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2019Annual Report

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2019Annual Report 2019 ANNUAL REPORT DEAR SHAREHOLDERS 2019 was another successful year for Getty as our team result being that our portfolio of 945 properties continues to be continued to grow our portfolio with high-quality real estate, 99% occupied. i driving increases in earnings and creating value for our shareholders. Our existing portfolio delivers consistent results, Driving Growth and Shareholder Returns and our key priority remains expanding our company through Due to the strong execution of our business initiatives, we focused investments in targeted industries and metropolitan delivered a 5% increase in rental income, and increased net markets. earnings and adjusted funds from operations per share (AFFO) in 2019. After taking into account additional borrowing costs Continued Execution of Core Business Strategy and newly issued shares from the Company’s 2019 capital We executed on all aspects of our growth strategy in 2019 as raising activities, we were able to grow our AFFO per share we acquired 27 high-quality properties for $87.2 million through to $1.72 for the year. a combination of portfolio and individual acquisitions. This Our 2019 accomplishments resulted in our Board’s decision activity also reflects our extremely disciplined investment to increase our dividend by 6% to an annualized rate of $1.48 approach, which carefully considers real estate attributes as per share – making 2019 the fifth consecutive year that the well as the operational and credit quality of our prospective Company has rewarded shareholders with a significant increase tenants. During the year, we reviewed approximately $1.3 billion in its recurring cash dividend rate. The dividend remains well- of actionable opportunities, with more than one-third of the covered and its increase stems from the stability of our current activity in other automotive categories. Included in our portfolio along with our expectation of continued growth in acquisitions were two portfolio sale-leaseback transactions in AFFO. the Los Angeles, CA, and Las Vegas, NV metropolitan areas where we acquired 10 properties, plus 17 individual property Maintaining Our Flexible & Conservative Balance Sheet transactions in highly sought-after core markets. As we continue We prioritize maintaining a conservatively leveraged balance through 2020, we have a significant pipeline across the sheet as we grow. To further this philosophy, we issued long- convenience & gas and other automotive sectors, and we term and permanent capital to fund our business activities expect to remain active while maintaining our underwriting throughout 2019. Specifically, in the third quarter of 2019, we discipline. issued $125 million of 10-year, 3.52% senior unsecured notes Our redevelopment program also continues to make positive to AIG, Mass Mutual and Prudential. As a result of this extremely strides as we completed four projects and signed a number of successful issuance, Getty ended 2019 with the smallest new leases with national retail tenants in 2019. The completed percentage of floating rate debt in the Company’s history at projects included two new-to-industry convenience & gas less than 5%. locations leased to Sheetz and Big Y, both of whom are highly In addition, we also partially financed our growth in 2019 through successful convenience store operators in their respective the issuance of $14.2 million of common equity through the regions. The other two sites were ground leased to a local use of our at-the-market (ATM) program. The ATM program developer for a variety of retail uses. We invested a total of continues to be a valuable tool for our Company as it is a cost $1.1 million in these four projects and expect to generate an effective and efficient way to raise equity capital and allows incremental return on our investment of approximately 40%. In us to match fund our acquisitions and redevelopment projects. terms of our redevelopment outlook, we maintain a solid pipeline, ending the year with 12 signed leases. We also have a number We expect to maintain a conservative leverage profile and of additional sites which we expect to move into our actively manage our capital structure to prudently grow over redevelopment pipeline this year and over the next several the long-term. years. We continue to believe that between five and ten percent Ongoing Health of Convenience & Gas and Other of our current portfolio can be redeveloped for either new Automotive Sectors convenience & gas use or alternative retail uses. By strategically investing in our existing portfolio, we believe we can generate We continue to demonstrate that the value of owning attractive attractive risk-adjusted returns, improve the credit quality of our real estate located in both stable and growing metropolitan portfolio and diversify our retail tenant base. markets is a critical component to creating long-term shareholder On the asset management front, we signed two leases for value. We believe our national portfolio located in 33 states is individual convenience & gas locations, sold nine properties, largely irreplaceable in today’s marketplace as we have 57% and exited five third-party leased sites during 2019. The net of our revenue coming from top 25 MSAs. In addition, our service and consumer-oriented properties serve many aspects “other automotive” sectors including car washes and of the retail marketplace which are basically insulated from the automotive parts & service, is currently adding significant growth of e-commerce. For the convenience store and gasoline volume to our transaction pipeline. These categories are an station industry, 2019 was another year of sales growth as ideal complement to our portfolio, allowing us to expand our retail fuels benefited from stable volumes and input costs, and investment prospects, while drawing on much of the convenience sales grew by 2.3% nationally. With that said, we underwriting expertise we have built throughout Getty’s and our tenants are mindful of advances in technology, such history. The properties suited to these businesses are in as the increase in sales of pure battery electric vehicles. While almost all cases of similar size and location to our existing the convenience store and gasoline station industry is evolving, portfolio. In addition, many of these service-oriented sub- our tenants are placing additional emphasis on branding and sectors within the other automotive category remain highly customer loyalty inside their stores in order to drive higher internet-resistant, and are growing and consolidating, which margin sales and reduce their overall dependence on customer creates transaction opportunities for the Company. We are visits derived solely from refueling. We believe that our portfolio excited that in the second half of 2019, we were able to close of well-located properties in major metropolitan markets will on a number of property acquisitions in these sectors. remain resilient and thrive in the ever-changing consumer retail Looking ahead, we believe we can make meaningful inroads landscape. into the other automotive sectors and create a recurring set of opportunities which is similar in size to what we typically Commitment to Our Focused Growth Strategy underwrite annually in the convenience & gas sector. We remain focused on executing a highly targeted strategy to Thank You! deliver growth. First, we are expanding our portfolio through I am very proud of Getty’s 2019 accomplishments and as I look disciplined acquisitions in the convenience & gas and other ahead to 2020, I am optimistic. I believe we have the right automotive sectors. Second, we remain committed to our growth strategy and a first-rate team in place to execute on it redevelopment strategy and expect to complete a steady and create value for our shareholders for years to come. I would number of projects on an annual basis with well-known, like to conclude by personally thanking our management team nationally recognized retail tenants, which further and employees for all of their hard work during the past year. demonstrates the embedded value inherent in our existing I would also like to thank our Board and shareholders for their portfolio. Finally, we are committed to proactive asset continued support. management, which includes benefiting from the stable growth inherent in our core net lease portfolio, steady Best Regards, performance of our tenants, and asset recycling. I am particularly excited about two initiatives that we expect will materially benefit Getty in 2020 and beyond. The first initiative involves realigning our team and adding staff to focus on external growth and overseeing our growing Christopher J. Constant portfolio. The second initiative, which is broadening our President and Chief Executive Officer investment criteria to include acquisitions of properties in FINANCIAL HIGHLIGHTS Financial Summary (Years ended December 31) (a) 2017 2018 2019 Number Of Properties 907 933 945 Total Revenues 120,153 136,106 140,655 2015 Quarterly Performance (a) Dividends Declared Growth (a) 2015 Quarterly Performance (a) Dividends Declared Growth (a) AFFO (Per Share in parentheses) Net Income Regular Special A47,186FFO (Per Share in47,706 parentheses) 49,723 Regular Special (Per Share) 1.15 1.26 1. 17 1. 19 1.15 25,000 25,000 0.96 0.96 20,000 22,825 Funds From Operations 20,000 74,555 73,564 2277,833,825 (0.68) (Per Share) 0.85 (0.68) 0.85 15,000 18,546 15,000 2.00 18,546 1.80 1.86 (0.54) (0.54) 10,000 12,796 Adjusted Funds From Operations 10,000 62,032 69,66912,796 71,816 11,038 11,038 (0.38) (0.38) 5,000 (0.33) (Per Share) 5,000 (0.33) 1.66 1.71 1.72 Dividends Per Share 1.16 1.31 1.42 Q1 Q2 Q3 Q4 2013 2014 2015 Q1 Q2 Q3 Q4 2013 2014 2015 2019 Quarterly Performance (a) AFFO (Per Share) Revenue AFFO (Per Share) Revenue 20,000 40,000 20,000 40,000 18,145 18,148 36,428 35,890 18,145 18,148 36,428 35,890 17,520 18,004 34,049 34,288 17,520 18,004 34,049 34,288 15,000 (0.43) (0.43) 30,000 15,000 (0.43) (0.43) 30,000 (0.42) (0.43) (0.42) (0.43) 10,000 20,000 10,000 20,000 5,000 10,000 5,000 10,000 0 0 0 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Geographic Diversity (a) See “Item 6.
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