Good morning, and welcome to Getty Realty's Earnings Conference Call for the Third Quarter 2023. 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 Third Quarter Earnings Conference Call. Yesterday afternoon, the company released its financial and operating results for the quarter ended September 30, 2023. 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 2023 guidance and may also include statements made by management including those regarding the company's future operations, future financial performance or investment plan 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, 2022, and our subsequent 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 today. 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, 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 2023. 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 financial results and investment activities, along with some perspective on our outlook in light of the ongoing economic uncertainty. As usual, Mark will then take you through our portfolio, and Brian will further discuss our financial results and guidance. In the third quarter, we produced strong AFFO per share growth of 5.6%, and for the nine months ended September 30th, our AFFO per share grew a healthy 5.7%. This growth continues to be driven by our robust investment activity and thoughtful capital markets execution. Year-to-date, we have surpassed the company's previous record for annual investments by deploying $269 million, including $155 million in the third quarter. We also continue to maintain an attractive investment pipeline with more than $95 million under contract for the acquisition and development funding of convenience stores, auto service centers, and express tunnel car washes, all of which we expect to fund over the next six to nine months. When combined with our investments to date, our pipeline provides visibility into our earnings for the fourth quarter and our growth prospects for the next year. The ongoing success of our investment platform and steady growth in our cash flow and earnings can be attributed in part to our successful capital markets activity. Since January of 2022, we have raised more than $600 million of attractively priced capital, much of it with a forward or delayed draw execution, including our recently announced $150 million unsecured term loan, $225 million of long-term unsecured notes, and more than $230 million of common equity. Our strategic approach to raising capital has enhanced our ability to lock in accretive investment spreads, support a committed investment pipeline that is fully funded, and maintain a balance sheet with moderate leverage and ample capacity for future transactions. We believe that Getty's business model of focusing on convenience and automotive retail assets provides us with a competitive advantage in the market, given our sector expertise, tenant relationships, and track record of execution. Many of our completed transactions this year have come from repeat business, meaning we already have a good rapport with our counterparts and are capitalizing on our relationships and transaction experience to bring new properties into the company's portfolio with tenants that are well known to us who have a proven record of performance through economic cycles. We have also successfully increased our initial yields with these tenants to reflect current market pricing while not sacrificing our rigorous underwriting standards. The net result is that we continue to buy the same quality properties in sectors where we have significant knowledge of industry trends and with tenants we know well, but at prices that reflect the rapid rise in financial costs. As we look beyond our pipeline and deal activity, the real estate market has changed significantly since the end of the second quarter. Rapid changes in the availability and cost of capital have outpaced sellers' expectations for the value of their properties. For Getty specifically, we believe prospective tenants who are often making long-term financing decisions related to mergers and acquisitions or development, are in the process of re-evaluating their capital structures to reflect less access to capital and lower values attributable to real estate financing. While we continue to identify opportunities to acquire assets that meet our rigorous underwriting standards, we expect to be disciplined in our capital deployment while the market continues to fully digest the reality of higher cap rates for the foreseeable future. Given our performance year-to-date, committed and funded investment pipeline and earnings growth expectations, our board approved an increase of 4.7% in our recurring quarterly dividend to $0.45 per share. This represents the 10th consecutive year we have grown the dividend alongside our earnings growth. Our board believes this annual increase is appropriate as it maintains a stable payout ratio and continues to increase Getty's retained cash flow to have more investable capital to meet our growth objectives. Additionally, as a result of our year-to-date investment and capital activities, we are raising our 2023 AFFO guidance by a dollar to a range of $2.24 to $2.25 per share. Getty is well positioned for the current environment, given the essential nature of our assets, the operating strength of our institutional tenant base, and our well-positioned balance sheet, including low to moderate leverage and ample equity. In a challenging market, we believe that we benefit from our targeted nature of our investment strategy, due to our sector expertise and strong relationships with operators in our space. Our disciplined approach, which emphasizes owning high quality real estate in major metro areas and partnering with growing regional and national operators, will continue to afford us attractive acquisition and development funding opportunities to underwrite. As a result, we remain confident in our ability to create shareholder value through earnings growth and portfolio diversification. With that, I'll turn the call over to Mark to discuss our portfolio and investment activities.

Thank you, Chris. At the end of the quarter, our lease portfolio included 1,074 net lease properties and three active redevelopment sites. Excluding the active redevelopments, occupancy was 99.7% and our weighted average lease term was nine years. Our portfolio spans 40 states plus Washington, DC, with 61% of our annualized base rent coming from top 50 MSAs and 79% coming from the top 100 MSAs. Our rents are well-covered with trailing 12-month tenant rent coverage ratios of 2.7x. Turning to our investment activities, we had a record quarter, as Getty invested $155 million net of amounts previously funded across 50 properties in several different property types and attractive MSAs. Highlights of this quarter's investments include the acquisition of nine convenience stores located in Las Vegas and various markets across Texas and the Southeast for $55.1 million, nine car wash properties located throughout the US for $48.5 million, two drive-thru quick service restaurants, and an auto service center for a total of $3.5 million, and nine under-construction car wash properties for $31.5 million. As part of this acquisition, we provide additional funding during the construction period to complete these projects. We also advanced incremental development funding in the amount of $16.6 million, including accrued interest for the construction of 20 new-to-industry car washes, convenience stores, and auto service centers. These assets are either already owned by the company and are under construction or will be acquired via sale-leaseback transactions at the end of the project's respective construction periods. For the third quarter, the aggregate initial cash yield on our investment activity was approximately 7.2% and the weighted average lease term for acquired properties was 17.2 years. Subsequent to quarter-end, we invested an additional $3.3 million towards the development of an Express Tunnel car wash property. The cumulative result of our year-to-date investment activity is $269 million deployed at an initial cash yield of approximately 7.2% across all targeted asset types. Looking ahead regarding the $95 million of commitments to fund acquisition developments, we expect to fund these transactions over the next six to nine months at an average initial yield of approximately 20 basis points in excess of our investment activity year-to-date. From a market perspective, in many cases, we are now submitting offers that are approaching 150 basis points more than where we transacted in 2021 and 2022. The amount of cap rate expansion combined with the short duration in which these moves in asset pricing have occurred has caused many sellers to pause. We believe the market will adjust to the changed economic landscape and will stabilize as sellers evolve and modify their expectations. The direct nature of our investment strategy affords us the opportunity to discuss these changes directly with decision-makers, and we believe that we can continue to identify accretive investments as we move through the remainder of 2023 and into 2024. Moving to our redevelopment platform, during the quarter, we invested approximately $460,000 in projects that are in various stages in our pipeline. We completed one redevelopment project where rent commenced on an automotive parts store in Pennsylvania that leads to AutoZone. We invested a total of approximately $200,000 in the project, generating an incremental return on invested capital of approximately 21%. We also completed the renovation of a convenience store property in Connecticut, which was already subject to a long-term triple net lease. In this project, we invested $450,000 in our incremental return on the invested capital with 7.5%. We ended the quarter with three properties under active redevelopment and others in various states with feasibility planning for potential recapture from our net lease portfolio. We expect to continuously complete projects over the next few years. Turning to our asset management activities for the third quarter, we exited one lease property and sold two properties for aggregate gross proceeds of $1.9 million. With that, I turn the call over to Brian for our financial results.

Thanks, Mark. Good morning, everyone. Last night, we reported AFFO per share of $0.57 for Q3 2023, representing a 5.6% increase compared to the $0.54 per share we reported in the prior year. FFO and net income for the third quarter were $0.53 and $0.31 per share respectively. Total revenues were $50.5 million for the third quarter, representing a 25.3% increase over the prior year. Base rental income, which excludes tenant reimbursement and GAAP revenue adjustments, grew 10.5% to $40.9 million. This growth continues to be driven by our acquisition activity and recurring rent escalators in our leases, with additional contributions from rent commencements and completed redevelopment projects. On the expense side, G&A costs were $5.7 million in the quarter, as compared to $5 million in the third quarter of 2022. The change in G&A was primarily due to increased personnel costs including non-cash stock-based compensation. Total property costs were $8.7 million for the quarter as compared to $5.7 million for the third quarter of 2022. This quarter included the increase in property operating expenses, which was primarily due to timing and free universal real estate tax payments, partially offset by lower rent expense, and also included an increase in leasing and redevelopment expenses due to additional professional fees and demolition costs for development projects. Environmental expenses, which are highly variable due to a number of estimates and noncash adjustments, were $313,000 in the quarter as compared to $632,000 for the third quarter of 2022. Turning to the balance sheet and our capital markets activities, we ended the quarter with $750 million in total debt outstanding. This consisted of $675 million of senior unsecured notes with a weighted average interest rate of 3.9% and a weighted average maturity of 6.7 years, as well as $75 million drawn on our $300 million revolving credit facility. As of September 30th, net debt to EBITDA was 5x, and total debt to total capitalization was 35%, while total indebtedness to total asset value, as calculated pursuant to our credit agreement, was 37%. Taking into account unsettled forward equity of $48.4 million, net debt to EBITDA would be approximately 4.7x. Subsequent to quarter-end, as Chris mentioned, we closed on a new $150 million senior unsecured term loan. The term loan matures in October 2025 with a 1 to 12-month extension option. The term loan includes an initial draw of $75 million that was funded at close and used to repay the amount outstanding under our revolving credit facility, and an additional $75 million that can be funded at our option any time over the next six months. In connection with the closing of the term loan, we entered into interest rate swaps to fix SOFR for the full principal loan. Including the impact of these swaps, the effective interest rate on the term loan is 6.13%, based on our leverage ratio as of September 30th. This gives a little bit more color on the term loan. We are obviously pleased to secure this financing in the current environment. I think it demonstrates continued access to capital and the support of our banking relationships while providing us with a flexible loan that we can refinance in two to three years as the capital market stabilizes. Importantly, as we continue to scale our platform and position our balance sheet for additional credit ratings and possible public law issuance. While the shorter term prevented us from taking greater advantage of the inverted yield curve upon fixing the rate, we were still able to lock in material accretion relative to returns on our invested capital while keeping our investment pipeline funded and retaining the flexibility I mentioned. Moving to our equity capital markets activities, during the quarter, we settled 2.2 million shares of common stock that are subject to outstanding forward sale agreements, which generated $71.6 million in net proceeds. We currently have approximately 1.5 million shares of common stock still subject to outstanding forward equity agreements, which upon settlement are anticipated to raise gross proceeds of approximately $48.4 million. Returning to the $95 million committed investment pipeline, as Chris mentioned, these transactions are fully funded through a combination of proceeds from outstanding forward equity agreements and the new term loan. Pro forma for these investments and capital activity, we expect our balance sheet to remain well positioned to support the company's growth. Leverage is expected to remain in line with our target range of 4.5x to 5.5x net debt to EBITDA, and we expect to maintain ample capacity under our revolving credit facility. As our investment pipeline evolves, we will continue to evaluate all capital sources to ensure that we are funding transactions in an accretive manner while also maintaining our investment credit profile. With respect to our environmental liability, we ended the quarter at $22.7 million, which was a reduction of $438,000 since the end of 2022. Our net environmental remediation spending in the third quarter was approximately $1.6 million. Finally, with respect to our 2023 earnings outlook, as a result of our year-to-date investment activity and capital markets transactions, we are raising our 2023 AFFO per share guidance to a range of $2.24 to $2.25 from our previous range of $2.23 to $2.24. As a reminder, our outlook includes transaction and capital markets activities to date, but does not otherwise assume any potential acquisitions, dispositions, or capital markets activities for the remainder of the year. Specific factors which continue to impact our guidance include variability with respect to certain operating expenses and deal pursuit costs, as well as $300,000 of anticipated demolition costs for redevelopment projects that run through property costs on our P&L. With that, I'll ask the operator to open the call for questions.

Our first question comes from Todd Thomas from KeyBanc.

Hi, good morning. This is on behalf of Todd Thomas. I was wondering if you could disclose the blended cash investment yield for the 3Q investments, and could you provide the yield for the acquisitions compared to the development funding? Thank you.

Yes, in our remarks, the initial cash yield in the third quarter was 7.2% and it was roughly the same return between acquisitions and development funding.

Okay, and do you see yields trending higher given the rise in borrowing costs? How should we think about the yields given that you already have a committed pipeline in place?

Yes, again, with the $95 million that's committed, we believe that will be about 20 basis points over where we invested in the third quarter. As Mark mentioned, we are putting out new letters of intent at rates that are significantly higher than those levels.

And the one nuance I would just add to Chris' comments is development funding transactions by design are nine to 15 month type transactions. So some of the dollars that are going out in development funding are still at yields from transactions that were made 12 to 18 months ago versus the sale leasebacks with more traditional acquisition activity, which is shorter timeframe and a little more reflective of the current environment. So I think it's consistent with what Chris said. We're seeing yields absolutely move up, but some dollars going out are still based on old pricing.

Okay. And where are you still seeing the best opportunities in pricing? Has convenience for competition alleviated or what about automotive and car wash?

Yes, it's Mark. So we're very active in all our asset classes. We're getting a lot of momentum across all the categories. Certainly, some of the asset classes tend to be a little stickier on pricing as markets cycle through, but we remain competitive with a tremendous amount of opportunity in the convenience store, car wash, and automotive parts sectors. I would say that the most competitive right now is the quick service restaurant category regarding pricing pressure.

Our next question comes from Wes Golladay from Baird.

Hey, good morning, everyone. Just a follow-up on the question about the cap rates moving higher. I guess, how do you balance that against having rent coverage maybe come under a little bit of pressure? Or are you seeing the operations of the tenants kind of grow in line with this more inflationary environment?

Excuse me, it's Mark. So we certainly haven't deviated from our underwriting model and our total valuation look at each deal and each portfolio. We haven't seen much deterioration in tenant rent coverage on the underwriting of new opportunities. So, yes, the performance of the tenants we're underwriting is in line with the moves in the market.

Another factor is the proceeds that tenants receive. If you think of a typical sale leaseback transaction, we set rent at a coverage ratio and apply some cap rate to determine proceeds to the tenant. The math would lead to either higher risk, which is what you're able to do, but given our underwriting and the consistency there, the net result would be less proceeds to the tenant, which is reflected in Chris' opening comments about folks in the space having to come to the realization that the real estate isn't worth as much today as it may have been 18 to 30 months ago.

Okay, yes, thanks for clarifying that. I appreciate that, Brian. I guess then, with capital become a little bit more scarce and maybe looking at alternative forms of equity for you. You do have part of the portfolio that's probably not appreciated by the market where you could probably still get relatively low cap rates. Do you have any increased appetite to start monetizing some of these lower cap rate assets?

Yes, we certainly look at the portfolio and are aware of where we think there is outsized value. We do dispose of properties and we have disposed of small portfolios over the past couple of years. We're certainly aware of that and will look around. But right now, I think the balance sheet is in great shape. The term loans certainly help with that. We still have roughly $50 million for equity, so we're looking at various forms of capital and will transact where they make sense.

Our next question comes from Mitchell Germain from JMP Securities.

Hi, this is Jody from Mitch. One of the first questions I had is just understanding the composition of the pipeline in terms of asset class and also if you're seeing any changes in the lease structure, maybe more terms or escalators.

We continue to balance out the pipeline across all our asset classes throughout the year. There's always ebbs and flows as deals cycle through. Our goal is to be fairly well distributed across all asset classes, geography, and tenant mix, mindful of tenant concentration and geographic concentrations. Regarding terms, yes, we've been able to not only push pricing and return, but also apply pressure on annual escalators where appropriate. The actual lease terms are still roughly that 15 to 20-year base term on the initial commitment, but the market certainly has yielded discussions to create overall value for us.

Fair, yes. C-stores have been declining in composition overall. But in terms of asset pricing there, are you seeing similar pricing timelines for those compared to other assets in your pipeline? How's that faring?

Yes, I think there are two thoughts in that question. First off, if you look at our portfolio, one of our objectives is to diversify across convenience and automotive retail real estate. So, with a background of our business being primarily C-stores, it's natural in our eyes that you see the composition of our rent become more balanced across all the categories that we're investing in. We're still very comfortable with the C-store sector and acquired nine great assets this quarter. There are certainly C-store assets in our pipeline. I believe this is a natural evolution for Getty to be more balanced from a rent perspective. In terms of pricing within the various asset classes, I'm going to revert back to the broader theme expressed in my remarks, which is that in retail real estate today, there is an expectation that sellers need to understand that pricing has changed. Financing costs have dictated that for transactions, sellers need to adjust their expectations regarding current rates and values.

And I'll just add to that, which I think is implicit in what Chris is saying. This has been talked about before, the nature of the sale leaseback business, which is our primary origination platform versus just aggregating assets from various sellers. Our counterpart sitting across from us isn't just speculating on a price to sell an asset and what return that generates for them. These are finance professionals raising capital for their companies, for new store growth, acquisitions, technology initiatives, and more. So we're making real estate investments, but they're making financing decisions. As long as their cost of capital allows them to meet their hurdle rates, we can find opportunities to transact. The main point we're conveying is that there is transparency in our discussions. Given our relationships and knowledge, we can share with these tenants that while our costs are going up, we are open for business to transact, but it has to meet our real estate underwriting and pricing expectations. We've had some success over the last year in driving these conversations.

Fair. So just on that point, are all the different asset classes in your pipeline seeing similar price pressures, or is it different for different categories?

This is Brian. I think it's driven by where we are in our lifecycle with the different asset classes. In car wash and CNG, where we often go direct to those tackles, primarily, you see the most activity. Our experience with this is our relationships, given that we've recently entered that sector within the last 18 to 24 months. In the QSR space, we've only dedicated efforts to that within the last 12 months. So we're still ramping up in that sector to build those relationships. So in simple terms, we see it most in car wash and CNG, and we're getting there in auto service. In QSR, we're still ramping up.

Okay. Thank you. And just the last one from me. You mentioned that the pipeline is fully funded, and part of that was the term loan. So do we have any expected timeline for the second tranche of the term loan?

Yes, it’s going to be within the next six months because that's the term of that. As always, we're looking to balance funding the transactions, maintaining our leverage profile, and maintaining liquidity. We'll utilize the equity and the loan options as it makes sense to maintain the balance sheet, and that will occur over the next six months.

Operator, are there any more questions on the line?

Okay. It does look like we have one more, Akhil Nagulapalli from JP Morgan.

Hi, good morning. This is Akhil from JP Morgan. My first question is on how does the cost of a sale leaseback compare with your operators' other financing alternatives right now?

I think your question was how does the pricing of a sale leaseback compare to the financing alternatives that our tenants have? Most of our tenants being large, private regional, or national operators, their access to capital is generally through private equity or the bank market or private lending market. All of that has gotten more expensive and tougher to transact. We are seeing many more underwriting opportunities where sale leaseback may look a little more attractive to our tenants. However, we maintain a rigorous underwriting process focused on real estate, tenants, and property down to the asset level. So that doesn't necessarily change our view of what's attractive or not, but I'd say that sale leaseback certainly appears more appealing to the tenants today than it did six to nine months ago.

Understood, yes, one last question. How much opportunity do you think is there in the car wash business as operators consolidate locations in that space?

Yes, I think car wash was a sector that had a lot of capital flowing into it over the last several years. Obviously, the view of the tenants in that space is that there is a lot of room for new store development as the express tunnel model takes share from traditional car washes. Our view in that space has been that we want to partner with large established operators who have a track record of operating as well as growing in the sector. I think we've done a good job with that in terms of picking our tenants. We're focused on not only providing capital to the sector but really partnering with the right tenants for the long term in the car wash space. I do believe you're going to see some consolidation there, and I expect our tenants to do well in this environment as we continue to see growth, both in new store development and existing operations.

This concludes our question and answer session. I would like to turn the floor back over to Chris Constant for closing comments.

Great. Thank you, everyone, for joining us for our third quarter earnings call. We look forward to getting back to everyone when we report our fourth quarter and full-year results for 2023.

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