Getty Realty Corp 10-Q for FY2026 Q2
Getty Realty Corp (GTY)
About this 10-Q
Getty Realty Corp filed this 10-Q on July 23, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $59.05M
- up 10.9% from $53.26M a year earlier
- Net income
- $22.59M
- up 61.2% from net income of $14.01M a year earlier
- Diluted EPS
- $0.36
- up 50.0% from $0.24 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
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(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The registrant had outstanding
GETTY REALTY CORP.
FORM 10-Q
INDEX
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Item 1. |
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Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 |
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Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 |
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Consolidated Statements of Cash Flows for the Six Months ended June 30, 2026 and 2025 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 5. |
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Item 6. |
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GETTY REALTY CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except per share amounts)
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June 30, |
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December 31, |
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2026 |
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2025 |
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ASSETS: |
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Real Estate: |
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Land |
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$ |
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$ |
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Buildings and improvements |
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Lease intangible assets |
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Investment in direct financing leases, net |
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Construction in progress |
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Real estate held for use |
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Less accumulated depreciation and amortization |
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Real estate held for use, net |
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Real estate held for sale, net |
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2,517 |
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Real estate, net |
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Notes and mortgages receivable |
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Cash and cash equivalents |
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Restricted cash |
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Deferred rent receivable |
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Accounts receivable |
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Right-of-use assets - operating |
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Right-of-use assets - finance |
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Prepaid expenses and other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY: |
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Credit Facility |
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$ |
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$ |
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Senior Unsecured Notes, net |
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Environmental remediation obligations |
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Dividends payable |
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Lease liability - operating |
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Lease liability - finance |
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Accounts payable and accrued liabilities |
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Total liabilities |
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— |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Accumulated other comprehensive income (loss) |
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Additional paid-in capital |
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Dividends paid in excess of earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
1
GETTY REALTY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
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For the Three Months |
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For the Six Months |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues: |
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Revenues from rental properties |
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$ |
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$ |
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$ |
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$ |
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Interest on notes and mortgages receivable |
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Total revenues |
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Operating expenses: |
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Property costs |
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Impairments |
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Environmental |
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General and administrative |
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Depreciation and amortization |
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Total operating expenses |
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Gains on dispositions of real estate |
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Operating income |
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Other income, net |
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Interest expense |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Basic net earnings per common share: |
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$ |
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$ |
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$ |
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$ |
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Diluted net earnings per common share: |
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$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Comprehensive income: |
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Net earnings |
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Unrealized gain (loss) on cash flow hedges |
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— |
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— |
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Cash flow hedge expense reclassified to interest expense |
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— |
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— |
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Total other comprehensive income (loss) |
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— |
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— |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
2
GETTY REALTY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
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For the Six Months Ended June 30, |
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2026 |
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2025 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net earnings |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash flow provided by |
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Depreciation and amortization expense |
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Impairments |
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Gains on dispositions of real estate |
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Deferred rent receivable |
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Amortization of intangible market lease assets and liabilities and lease incentives |
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Amortization of investment in direct financing leases |
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Amortization of debt issuance costs |
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Accretion expense |
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Stock-based compensation expense |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other assets |
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( |
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( |
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Environmental remediation obligations |
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( |
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Accounts payable and accrued liabilities |
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Net cash flow provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Property acquisitions |
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Capital expenditures |
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Addition to construction in progress |
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Proceeds from dispositions of real estate |
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Deposits for property acquisitions |
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Issuance of notes and mortgages receivable |
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Collection of notes and mortgages receivable |
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Net cash flow used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Borrowings from Credit Facility |
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Repayments of Credit Facility |
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Proceeds from Senior Unsecured Notes |
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Repayment of Term Loan |
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— |
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( |
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Repayments of Senior Unsecured Notes |
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— |
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( |
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Payments of finance lease liability |
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( |
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Payments of cash dividends |
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Payments of debt issuance costs |
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( |
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Security deposits received (refunded) |
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Payments in settlement of restricted stock units |
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( |
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Proceeds from issuance of common stock, net - equity offering |
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— |
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Proceeds from issuance of common stock, net - ATM Program |
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Net cash flow provided by financing activities |
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Change in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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For the Six Months Ended June 30, |
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2026 |
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2025 |
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Supplemental disclosures of cash flow information |
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Cash paid during the period for: |
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Interest |
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$ |
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$ |
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Income taxes |
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Environmental remediation obligations |
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Non-cash transactions |
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Dividends declared but not yet paid |
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$ |
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$ |
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Issuance of notes and mortgages receivable related to property dispositions |
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The accompanying notes are an integral part of these consolidated financial statements.
3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. — DESCRIPTION OF BUSINESS
Getty Realty Corp. (“Getty Realty,” “we,” “us,” “our’ and the “Company”), a Maryland corporation, is a publicly traded, net lease real estate investment trust (“REIT”) specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate. Our predecessor was founded in 1955 and our common stock was listed on the New York Stock Exchange (“NYSE”) in 1997. Unless otherwise expressly stated or the context otherwise requires, the “Company,” “we,” “us,” and “our” as used herein refer to Getty Realty and its owned and controlled subsidiaries.
Our portfolio includes convenience stores, express tunnel car washes, automotive service centers (gasoline and repair, oil and maintenance, tire and battery, and collision), drive-thru quick service restaurants, and certain other freestanding retail properties. Our
NOTE 2. — ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Getty Realty and its wholly owned subsidiaries. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). We do not distinguish our principal business or our operations on a geographical basis for purposes of measuring performance. We manage and evaluate our operations as a single segment. All significant intercompany accounts and transactions have been eliminated.
Unaudited, Interim Consolidated Financial Statements
The consolidated financial statements are unaudited but, in our opinion, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results for the periods presented. These statements should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the year ended December 31, 2025.
Use of Estimates, Judgments and Assumptions
The consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the period reported. Estimates, judgments and assumptions underlying the accompanying consolidated financial statements include, but are not limited to, real estate, receivables, deferred rent receivable, direct financing leases, depreciation and amortization, impairment of long-lived assets, environmental remediation costs, environmental remediation obligations, litigation, accrued liabilities, income taxes and the allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed. Application of these estimates and assumptions requires exercise of judgment as to future uncertainties and, as a result, actual results could differ materially from these estimates.
Real Estate
Real estate assets are stated at cost less accumulated depreciation and amortization. For acquisitions of real estate, we estimate the fair value of acquired tangible assets (consisting of land, buildings and improvements) “as if vacant” and identified intangible assets and liabilities (consisting of leasehold interests, intangible market lease assets and liabilities, in-place leases and tenant relationships) and assumed debt. Based on these estimates, we allocate the estimated fair value to the applicable assets and liabilities. When we enter into sale-leaseback transactions with intangible market lease assets and liabilities, the intangibles will be accounted for as prepaid rent receivables or prepaid rent liabilities, respectively. Fair value is determined based on an exit price approach, which contemplates the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assumptions used are property and geographic specific and may include, among other considerations, capitalization rates, market rental rates, discount rates, EBITDAR to rent coverage ratios, and land comparables.
We expense transaction costs associated with business combinations in the period incurred. Acquisitions of real estate which do not meet the definition of a business are accounted for as asset acquisitions. The accounting model for asset acquisitions is similar to the accounting model for business combinations except that the acquisition costs are capitalized and allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. For additional information regarding property acquisitions, see Note 12 – Property Acquisitions.
4
We capitalize direct costs, including costs such as construction costs and professional services, and indirect costs associated with the development and construction of real estate assets while substantive activities are ongoing to prepare the assets for their intended use. The capitalization period begins when development activities are underway and ends when it is determined that the asset is substantially complete and ready for its intended use.
We evaluate the held for sale classification of our real estate as of the end of each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell.
When real estate assets are sold or retired, the cost and related accumulated depreciation and amortization is eliminated from the respective accounts and any gain or loss is credited or charged to income. We evaluate real estate sale transactions where we provide seller financing to determine sale and gain recognition in accordance with GAAP. Expenditures for maintenance and repairs are charged to income when incurred.
Direct Financing Leases
Income under direct financing leases is included in revenues from rental properties and is recognized over the lease terms using the effective interest rate method which produces a constant periodic rate of return on the net investments in the leased properties. The investments in direct financing leases are increased for interest income earned and amortized over the life of the leases and reduced by the receipt of lease payments. We consider direct financing leases to be past-due or delinquent when a contractually required payment is not remitted in accordance with the provisions of the underlying agreement.
On June 16, 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments (“ASU 2016-13”). For additional information regarding our direct financing leases, see Note 3 - Leases.
We review our direct financing leases each reporting period to determine whether there were any indicators that the value of our net investments in direct financing leases may be impaired and adjust the allowance for any estimated changes in the credit loss with the resulting change recorded through our consolidated statement of operations. When determining a possible impairment, we take into consideration the collectability of direct financing lease receivables for which a reserve would be required. In addition, we determine whether there has been a permanent decline in the current estimate of the residual value of the property. There were
When we enter into a contract to sell properties that are recorded as direct financing leases, we evaluate whether we believe that it is probable that the disposition will occur. If we determine that the disposition is probable and therefore the property’s holding period is reduced, we may adjust an allowance for credit losses to reflect the change in the estimate of the undiscounted future rents. Accordingly, the net investment balance is written down to fair value.
Notes and Mortgages Receivable
Notes and mortgages receivable consists of loans originated by us in conjunction with property dispositions and funding provided to tenants in conjunction with property acquisitions and capital improvements. Notes and mortgages receivable are recorded at stated principal amounts. We estimated our credit loss reserve for our notes and mortgages receivable using the weighted average remaining maturity (“WARM”) method, which has been identified as an acceptable loss-rate method for estimating credit loss reserves in the FASB Staff Q&A Topic 326, No. 1. The WARM method requires us to reference historic loan loss data across a comparable data set and apply such loss rate to our notes and mortgages portfolio over its expected remaining term, taking into consideration expected economic conditions over the relevant timeframe. We applied the WARM method for our notes and mortgages portfolio, which share similar risk characteristics. Application of the WARM method to estimate a credit loss reserve requires significant judgment, including (i) the historical loan loss reference data, (ii) the expected timing and amount of loan repayments, and (iii) the current credit quality of our portfolio and our expectations of performance and market conditions over the relevant time period. To estimate the historic loan losses relevant to our portfolio, we used our historical loan performance since the launch of our loan origination business in 2013. As of June 30, 2026 and December 31, 2025, the allowance for credit losses on notes and mortgages receivable was $
We also originate construction loans and provide development financing for the construction of income-producing properties which we generally expect to acquire via sale-leaseback transactions at the end of the construction period. During the six months ended June 30, 2026, we funded $
5
In addition, we may acquire from tenants real estate assets that are under construction and commit to provide additional funding during the construction period to complete the properties. These transactions typically do not meet the criteria for sale-leaseback accounting and are accounted for as finance receivables. Accordingly, initial investments and all subsequent fundings made during the construction period are recorded within notes and mortgages receivable on our consolidated balance sheets, and income earned on these investments are recognized within interest on notes and mortgages receivable on our consolidated statements of operations. At the end of the construction period, we will recognize the purchase of the assets, remove the finance receivables from our consolidated balance sheets, and begin to record rental income from the operating leases. As of June 30, 2026, we funded $
Revenue Recognition and Deferred Rent Receivable
Lease payments from operating leases are recognized on a straight-line basis over the term of the leases. The cumulative difference between lease revenue recognized under this method and the contractual lease payment terms is recorded as deferred rent receivable on our consolidated balance sheets. We review our accounts receivable, including its deferred rent receivable, related to base rents, straight-line rents, tenant reimbursements and other revenues for collectability. Our evaluation of collectability primarily consists of reviewing past due account balances and considers such factors as the credit quality of our tenant, historical trends of the tenant, changes in tenant payment terms, current economic trends, and other facts and circumstances related to the applicable tenants. In addition, with respect to tenants in bankruptcy, we estimate the probable recovery through bankruptcy claims. If a tenant’s accounts receivable balance is considered uncollectible, we will write off the related receivable balances and cease to recognize lease income, including straight-line rent unless cash is received. If the collectability assessment subsequently changes to probable, any difference between the lease income that would have been recognized if collectability had always been assessed as probable and the lease income recognized to date, is recognized as a current-period adjustment to revenues from rental properties. Our reported net earnings are directly affected by our estimate of the collectability of our accounts receivable.
The present value of the difference between the fair market rent and the contractual rent for leases at the time properties are acquired is amortized into revenues from rental properties over the remaining terms of the in-place leases. Lease termination fees are recognized as other income when earned upon the termination of a tenant’s lease and relinquishment of space in which we have no further obligation to the tenant.
The sales of nonfinancial assets, such as real estate, are to be recognized when control of the asset transfers to the buyer, which will occur when the buyer has the ability to direct the use of or obtain substantially all of the remaining benefits from the asset. This generally occurs when the transaction closes and consideration is exchanged for control of the property.
Impairment of Long-Lived Assets
Assets are written down to fair value when events and circumstances indicate that the assets might be impaired and the projected undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. Assets held for disposal are written down to fair value less estimated disposition costs.
The estimated fair value of real estate is based on the price that would be received from the sale of the property in an orderly transaction between market participants at the measurement date. In general, we consider multiple internal valuation techniques when measuring the fair value of a property, all of which are based on unobservable inputs and assumptions that are classified within Level 3 of the Fair Value Hierarchy. These assessments have a direct impact on our net income because recording an impairment loss results in an immediate negative adjustment to net income. The evaluation of anticipated cash flows is highly subjective and is based in part on assumptions regarding future rental rates and operating expenses that could differ materially from actual results in future periods. Where properties held for use have been identified as having a potential for sale, additional judgments are required related to the determination as to the appropriate period over which the projected undiscounted cash flows should include the operating cash flows and the amount included as the estimated residual value. This requires significant judgment. In some cases, the results of whether impairment is indicated are sensitive to changes in assumptions input into the estimates, including the holding period until expected sale.
We recorded impairments aggregating $
6
Fair Value of Financial Instruments
All of our financial instruments are reflected in the accompanying consolidated balance sheets at amounts which, in our estimation based upon an interpretation of available market information and valuation methodologies, reasonably approximate their fair values, except those separately disclosed in the notes below.
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates of fair value that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the period reported using a hierarchy (the “Fair Value Hierarchy”) that prioritizes the inputs to valuation techniques used to measure the fair value. The Fair Value Hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels of the Fair Value Hierarchy are as follows: “Level 1” – inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date; “Level 2” – inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and “Level 3” – inputs that are unobservable. Certain types of assets and liabilities are recorded at fair value either on a recurring or non-recurring basis. Assets required or elected to be marked-to-market and reported at fair value every reporting period are valued on a recurring basis. Other assets not required to be recorded at fair value every period may be recorded at fair value if a specific provision or other impairment is recorded within the period to mark the carrying value of the asset to market as of the reporting date. Such assets are valued on a non-recurring basis.
Environmental Remediation Obligations
We record the fair value of an environmental remediation obligation as an asset and liability when there is a legal obligation associated with the retirement of a tangible long-lived asset and the liability can be reasonably estimated. Environmental remediation obligations are estimated based on the level and impact of contamination at each property. The accrued liability is the aggregate of our estimate of the fair value of cost for each component of the liability. The accrued liability is net of estimated recoveries from state underground storage tank (“UST”) remediation funds considering estimated recovery rates developed from prior experience with the funds. Net environmental liabilities are currently measured based on their expected future cash flows which have been adjusted for inflation and discounted to present value. We accrue for environmental liabilities that we believe are allocable to other potentially responsible parties if it becomes probable that the other parties will not pay their environmental remediation obligations. For additional information regarding environmental obligations, see Note 7 – Environmental Obligations.
Income Taxes
We file a federal income tax return on which we consolidate our tax items and the tax items of our subsidiaries that are pass-through entities. Effective January 1, 2001, we elected to qualify, and believe that we are operating so as to qualify, as a REIT for federal income tax purposes. Accordingly, we generally will not be subject to federal income tax on qualifying REIT income, provided that distributions to our stockholders equal at least the amount of our taxable income as defined under the Internal Revenue Code. We accrue for uncertain tax matters when appropriate. The accrual for uncertain tax positions is adjusted as circumstances change and as the uncertainties become more clearly defined, such as when audits are settled or exposures expire. Tax returns filed for the years ended December 31, 2022, 2023 and 2024, and tax returns which will be filed for the year ended December 31, 2025, remain open to examination by federal and state tax jurisdictions under the respective statutes of limitations.
New Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027,with early adoption permitted. We are currently evaluating the impact of adopting ASU 2024-03.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 is intended to clarify and improve certain aspects of interim financial reporting, including the requirements for interim disclosures and the application of recognition and measurement guidance in interim periods. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. We are currently evaluating the potential impact of the guidance and potential additional disclosures required.
7
NOTE 3. — LEASES
As Lessor
As of June 30, 2026, we owned
The majority of our tenants’ financial results depend on convenience store sales, the sale of refined petroleum products and/or the sale of automotive services and parts. During the terms of our leases, we monitor the credit quality of our triple-net lease tenants by reviewing their published credit rating, if available, reviewing publicly available financial statements, or reviewing financial or other operating statements which are delivered to us pursuant to applicable lease agreements, monitoring news reports regarding our tenants and their respective businesses, and monitoring the timeliness of lease payments and the performance of other financial covenants under their leases.
Pursuant to ASU 2016-02, for leases in which we are the lessor, we are (i) retaining classification of our historical leases as we were not required to reassess classification upon adoption of the new standard, (ii) expensing indirect leasing costs in connection with new or extended tenant leases, the recognition of which would have been deferred under prior accounting guidance and (iii) aggregating revenue from our lease components and non-lease components (comprised of tenant reimbursements) into revenue from rental properties.
Revenues from Rental Properties
Revenues from rental properties for the three and six months ended June 30, 2026, were $
In accordance with GAAP, we recognize rental revenue in amounts which vary from the amount of rent contractually due during the periods presented. As a result, revenues from rental properties include non-cash adjustments recorded for (i) deferred rental revenue due to the recognition of rental income on a straight-line basis over the current lease term, (ii) the net amortization of intangible market lease assets and liabilities, (iii) rental income recorded under direct financing leases using the effective interest method which produces a constant periodic rate of return on the net investments in the leased properties, and (iv) the amortization of deferred lease incentives. Non-cash adjustments included in revenues from rental properties were $
Tenant reimbursements, which are included in revenues from rental properties and consist of real estate taxes and other municipal charges paid by us and reimbursed by our tenants pursuant to the terms of triple-net lease agreements, were $
Investment in Direct Financing Leases
The components of investment in direct financing leases, net as of June 30, 2026 and December 31, 2025 are as follows (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Lease payments receivable |
|
$ |
|
|
$ |
|
||
Unguaranteed residual value |
|
|
|
|
|
|
||
Unearned Income |
|
|
( |
) |
|
|
( |
) |
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
||
In accordance with ASU 2016-13, as of June 30, 2026 and December 31, 2025, we had recorded an allowance for credit losses of $
8
We evaluate the credit quality of our investment in direct financing leases utilizing internal underwriting and credit analysis. Substantially all of our tenants under direct financing leases are required to provide us with specified unit-level and/or corporate-level financial information. As of June 30, 2026 and December 31, 2025, no material balances of our investments in direct financing leases were past due.
Minimum Rents Due
As of June 30, 2026, future contractual annual rentals receivable from our tenants, which have terms in excess of one year are as follows (in thousands):
|
|
Operating |
|
|
Direct |
|
||
2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
As Lessee
For leases in which we are the lessee, lease accounting standards require leases with durations greater than twelve months to be recognized on our consolidated balance sheets. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carry forward our historical assessments of (i) whether contracts are or contain leases, (ii) lease classification and (iii) initial direct costs.
As of January 1, 2019, we recognized operating lease right-of-use assets of $
The following presents the lease-related assets and liabilities (in thousands):
|
|
June 30, |
|
|
Assets |
|
|
|
|
Right-of-use assets - operating |
|
$ |
|
|
Right-of-use assets - finance |
|
|
|
|
Total lease assets |
|
$ |
|
|
Liabilities |
|
|
|
|
Lease liability - operating |
|
|
|
|
Lease liability - finance |
|
|
|
|
Total lease liabilities |
|
$ |
|
|
The following presents the weighted average lease terms and discount rates of our leases:
Weighted-average remaining lease term (years): |
|
|
|
|
Operating leases |
|
|
||
Finance leases |
|
|
||
Weighted-average discount rate: |
|
|
|
|
Operating leases (a) |
|
|
% |
|
Finance leases |
|
|
% |
|
9
The following presents our total lease costs (in thousands):
|
|
For the Three Months |
|
|
For the Six Months |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Operating lease cost |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Finance lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of leased assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term lease cost |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following presents supplemental cash flow information related to our leases (in thousands):
|
|
For the Three Months |
|
|
For the Six Months |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows for operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating cash flows for finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financing cash flows for finance leases |
|
|
|
|
|
|
|
|
|
|
|
|
||||
As of June 30, 2026, scheduled lease liabilities mature as follows (in thousands):
|
|
Operating |
|
|
Direct |
|
||
2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
— |
|
|
2029 |
|
|
|
|
|
— |
|
|
2030 |
|
|
|
|
|
— |
|
|
Thereafter |
|
|
|
|
|
— |
|
|
Total lease payments |
|
|
|
|
|
|
||
Less: amount representing interest |
|
|
( |
) |
|
|
( |
) |
Present value of lease payments |
|
$ |
|
|
$ |
|
||
Major Tenants
As of June 30, 2026 and 2025, we had two significant tenants by revenue:
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||||||||
|
|
Number of Properties |
|
|
% of Total Revenues |
|
|
Number of Properties |
|
|
% of Total Revenues |
|
||||
ARKO Corp. (NASDAQ: ARKO) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Global Partners LP (NYSE: GLP) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Getty Petroleum Marketing Inc.
Getty Petroleum Marketing Inc. (“Marketing”) was our largest tenant from 1997 until 2012 under a unitary triple-net master lease that was terminated in April 2012, at which time we either sold or released these properties. As of June 30, 2026,
In connection with leases for properties previously leased to Marketing, title to the USTs and the related retirement and decommissioning obligations were transferred to the tenants. We remain contingently liable if tenants fail to perform. Through June 30, 2026, we removed $
10
balance sheet. The remaining $
NOTE 4. — COMMITMENTS AND CONTINGENCIES
Credit Risk
In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments, if any, with high credit quality institutions. Temporary cash investments, if any, are currently held in an overnight bank time deposit with JPMorgan Chase Bank, N.A. and these balances, at times, may exceed federally insurable limits.
Legal Proceedings
We are involved in various legal proceedings and claims which arise in the ordinary course of our business. As of June 30, 2026 and December 31, 2025, we had $
Matters related to our former Newark, New Jersey Terminal and the Lower Passaic River
In 2004, the United States Environmental Protection Agency (“EPA”) issued General Notice Letters (“GNL”) to over
In addition to the RI/FS activities, in June 2012, certain members of the CPG entered into an Administrative Settlement Agreement and Order on Consent (“10.9 AOC”) with the EPA to perform certain remediation activities, including removal and capping of sediments at the river mile 10.9 area and certain testing, which remedial work has been completed. Concurrent with the CPG’s work on the RI/FS, on April 11, 2014, the EPA issued a draft Focused Feasibility Study (“FFS”) with proposed remedial alternatives to remediate the lower 8.3-miles of the LPRSA. On March 4, 2016, the EPA issued a ROD for the lower 8.3-miles (“Lower 8-mile ROD”) selecting a remedy that involves bank-to-bank dredging and installing an engineered cap with an estimated cost of $
On March 31, 2016, the EPA issued a “Notice of Potential Liability and Commencement of Negotiations for Remedial Design” (“Notice”) to more than
By letter dated March 30, 2017, the EPA advised the recipients of the Notice that it would be entering into cash out settlements with certain PRPs who the EPA stated did not discharge any of the eight hazardous substances identified as a COC in the Lower 8-mile ROD to resolve their alleged liability for OU2. Cash out settlements were finalized in 2018 and 2021 with a total of
11
identified by the EPA for cash out settlements. Most of the PRPs identified by the EPA, including the Company, participated in the allocation process. Occidental did not participate in the allocation proceedings, but on June 30, 2018, filed a complaint in the United States District Court for the District of New Jersey listing over
The allocator issued a final Allocation Recommendation Report in December 2020, which was based upon an
In December 2022, the EPA and the Settling Parties finalized their agreement in a proposed consent decree (“CD”), pursuant to which and without admitting liability, the Settling Parties agree to pay the EPA the collective sum of $
On December 18, 2024, the Court issued an Order and Opinion granting the United States’ Motion to Enter the Modified CD finding the settlement procedurally sound, substantively fair and reasonable, and in furtherance of CERCLA’s goals.
On January 9, 2025, Nokia of America Corporation, an intervening party, filed a Notice of Appeal of the Order to the United States Court of Appeals for the Third Circuit. Occidental, also an intervening party, filed a separate Notice of Appeal on February 13, 2025. The timeline for resolving the appeals before the Third Circuit remains inherently uncertain. Depending on the time required for briefing and deliberation, a decision will extend into 2026 and beyond.
In 2025, following its appeal of the Modified CD, Occidental underwent a corporate reorganization that ultimately resulted in the segregation of its business assets from its legacy environmental liabilities (including those related to the Diamond Alkali Superfund Site) and the formation of two newly created entities: Occidental Chemical Company (“OxyChem”) and Environmental Resource Holdings, LLC (“ERH”). Consequently, in February, 2026, members of the SPG filed a declaratory judgment action in the New Jersey District Court seeking a ruling that both OxyChem and ERH remain jointly and severally liable for all of Occidental’s CERCLA obligations relating to the Diamond Alkali Superfund Site.
If the Modified CD remains in its currently approved form after the appeals process is exhausted, our alleged liability to the EPA and to any non-settling parties, including Occidental, for the remediation of the entire 17-mile Lower Passaic River and its tributaries will be resolved. If the District Court’s Order is overturned on appeal, then, based on currently known facts and circumstances, including, among other factors, the EPA’s conclusion that we are individually and collectively with numerous other parties only responsible for a minor share of the response costs incurred or to be incurred in connection with the LPRSA, our relative participation in the costs related to the 2007 AOC and 10.9 AOC, our belief that there was not any use or discharge of dioxins, furans or polychlorinated biphenyls in connection with our former petroleum storage operations at our former Newark, New Jersey Terminal, and that there are numerous other parties who will likely bear the costs of remediation and/or damages, we do not believe that resolution of the Lower Passaic River proceedings as relates to us is reasonably likely to have a material impact on our results of operations. Nevertheless, if the District
12
Court’s Order is overturned or is not ultimately approved in its current form, performance of the EPA’s selected remedies for the LPRSA may be subject to future negotiation, potential enforcement proceedings and/or possible litigation and, on this basis, our ultimate liability in the proceedings pertaining to the LPRSA remains uncertain and subject to contingencies which cannot be predicted and an outcome which is not yet known. We previously transferred funds to an escrow account based on our share of the settlement contemplated by the Modified CD, however it is possible that circumstances may change including but not limited to possible consequences of an adverse ruling in the above referenced declaratory judgment action, such that and losses related to the Lower Passaic River proceedings could exceed the amounts we have funded.
MTBE Litigation – State of Pennsylvania
On July 7, 2014, our subsidiary, Getty Properties Corp., was served with a complaint filed by the Commonwealth of Pennsylvania (the “State”) in the Court of Common Pleas, Philadelphia County relating to alleged statewide MTBE contamination in Pennsylvania. The named plaintiff is the State, by and through (then) Pennsylvania Attorney General Kathleen G. Kane (as Trustee of the waters of the State), the Pennsylvania Insurance Department (which governs and administers the Underground Storage Tank Indemnification Fund), the Pennsylvania Department of Environmental Protection (vested with the authority to protect the environment) and the Pennsylvania Underground Storage Tank Indemnification Fund. The complaint names us and more than
The case was filed in the Court of Common Pleas, Philadelphia County, but was removed by defendants to the United States District Court for the Eastern District of Pennsylvania and then transferred to the United States District Court for the Southern District of New York so that it may be managed as part of the ongoing MTBE MDL proceedings. In November 2015, plaintiffs filed a Second Amended Complaint naming additional defendants and adding factual allegations against the defendants. We joined with other defendants in the filing of a motion to dismiss the claims against us, which was granted in part and denied in part.
The initial discovery phase of the litigation has concluded, and the U.S. District Court for the Southern District of New York has approved the transfer of certain discovered focus sites to the U.S. District Court for the Eastern District of Pennsylvania for trial. Our focus sites were not among those transferred for trial. The U.S. District Court for the Southern District of New York has retained the remainder of the focus sites for additional discovery, and upon completion of such discovery, additional pretrial motion practice is anticipated. Once all pretrial motions pertaining to this phase of the litigation are concluded, the remainder of the case is expected to be remanded to the Eastern District of Pennsylvania for trial. Multiple defendants in the case have settled with plaintiff. We continue to vigorously defend the claims made against us. We have recorded an accrual in connection with this matter based on management’s judgment that a loss is probable and the amount is reasonably estimable. Our ultimate liability in this proceeding is uncertain and subject to numerous contingencies, the outcome of which are not yet known.
MTBE Litigation – State of Maryland
On December 17, 2017, the State of Maryland, by and through the Attorney General on behalf of the Maryland Department of Environment and the Maryland Department of Health (the “State of Maryland”), filed a complaint in the Circuit Court for Baltimore City related to alleged statewide MTBE contamination in Maryland. The complaint was served upon us on January 19, 2018. The complaint names us and more than
13
The Company and the State of Maryland have entered into a settlement agreement to resolve all claims in this matter for $
NOTE 5. — DEBT
The amounts outstanding under our Credit Facility and our Senior Unsecured Notes are as follows ($ in thousands):
|
|
Maturity |
|
Interest |
|
June 30, |
|
|
December 31, |
|
||
Credit Facility (a) |
|
|
|
$ |
|
|
$ |
|
||||
Series D-E Notes |
|
|
|
|
|
|
|
|
||||
Series F-H, R Notes |
|
|
|
|
|
|
|
|
||||
Series I-K Notes |
|
|
|
|
|
|
|
|
||||
Series L-N, S-T Notes |
|
|
|
|
|
|
|
|
||||
Series O-Q Notes |
|
|
|
|
|
|
|
|
||||
Series U |
|
|
|
|
|
|
|
— |
|
|||
Total debt |
|
|
|
|
|
|
|
|
|
|
||
Unamortized debt issuance costs, net (b) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Total debt, net |
|
|
|
|
|
$ |
|
|
$ |
|
||
Credit Facility
In January 2025, we entered into a third amended and restated credit agreement (as amended, the “Third Restated Credit Agreement”). The Third Restated Credit Agreement provides for an unsecured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $
The Credit Facility matures in , subject to
Borrowings under the Credit Facility bear interest at a rate equal to (i) the sum of a SOFR rate plus a SOFR adjustment of
The per annum rate of the unused line fee on the undrawn funds under the Credit Facility is
Term Loan
In October 2023, we entered into a term loan credit agreement (the “Term Loan Agreement”) that provided for a senior unsecured term loan (the "Term Loan") in an aggregate principal amount of $
In January 2025, we used borrowings under the Third Restated Credit Agreement to repay, in full, the Term Loan. As a result of this early repayment, we recognized approximately $
14
Senior Unsecured Notes
In November 2025, we entered into a note purchase and guarantee agreement with multiple purchasers party thereto pursuant to which, in January 2026, we issued $
In November 2024, we entered into a seventh amended and restated note purchase and guarantee agreement with The Prudential Insurance Company of America and certain of its affiliates (collectively, “Prudential”) (the "Seventh Amended and Restated Prudential Agreement") pursuant to which, in February 2025, we issued $
In November 2024, we entered into an amended and restated note purchase and guarantee agreement with New York Life Insurance Company and certain of its affiliates (collectively, “New York Life”) (the “Amended and Restated New York Life Agreement”) pursuant to which, in February 2025, we issued $
In February 2022, we entered into a second amended and restated note purchase and guarantee agreement with American General Life Insurance Company and certain of its affiliates (collectively, “AIG”) (the “Second Amended and Restated AIG Agreement”) pursuant to which we issued $
In February 2022, we entered into a second amended and restated note purchase and guarantee agreement with Massachusetts Mutual Life Insurance Company and certain of its affiliates (collectively, “MassMutual”) (the “Second Amended and Restated MassMutual Agreement”) pursuant to which we issued $
In June, 2018, we entered into a note purchase and guarantee agreement with MetLife and certain of its affiliates (collectively, "MetLife") (the “MetLife Agreement”) pursuant to which we issued $
The funded and outstanding Series D Notes, Series E Notes, Series F Note, Series G Notes, Series H Notes, Series I Notes, Series J Notes, Series K Notes, Series L Notes, Series M Notes, Series N Notes, Series O Notes, Series P Notes, Series Q Notes, Series R Notes, Series S Notes, Series T Notes and Series U Notes are collectively referred to as the “Senior Unsecured Notes”.
Covenants
The Third Restated Credit Agreement and Senior Unsecured Notes contain customary financial covenants such as leverage, coverage ratios and minimum tangible net worth, as well as limitations on restricted payments, which may limit our ability to incur additional debt or pay dividends. The Third Restated Credit Agreement and Senior Unsecured Notes also contain customary events of default, including cross defaults to each other, change of control and failure to maintain REIT status (provided that the Senior Unsecured Notes require a mandatory offer to prepay the notes upon a change in control in lieu of a change of control event of default). Any event of default, if not cured or waived in a timely manner, would increase by 200 basis points (
15
any event or condition that constitutes an event of default under the Second Restated Credit Agreement or that, with the giving of any notice, the passage of time, or both, would be an event of default under the Second Restated Credit Agreement.
As of June 30, 2026, we were in compliance with all of the material terms of the Third Restated Credit Agreement and Senior Unsecured Notes, including the various financial covenants described herein.
Debt Maturities
As of June 30, 2026, scheduled debt maturities, including balloon payments, are as follows (in thousands):
|
|
Credit Facility |
|
|
Senior |
|
|
Total |
|
|||
2026 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
2027 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
2028 |
|
|
— |
|
|
|
|
|
|
|
||
2029 (a) |
|
|
|
|
|
|
|
|
|
|||
2030 |
|
|
— |
|
|
|
|
|
|
|
||
Thereafter |
|
|
— |
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
NOTE 6. — DERIVATIVE INSTRUMENTS
We enter into derivative instruments for risk management purposes only, including derivatives designated as hedging instruments as required by FASB ASC Topic 815, Derivatives and Hedging, and those utilized as economic hedges. Our use of derivative instruments is currently limited to interest rate hedges. We do not enter into derivative instruments for trading or speculative purposes, where changes in the cash flows of the derivative are not expected to offset changes in cash flows of the hedged item. All derivatives are recognized on our consolidated balance sheets at fair value. For those derivative instruments for which we intend to elect hedge accounting, at the time the derivative contract is entered into, we document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking the various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific assets and liabilities on our consolidated balance sheets or to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.
To the extent our derivatives are effective in offsetting the variability of the hedged cash flows, and otherwise meet the cash flow hedge accounting criteria in accordance with GAAP, changes in the derivatives’ fair value are not included in current earnings, but are included in accumulated other comprehensive income (loss). These changes in fair value will be reclassified into earnings at the time of the forecasted transaction. Ineffectiveness measured in the hedging relationship is recorded in earnings in the period in which it occurs.
In October 2023, we entered into interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates on $
In October 2025, we committed to a plan to issue new senior unsecured notes and, upon funding in January 2026, use a portion of the proceeds to fully repay the variable-rate borrowings that were hedged by the interest rate swaps. As a result, forecasted variable-rate interest payments after January 2026 were no longer considered probable of occurring and, accordingly, the Company discontinued hedge accounting for all designated interest rate swaps. As of the date of hedge de-designation, the net loss deferred in AOCI related to the swaps was reclassified into earnings during the fourth quarter of 2025 in accordance with ASC 815-30-40-5.
The interest rate swaps were terminated in December 2025, resulting in a cash settlement payment of $
16
The following table presents amounts recorded to accumulated other comprehensive income (loss) related to derivative and hedging activities for the periods presented (in thousands):
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
2026 |
|
2025 |
|
|
2026 |
|
2025 |
|
||||||
Accumulated other comprehensive income (loss) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
NOTE 7. — ENVIRONMENTAL OBLIGATIONS
We are subject to numerous federal, state and local laws and regulations, including matters relating to the protection of the environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets including buildings containing hazardous materials, USTs and other equipment. Environmental costs are principally attributable to remediation costs which are incurred for, among other things, removing USTs, excavation of contaminated soil and water, installing, operating, maintaining and decommissioning remediation systems, monitoring contamination and governmental agency compliance reporting required in connection with contaminated properties.
We enter into leases and various other agreements which contractually allocate responsibility between the parties for known and unknown environmental liabilities at or relating to the subject properties. Under applicable law, we are contingently liable for these environmental obligations in the event that our tenant does not satisfy them, and we are required to accrue for environmental liabilities that we believe are allocable to others under our leases if we determine that it is probable that our tenant will not meet its environmental obligations. Our assumptions regarding the ultimate allocation method and share of responsibility that we use to allocate environmental liabilities may change, which has resulted, and may in the future result, in material adjustments to the amounts recorded for environmental litigation accruals and environmental remediation liabilities. We assess whether to accrue for environmental liabilities based upon relevant factors including our tenants’ histories of paying for such obligations, our assessment of their financial capability, and their intent to pay for such obligations. However, there can be no assurance that our assessments are correct or that our tenants who have paid their obligations in the past will continue to do so. We may ultimately be responsible to pay for environmental liabilities as the property owner if our tenant fails to pay them.
The estimated future costs for known environmental remediation requirements are accrued when it is probable that a liability has been incurred and a reasonable estimate of fair value can be made. The accrued liability is the aggregate of our estimate of the fair value of cost for each component of the liability, net of estimated recoveries from state UST remediation funds considering estimated recovery rates developed from prior experience with the funds.
For substantially all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and regulations, removal of USTs at the end of their lease term (the cost of which is mainly the responsibility of our tenant, but in certain cases partially paid for by us) and remediation of any environmental contamination that arises during the term of their tenancy. Substantially all of our tenants are also responsible for pre-existing environmental contamination that is discovered during their lease term, except contamination that was known at lease commencement, as to which we have established reserves when appropriate.
For the subset of our triple-net leases which cover properties previously leased to Marketing (substantially all of which commenced in 2012), the allocation of responsibility differs from our other triple-net leases as it relates to preexisting known and unknown contamination. Under the terms of our leases covering properties previously leased to Marketing,
Based on the expiration of the Lookback Periods, together with other factors which have significantly mitigated our potential liability for preexisting environmental obligations, including the absence of any contractual obligations on the part of the Company relating to properties which have been sold, quantifiable trends associated with types and ages of USTs at issue, expectations regarding future UST replacements, and historical trends and expectations regarding discovery of preexisting unknown environmental contamination and/or attempted pursuit of us, we have concluded that there is no material continued risk of having to satisfy contractual obligations relating to preexisting unknown environmental contamination. During the six months ended June 30, 2026, we removed the remaining $
17
We measure our environmental remediation liabilities at fair value based on expected future net cash flows, adjusted for inflation and then discount them to present value. We adjust our environmental remediation liabilities quarterly to reflect changes in projected expenditures, changes in present value due to the passage of time and reductions in estimated liabilities as a result of actual expenditures incurred during each quarter. As of June 30, 2026, we had accrued a total of $
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $
During the six months ended June 30, 2026 and 2025, we increased the carrying values of certain of our properties by $
Capitalized asset retirement costs are being depreciated over the estimated remaining life of the UST, a
Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon initial assessment of contamination, alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations and their interpretations, changes in costs associated with environmental remediation services and equipment, the availability of state UST remediation funds and the possibility of existing legal claims giving rise to allocation of responsibilities to others, as well as the time it takes to remediate contamination and receive regulatory approval. In developing our liability for estimated environmental remediation obligations on a property-by-property basis, we consider, among other things, laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates derived upon facts known to us at this time, which are subject to significant change as circumstances change, and as environmental contingencies become more clearly defined and reasonably estimable.
Any changes to our estimates or our assumptions that form the basis of our estimates may result in our providing an accrual, or adjustments to the amounts recorded, for environmental remediation liabilities.
In September 2022, we purchased a
18
NOTE 8. — STOCKHOLDERS’ EQUITY
A summary of the changes in stockholders’ equity for the three and six months ended June 30, 2026 and 2025 is as follows (in thousands except per share amounts):
|
|
Common Stock |
|
|
Additional |
|
|
Dividends |
|
|
|
|
||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
of Earnings |
|
|
Total |
|
|||||
Balance, March 31, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Accumulated other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dividends declared — $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Shares issued pursuant to ATM Program, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Shares issued pursuant to dividend reinvestment |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Stock-based compensation and settlements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance, December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accumulated other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Dividends declared — $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Shares issued pursuant to ATM Program, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Shares issued pursuant to dividend reinvestment |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Stock-based compensation and settlements |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
Common Stock |
|
|
Accumulated |
|
|
Additional |
|
|
Dividends |
|
|
|
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Income |
|
|
Capital |
|
|
Of Earnings |
|
|
Total |
|
||||||
Balance, March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Accumulated other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Dividends declared — $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Shares issued pursuant to equity offering, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Shares issued pursuant to ATM Program, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Shares issued pursuant to dividend reinvestment |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Stock-based compensation/settlements |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance, December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Dividends declared — $ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Shares issued pursuant to equity offering, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Shares issued pursuant to ATM Program, net |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Shares issued pursuant to dividend reinvestment |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Stock-based compensation/settlements |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
On March 2, 2026, our Board of Directors granted
Equity Offering
In February 2026, we completed a follow-on public offering of
In July 2024, we completed a follow-on public offering of
19
ATM Program
In February 2023, we established and, in February 2024, we amended, an at-the-market equity offering program (the “ATM Program”), pursuant to which we are able to issue and sell shares of our common stock with an aggregate sales price of up to $
The use of forward sales agreements allow us to establish a share price for the sale of shares of common stock at the time the forward sales agreements become effective, but defer receiving the proceeds from the sale of shares of common stock until a later date. To account for the forward sales agreements, we considered the accounting guidance governing financial instruments and derivatives. To date, we have concluded that our forward sales agreements are not liabilities as they do not embody obligations to repurchase our shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to our shares.
We also evaluated whether the forward sales agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments. We concluded that the forward sales agreements are classifiable as equity contracts based on the following assessments: (i) none of the agreements’ exercise contingencies that are based on observable markets or indices besides those related to the market for our own stock price and operations, and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.
We also consider the potential dilution resulting from the forward sales agreements on our earnings per share calculations. We use the treasury stock method to determine the dilution resulting from the forward sales agreements during the period of time prior to settlement.
ATM Direct Issuances
During the six months ended June 30, 2026 and June 30, 2025,
ATM Forward Agreements
During the three and six months ended June 30, 2026, we settled
The following table summarizes activity under our ATM Program in connection with forward sales agreements for the six months ended June 30, 2026 and 2025 ($ in thousands):
|
|
|
|
|
For the Six Months Ended |
|
|
As of June 30, 2026 |
|
|||||||||||
Period Entered Into Forward Sales Agreements |
|
Shares Sold |
|
|
Shares Settled |
|
|
Net Proceeds |
|
|
Shares |
|
|
Anticipated |
|
|||||
Three Months Ended December 31, 2024 |
|
|
|
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|||
Three Months Ended September 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Three Months Ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Three Months Ended June 30, 2026 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Total |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
20
|
|
|
|
|
For the Six Months Ended |
|
|
As of June 30, 2025 |
|
|||||||||||
Period Entered Into Forward Sales Agreements |
|
Shares Sold |
|
|
Shares Settled |
|
|
Net Proceeds |
|
|
Shares |
|
|
Anticipated |
|
|||||
Three Months Ended June 30, 2024 |
|
|
|
|
|
|
|
$ |
|
|
|
— |
|
|
$ |
— |
|
|||
Three Months Ended December 31, 2024 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Total |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|||||
We expect to settle outstanding forward sales agreements, typically within 12 months of the respective agreement dates, via physical delivery of the outstanding shares of common stock in exchange for cash proceeds, although we may elect cash settlement or net share settlement for all or a portion of our obligations under the forward sales agreements, subject to certain conditions.
Dividends
For the six months ended June 30, 2026, we paid regular quarterly dividends of $
Dividend Reinvestment Plan
Our dividend reinvestment plan provides our common stockholders with a convenient and economical method of acquiring additional shares of common stock by reinvesting all or a portion of their dividend distributions. During the six months ended June 30, 2026 and 2025, we issued
Stock-Based Compensation
Stock-based compensation expense using the fair value method was $
NOTE 9. — EARNINGS PER COMMON SHARE
Basic and diluted earnings per common share gives effect, utilizing the two-class method, to the potential dilution from the issuance of shares of our common stock in settlement of RSUs which provide for non-forfeitable dividend equivalents equal to the dividends declared per common share. Basic and diluted earnings per common share is computed by dividing net earnings less dividend equivalents attributable to RSUs by the weighted average number of common shares outstanding during the period.
The following table is a reconciliation of the numerator and denominator used in the computation of basic and diluted earnings per common share using the two-class method (in thousands except per share data):
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net earnings |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less dividend equivalents attributable to RSUs outstanding |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net earnings attributable to common stockholders used in basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Incremental shares from stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Incremental shares from Equity Offering forward agreements |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Incremental shares from ATM Program forward agreements |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic earnings per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted earnings per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
21
NOTE 10. — FAIR VALUE MEASUREMENTS
Debt Instruments
As of June 30, 2026 and December 31, 2025, the fair value of borrowings under the Credit Facility was $
Derivative Instruments
As of June 30, 2026 and December 31, 2025, we were not party to any derivative instruments and no derivative positions were included on our consolidated balance sheets. Periodically, we use interest rate swap agreements to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis of the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves.
Supplemental Retirement Plan
We have mutual fund assets that are measured at fair value on a recurring basis using Level 1 inputs. We have a Supplemental Retirement Plan for executives. The amounts held in trust under the Supplemental Retirement Plan using Level 2 inputs may be used to satisfy claims of general creditors in the event of our or any of our subsidiaries’ bankruptcy. We have liability to the executives participating in the Supplemental Retirement Plan for the participant account balances equal to the aggregate of the amount invested at the executives’ direction and the income earned in such mutual funds.
The following summarizes as of June 30, 2026, our assets and liabilities measured at fair value on a recurring basis by level within the Fair Value Hierarchy (in thousands):
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mutual funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
The following summarizes as of December 31, 2025, our assets and liabilities measured at fair value on a recurring basis by level within the Fair Value Hierarchy (in thousands):
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mutual funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred compensation |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Real Estate Assets
As of June 30, 2026 and December 31, 2025, we had real estate assets of $
NOTE 11. — ASSETS HELD FOR SALE
We evaluate the held for sale classification of our real estate as of the end of each quarter. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less costs to sell. As of June 30, 2026,
22
Real estate held for sale consisted of the following as of June 30, 2026, and December 31, 2025 (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Real estate held for sale, net |
|
$ |
|
|
$ |
|
||
During the six months ended June 30, 2026, we sold
NOTE 12. — PROPERTY ACQUISITIONS
2026
During the six months ended June 30, 2026, we acquired interests in
|
|
|
|
|
|
|
|
Purchase Price Allocation |
|
|||||||||||||||||||
Asset Type |
|
Properties |
|
|
Purchase |
|
|
Land |
|
|
Buildings & |
|
|
In-Place |
|
|
Intangible |
|
|
Intangible |
|
|||||||
Convenience stores |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|||||
Express tunnel car washes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
Drive-thru QSRs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
Auto service centers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|||||
2025
During the six months ended June 30, 2025, we acquired interests in
|
|
|
|
|
|
|
|
Purchase Price Allocation |
|
|||||||||||||||||||
Asset Type |
|
Properties |
|
|
Purchase |
|
|
Land |
|
|
Buildings & |
|
|
In-Place |
|
|
Intangible |
|
|
Intangible |
|
|||||||
Convenience stores |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|||||||
Express tunnel car washes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
Drive-thru QSRs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||||
Auto service centers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|||||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|||||
NOTE 13. — SEGMENT REPORTING
We are a net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate. Substantially all of our properties are leased on a triple-net basis to convenience store operators, petroleum distributors, express tunnel car wash operators, and other automotive-related and retail tenants. Our Chief Operating Decision Maker ("CODM"), which is our , does not distinguish or group operations based on geography, size, type or other basis when assessing the financial performance of our properties. Our operating properties have similar economic characteristics and provide similar products and services to consumers. Accordingly, we manage and evaluate our operations as a single reportable segment based on our consolidated financial statements for financial reporting and disclosure purposes.
23
The CODM reviews net earnings and the relevant components thereof that are directly reflected on our consolidated statements of operations. The CODM is also regularly provided the reportable segment level asset information, real estate held for use, which is directly reflected on our consolidated balance sheets. Refer to the descriptions below for further details:
NOTE 14. — SUBSEQUENT EVENTS
In preparing our unaudited consolidated financial statements, we have evaluated events and transactions occurring after June 30, 2026, for recognition or disclosure purposes. Based on this evaluation, there were no significant subsequent events from June 30, 2026, through the date the financial statements were issued.
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand our operations and our present business environment from the perspective of management. The following discussion and analysis should be read in conjunction with the sections entitled “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025; “Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2026; and “Part I, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for the period ended June 30, 2026.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of the federal securities laws that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995, including Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “seeks,” “plans,” “projects,” “estimates,” “anticipates,” “predicts” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and are not historical facts. All capitalized and undefined terms used in this section shall have the same meanings hereafter defined in this Quarterly Report on Form 10-Q.
Examples of forward-looking statements included in this Quarterly Report on Form 10-Q include, but are not limited to, our statements regarding:
25
These forward-looking statements are based on our current beliefs and assumptions and information currently available to us, and are subject to known and unknown risks, uncertainties and other factors including, but not limited to, the risks described in “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K, “Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the period ended March 31, 2026, and this Quarterly Report on Form 10-Q for the period ended June 30, 2026 as such risk factors may be updated from time to time in our public filings. Such risks and uncertainties were derived based on numerous important assumptions, which may not be realized, and may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Most of these factors are difficult to predict accurately and are generally beyond our control. New risk factors and uncertainties may also emerge from time to time, and there can be no assurance that we have identified all risks and uncertainties that may affect it.
As a result of these and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect our business, financial condition, operating results, our growth or reinvestment strategies, our ability to pay dividends or stock price. An investment in our stock involves various risks, including those mentioned above and elsewhere in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and those that are described from time to time in our other filings with the SEC.
You should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events, unless required by law.
General
Real Estate Investment Trust
We are a net lease REIT specializing in the acquisition, financing and development of convenience, automotive and other single tenant retail real estate. Our portfolio includes convenience stores, express tunnel car washes, automotive service centers (gasoline and repair, oil and maintenance, tire and battery, and collision), drive-thru quick service restaurants, and certain other freestanding retail properties. As of June 30, 2026, our portfolio included 1,224 properties, including 1,198 properties owned by us and 26 properties that we leased from third-party landlords. As a REIT, we are not subject to federal corporate income tax on the taxable income we distribute to our stockholders. In order to continue to qualify for taxation as a REIT, we are required, among other things, to distribute at least 90% of our ordinary taxable income to our stockholders each year.
Our Properties
Our 1,224 properties are located in 46 states and Washington D.C. and our typical property is located in a larger metropolitan area and is used as a convenience store, express tunnel car wash, automotive service center, drive thru quick service restaurant, or certain other freestanding retail uses. Many of our properties are located at highly trafficked urban intersections or conveniently close to highway entrances or exit ramps.
26
As of June 30, 2026, we leased 1,220 of our properties to tenants under triple-net leases, including 984 properties leased under 66 separate unitary or master triple-net leases, and 236 properties leased under single unit triple-net leases. These leases generally provide for an initial term of 15 or 20 years, with options for successive renewal terms of up to 20 years, and periodic rent escalations. As of June 30, 2026, our weighted average remaining lease term, excluding renewal options, was 10.3 years.
Substantially all of our properties are leased on triple-net basis to convenience store operators, petroleum distributors, express tunnel car wash operators and other automotive-related and retail tenants. Our tenants either operate their business at our properties directly or, in the case of certain convenience stores and gasoline and repair stations, sublet our properties and supply fuel to third parties that operate the businesses. For additional information regarding risks related to our tenants’ dependence on the performance of the industry, see “Item 1A. Risk Factors—Risks Related to Our Business and Operations—Significant number of our tenants depend on the same industry for their revenues” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Our triple-net lease tenants are responsible for the payment of all taxes, maintenance, repairs, insurance and other operating expenses relating to our properties, and are also responsible for environmental contamination occurring during the terms of their leases. Substantially all of our tenants are also responsible for pre-existing environmental contamination that is discovered during their lease term, except contamination that was known at lease commencement, as to which we have established reserves. For additional information regarding our environmental obligations, see Note 7 – Environmental Obligations.
As of June 30, 2026, we also had three vacant properties and one property under redevelopment.
Investment Strategy and Activity
As part of our strategy to grow and diversify our portfolio, we regularly review acquisition and financing opportunities to invest in additional convenience, automotive and other single tenant retail real estate. We primarily pursue sale leaseback transactions with existing and prospective tenants and will also provide forward commitments to acquire new-to-industry construction and acquire assets with in-place leases. Our investment activities may also include purchase money financing with respect to properties we sell, real property loans relating to our leasehold properties, and construction loans or other financing for the development of new-to-industry properties. Our investment strategy seeks to generate current income and benefit from long-term appreciation in the underlying value of our real estate. To achieve that goal, we seek to invest in well-located, freestanding properties that support automobility and provide convenience and service to consumers in major markets across the country. A key element of our investment strategy is to invest in properties that will enhance our property type, tenant, and geographic diversification.
During the six months ended June 30, 2026, we invested $162.6 million across 67 properties, including the acquisition of 30 auto service centers, 20 drive-thru quick service restaurants, six express tunnel car washes and one convenience store.
During the six months ended June 30, 2025, we invested $78.4 million across 33 properties, including the acquisition of 12 drive-thru quick service restaurants, seven auto service centers, five convenience stores and five express tunnel car washes.
Redevelopment Strategy and Activity
We believe that certain of our properties, primarily those currently being used as gas and repair businesses, are well-suited to be redeveloped as modern convenience stores or other single tenant convenience and automotive retail uses, such as automotive parts retailers, quick service restaurants, auto service centers, and bank branches. We believe that the redeveloped properties can be leased or sold at higher values than their prior use. Since the inception of our redevelopment program in 2015, we have completed 35 redevelopment and revenue-enhancing capital expenditure projects.
As of June 30, 2026, we had one property under active redevelopment and others in various stages of feasibility planning for potential recapture from our net lease portfolio.
Supplemental Non-GAAP Measures
We manage our business to enhance the value of our real estate portfolio and, as a REIT, place particular emphasis on minimizing risk, to the extent feasible, and generating cash sufficient to make required distributions to stockholders of at least 90% of our ordinary taxable income each year. In addition to measurements defined by accounting principles generally accepted in the United States of America (“GAAP”), we also focus on Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”) to measure our performance.
FFO and AFFO are generally considered by analysts and investors to be appropriate supplemental non-GAAP measures of the performance of REITs. FFO and AFFO are not in accordance with, or a substitute for, measures prepared in accordance with GAAP. In addition, FFO and AFFO are not based on any comprehensive set of accounting rules or principles. Neither FFO nor AFFO represent cash generated from operating activities calculated in accordance with GAAP and therefore these measures should not be considered an alternative for GAAP net earnings or as a measure of liquidity. These measures should only be used to evaluate our performance in conjunction with corresponding GAAP measures.
27
FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net earnings before (i) depreciation and amortization of real estate assets, (ii) gains or losses on dispositions of real estate assets, (iii) impairment charges, and (iv) the cumulative effect of accounting changes.
We define AFFO as FFO excluding (i) certain revenue recognition adjustments (defined below), (ii) certain environmental adjustments (defined below), (iii) stock-based compensation, (iv) amortization of debt issuance costs and (v) other non-cash and/or unusual items that are not reflective of our core operating performance.
Other REITs may use definitions of FFO and/or AFFO that are different than ours and, accordingly, may not be comparable.
We believe that FFO and AFFO are helpful to analysts and investors in measuring our performance because both FFO and AFFO exclude various items included in GAAP net earnings that do not relate to, or are not indicative of, the core operating performance of our portfolio. Specifically, FFO excludes items such as depreciation and amortization of real estate assets, gains or losses on dispositions of real estate assets, and impairment charges. With respect to AFFO, we further exclude the impact of (i) deferred rental revenue (straight-line rent), the net amortization of intangible market lease assets and liabilities, adjustments recorded for the recognition of rental income from direct financing leases, and the amortization of deferred lease incentives (collectively, “Revenue Recognition Adjustments”), (ii) environmental accretion expenses, environmental litigation accruals, insurance reimbursements, legal settlements and judgments, and changes in environmental remediation estimates (collectively, “Environmental Adjustments”), (iii) stock-based compensation expense, (iv) amortization of debt issuance costs and (v) other items, which may include allowances for credit losses on notes and mortgages receivable and direct financing leases, losses on extinguishment of debt, retirement and severance costs, and other items that do not impact our recurring cash flow and which are not indicative of our core operating performance.
We pay particular attention to AFFO which we believe provides the most useful depiction of the core operating performance of our portfolio. By providing AFFO, we believe we are presenting information that assists analysts and investors in their assessment of our core operating performance, as well as the sustainability of our core operating performance with the sustainability of the core operating performance of other real estate companies.
28
A reconciliation of net earnings to FFO and AFFO is as follows (in thousands, except per share amounts):
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net earnings |
|
$ |
22,585 |
|
|
$ |
14,014 |
|
|
$ |
49,214 |
|
|
$ |
28,800 |
|
Depreciation and amortization of real estate assets |
|
|
16,760 |
|
|
|
14,917 |
|
|
|
33,033 |
|
|
|
30,958 |
|
Gains on dispositions of real estate |
|
|
(4,721 |
) |
|
|
(1,558 |
) |
|
|
(6,450 |
) |
|
|
(1,886 |
) |
Impairments |
|
|
2,461 |
|
|
|
455 |
|
|
|
3,977 |
|
|
|
1,624 |
|
Funds from operations (FFO) |
|
|
37,085 |
|
|
|
27,828 |
|
|
|
79,774 |
|
|
|
59,496 |
|
Revenue recognition adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred rental revenue (straight-line rent) |
|
|
(2,579 |
) |
|
|
(2,401 |
) |
|
|
(4,345 |
) |
|
|
(4,350 |
) |
Amortization of intangible market lease assets and liabilities, net |
|
|
(60 |
) |
|
|
(87 |
) |
|
|
(119 |
) |
|
|
(168 |
) |
Amortization of investment in direct financing leases |
|
|
1,363 |
|
|
|
1,153 |
|
|
|
2,659 |
|
|
|
2,246 |
|
Amortization of lease incentives |
|
|
545 |
|
|
|
206 |
|
|
|
792 |
|
|
|
408 |
|
Total revenue recognition adjustments |
|
|
(731 |
) |
|
|
(1,129 |
) |
|
|
(1,013 |
) |
|
|
(1,864 |
) |
Environmental Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accretion expense |
|
|
65 |
|
|
|
67 |
|
|
|
156 |
|
|
|
164 |
|
Changes in environmental estimates |
|
|
57 |
|
|
|
(19 |
) |
|
|
(7,727 |
) |
|
|
(227 |
) |
Environmental litigation accruals |
|
|
(25 |
) |
|
|
5,066 |
|
|
|
(25 |
) |
|
|
5,066 |
|
Insurance reimbursements |
|
|
— |
|
|
|
— |
|
|
|
(6 |
) |
|
|
(43 |
) |
Total environmental adjustments |
|
|
97 |
|
|
|
5,114 |
|
|
|
(7,602 |
) |
|
|
4,960 |
|
Other Adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation expense |
|
|
1,775 |
|
|
|
1,790 |
|
|
|
2,727 |
|
|
|
3,403 |
|
Amortization of debt issuance costs |
|
|
409 |
|
|
|
364 |
|
|
|
799 |
|
|
|
1,768 |
|
Retirement and severance costs |
|
|
213 |
|
|
|
— |
|
|
|
3,144 |
|
|
|
— |
|
Total other adjustments |
|
|
2,397 |
|
|
|
2,154 |
|
|
|
6,670 |
|
|
|
5,171 |
|
Adjusted funds from operations (AFFO) |
|
$ |
38,848 |
|
|
$ |
33,967 |
|
|
$ |
77,829 |
|
|
$ |
67,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic per share amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings |
|
$ |
0.36 |
|
|
$ |
0.24 |
|
|
$ |
0.79 |
|
|
$ |
0.49 |
|
FFO (a) |
|
|
0.59 |
|
|
|
0.49 |
|
|
|
1.29 |
|
|
|
1.04 |
|
AFFO (a) |
|
|
0.62 |
|
|
|
0.59 |
|
|
|
1.25 |
|
|
|
1.19 |
|
Diluted per share amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earnings |
|
$ |
0.36 |
|
|
$ |
0.24 |
|
|
$ |
0.79 |
|
|
$ |
0.49 |
|
FFO (a) |
|
|
0.59 |
|
|
|
0.49 |
|
|
|
1.28 |
|
|
|
1.04 |
|
AFFO (a) |
|
|
0.62 |
|
|
|
0.59 |
|
|
|
1.25 |
|
|
|
1.19 |
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
60,580 |
|
|
|
55,530 |
|
|
|
60,225 |
|
|
|
55,297 |
|
Diluted |
|
|
60,739 |
|
|
|
55,606 |
|
|
|
60,353 |
|
|
|
55,443 |
|
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
FFO |
|
$ |
1,098 |
|
|
$ |
823 |
|
|
$ |
2,376 |
|
|
$ |
1,766 |
|
AFFO |
|
|
1,151 |
|
|
|
1,004 |
|
|
|
2,318 |
|
|
|
2,012 |
|
29
Results of Operations
Three months ended June 30, 2026, compared to the three months ended June 30, 2025
The following table presents select data and comparative results from our consolidated statements of operations for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025 (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Revenues: |
|
|
|
|
|
|
|
|
|
|||
Revenues from rental properties |
|
$ |
58,554 |
|
|
$ |
52,724 |
|
|
$ |
5,830 |
|
Interest on notes and mortgages receivable |
|
|
497 |
|
|
|
533 |
|
|
|
(36 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Property costs |
|
|
2,020 |
|
|
|
2,443 |
|
|
|
(423 |
) |
Impairments |
|
|
2,461 |
|
|
|
455 |
|
|
|
2,006 |
|
Environmental |
|
|
337 |
|
|
|
5,341 |
|
|
|
(5,004 |
) |
General and administrative |
|
|
7,297 |
|
|
|
6,794 |
|
|
|
503 |
|
Depreciation and amortization |
|
|
16,760 |
|
|
|
14,917 |
|
|
|
1,843 |
|
|
|
|
|
|
|
|
|
|
|
|||
Other items: |
|
|
|
|
|
|
|
|
|
|||
Gains on dispositions of real estate |
|
|
4,721 |
|
|
|
1,558 |
|
|
|
3,163 |
|
Interest expense |
|
|
12,267 |
|
|
|
10,904 |
|
|
|
1,363 |
|
Revenues from Rental Properties
The following table presents the results for revenues from rental properties for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025 (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Rental income |
|
$ |
56,687 |
|
|
$ |
50,180 |
|
|
$ |
6,507 |
|
Revenue recognition adjustments |
|
|
731 |
|
|
|
1,129 |
|
|
|
(398 |
) |
Tenant reimbursement income |
|
|
1,136 |
|
|
|
1,415 |
|
|
|
(279 |
) |
Total revenues from rental properties |
|
|
58,554 |
|
|
|
52,724 |
|
|
|
5,830 |
|
Rental income includes base rental income and additional rental income, if any, based on the aggregate volume of fuel sold at certain properties. The increase in rental income was primarily due to additional base rental income from properties acquired during the prior 12 months, as well as rent commencements from completed redevelopments and contractual rent increases for certain in-place leases, partially offset by dispositions of real estate during the same period.
In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent contractually due during the periods presented. As a result, revenues from rental properties include revenue recognition adjustments comprised of (i) non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line basis over the current lease term, (ii) the net amortization of intangible market lease assets and liabilities, (iii) recognition of rental income under direct financing leases using the effective interest rate method which produces a constant periodic rate of return on the net investments in the leased properties, and (iv) the amortization of deferred lease incentives.
Tenant reimbursements consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of triple-net lease agreements. The decrease in tenant reimbursement income was driven by a decrease in reimbursable real estate taxes due from our tenants as we transitioned certain tenants to paying real estate taxes due directly to the applicable taxing authorities.
Interest on Notes and Mortgages Receivable
The decrease in interest on notes and mortgages receivable was primarily due to a decrease in average notes and mortgages receivables outstanding during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.
30
Property Costs
The following table presents the results for property costs for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025 (in thousands):
|
|
For the Three Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Property operating expenses |
|
$ |
1,869 |
|
|
$ |
2,286 |
|
|
$ |
(417 |
) |
Leasing and redevelopment expenses |
|
|
151 |
|
|
|
157 |
|
|
|
(6 |
) |
Total property costs |
|
|
2,020 |
|
|
|
2,443 |
|
|
|
(423 |
) |
Property costs are comprised of (i) property operating expenses, including rent expense, reimbursable and non-reimbursable real estate taxes and municipal charges, certain state and local taxes, and maintenance expenses, and (ii) leasing and redevelopment expenses, including professional fees, demolition costs, and redevelopment project cost write-offs, if any.
The decrease in property operating expenses was primarily due to a decrease in reimbursable real estate taxes as we transitioned certain tenants to paying real estate taxes directly to the applicable taxing authorities, as well as lower rent expense and other non-reimbursable expenses.
Impairments
Impairments are recorded when the carrying value of a property is reduced to fair value. Impairment charges for both the three months ended June 30, 2026 and 2025 were attributable to (i) the addition of asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, and (ii) reductions in the carrying value of certain properties based on third-party indications of potential selling prices.
Environmental Expenses
The change in environmental expenses was primarily due to a decrease in environmental litigation accruals. Environmental expenses vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for one period, as compared to prior periods.
General and Administrative Expenses
The increase in general and administrative expenses was primarily due to increases in employee-related expenses and professional fees.
Depreciation and Amortization Expenses
The increase in depreciation and amortization expenses was primarily due to additional depreciation and amortization from properties acquired during the prior 12 months, partially offset by a decrease in depreciation charges related to asset retirement costs, the effect of certain assets becoming fully depreciated, lease terminations, and dispositions of real estate during the same period.
Gains on Dispositions of Real Estate
The gains on dispositions of real estate were primarily due to the disposition of four properties during the three months ended June 30, 2026 and the disposition of three properties during the three months ended June 30, 2025.
Interest Expense
The increase in interest expense was due to higher average borrowings and higher average interest rates during the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.
31
Six months ended June 30, 2026, compared to the six months ended June 30, 2025.
The following table presents select data and comparative results from our consolidated statements of operations for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025 (in thousands):
|
|
For the Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Revenues: |
|
|
|
|
|
|
|
|
|
|||
Revenues from rental properties |
|
$ |
115,944 |
|
|
$ |
104,430 |
|
|
$ |
11,514 |
|
Interest on notes and mortgages receivable |
|
|
951 |
|
|
|
1,157 |
|
|
|
(206 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Property costs |
|
|
4,031 |
|
|
|
4,425 |
|
|
|
(394 |
) |
Impairments |
|
|
3,977 |
|
|
|
1,624 |
|
|
|
2,353 |
|
Environmental |
|
|
(7,209 |
) |
|
|
5,457 |
|
|
|
(12,666 |
) |
General and administrative |
|
|
16,353 |
|
|
|
13,720 |
|
|
|
2,633 |
|
Depreciation and amortization |
|
|
33,033 |
|
|
|
30,958 |
|
|
|
2,075 |
|
|
|
|
|
|
|
|
|
|
|
|||
Other items: |
|
|
|
|
|
|
|
|
|
|||
Gains on dispositions of real estate |
|
|
6,450 |
|
|
|
1,886 |
|
|
|
4,564 |
|
Interest expense |
|
|
24,281 |
|
|
|
22,636 |
|
|
|
1,645 |
|
Revenues from Rental Properties
The following table presents the results for revenues from rental properties for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025 (in thousands):
|
|
For the Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Rental income |
|
$ |
112,691 |
|
|
$ |
100,043 |
|
|
$ |
12,648 |
|
Revenue recognition adjustments |
|
|
1,013 |
|
|
|
1,864 |
|
|
|
(851 |
) |
Tenant reimbursement income |
|
|
2,240 |
|
|
|
2,523 |
|
|
|
(283 |
) |
Total revenues from rental properties |
|
|
115,944 |
|
|
|
104,430 |
|
|
|
11,514 |
|
Rental income includes base rental income and additional rental income, if any, based on the aggregate volume of fuel sold at certain properties. The increase in rental income was primarily due to additional base rental income from new property acquisitions, as well as rent commencements from completed redevelopments and contractual rent increases for certain in-place leases, partially offset by dispositions of real estate.
In accordance with GAAP, we recognize revenues from rental properties in amounts which vary from the amount of rent contractually due during the periods presented. As a result, revenues from rental properties include revenue recognition adjustments comprised of (i) non-cash adjustments recorded for deferred rental revenue due to the recognition of rental income on a straight-line basis over the current lease term, (ii) the net amortization of intangible market lease assets and liabilities, (iii) recognition of rental income under direct financing leases using the effective interest rate method which produces a constant periodic rate of return on the net investments in the leased properties, and (iv) the amortization of deferred lease incentives.
Tenant reimbursements consist of real estate taxes and other municipal charges paid by us which are reimbursable by our tenants pursuant to the terms of our triple-net lease agreements.
Interest on Notes and Mortgages Receivable
The decrease in interest on notes and mortgages receivable was primarily due to a decrease in average notes and mortgages receivables outstanding during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.
32
Property Costs
The following table presents the results for property costs for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025 (in thousands):
|
|
For the Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Property operating expenses |
|
$ |
3,639 |
|
|
$ |
4,110 |
|
|
$ |
(471 |
) |
Leasing and redevelopment expenses |
|
|
392 |
|
|
|
315 |
|
|
|
77 |
|
Total property costs |
|
|
4,031 |
|
|
|
4,425 |
|
|
|
(394 |
) |
Property costs are comprised of (i) property operating expenses, including rent expense, reimbursable and non-reimbursable real estate taxes and municipal charges, certain state and local taxes, and maintenance expenses, and (ii) leasing and redevelopment expenses, including professional fees, demolition costs, and redevelopment project cost write-offs, if any.
The decrease in property operating expenses was primarily due to a decrease in reimbursable real estate taxes as we transitioned certain tenants to paying real estate taxes directly to the applicable taxing authorities, as well as lower rent expense. The increase in leasing and redevelopment expenses was primarily due to demolition costs for redevelopment projects.
Impairment Charges
Impairments are recorded when the carrying value of a property is reduced to fair value. Impairment charges for the six months ended June 30, 2026 and 2025 were attributable to (i) the addition of asset retirement costs to certain properties due to changes in estimates associated with our environmental liabilities, which increased the carrying values of these properties in excess of their fair values, and (ii) reductions in the carrying value of certain properties based on third-party indications of potential selling prices Impairment charges for the six months ended June 30, 2025 also included reductions in estimated undiscounted cash flows expected to be received during the assumed holding period for certain of our properties.
Environmental Expenses
The change in environmental expenses was primarily due to (i) the removal of the remaining $7.7 million of unknown reserve liabilities which had previously been accrued for certain properties, and (ii) a decrease in environmental litigation accruals. Environmental expenses vary from period to period and, accordingly, undue reliance should not be placed on the magnitude or the direction of change in reported environmental expenses for one period, as compared to prior periods.
General and Administrative Expenses
The increase in general and administrative expenses was primarily due to net non-recurring retirement costs of $2.3 million, of which $2.1 million related to the retirement of our former Chief Operating Officer, partially offset by decreases in employee-related expenses, professional fees, and certain transaction related costs.
Depreciation and Amortization Expenses
The increase in depreciation and amortization expenses was primarily due to additional depreciation and amortization from properties acquired during the prior 12 months, partially offset by a decrease in depreciation charges related to asset retirement costs, the effect of certain assets becoming fully depreciated, lease terminations, and dispositions of real estate during the same period.
Gain on Dispositions of Real Estate
The gain on dispositions of real estate were primarily due to the sale of six properties and one partial condemnation during the six months ended June 30, 2026, and the sale of five properties and two partial condemnations during the six months ended June 30, 2025.
Interest Expense
The increase in interest expense was due to higher average borrowings and higher average interest rates during the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.
33
Liquidity and Capital Resources
General
Our primary uses of liquidity include payments of operating expenses, interest on our outstanding debt, environmental remediation costs, distributions to shareholders, and future acquisitions and redevelopment projects. We have not historically incurred significant capital expenditures other than those related to acquisitions.
We expect to meet our short-term liquidity requirements through cash flow from operations, funds available under our Credit Facility, proceeds from the settlement of shares of common stock subject to forward sales agreements under our Equity Offering and ATM Program, and available cash and cash equivalents.
As of June 30, 2026, we had $377.0 million of availability under our Credit Facility, 5.8 million shares of common stock subject to forward sales agreements which are anticipated to generate approximately $190.5 million of gross proceeds upon settlement, and available cash and cash equivalents of $4.8 million.
We anticipate meeting our longer-term capital needs through cash flow from operations, funds available under our Credit Facility, available cash and cash equivalents, the future issuance of shares of common stock or debt securities, and proceeds from future real estate asset sales.
Our cash flow activities for the six months ended June 30, 2026 and 2025, are summarized as follows (in thousands):
|
|
Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|||
Net cash flow provided by operating activities |
|
$ |
74,790 |
|
|
$ |
63,412 |
|
|
$ |
11,378 |
|
Net cash flow used in investing activities |
|
|
(149,177 |
) |
|
|
(67,944 |
) |
|
|
(81,233 |
) |
Net cash flow provided by financing activities |
|
|
70,878 |
|
|
|
2,501 |
|
|
|
68,377 |
|
Operating Activities
The change in net cash flow provided by operating activities for the six months ended June 30, 2026 and 2025 was primarily the result of changes in revenues and expenses as discussed in “Results of Operations” above and the other changes in assets and liabilities on our consolidated statements of cash flows.
Investing Activities
The increase in net cash flow used in investing activities was primarily due to a $63.6 million increase in property acquisitions, an $11.1 million decrease in collections of notes and mortgages receivable, a $7.4 million increase in issuance of notes and mortgages receivable, and a $6.9 million decrease in deposits for property acquisitions, partially offset by a $7.7 million increase in proceeds from dispositions of real estate.
Financing Activities
The increase in net cash flow provided by financing activities was primarily due to a net increase in total borrowings of $55.5 million and an increase in net proceeds from the issuance of common stock of $16.0 million, partially offset by an increase in cash dividends paid of $6.7 million.
Credit Facility
In January 2025, we entered into a third amended and restated credit agreement (as amended, the “Third Restated Credit Agreement”). The Third Restated Credit Agreement provides for an unsecured revolving credit facility (the “Credit Facility”) in an aggregate principal amount of $450.0 million and includes an accordion feature to increase the revolving commitments or add one or more tranches of term loans up to an additional aggregate amount not to exceed $300.0 million, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments for such increased amount and that no default or event of default shall have occurred and be continuing under the terms of the Credit Facility.
The Credit Facility matures in January 2029, subject to two six-month extensions (for a total of 12 months) exercisable at our option. Our exercise of an extension option is subject to the absence of any default and our compliance with certain conditions, including the payment of extension fees to the lenders under the Credit Facility.
Borrowings under the Credit Facility bear interest at a rate equal to (i) the sum of a SOFR rate plus a SOFR adjustment of 0.10% plus a margin of 1.30% to 1.90%, or (ii) the sum of a base rate plus a margin of 0.30% to 0.90%, in each case with the margin based on our consolidated total indebtedness to total asset value ratio at the end of each quarterly reporting period.
34
The per annum rate of the unused line fee on the undrawn funds under the Credit Facility is 0.15% to 0.25% based on our daily unused portion of the available Credit Facility.
Term Loan
In October 2023, we entered into a term loan credit agreement (the “Term Loan Agreement”) that provided for a senior unsecured term loan (the "Term Loan") in an aggregate principal amount of $150.0 million. The Term Loan was to mature in October 2025, subject to one twelve-month extension exercisable at our option.
In January 2025, we used borrowings under the Third Restated Credit Agreement to repay, in full, the Term Loan. As a result of this early repayment, we recognized approximately $0.9 million in unamortized debt issuance costs, which were expensed as interest expense on our consolidated statements of operations.
Senior Unsecured Notes
In November 2025, we entered into a note purchase and guarantee agreement with multiple purchasers party thereto pursuant to which, in January 2026, we issued $250.0 million of 5.76% Series U Guaranteed Senior Notes due January 22, 2036 (the “Series U Notes”) to the purchasers and used the proceeds to repay amounts outstanding under our Credit Facility.
In November 2024, we entered into a seventh amended and restated note purchase and guarantee agreement with The Prudential Insurance Company of America and certain of its affiliates (collectively, “Prudential”) (the "Seventh Amended and Restated Prudential Agreement") pursuant to which, in February 2025, we issued $50.0 million of 5.70% Series T Guaranteed Senior Notes due February 22, 2032 (the “Series T Notes”) to Prudential and used the proceeds to repay the $50.0 million of 4.75% Series C Guaranteed Senior Notes due February 25, 2025 (the “Series C Notes”) outstanding under our sixth amended and restated note purchase and guarantee agreement with Prudential (the "Sixth Amended and Restated Prudential Agreement"). The other senior unsecured notes outstanding as of June 30, 2026 under the Sixth Amended and Restated Prudential Agreement, including (i) $50.0 million of 5.47% Series D Guaranteed Senior Notes due June 21, 2028 (the “Series D Notes”), (ii) $50.0 million of 3.52% Series F Guaranteed Senior Notes due September 12, 2029 (the “Series F Notes”), (iii) $100.0 million of 3.43% Series I Guaranteed Senior Notes due November 25, 2030 (the “Series I Notes”) and (iv) $80.0 million of 3.65% Series Q Guaranteed Senior Notes due January 20, 2033 (the “Series Q Notes”), remain outstanding under the Seventh Amended and Restated Prudential Agreement.
In November 2024, we entered into an amended and restated note purchase and guarantee agreement with New York Life Insurance Company and certain of its affiliates (collectively, “New York Life”) (the “Amended and Restated New York Life Agreement”) pursuant to which, in February 2025, we issued $50.0 million of 5.52% Series R Guaranteed Senior Notes due September 12, 2029 (the “Series R Notes”) and $25.0 million of 5.70% Series S Guaranteed Senior Notes due February 22, 2032 (the “Series S Notes”) to New York Life. The other senior unsecured notes outstanding as of June 30, 2026 under our note purchase and guarantee agreement with New York Life (the “New York Life Agreement”), including (i) $25.0 million of 3.45% Series N Guaranteed Senior Notes due February 22, 2032 (the “Series N Notes”) and (ii) $25.0 million of 3.65% Series P Guaranteed Senior Notes due January 20, 2033 (the “Series P Notes”), remain outstanding under the Amended and Restated New York Life Agreement.
In February 2022, we entered into a second amended and restated note purchase and guarantee agreement with American General Life Insurance Company and certain of its affiliates (collectively, “AIG”) (the “Second Amended and Restated AIG Agreement”) pursuant to which we issued $55.0 million of 3.45% Series L Guaranteed Senior Notes due February 22, 2032 (the “Series L Notes”) to AIG. The other senior unsecured notes outstanding as of June 30, 2026 under our first amended and restated note purchase and guarantee agreement with AIG (the “First Amended and Restated AIG Agreement”), including (i) $50.0 million of 3.52% Series G Guaranteed Senior Notes due September 12, 2029 (the “Series G Notes”) and (ii) $50.0 million of 3.43% Series J Guaranteed Senior Notes due November 25, 2030 (the “Series J Notes”), remain outstanding under the Second Amended and Restated AIG Agreement.
In February 2022, we entered into a second amended and restated note purchase and guarantee agreement with Massachusetts Mutual Life Insurance Company and certain of its affiliates (collectively, “MassMutual”) (the “Second Amended and Restated MassMutual Agreement”) pursuant to which we issued $20.0 million of 3.45% Series M Guaranteed Senior Notes due February 22, 2032 (the “Series M Notes”) and, in January 2023, $20.0 million of 3.65% Series O Guaranteed Senior Notes due January 20, 2033 (the “Series O Notes”) to MassMutual. The other senior unsecured notes outstanding as of June 30, 2026 under our first amended and restated note purchase and guarantee agreement with MassMutual (the “First Amended and Restated MassMutual Agreement”), including (i) $25.0 million of 3.52% Series H Guaranteed Senior Notes due September 12, 2029 (the “Series H Notes”) and (ii) $25.0 million of 3.43% Series K Guaranteed Senior Notes due November 25, 2030 (the “Series K Notes”), remain outstanding under the Second Amended and Restated MassMutual Agreement.
In June, 2018, we entered into a note purchase and guarantee agreement with MetLife and certain of its affiliates (collectively, "MetLife") (the “MetLife Agreement”) pursuant to which we issued $50.0 million of 5.47% Series E Guaranteed Senior Notes due June 21, 2028 (the “Series E Notes”) to MetLife.
35
The funded and outstanding Series D Notes, Series E Notes, Series F Note, Series G Notes, Series H Notes, Series I Notes, Series J Notes, Series K Notes, Series L Notes, Series M Notes, Series N Notes, Series O Notes, Series P Notes, Series Q Notes, Series R Notes, Series S Notes, Series T Notes and Series U Notes are collectively referred to as the “Senior Unsecured Notes”.
Debt Maturities
The amounts outstanding under our Credit Facility and Senior Unsecured Notes, exclusive of extension options, are as follows ($ in thousands):
|
|
Maturity |
|
Interest |
|
June 30, |
|
|
December 31, |
|
||
Credit Facility (a) |
|
January 2029 |
|
5.01% |
|
$ |
73,000 |
|
|
$ |
250,000 |
|
Series D-E Notes |
|
June 2028 |
|
5.47% |
|
|
100,000 |
|
|
|
100,000 |
|
Series F-H, R Notes |
|
September 2029 |
|
4.09% |
|
|
175,000 |
|
|
|
175,000 |
|
Series I-K Notes |
|
November 2030 |
|
3.43% |
|
|
175,000 |
|
|
|
175,000 |
|
Series L-N, S-T Notes |
|
February 2032 |
|
4.41% |
|
|
175,000 |
|
|
|
175,000 |
|
Series O-Q Notes |
|
January 2033 |
|
3.65% |
|
|
125,000 |
|
|
|
125,000 |
|
Series U |
|
January 2036 |
|
5.76% |
|
|
250,000 |
|
|
|
— |
|
Total debt |
|
|
|
|
|
|
1,073,000 |
|
|
|
1,000,000 |
|
Unamortized debt issuance costs, net (b) |
|
|
|
|
|
|
(6,028 |
) |
|
|
(5,044 |
) |
Total debt, net |
|
|
|
|
|
$ |
1,066,972 |
|
|
$ |
994,956 |
|
Equity Offering
In February 2026, we completed a follow-on public offering of 4.0 million shares of common stock in connection with forward sales agreements. We expect to settle the forward sales agreements, typically within 12 months, via physical delivery of the outstanding shares of common stock in exchange for gross cash proceeds of approximately $129.9 million. As of June 30, 2026, no shares were settled.
In July 2024, we completed a follow-on public offering of 4.0 million shares of common stock in connection with forward sales agreements. During the year ended December 31, 2025, we settled all 4.0 million shares and realized net proceeds of $113.6 million after deducting fees and expenses and making certain other adjustments as provided in the equity distribution agreement.
ATM Program
In February 2023, we established and, in February 2024, we amended, an at-the-market equity offering program (the “ATM Program”), pursuant to which we are able to issue and sell shares of our common stock with an aggregate sales price of up to $350.0 million through a consortium of banks acting as our sales agents or acting as forward sellers on behalf of any forward purchasers pursuant to forward sales agreements. Sales of the shares of common stock may be made, as needed, from time to time in at-the-market offerings as defined in Rule 415 of the Securities Act, including by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices or as otherwise agreed to with the applicable agent.
The use of forward sales agreements allow us to establish a share price for the sale of shares of common stock at the time the forward sales agreements become effective, but defer receiving the proceeds from the sale of shares of common stock until a later date. To account for the forward sales agreements, we considered the accounting guidance governing financial instruments and derivatives. To date, we have concluded that our forward sales agreements are not liabilities as they do not embody obligations to repurchase our shares nor do they embody obligations to issue a variable number of shares for which the monetary value are predominantly fixed, varying with something other than the fair value of the shares, or varying inversely in relation to our shares.
We also evaluated whether the forward sales agreements meet the derivatives and hedging guidance scope exception to be accounted for as equity instruments. We concluded that the forward sales agreements are classifiable as equity contracts based on the following assessments: (i) none of the agreements’ exercise contingencies that are based on observable markets or indices besides those related to the market for our own stock price and operations, and (ii) none of the settlement provisions precluded the agreements from being indexed to our own stock.
36
We also consider the potential dilution resulting from the forward sales agreements on our earnings per share calculations. We use the treasury stock method to determine the dilution resulting from the forward sales agreements during the period of time prior to settlement.
ATM Direct Issuances
During the six months ended June 30, 2026 and June 30, 2025, no shares of common stock were issued under the ATM Program. Future sales, if any, will depend on a variety of factors to be determined by us from time to time, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding for us and potential uses of funding available to us.
ATM Forward Agreements
During the three and six months ended June 30, 2026, we settled 1,460,545 and 2,110,545 shares of common stock, respectively subject to outstanding forward sales agreements and realized net proceeds of $39.8 million and $59.7 million, respectively, after deducting fees and expenses and making certain other adjustments as provided in the equity distribution agreement. During the three and six months ended June 30, 2025, we settled 406,727 shares of common stock subject to outstanding forward sales agreements and realized net proceeds of $10.9 million after deducting fees and expenses and making certain other adjustments as provided in the equity distribution agreement.
The following table summarizes activity under our ATM Program in connection with forward sales agreements for the six months ended June 30, 2026 and 2025 ($ in thousands):
|
|
|
|
|
For the Six Months Ended |
|
|
As of June 30, 2026 |
|
|||||||||||
Period Entered Into Forward Sales Agreements |
|
Shares Sold |
|
|
Shares Settled |
|
|
Net Proceeds |
|
|
Shares |
|
|
Anticipated |
|
|||||
Three Months Ended December 31, 2024 |
|
|
650,000 |
|
|
|
650,000 |
|
|
$ |
19,922 |
|
|
|
— |
|
|
$ |
— |
|
Three Months Ended September 30, 2025 |
|
|
1,018,695 |
|
|
|
1,018,695 |
|
|
|
27,548 |
|
|
|
— |
|
|
|
— |
|
Three Months Ended December 31, 2025 |
|
|
441,850 |
|
|
|
441,850 |
|
|
|
12,242 |
|
|
|
— |
|
|
|
— |
|
Three Months Ended June 30, 2026 |
|
|
1,812,000 |
|
|
|
— |
|
|
|
— |
|
|
|
1,812,000 |
|
|
|
60,614 |
|
Total |
|
|
3,922,545 |
|
|
|
2,110,545 |
|
|
$ |
59,712 |
|
|
|
1,812,000 |
|
|
$ |
60,614 |
|
|
|
|
|
|
For the Six Months Ended |
|
|
As of June 30, 2025 |
|
|||||||||||
Period Entered Into Forward Sales Agreements |
|
Shares Sold |
|
|
Shares Settled |
|
|
Net Proceeds |
|
|
Shares |
|
|
Anticipated |
|
|||||
Three Months Ended June 30, 2024 |
|
|
406,727 |
|
|
|
406,727 |
|
|
$ |
10,942 |
|
|
|
— |
|
|
$ |
— |
|
Three Months Ended December 31, 2024 |
|
|
992,696 |
|
|
|
— |
|
|
|
— |
|
|
|
992,696 |
|
|
|
32,277 |
|
Total |
|
|
1,399,423 |
|
|
|
406,727 |
|
|
$ |
10,942 |
|
|
|
992,696 |
|
|
$ |
32,277 |
|
We expect to settle outstanding forward sales agreements, typically within 12 months of the respective agreement dates, via physical delivery of the outstanding shares of common stock in exchange for cash proceeds, although we may elect cash settlement or net share settlement for all or a portion of our obligations under the forward sales agreements, subject to certain conditions.
Dividends
We elected to be treated as a REIT under the federal income tax laws with the year beginning January 1, 2001. To qualify for taxation as a REIT, we must, among other requirements such as those related to the composition of our assets and gross income, distribute annually to our stockholders at least 90% of our taxable income, including taxable income that is accrued by us without a corresponding receipt of cash.
It is also possible that instead of distributing 100% of our taxable income on an annual basis, we may decide to retain a portion of our taxable income and to pay taxes on such amounts as permitted by the Internal Revenue Service. Payment of dividends is subject to market conditions, our financial condition, including but not limited to, our continued compliance with the provisions of the Third Restated Credit Agreement, our Senior Unsecured Notes and other factors, and therefore is not assured. In particular, the Third Restated Credit Agreement and our Senior Unsecured Notes prohibit the payment of dividends during certain events of default.
37
Regular quarterly dividends paid to our stockholders for the six months ended June 30, 2026 were $60.1 million, or $0.97 per share. There can be no assurance that we will continue to pay dividends at historical rates.
Critical Accounting Policies and Estimates
The consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with GAAP. The preparation of consolidated financial statements in accordance with GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported on our consolidated financial statements. Although we have made estimates, judgments and assumptions regarding future uncertainties relating to the information included on our consolidated financial statements, giving due consideration to the accounting policies selected and materiality, actual results could differ from these estimates, judgments and assumptions and such differences could be material.
Estimates, judgments and assumptions underlying the accompanying consolidated financial statements include, but are not limited to, real estate, receivables, deferred rent receivable, direct financing leases, depreciation and amortization, impairment of long-lived assets, environmental remediation obligations, litigation, accrued liabilities, income taxes and the allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed. The information included on our consolidated financial statements that is based on estimates, judgments and assumptions is subject to significant change and is adjusted as circumstances change and as the uncertainties become more clearly defined.
Our accounting policies are described in Note 1 in “Item 8. Financial Statements and Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 2025. The SEC’s Financial Reporting Release (“FRR”) No. 60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies (“FRR 60”), suggests that companies provide additional disclosure on those accounting policies considered most critical. FRR 60 considers an accounting policy to be critical if it is important to our financial condition and results of operations and requires significant judgment and estimates on the part of management in its application. We believe that our most critical accounting policies relate to revenue recognition and deferred rent receivable, direct financing leases, impairment of long-lived assets, environmental remediation obligations, litigation, income taxes, and the allocation of the purchase price of properties acquired to the assets acquired and liabilities assumed (collectively, our “Critical Accounting Policies”), each of which is discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Environmental Matters
We are subject to numerous federal, state and local laws and regulations, including matters relating to the protection of the environment such as the remediation of known contamination and the retirement and decommissioning or removal of long-lived assets including buildings containing hazardous materials, USTs and other equipment. Environmental costs are principally attributable to remediation costs which are incurred for, among other things, removing USTs, excavation of contaminated soil and water, installing, operating, maintaining and decommissioning remediation systems, monitoring contamination and governmental agency compliance reporting required in connection with contaminated properties.
We enter into leases and various other agreements which contractually allocate responsibility between the parties for known and unknown environmental liabilities at or relating to the subject properties. Under applicable law, we are contingently liable for these environmental obligations in the event that our tenant does not satisfy them, and we are required to accrue for environmental liabilities that we believe are allocable to others under our leases if we determine that it is probable that our tenant will not meet its environmental obligations. It is possible that our assumptions regarding the ultimate allocation method and share of responsibility that we used to allocate environmental liabilities may change, which may result in material adjustments to the amounts recorded for environmental litigation accruals and environmental remediation liabilities. We assess whether to accrue for environmental liabilities based upon relevant factors including our tenants’ histories of paying for such obligations, our assessment of their financial capability, and their intent to pay for such obligations. However, there can be no assurance that our assessments are correct or that our tenants who have paid their obligations in the past will continue to do so. We may ultimately be responsible to pay for environmental liabilities as the property owner if our tenant fails to pay them.
The estimated future costs for known environmental remediation requirements are accrued when it is probable that a liability has been incurred and a reasonable estimate of fair value can be made. The accrued liability is the aggregate of our estimate of the fair value of cost for each component of the liability, net of estimated recoveries from state UST remediation funds considering estimated recovery rates developed from prior experience with the funds.
For substantially all of our triple-net leases, our tenants are contractually responsible for compliance with environmental laws and regulations, removal of USTs at the end of their lease term (the cost of which is mainly the responsibility of our tenant, but in certain cases partially paid for by us) and remediation of any environmental contamination that arises during the term of their tenancy. Substantially all of our tenants are also responsible for pre-existing environmental contamination that is discovered during their lease term, except contamination that was known at lease commencement, as to which we have established reserves when appropriate.
38
For the subset of our triple-net leases which cover properties previously leased to Marketing (substantially all of which commenced in 2012), the allocation of responsibility differs from our other triple-net leases as it relates to preexisting known and unknown contamination. Under the terms of our leases covering properties previously leased to Marketing, we agreed to be responsible for environmental contamination that was known at the time the lease commenced, and for unknown environmental contamination which existed prior to commencement of the lease and which is discovered (other than as a result of a voluntary site investigation) during the first 10 years of the lease term (or a shorter period for a minority of such leases) (a “Lookback Period”). A similar lookback period allocation also applies to certain properties previously leased to Marketing which we have sold. After expiration of the applicable Lookback Period, responsibility for all newly discovered contamination at these properties, even if it relates to periods prior to commencement of the lease or sale, is the contractual responsibility of our tenant or buyer as the case may be.
Based on the expiration of the Lookback Periods, together with other factors which have significantly mitigated our potential liability for preexisting environmental obligations, including the absence of any contractual obligations on the part of the Company relating to properties which have been sold, quantifiable trends associated with types and ages of USTs at issue, expectations regarding future UST replacements, and historical trends and expectations regarding discovery of preexisting unknown environmental contamination and/or attempted pursuit of us, we have concluded that there is no material continued risk of having to satisfy contractual obligations relating to preexisting unknown environmental contamination at certain properties. Accordingly, during the six months ended June 30, 2026, we removed the remaining $7.7 million of unknown reserve liabilities and, as of June 30, 2026, we had removed $36.0 million of unknown reserve liabilities which had previously been accrued for these properties. As of June 30, 2026, no unknown environmental reserve liabilities remain on our consolidated balance sheet.
We measure our environmental remediation liabilities at fair value based on expected future net cash flows, adjusted for inflation and then discount them to present value. We adjust our environmental remediation liabilities quarterly to reflect changes in projected expenditures, changes in present value due to the passage of time and reductions in estimated liabilities as a result of actual expenditures incurred during each quarter. As of June 30, 2026, we had accrued a total of $8.4 million for our prospective environmental remediation obligations, which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries. As of December 31, 2025, we had accrued a total of $15.9 million for our prospective environmental remediation obligations. This accrual consisted of (a) $8.2 million, which was our estimate of reasonably estimable environmental remediation liability, including obligations to remove USTs for which we are responsible, net of estimated recoveries and (b) $7.7 million for future environmental liabilities related to preexisting unknown contamination.
Environmental liabilities are accreted for the change in present value due to the passage of time and, accordingly, $0.2 million of net accretion expense was recorded for each of the six months ended June 30, 2026 and 2025 and included in environmental expenses. In addition, during the six months ended June 30, 2026 and 2025, we recorded credits to environmental expenses aggregating $7.8 million and $0.2 million, respectively, where decreases in estimated remediation costs exceeded the depreciated carrying value of previously capitalized asset retirement costs. Changes in environmental estimates aggregating $41 thousand for each of the six months ended June 30, 2026 and 2025 were related to properties that were previously disposed of by us. Environmental expenses also include project management fees, legal fees, and environmental litigation accruals.
During the six months ended June 30, 2026 and 2025, we increased the carrying values of certain of our properties by $1.2 million and $1.3 million, respectively, due to changes in estimated environmental remediation costs. The recognition and subsequent changes in estimates in environmental liabilities and the increase or decrease in carrying values of the properties are non-cash transactions which do not appear on our consolidated statements of cash flows.
Capitalized asset retirement costs are being depreciated over the estimated remaining life of the UST, a 10-year period if the increase in carrying value is related to environmental remediation obligations or such shorter period if circumstances warrant, such as the remaining lease term for properties we lease from others. Depreciation and amortization expense related to capitalized asset retirement costs on our consolidated statements of operations for the six months ended June 30, 2026 and 2025, were $0.7 million and $0.9 million, respectively. Capitalized asset retirement costs were $23.9 million for known environmental liabilities as of June 30, 2026, and $29.3 million, including $23.9 million for known environmental liabilities and $5.4 million of reserves for future environmental liabilities, as of December 31, 2025. We recorded impairment charges aggregating $0.9 million and $1.0 million for the six months ended June 30, 2026 and 2025, respectively, for capitalized asset retirement costs.
Environmental exposures are difficult to assess and estimate for numerous reasons, including the amount of data available upon initial assessment of contamination, alternative treatment methods that may be applied, location of the property which subjects it to differing local laws and regulations and their interpretations, changes in costs associated with environmental remediation services and equipment, the availability of state UST remediation funds and the possibility of existing legal claims giving rise to allocation of responsibilities to others, as well as the time it takes to remediate contamination and receive regulatory approval. In developing our liability for estimated environmental remediation obligations on a property-by-property basis, we consider, among other things, laws and regulations, assessments of contamination and surrounding geology, quality of information available, currently available technologies for treatment, alternative methods of remediation and prior experience. Environmental accruals are based on estimates
39
derived upon facts known to us at this time, which are subject to significant change as circumstances change, and as environmental contingencies become more clearly defined and reasonably estimable.
Any changes to our estimates or our assumptions that form the basis of our estimates may result in our providing an accrual, or adjustments to the amounts recorded, for environmental remediation liabilities.
In September 2022, we purchased a 5-year pollution legal liability insurance policy to cover a subset of our properties which we believe present the greatest risk for discovery of preexisting unknown environmental liabilities and for new environmental events. The policy has a $25.0 million aggregate limit and is subject to various self-insured retentions and other conditions and limitations. Our intention in purchasing this policy was to obtain protection for certain properties which we believe have the greatest risk of significant environmental events.
Environmental Litigation
We are subject to various legal proceedings and claims which arise in the ordinary course of our business. As of June 30, 2026 and December 31, 2025, we had $5.0 million and $5.6 million accrued, respectively, for these matters which we believe were appropriate based on information then currently available. Matters related to our former Newark, New Jersey Terminal and the Lower Passaic River, and our MTBE litigations in the states of Pennsylvania and Maryland, in particular, could cause a material adverse effect on our business, financial condition, results of operations, liquidity, ability to pay dividends or stock price. For additional information with respect to these and other pending environmental lawsuits and claims,see “Part I, Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2025; “Part II, Item 1. Legal Proceedings” and “Note 4 — Commitments and Contingencies” in “Part I, Item 1. Financial Statements” in our Quarterly Report on Form 10-Q for the period ended March 31, 2026; and “Part II, Item 1. Legal Proceedings” and “Note 4 — Commitments and Contingencies” in “Part I, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for the period ended June 30, 2026.
40
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to interest rate risk, primarily as a result of borrowings under our Credit Facility, which bears interest at a rate equal to (i) the sum of a SOFR rate plus a SOFR adjustment of 0.10% plus a margin of 1.30% to 1.90% or (ii) the sum of a base rate plus a margin of 0.30% to 0.90%, in each case with the margin based on our consolidated total indebtedness to total asset value ratio at the end of each quarterly reporting period.
Based on the outstanding borrowings under the Credit Facility of $73.0 million as of June 30, 2026, an increase in market interest rates of 1.0% for 2026 would decrease our 2026 net income and cash flows by approximately $0.4 million. Our exposure to fluctuations in interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our Credit Facility and with increases or decreases in amounts outstanding under borrowing agreements entered into with interest rates floating at market rates.
In order to minimize our exposure to credit risk associated with financial instruments, we place our temporary cash investments, if any, with high credit quality institutions. Temporary cash investments, if any, are currently held in an overnight bank time deposit with JPMorgan Chase Bank, N.A. and these balances, at times, may exceed federally insurable limits.
See “Part II. Item. 1A. Risk Factors” in this Quarterly Report on Form 10-Q for additional information.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or furnished pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective as of June 30, 2026, at the reasonable assurance level.
Internal Control Over Financial Reporting
During our most recent fiscal quarter, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
41
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Please refer to “Part I, Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2025, “Part II, Item 1. Legal Proceedings” and “Note 4 — Commitments and Contingencies” in “Part I, Item 1. Financial Statements” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, and “Note 4 — Commitments and Contingencies” in “Part I, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for information regarding material pending legal proceedings. Except as set forth therein, there have been no new material legal proceedings and no material developments in any of our previously disclosed legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes to the information previously disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 and our Quarterly Report on Form 10-Q for the period ended March 31, 2026.
ITEM 5. OTHER INFORMATION
42
ITEM 6. EXHIBITS
Exhibit Number |
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Description of Document |
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Location of Document |
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|
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31.1 |
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Filed herewith. |
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31.2 |
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Filed herewith. |
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|
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32.1 |
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|
Furnished herewith. |
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32.2 |
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Furnished herewith. |
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|
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101.INS |
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XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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Filed herewith. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema. |
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Filed herewith. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase. |
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Filed herewith. |
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101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase. |
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Filed herewith. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase. |
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Filed herewith. |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
Filed herewith. |
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104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
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Filed herewith. |
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 23, 2026
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Getty Realty Corp. |
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|
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By: |
/s/ CHRISTOPHER J. CONSTANT |
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Christopher J. Constant President and Chief Executive Officer (Principal Executive Officer) |
|
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|
|
By: |
/s/ BRIAN R. DICKMAN |
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|
Brian R. Dickman Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
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|
|
By: |
/s/ EUGENE SHNAYDERMAN |
|
|
Eugene Shnayderman Vice President, Chief Accounting Officer and Controller (Principal Accounting Officer) |
44
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Christopher J. Constant, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Getty Realty Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Date: July 23, 2026
By: |
|
/s/ CHRISTOPHER J. CONSTANT |
|
|
Christopher J. Constant |
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Brian Dickman, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Getty Realty Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Date: July 23, 2026
By: |
|
/s/ BRIAN R. DICKMAN |
|
|
Brian R. Dickman |
|
|
Executive Vice President Chief Financial Officer and Treasurer |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Getty Realty Corp. (the “Company”) hereby certifies, to such officer’s knowledge, that:
Date: July 23, 2026
By: |
/s/ CHRISTOPHER J. CONSTANT |
|
Christopher J. Constant |
|
President and Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to Getty Realty Corp. and will be retained by Getty Realty Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Getty Realty Corp. (the “Company”) hereby certifies, to such officer’s knowledge, that:
Date: July 23, 2026
By: |
/s/ BRIAN R. DICKMAN |
|
Brian R. Dickman |
|
Executive Vice President Chief Financial Officer and Treasurer |
A signed original of this written statement required by Section 906 has been provided to Getty Realty Corp. and will be retained by Getty Realty Corp. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.