Getty Realty Corp. 2026 Q3 Earnings Call

Thank you, operator. I would like to thank you all for joining us for Getty Realty's third quarter earnings conference call. Yesterday afternoon, the company released its financial and operating results for the quarter ended September 30, 2026. The Form 8-K and earnings release are available in 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 third quarter of 2026. Joining us on the call today are Bryan 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 Bryan will provide additional information regarding our earnings, balance sheet, and 2026 AFFO per share guidance. Getty is having the most productive year of my tenure, with more than $500 million of year-to-date investments, highlighted by our recently closed $261 million sale-leaseback transaction with Refuel. We have long said that one of Getty's advantages is the relationships we have in our target sectors, and this transaction is a clear demonstration of that.

This was an off-market deal that we negotiated directly with Refuel, a convenience retail operator that we have been cultivating a relationship with since 2019, and who has been a tenant of Getty's since 2021. Refuel is a leading operator in the convenience store sector, known for its premium brand, growing platform, and high-quality real estate, all of which align well with our underwriting criteria. They are one of the largest regional convenience store platforms in the country, operating approximately 250 locations under the Refuel and Double Quick brands across five states in the southeastern U.S. We worked closely with the Refuel management team to size the portfolio and ultimately acquired 41 locations. These assets are spread across several growth markets, including Raleigh-Durham in North Carolina, Charleston and Myrtle Beach in South Carolina, Austin and San Antonio in Texas, and the Greater Jackson metro area in Mississippi.

All of these locations are modern, large format convenience stores that include proprietary hot food offerings and/or branded quick-service restaurants, and average nearly 5,000 sq ft and 2.5 acres per site. Even as capital costs have shifted since we priced the transaction, the initial cash yield reflects the quality of the real estate and the operator, as well as the opportunity to complete the transaction outside of a competitive process. Importantly, we funded a substantial portion of the transaction with capital raised earlier in the year at lower costs, which allowed us to generate a positive initial investment spread. We were also able to identify capital recycling opportunities within our existing portfolio that allow us to capture outsized value for certain properties and accretively redeploy the proceeds into the regional portfolio.

Again, I will say that we are thrilled to increase our exposure with a stronger operator in Refuel and to own these large, modern convenience store assets in some of the best markets across the U.S. In addition to the Refuel transaction, we have invested more than $240 million across a diverse set of convenience and automotive retail assets year to date, including collision centers, drive-through QSRs, oil change facilities, express tunnel car washes, and other large format convenience stores. This activity has helped drive a 21% year-over-year increase in our annualized base rent, 5% growth in our year-to-date AFFO per share, and another increase in our full year 2026 earnings guidance range. These results demonstrate the effectiveness of our platform and our ability to consistently source relationship-based sale-leasebacks in our core convenience and automotive retail real estate sectors.

But our ability to source opportunities must be matched by disciplined capital allocation. We will deploy capital only when expected investment spreads support earnings growth and create long-term value for our shareholders. As we look at the spectrum of opportunities beyond what we have under contract, it is clear that the rapid increase in interest rates and broader capital costs are having an impact on the transaction market for commercial properties in our target sectors. We think it is important that we remain positioned to serve our tenant base and capture the opportunities that will inevitably surface as the market recalibrates. While we are real estate investors at our core, operators in our target sectors also view us as a financing source. Our capital helps them invest in their businesses, grow their store networks, and manage their balance sheets, and we want to continue supporting these efforts.

That said, we intend to remain disciplined in our underwriting and approach to capital allocation. We will continue to prioritize owning well-located properties with strong access and visibility in densely populated or growing metro areas. We will structure leases that require site-level financial reporting and other landlord protections. We will continue to be thoughtful about how we raise and deploy capital to ensure we are doing so in an accretive manner. The long-term health of our portfolio is paramount, and we remain confident in the quality, durability, and ongoing diversification of our asset base, as well as the tenants that occupy our real estate who provide essential goods and services to the mobile consumer. We believe that we have built a differentiated platform that can drive disciplined growth as we continue to lean into our focused investment strategy and our core convenience in automotive retail sectors.

Finally, I'm pleased to report that our board of directors approved an increase of 3.1% in our recurring quarterly dividend to $0.50 per share. This represents the 13th straight year we have grown the dividend alongside our earnings. With that, I will let RJ discuss our portfolio and investment activities.

Thank you, Chris. At quarter end, our lease portfolio included 1,263 properties in two active redevelopment sites. Excluding the active redevelopments, occupancy was 99.7%, and our weighted average lease term has increased to 10.8 years. Our portfolio spans 46 states plus Washington, D.C., with 58% of our ABR coming from the top 50 MSAs and 74% coming from top 100 MSAs. For the quarter, we invested $297.4 million, which included the acquisition of 53 properties for $286 million and incremental development funding of $11.3 million. The initial cash yield on these investments was 6.9%. The weighted average lease term on acquired assets for the quarter was 19.5 years.

Beyond the Refuel transaction, we also acquired 12 additional properties for $25.2 million at an 8% initial cash yield, including one travel center, several auto service centers, and a couple of drive-through QSRs that all represented repeat business with existing tenants. Subsequent to quarter end, we invested an additional $46.3 million at a 7.6% initial cash yield, bringing our year-to-date total investments to $502.3 million at a 7.2% initial cash yield. Looking ahead, the majority of the $75 million of investments under contract are auto service centers and drive-through QSRs. About half of the pipeline is comprised of development funding transactions, with the balance being regular way acquisitions. Initial cash yields for this opportunity set are in the 8% area.

With respect to other investments that we are evaluating, we are having constructive discussions with counterparties regarding asset pricing. While we typically see a lag between changes in capital costs and transaction yields, we are encouraged by the dialogue thus far, including successfully repricing certain deals. We expect opportunities to remain available in our target convenience and automotive retail sectors, but we will proceed selectively and pursue only those investments that meet our underwriting and return criteria. Moving to dispositions, during the third quarter, we sold eight properties for gross proceeds of $11.6 million, and year to date, we've disposed of 14 properties for gross proceeds of $23.5 million. We have several additional properties in various stages of the disposition process, and we are tracking to generate the proceeds we've targeted to partially fund the Refuel transaction and potentially other investment activity.