have in the collision sector right now, they want to build their prototypes. And some of the things we accomplished in the second quarter were more traditional sale leasebacks. And again, we're -- from a Getty's standpoint, right, it's accretive fundings in the sectors we know with tenants we like. And eventually, we get to the same place, which is the fee with a partner on a long-term lease.

Okay. A couple of quick ones. The sales in the quarter more defensive? Or did you just get offers on those 4 properties that were attractive to you guys?

Rob, it's Brian. It was selection. Like you said, it was just $8 million, handful of properties. We've been pretty selective with dispositions over the years. We'll continue to do that, certainly taking as the portfolio has gotten larger and more diverse. I think we have maybe a more strategic view around dispositions. But in the quarter, it's just a handful there, and it was a mix. There's a couple that we disposed of in a more tactical way. And then there was a couple of former redevelopments in there, frankly, that we were able to round trip and get some really attractive valuations in a disposition market versus the equity markets.

Okay. And then last one for you, Brian. If you wanted to term out some debt following the next massive acquisitions, where is the best source for you today? And where would that be pricing?

It's a great question just as the credit markets continue to move around, they're definitely open, constructive. Spreads are on the tighter side, but benchmarks are on the wider side. I think a 10-year note for us, which is our sort of base case financing would be about 6.25%, driven primarily by the increase in the 10-year. We printed a 5.75% at the end of last year. So spreads have come in maybe about 5 basis points, but treasury is up about 50, 60 basis points. So again, that's our plan A. That's our base case. We have in the past, looked at term loan financing. We've done shorter-term 5- and 7-year private placements. There's only $73 million on the line right now. So that's sub-20% utilization. So we're not feeling any pressure in the near term to go term that out. But we would look across those markets, term loan, private placement, different durations. We do have a preference, all else being equal for long-term fixed rate debt given the nature of the cash flows we have coming in. But if the facts and circumstances drive a shorter-term debt or different execution, we have and we'll have no problem executing on that going forward.

And Michael Goldsmith with UBS has our next question.

Pipeline remains healthy and you guys continue to invest beyond what you report in the prior quarter for the pipeline. So I guess, can you talk about a little bit about like the level -- how we should think about the level of visibility into acquisitions in the quarter, like what kind of the opportunities that pop up through the period just to get a sense of the upside to the acquisition opportunity just given that you've been beating what you've seen and reported ahead of the quarter?

Michael, it's RJ. So I think as you know, our pipeline is what we have under contract when we report. And I think as we've discussed in the past, there's always things that close that never hit the pipeline. If you just think about the normal cycle of a transaction, anything we signed under contract, call it, the front side of a quarter, in general, will close within that interquarter, and that's never going to hit the pipeline. That happens every quarter, happened this quarter. So certainly, I think our pipeline is a decent proxy for activity, but I certainly wouldn't get hyper focused on any incremental movements up or down because there's so much activity that transpires in the quarter that just never hits that pipeline.

Got it. I'll try to control my excitement there. And then Brian, can we talk a little bit about just you've got good funding, which should carry you through the year and into next year. But like can you talk -- we've seen a couple of the net lease REITs have built up quite large forwards and have very strong visibility to funding through the end of next year. You guys are thinking maybe a little bit more at a more measured pace on your forward. So can you guys just talk a little bit about your philosophy on just what's the right level of forward liquidity for your business model?

Yes. It's a great question, Michael. It's certainly topical, given some of the activity in the net lease space, equity raising, stock prices, et cetera. I think for us and philosophically, as you put it, the best word is balance, right? I don't think there's any question that prefunding or at least partially prefunding pipelines, giving ourselves and the market visibility into our funding needs or lack thereof. RJ and I talk all the time, the clarity that raised equity gives our acquisition team around pricing, around the cost of our capital and therefore, where they price deals. So I don't think there's any question that it's the ATM, the forward execution that all of these technology as a word that's become more accepted over the last decade or so are great for all net lease platforms, including ours. I think the one place where maybe we have a differentiated view or not is maybe it is just the order of magnitude, right? I think our view here is that if we do what we're supposed to do and we execute, grow earnings, create value for shareholders, all else held equal, the share price should be higher in 9, 12, 15 months or whatever time frame you want to use than it is today. And so I think for us, it's just striking that balance to ensure that we reduce funding risk that we have significant liquidity, demonstrated access to capital, but don't want to be too long, too much equity at a lower price such that we miss out on an opportunity to generate some better spreads and better earnings growth in forward years.

Moving on to Anthony Paolone with JPMorgan.

I think I just have one last one here. The 2.5x store level coverage that you talked about, I know it's a quarter lag and it's trailing. And so I just want to make sure I understand like as we kind of roll that forward and sort of incorporate what's happened to oil price this year, does that number go up or down? I mean you mentioned the fuel margins being up in the first quarter, but I just want to understand like what we should expect with the coverage there.

Yes. So again, I referenced in my script that Q1 margins for our portfolio were $0.46. I'll just go that is very healthy, right, and better than Q1 2025. That certainly supported the growth of the performance of the C-store tenants in our portfolio. As we look ahead, all that I can tell you is that if you look at national margins because we don't have that data from our tenants at this point, margins continue to hold. So as the price has gone up and down, our tenants have been able to pass that on and continue to make what I would think are very healthy profits at the pump. And then the back half of that is, as we referenced public companies that report maybe monthly same-store, right? Again, you're seeing that same-store plus or minus couple of percent. So we haven't really seen in the C-store business, which is the lion's share of our reporting, any significant fluctuation. So just continues to be resilient. Think about habitual, think about some of the nondiscretionary pieces in our portfolio. But I always like to say, I think our portfolio is sort of built for periods where there may be some stress and the consumer might be looking for some value. And then certainly, on the auto side, right, this is nondiscretionary, right, repairs and oil changes in general maintenance and tires and things like that. So again, we're not expecting to see any massive fluctuation, Tony, just given what we see for all this thing in the market and what we hear from our tenants. But that's probably about as much as far as we can go at this point without seeing the data.

Our next question comes from Michael Gorman with BTIG.

Chris, maybe just staying on that for a second. I'm just curious, obviously, it's been a robust transaction environment. Is any of that driven by the strength of the margins that you're seeing at the C-store level? Does that tend to increase transaction activity either from the seller or on the buyer side as people underwrite these assets? Does that have an impact at all? Or maybe expanding out, are you seeing any impact from the geopolitical instability at all?

On the broader consolidation or M&A market, I'll say not. It's a good question, but I don't think today's margin environment is really what's driving increased M&A. What I would just say is the sector itself, and it includes the other pieces of our portfolio as well, continues to be healthy. You have large operators that are looking to grow. There are real economies of scale, both on the fuel side from a purchasing standpoint and pricing standpoint and also in the store as well. So what I would just say is large sectors fragmented, definitely, there are consolidators across the board. And the fact that their core businesses remain healthy is only going to continue to fuel their desire to grow through either new store development or further consolidation.

Okay. Great. That's helpful. And then maybe just one quick one, Brian. I apologize if I missed it, but can you just give an update on credit losses year-to-date, kind of where that stands relative to guidance? And have you changed the underlying assumption for credit losses for the full year in the updated guidance range?

Yes. You didn't miss it. Fair question. No realized credit losses to date. We continue to use a 25 basis point assumption in our models, but we roll that forward, so to reflect more of a half a year than a full year, if that makes sense. So that does still drive a little bit of variability. I think we've mentioned when we provide that range, right, given that's a run rate number, our guidance, the range is really driven by that credit loss assumption as well as some expense variability, a little bit on the operating side, some dead deal costs, things that do impact the business from time to time. But to date, we have not realized any. And there's always situations we're monitoring, but nothing rising to the level of a formal watch list at this time.

We'll go next to Wes Golladay with Baird.

I just want to go back to the comment about the accelerating pace of the underwriting. Is that more so due to deal volume? Or do you have new systems in place?

Wes, candidly, I think it's probably both. We've spent quite a bit of time and effort investing in the people and our processes and how we go about underwriting and executing. So certainly, that's, I think, a key factor, I think, coupled with the market. And frankly, I think the products we offer right now are probably more attractive to our counterparties than they've been in recent times. So I think those 2 things are kind of converging and providing a pretty good universe for us to underwrite and address.

And this now concludes our question-and-answer session. I would like to turn the floor back over to Christopher Constant for closing comments.

Thank you, operator. I just want to thank everyone for joining the call today and for your interest in Getty, and we look forward to getting back to everybody when we report our Q3 earnings in October.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.